Before the National Association of Manufacturers even had a chance to release their important new report today on the aggregate annual cost of federal regulations, left-wing groups decided to attack the numbers. They disliked an earlier report that authors Mark Crain and Nicole Crain had prepared for the SmallBusiness Administration (SBA) that found regulatory costs of $1.75 trillion annually, and struck pre-emptively.
No one need credit politically motivated attacks like this anymore. The ongoing, actually inexcusable, official uncertainty over the aggregate costs of U.S. federal regulations despite over a decade of Office of Management and Budget reports to Congress on the benefits and costs raises concern, not about those trying to measure, but on the fact that the largest government on earth has no map of itself when it comes to regulation.
Official disclosure needs amplification, and Congress does need to fix the problem.
The new estimate from NAM/Crain and Crain turns out to be $2.028 trillion annually. They break costs up into four main categories:
- Economic: $1,448
- Environmental: $330
- Occupational Safety/Heath & Homeland Security: $92
- Tax Compliance: $159
For perspective, the federal budget approaches $4 trillion. A couple years back I too set about reckoning a baseline for the cost of regulation and intervention. I did it Lego-block style rather than a “top-down” econometric approach, sampling governmental studies of the past couple decades and other information and assembling a composite of sorts. Originally I called the working paper Piss and Vinegar in honor of all the vehemence and spit surrounding the regulatory cost issue, but settled on Tip of the Costberg, in which I reckon (calculate isn’t quite the word for my project) some $1.863 trillion in annual costs beneath which I’m reluctant to go, and which is not inclusive besides.
I did keep my subtitle, On the Invalidity of All Cost of Regulation Estimates, and the Need to Compile Them Anyway.
In recent years, the administration has referred to regulatory costs approaching $2 trillion an “urban legend.” There was even an official White House blog post lamenting that “One group is even claiming that the regulations currently on the books cost the U.S. economy $1.75 trillion in 2008.” That presumably contemptible “one group”? It was, of course, Obama’s own SBA.
It was improper for the Obama Administration to effectively denigrate the Small Business Administration’s overall effort to establish and clarify regulatory impacts. Administration policymakers should have striven to reconcile data differences or methodological approaches and coalesce around some defensible narrative regarding the aggregate scope of regulation.
This “official” attack on the SBA by the very administration under which the report appeared was inconsistent with the spirit of Obama’s Executive Order 13563 on “Improving Regulation and Regulatory Review” and with the reality that we know precious little about the regulatory state’s impacts and almost thoroughly fail to account for much of it.
Interestingly the OMB itself some years back presented cost not far removed from modern estimates like the new NAM/Crain and Crain report.
Methodologies were somewhat different, but OMB formerly embraced SBA regulatory cost surveys. For context and reference, several turn-of-the-century-era cost estimates may be seen in my Costbergchart Estimates of the Cost of Regulation: Late 20th Century, Early 21st Century. Even the GAO (Government Accountability Office) weighed in during the 1990s; and notably, OMB’s 2002 estimates once exceeded those of SBA. In the October 2001 report by Mark Crain and Thomas D. Hopkins, the authors noted regulatory costs of $843 billion, which would be around $1.1 trillion in 2013 dollars. That report, in turn, had updated still earlier analyses, such as Thomas Hopkins’ original 1995 analysis for SBA that OMB employed with enthusiasm in the mid-90s to early 2000s.
All else equal, adjusting those costs to modern would put these assessments in the NAM ballpark, particularly upon including the cost of new rulemaking regimes such as the Department of Homeland Security, the Dodd-Frank financial rules, the Affordable Care Act, the Federal Communications Commission’s “net neutrality” rule, restricted access to energy and other adventures.
Regulatory cost measurement is problematic, without doubt: I even regard it to be to some extent impossible. But much of the outrage seems geared toward rationalizing agency regulatory intervention and turning attention away from genuine overreach.
Much of the problem appears to be with measurement as such. The impulse to pour disdain on those who called for disclosure and accountability is hard to understand, but has had the effect of thwarting efforts to reform regulations. For example, a report called “Setting the Record Straight,” editorialized, “we concluded that the Crain and Crain report …. does not come close to justifying regulatory reform efforts, such as the REINS Act, which seek to limit protection of people and the environment.” No one wants to limit protection of people and the environment, the comment was simply belligerent.Bottom line: there now exists 20 years of OMB regulatory cost roundups, plenty of time for critics to have created alternative aggregate estimates rather than trying to sweep regulation under a rug.
But no more. We need to make better sense of the regulatory hairball, and we will. Unfortunately, the U.S. Government doesn’t have its own comprehensive data. We need NAM’s report and others–but we need the federal government to measure itself again.