Anyone who has ever traveled to Washington, D.C.m knows that as majestic as the White House and the U.S. Capitol are, they are a mere fraction of the federal government. Alphabet soup departments like the EPA, IRS, VA, HHS, DOE, and others most Americans have never heard of take up space in the capital and amount to a hidden regulatory tax on all Americans.
In fact, a new report estimated that if the costs of federal regulation flowed down to U.S. households, the average American family would pay $14,809 annually in a hidden regulatory tax. That’s $14,809 in addition to income taxes, state taxes, and Social Security. $14,809 in addition to sales taxes, property taxes, and even estate taxes — where the government taxes you for being dead.
“That amounts to 21 percent of the average income of $69,629 and 26.45 percent of the expenditure budget of $55,978,” wrote Clyde Wayne Crews, Jr., vice president for policy at the Competitive Enterprise Institute, in the report “Ten Thousand Commandments” released Wednesday.
The average American family would spend more on embedded regulation than on health care, food, transportation, entertainment, and apparel. Only housing costs more.
Crews analyzed federal government data, past reports, and newer studies to estimate the economic impact of federal regulatory compliance at $1.9 trillion each year. When numbers get that big, it becomes hard to understand them. But a hidden tax that costs each family roughly $15,000 per year, that makes sense.
Liberals and others would point out that no family specifically pays this price, and that is indeed true. But regulations hold back economic progress and make wealth creation harder to come by.
How many entrepreneurs give up on new business opportunities because it is too complicated to hire someone? How many small businesses fail because compliance costs exceed their profit margins? Then there are the increased costs to the larger firms which won’t go out of business when the government adds red tape, but will make ordinary goods just that much more expensive.
Regulation is a silent killer, and it grows even when Americans didn’t vote for it. In 2016, for example, Congress enacted only 214 laws, but federal agencies issued 3,853 rules. The lack of public accountability — when was the last time you voted for the EPA secretary? — means these bureaucrats aren’t held accountable in the same way as members of Congress. So they can issue 18 rules for every law enacted by the people’s representatives.
The 2016 Federal Register runs to 95,894 pages, the highest level in its history, and 19 percent higher than the previous year’s 80,260 pages.
That’s also just the rules officially issued. Sixty federal departments, agencies, and commissions have another 3,318 in development. The five most active rulemaking agencies are the Department of the Treasury, the Interior, Transportation, Commerce, and the Environmental Protection Agency.
In the last year of President Obama’s tenure, the administration averaged 86 “major” rules, a 36 percent higher average than that of George W. Bush’s presidency. Obama issued 685 major rules in his eight years, compared to Bush’s 505.
President Donald Trump has shown some promise in cutting down this red tape, but he has his work cut out for him. As a businessman with a very vocal opposition, Trump may not be cut out for regulatory reform, but he did promise to sign the REINS (Regulations from the Executive in Need of Scrutiny) Act, should it pass both houses of Congress.
The bill, which would require any regulation with an economic impact of $100 million or more to pass Congress and be signed by the president, would “provide more accountability and transparency before major rules or regulations take effect,” according to House Speaker Paul Ryan. It would keep Congress from getting “all of the credit and none of the blame,” according to Sen. Mike Lee (R-Utah).
Not all regulation is bad, but regulators should be accountable to the people. Would the average American family vote for sensible regulation? Sure. Would they vote for a $15,000 annual tax? That seems less likely.