Ten Thousand Commandments: An Annual Policymaker’s Snapshot of the Federal Regulatory State (2000 Edition)

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The federal government spent $1.7 trillion in 1999 to carry out discretionary and entitlement spending and pay interest on the debt.1 In the new fiscal year 2001 federal budget, President Bill Clinton proposed to spend $1.84 trillion.2 While these costs fully encompass the on-budget scope of the federal government, there is considerably more to the reach of the federal government than the sum of the taxes sent to Washington. Federal environmental, safety and health, and economic regulations cost hundreds of billions of dollars every year—on top of official federal outlays. Regulatory costs occur “off-budget” and therefore largely escape the disclosure and scrutiny that the fiscal budget encounters. In large part, what regulatory discipline exists depends upon the good faith of agencies to voluntarily disclose the costs and benefits of their rules, rather than a requirement that they do so.

Thus, it is not only unclear what Americans pay in regulatory compliance costs, but the level of benefits received in return for those costs is a subject of great debate. Yet in the face of this uncertainty, the 1999 Federal Register contained the highest number of pages since 1980, the last year of the Carter presidency. Between 1998 and 1999, the number of rules in the pipeline costing at least $100 million jumped 17 percent. At the same time, major rules actually finalized dropped significantly.

The exact cost of federal regulations can never be fully known. But governmental and private data exist on numbers of regulations, the agencies that issue them, and sometimes regulatory costs and benefits—all of which can be compiled in a way that makes the regulatory state more comprehensible to the public. That is the purpose of the annual Ten Thousand Commandments report, some highlights of which appear below.

· The 1999 Federal Register contained 71,161 pages, the highest level since Jimmy Carter’s presidency and a 4 percent jump over 1998.

· Well over 4,000 rules are issued by agencies every single year.

· Agencies have issued over 23,000 final rules since the Republican takeover of Congress.

· In 1999, 4,538 regulations were at various stages of implementation throughout the 50-plus federal departments, agencies, and commissions.

· Of the 4,538 regulations in the works, 137 are “economically significant” rules that will have at least $100 million in economic impact. That means new regulations which will impose at least $13.7 billion yearly in future off-budget costs are in the pipeline.

· $100-million rules in the works increased 17 percent between 1998 and 1999, from 117 to 137.

· The five most active rule-producing agencies (DOT, EPA, Treasury, DOC, USDA) account for 46 percent of all rules under consideration.

· Rules impacting small businesses are up 35 percent over the past five years.

· The costs of meeting the demands of off-budget social regulations in 1999 were as high as $234 billion, according to the Office of Management and Budget. A more broadly constructed competing estimate that includes economic regulatory costs and paperwork costs pegs regulatory expenditures at $758 billion in 1999. This latter amount, if in the ballpark, is equivalent to more than 44 percent of the $1.703 trillion spent on all federal fiscal-year 1999 outlays. But the costs of regulations, although approaching half the size of government outlays, are unbudgeted.

· Regulatory costs of $758 billion are equivalent to 8.2 percent of US gross domestic product, which was $9,235 billion last year.

· The costs of regulation are greater than Canada’s entire gross national product, which was $595 billion in 1997.

· The costs of regulations far exceed the maximum expected federal budgetary surplus of $489 billion in 2010.

· Regulatory costs of $758 billion even exceed corporate pretax profits, which were $718 billion in 1998.

· In 1998, the median two-earner family’s after-tax income of $41,846 contained about $7,410 in hidden regulatory costs. Thus, regulatory costs eat up about 18 percent of the after-tax family budget.

· Agencies spent $18.8 billion to administer and police the regulatory state in 1999. Counting the $758 billion in off-budget costs, that brings the total regulatory burden to $777 billion.

· The Environmental Protection Agency (EPA) expects to issue 456, or 10 percent, of the 4,538 planned rules.

· EPA rules in the pipeline will add at least $2.8 billion in regulatory costs each year.

· Fewer than half of the EPA’s planned $100-million rules are accompanied by benefit estimates.

The US is now comfortably enjoying its first string of budgetary surpluses in decades, and the federal government is expected to continue posting surpluses of between $124 billion and $489 billion over the next ten years.3 But if maintaining a true surplus remains a priority, then honest policymaking also must seek to control regulatory costs. Think of it this way: The maximum anticipated surplus is $489 billion in 2010. But the regulatory costs of over $700 billion already far exceed that level.

Moreover, regulations and taxes can be substitutes for one another; a new government program requires increasing spending—or imposing new rules and regulations. Thus, unless regulatory activity is monitored better, the balanced-budget imperative may tend to invite Congress to adopt new offbudget private-sector regulations rather than new spending that would deplete the surplus. If regulatory costs remain largely hidden from public view, the fallout from regulating instead of taxing and spending will continue to be less.

Regulations should be treated the same way federal spending is treated: To the extent possible, Congress should be held directly accountable for the compliance costs—as well as the benefits—federal regulations deliver to the public. The typical remedy proposed to police excess regulation is cost-benefit analysis of rules. The problem with cost-benefit analysis, however, is that it is largely a form of agency self-policing; agencies in effect would perform “audits” of their own rules. Granted, some propose that agency analyses be subjected to third-party review. But even this is unlikely to be enough, since agencies will rarely admit benefits of a rule do not justify the costs involved.

The way to maximize congressional accountability is to require Congress to vote on agency rules (in an expedited fashion) before they are binding. Vital for true accountability, this step would fulfill citizens’ rights to “No regulation without representation.” Disclosing costs of rules would remain important, however, even if Congress approved rules; openness about regulatory facts and figures is critical just as disclosure of program costs is critical in the federal budget. Relatively simple “Regulatory Report Cards,” in some respects like the presentation in Ten Thousand Commandments, can be performed officially each year by the federal government to distill regulatory data.