Six things you should know about the costs of federal regulation

From: Deseret News

By Matthew Sanders

How valuable is your time? Can you afford to lose some of it?

Throughout history we’ve observed markets emerge that help match up buyers and sellers. The New York Stock Exchange for shares of businesses, Chicago Board of Trade for commodities like food, metals and energy, and more recently eBay and Groupon for spot deals on consumer goods help make market matchmaking much more efficient and buyers and sellers happier.

Lots of ingredients go into a well-functioning market. Economists point to many things that help markets work well, and many that intrude and impede free exchange of goods and services. Some key factors include trustworthiness of buyers and sellers, government regulations and stable currencies all contribute to efficient transactions. Businesses simply refer to these as the “cost of doing business.”

Among the many costs of doing business, government regulations typically cost a business time and effort to comply — the more complicated and cumbersome, the more time. If the old adage holds true, that “time is money” then when regulations cost time, they cost jobs.

One of the main debates in this past election was on the virtues or evils of income taxes aimed at certain classes. But curiously little debate ensued on perhaps the most pernicious tax that affects all income levels – the time cost of doing business. Government rules and regulations have contributed to slowed job creation and disheartened individuals leaving the workforce.

Let’s look at some facts from these last 10 years of new and proposed regulations:

1. Rules outpace economy. According to new and proposed rules posted on, rules have grown at an astounding 15 percent compound annual growth rate from 2002 to 2012! The Dow Jones Industrial Average grew at 4 percent and the S&P 500 grew at 5 percent over the same period.

2. Millions leave workforce. Since the beginning of 2002, almost 8 million people have left the workforce. Or, about the combined populations of Hawaii, New Mexico and Nevada. At current average annual wages, that represents more than $350 billion in lost income.

3. Intervention is the trend. In 2002-2003, the federal government introduced 3,045 new rules. Federal regulators introduced almost three times as many rules in the past two years, numbering more than 8,500. The Federal Register’s publication of regulations, executive orders and other rules and notices published 82 thousand pages in 2011.

4. Government grows to administer its rules. With more than 60,000 new regulations in the past decade, that currently amounts to 608 per senator, 114 per member of congress or 4,503 for each cabinet member. Government has to hire people to develop, implement and manage new regulations, with the executive branch employees now numbering over 2.1 million.

5. Less oversight, more cost. But the Office of Information and Regulatory Affairs, or OIRA, which is charged with reviewing “economically significant” regulations with impact of $100 million or more, has seen its staff cut in half since its establishment under President Reagan. Interestingly, 144 such regulations were proposed in 2011, roughly double the average. A Wall Street Journal report in 2010 showed that federal regulations cost $1.75 trillion in 2008 alone, or almost $38,000 per household.

6. Bureaucracy unchained. Most remarkable in the story, perhaps, is how rules multiply in executive branch bureaucracies — where regulations in 2010 outpaced new laws from Congress 16 to one. A Harvard Law Review article once quoted President Jimmy Carter saying that, “dealing with the federal bureaucracy would be one of the worst problems [he] would have to face,” but that in reality it had been even “worse than [he] had anticipated.”

To govern an increasingly complex modern society and economy, the federal government and key institutions have understandably needed to grow and adapt. However, unwieldy bureaucratic interventions have left too many workers on the sidelines by raising the cost of doing business.

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