CEI: Federal Regulations Cost $1.9 Trillion Annually

By: Tho Bishop

A recent report from the Competitive Enterprise Institute highlights the cost of America’s regulatory state.

According to CEI:

The estimate for regulatory compliance and economic effects of federal intervention is $1.9 trillion annually for purposes of comparison with federal spending and other economic metrics. This estimate was compiled using available federal government data and reports, in context with contemporary studies.

Putting that number into perspective:

The estimated burden of regulation is equivalent to nearly half the level of federal spending, expected to be $4.1 trillion in 2018.

If it were a country, U.S. regulation would be the world’s eighth-largest economy, ranking behind India and ahead of Italy

The regulatory hidden tax is equivalent to federal individual and corporate income tax receipts combined, which total an estimated $1.884 trillion in 2017 ($1.587 trillion in individual income tax revenues; and $297 billion in corporate income tax revenues).

This significant drain on America’s productive sector exists in spite of the fact that deregulation has been one of the bright spots of the Trump Administration. So far the Administration has been able to maintain its objective of repealing two rules for every new one written and the number of pages in the 2017 Federal Registry was down dramatically from the previous Federal regimes. 

Still, the full costs of Federal regulation are truly impossible to calculate because beyond the compliance costs imposed on current businesses are those companies that do not exist due to America’s regulatory environment. As Per Bylund noted while discussing his book Seen, the Unseen, and The Unrealized: How Regulations Affect Our Everyday Lives:

Regulations make it costlier to act — and therefore some actions are no longer profitable when they would have been otherwise. So, for those businesses that lack political influence and aren’t the most effective, a regulation may decide whether there is a business or not. At the same time, businesses that survive the regulation might benefit from a protected situation because the regulation raises barriers to entry. This is why, for instance, it is rational for Walmart to support a high minimum wage — it will hurt Walmart’s competitors more than it hurts Walmart.

The real losers are common people who, as consumers, do not get the valuable goods and services they otherwise would have, and, as producers, cannot find the jobs they otherwise would. The winners are the incumbents, at least short-term, and — as always — the political class.

 

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