Ten Thousand Commandments: How Much Regulation Is Enough?
President Barack Obama’s recent federal budget proposal for fiscal year 2012 sought $3.729 trillion in discretionary, entitlement and interest spending. For reference, George W. Bush had proposed the first-ever $3 trillion U.S. budget. President Bush was also the first to propose a $2 trillion federal budget—in 2002, only nine years ago. It took us from the founding to Reagan to get a $1 trillion budget.
The result: Thanks to the bailouts and other amplified spending, the Congressional Budget Office projects a FY 2011 deficit of a previously unthinkable $1.48 trillion, greater than FY 2010’s actual deficit of $1.294 trillion.
To be sure, many other countries’ governments consume more of their national output than the U.S. government does. But in absolute terms, the U.S. government is the largest government on planet Earth, whether one’s metric is revenues, expenditures, deficits or accumulated debt.
Regulation: A Hidden Tax
Those costs fully convey the federal government’s on-budget scope, and they are sobering enough. Yet the government’s reach extends well beyond the taxes that Washington collects and the deficit spending and borrowing that now overwhelm. Federal environmental, safety and health and economic regulations cost hundreds of billions of dollars every year over and above the costs of the official federal outlays that dominate the policy agenda.
One could cut government spending to the bone, but government regulatory control over many economic sectors would remain the dominant modern reality. And of course, regulatory compliance costs that businesses face find their way into prices and consumer wallets just as taxes do.
Precise regulatory costs can never be fully known, because, unlike taxes, they are unbudgeted and often indirect. But scattered government and private data exist on scores of regulations and on the agencies that issue them, as well as on regulatory costs and benefits.
Some of that information has been compiled in the latest edition of the Ten Thousand Commandments report. Consider:
- The 2010 Federal Register stands at an all-time record-high 81,405 pages.
- An evaluation of the United States federal regulatory enterprise for the Small Business Administration by economists Nicole V. Crain and W. Mark Crain finds annual regulatory compliance costs hit $1.752 trillion in 2008. (Criticisms of this report have emerged from some quarters, but for starters lets recognize that estimated costs of Sarbanes-Oxley alone top $1 trillion.)
- Given 2010’s actual government spending/outlays of $3.456 trillion, the regulatory “hidden tax” stands at an unprecedented 50.7% of the level of federal spending itself.
- The dramatic reality that regulations and deficits now each greatly exceed $1 trillion a year is an unsettling new development for the U.S.
- Regulatory costs exceed all 2008 corporate pretax profits of $1.463 trillion.
- Regulatory costs dwarf corporate income taxes of $157 billion.
- Regulatory costs tower over estimated 2010 individual income taxes of $936 billion by 87% — nearly double the level.
- Regulatory costs of $1.752 trillion absorb 11.9% 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%.
- The Weidenbaum Center at Washington University in St. Louis and the Regulatory Studies Center at George Washington University in D.C. jointly estimate that agencies spent $55 billion (on budget) to administer and police the regulatory enterprise.
- Federal Register pages devoted specifically to final rules rose 20%, from 20,782 in 2009 to 24,914.
- In 2010, agencies issued 3,573 final rules, a typical annual out-gushing. Notably, proposed rules in the pipeline rose from 2,044 in 2009 to 2,439 in 2010—a 19.3% increase.
- While regulatory agencies issued 3,573 final rules in 2010, Congress passed and the president signed into law a comparatively “few” 217 bills. Considerable lawmaking power is delegated to unelected bureaucrats at agencies, something that must be addressed by Congress.
- Of the 4,225 regulations now in the pipeline at various stages of implementation at 58 federal departments, agencies and commissions, 224 are “economically significant” rules wielding at least $100 million in economic impact.
- Of the 4,226 regulations now in the works, 845 affect small business—an 11.5 increase over 2009’s 758.
- The five most active rule-producing agencies—the departments of the Treasury, Health and Human Services, Commerce, Agriculture, along with the Environmental Protection Agency — account for 1,820 rules, or 43% of all rules in the Unified Agenda pipeline.
Budget this Stuff, then “Liberate to Stimulate”
Without better regulatory oversight and monitoring — without an effort to measure and “budget” the flow of regulations, and in turn to consciously “liberate to stimulate” — the urgency of deficit reduction invites lawmakers to opt for off-budget regulations on the private sector rather than adding to already unchecked deficit spending. Taxation and regulation can substitute for one other.
Disclosure and Accountability
In any event, like federal spending, each agency’s stream of regulations and their costs should be tracked, monitored and talked about. Cost-benefit analysis has a certain role (cost-only analysis in particular has more of a legitimate role).
Still, Congress will need to leapfrog the cost-benefit debate and address the source of unchecked regulation; over-delegation of lawmaking power to the (unelected) agencies. Requiring expedited votes on economically significant or controversial agency rules before they become binding on the public would reestablish congressional accountability and would help establish a principle of “no regulation without representation.”
Increasingly, “Ten Thousand Commandments” is looking like an understatement.