Brooks: More Regulations Don’t Have Huge Effect on Economy

David Brooks’ article today in The New York Times belittles the cost of regulation to American businesses and the U.S. economy and praises the Obama administration for its “rigorous cost-benefit analyses” of proposed regulations. While he does note that “the Obama administration has significantly increased the regulatory costs imposed on the economy,” Brooks also says that it’s not clear that those regulations “have had a huge effect on the economy” or indeed on small businesses.

So more and more onerous regulations at higher and higher costs and greater economic uncertainty among businesses don’t have a dampening effect on hiring more workers or on capital investment? As CEI’s Clyde Wayne Crews and Ryan Young noted in a recent article:

There are more than 4,200 new rules at various stages of the federal regulatory pipeline right now. Companies, especially the ones too small to afford a Washington office, don’t know what’s coming next. No wonder they are skittish about making long-term investments, whether in employees or capital.

And small businesses have a harder time complying with the plethora of regulations. Crews and Young point out that the Small Business Administration has estimated that

. . . small businesses pay more than $10,000 per employee per year just to comply with the 165,000-page Code of Federal Regulations. State and local rules cost about $970 billion extra. That’s a lot of money – and a lot of regulation.

They conclude:

Regulations make hiring costlier and thus make jobs scarcer. And regulatory uncertainty makes companies reluctant to hire employees they might not be able to afford down the road. Case closed.

Brooks may want to peruse 10,000 Commandments 2011 by Crews, which calls for Congressional accountability for significant new regulations and better estimates and disclosures of costs instead of relying on agencies’ own projections, which vastly understate the off-budget costs of regulation.

As that study notes:

  • Regulatory costs of $1.752 trillion absorb 11.9 percent of the U.S. gross domestic product (GDP), estimated at $14.649 trillion in 2010.
  • Combining regulatory costs with federal FY 2010 outlays of $3.456 trillion reveals a federal government whose share of the entire economy now reaches 35.5 percent.