The United States of Regulation: Compliance Costs Consume Huge Chunks of Our Economy

If the money spent in America
on enforcing and complying with federal regulations was used
instead to start a whole new country, this new country would be a
major economic player on the world stage. So calculates Clyde Wayne
Crews at the Competitive Enterprise Institute in his annual
survey of the state of federal regulation, titled “Ten Thousand
Commandments.”

Though there’s no easy way to quantify private regulatory costs
because they’re not the kind of things that show up on budgets,
Crews calculates that Americans paid a grand total of $1.863
trillion in federal compliance costs for 2013.  That’s more
money than the entire Gross Domestic Products of countries like
Australia, Canada, and India.

Working through Bureau of Labor Statistics data calculating the
number of households in America and an average household income of
$65,000, Crews attempts to calculate how much of each family’s
budget is consumed by the cost of federal regulations, assuming
logically that businesses pass the costs along to consumers. Crews
acknowledge his attempted calculations aren’t fully scientific, but
he estimates that if the costs of regulation are completely passed
through to consumers, each household pays nearly $15,000 a year in
hidden regulatory costs. That’s nearly a quarter of the average
household income before taxes and higher than any other expense
outside of housing.

Crews is only focusing on the costs of federal regulations, by
the way. Imagine what additional burdens are faced by residents of
high-regulation states like California and New Jersey.

Crews’ report focuses a lot more on just these figures. There
are all sorts of terrifying numbers in his 89-page report. Some
highlights from his summary:

• This is the 21st edition of Ten Thousand Commandments. In that
  time, 87,282 final rules have been issued. That’s more than 3,500
  per year or about nine per day.

• The “Unconstitutionality Index” is the ratio of regulations
  issued by agencies compared to legislation passed by Congress and
  signed into law by the president. The ratio stood at 51 for 2013.
  That means there were 72 new laws and 3,659 new rules – 51 rules
  for every law, or a new rule every 2 ½ hours.
• The top six federal rulemaking agencies account for 49.3
  percent of all federal rules. In 2013, these were the Departments
  of the Treasury, Commerce, Interior, Health and Human Services, and
  Transportation and the Environmental Protection Agency.
• Small businesses pay more in per-employee regulatory costs.
  Firms with fewer than 20 employees pay an average of $10,585 per
  employee, compared to $7,755 for those with 500 or more
  employees.

Read the full report
here (pdf). Despite the length and subject matter, I find the
report very accessible.