In the Fiscal Year 2006 federal budget, President Bush proposed $2.77 trillion in discretionary, entitlement, and interest spending. Although those costs fully express the on-budget scope of the federal government, there is considerably more to the government’s reach 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.
The exact cost of federal regulations can never be fully known. Firms generally pass along to consumers some of the costs of the taxes they are required to pay. Similarly, some regulatory costs, although generally imposed on businesses, get passed on to consumers. Governmental and private data exist on scores of regulations and the agencies that issue them, as well as on regulatory costs and benefi ts. Some of this data 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 from which appear below.
• Extrapolating from an assessment of the federal regulatory enterprise by economist Mark Crain, regulatory costs hit an estimated $1.13 trillion in 2005.
• Given that 2005 government spending was $2.47 trillion, the hidden tax of regulation now approaches half the size on federal spending itself.
• Regulatory costs are more than triple the $318 billion budget defi cit.
• Regulatory costs also exceed all corporate pre-tax profi ts, which were $874 billion in 2003.
• Regulatory costs exceed estimated 2005 individual income taxes of $894 billion, and are far greater than corporate income taxes of $226 billion.
• Regulatory costs of $1.127 trillion are equivalent to 9 percent of U.S. gross domestic product, which was $12.293 trillion for 2005.
• Federal regulatory costs of $1.127 billion combined with outlays of $2.472 billion bring the federal government’s share of the economy to 29 percent, compared to 27 percent a year ago.
• On the basis of estimates from the Weidenbaum Center and the Mercatus Center, agencies spent $38.3 billion merely to administer and police the regulatory state in 2005. Counting the $1.127 billion in off-budget costs, that brings the total regulatory burden to $1.165 billion.
• The 2005 Federal Register, the daily depository of all proposed and final federal rules and regulations, contained 73,870 pages. This is a 2.4 percent decrease from 2004’s 75,675 pages, which had been an all-time record.
• In 2005, 3,943 final rules were issued by agencies. This is a 3.8 percent decline from 2004’s 4,101 rules.
• Whereas regulatory agencies issued 3,943 fi nal rules, Congress passed and the President signed into law a comparatively low 161 bills in 2005.
• In the 2005 Unifi ed Agenda of Federal Regulatory and Deregulatory Actions, which details rules recently completed as well as those anticipated within the upcoming 12 months, agencies reported on 4,062 regulations that were at various stages of implementation throughout the 50-plus federal departments, agencies, and commissions.
• Of the 4,062 regulations now in the regulatory pipeline, 137 are “economically significant” rules that will have at least $100 million in economic impact. Those rules will impose at least $13.7 billion yearly in future offbudget costs.
• Economically signifi cant rules in the works increased slightly between 2004 and 2005, from 135 to 137.
• The fi ve most active rule-producing agencies—the departments of Treasury, Interior, Commerce, and Homeland Security and the Environmental Protection Agency—with 1,808 rules among them, account for 44 percent of all rules in the Agenda pipeline.
• Of the 4,062 regulations now in the works, 788 affect small business.
The U.S. government has conclusively ended its recent short-lived string of budgetary surpluses—the first since 1969. But if regaining and maintaining a true surplus remains a priority, policy makers must control regulatory costs. Think of it this way: The maximum surplus projected by the Congressional Budget Offi ce (CBO) over the coming decade is a minimal and highly speculative $38 billion in 2012. Regulatory costs of more than $1.13 trillion clearly dwarf that amount. Moreover, regulations and taxes can substitute for one another; a new government program requires increasing spending—or imposing new rules and regulations, thus passing the costs on to businesses and individuals. Thus, without better regulatory monitoring, deficit control may invite congressional adoption of new off-budget private-sector regulations rather than new spending that would increase the defi cit. If regulatory costs remain largely hidden from public view, regulating will remain an attractive alternative to taxing and spending.
Regulations should be treated like federal spending: Whenever possible, Congress should be held accountable for the compliance costs—as well as the benefits—of federal regulations. Cost/benefit analysis of rules is the typical remedy proposed to police excess regulation. The problem with cost/benefit analysis, however, is that it is largely a form of agency self-policing; agencies would perform “audits” of their own rules, but would rarely admit that the benefits of a rule do not justify the costs involved. At the least, some third-party review would be needed.
A way to maximize congressional accountability is to require Congress to vote on agency rules—in an expedited fashion—before they become binding. Vital for true accountability, this step would fulfill citizens’ expectation of “no regulation without representation.” Disclosing costs of rules would remain important, however, even if Congress approved rules. Openness about regulatory facts and fi gures is critical, just as disclosure of program costs is critical in the federal budget. Simple “regulatory report cards,” similar to the presentation in Ten Thousand Commandments, can be issued officially each year by the federal government to distill regulatory data.