Ten Thousand Commandments: Annual Snapshot Of Federal Regulations by Competitive Enterprise Institute
by Clyde Wayne Crews Jr.
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In January 2015, the Congressional Budget Office (CBO) reported outlays for fiscal year (FY) 2014 of $3.5 trillion and projected spending for FY 2015 at $3.656 trillion. The CBO projected that spending would reach $4 trillion by 2017, whereas President Barack Obama’s federal budget proposal for FY 2016 already seeks $3.999 trillion in discretionary, entitlement, and interest spending.2 High debt and deficits notwithstanding, $4 trillion in annual spending will soon be the new normal.
Trillion dollar deficits were once unimaginable. Such sums typified the level of budgets themselves, not shortfalls. Spending is not projected to balance revenue at any point in the coming decade. We experienced trillion dollar deficits between 2009 and 2012, and the CBO projects that deficits will exceed $1 trillion again by FY 2025. In the near term, President Obama’s 2016 budget projects smaller deficits than recent highs—with $485 billion in 2014 expected to jump to an estimated $583 billion in 2015 before dipping and then heading back to $600 billion and beyond.
Many other countries’ government outlays make up a greater share of their national output, compared with about 20 percent for the U.S. at the federal level. But in absolute terms, the U.S. government is the largest government on the planet.6 Only five other nations top $1 trillion in annual government revenues, and none but the United States and now China—for the first time—collect more than $2 trillion.
Like federal spending, regulations and their costs should be tracked and disclosed annually. Then, periodic housecleaning should be performed. Cost-benefit analysis at the agency level is already deficient; such analyses accompany only a fraction of rules.
A problem with cost-benefit analysis is that it relies primarily on agency self-reporting. Having agencies audit their own rules is like asking students to grade their own exams. Regulators are disinclined to emphasize when a rule’s benefits do not justify its costs. In fact, one could expect agencies to devise new and dubious categories of benefits to justify an agency’s rule-making activity.
A major source of overregulation is the systematic overdelegation of rulemaking power to agencies. Requiring expedited votes on economically significant or controversial agency rules before they become binding would reestablish congressional accountability and help affirm a principle of “no regulation without representation.”
Openness about regulatory facts and figures can be bolstered through federal “regulatory transparency report cards,” similar to the presentation in the annual Ten Thousand Commandments report.10 These report cards could be officially issued each year to distill information for the public and policy makers about the scope of the regulatory state.
Federal Regulations: The Hidden Tax
The scope of federal government spending and deficits is sobering. The national debt topped $18 trillion in December 2014, the same month the International Monetary Fund calculated China’s economy to be worth $17.6 trillion in terms of purchasing power parity, making it the world’s largest economy (albeit still significantly lagging the United States on a per capita basis). Yet the federal government’s reach extends well beyond Washington’s taxes, deficits, and borrowing. Federal environmental, safety and health, and economic regulations affect the economy by hundreds of billions—perhaps trillions—of dollars annually, in addition to the official dollar outlays that dominate the federal policy debate.
Firms generally pass the costs of some taxes along to consumers. Likewise, some regulatory compliance costs borne by businesses will find their way into the prices that consumers pay, affect the wages workers earn, and lead to lower levels of growth and prosperity. Precise regulatory costs can never be fully known because, unlike taxes, they are unbudgeted and often indirect. But scattered government and private data exist about the number of regulations issued, their costs and effects, and the agencies that issue them. Compiling some of that information can make the federal regulatory enterprise somewhat more comprehensible. That compilation is one purpose of Ten Thousand Commandments, highlights of which follow:
- Based on the best available federal government data, past reports, and contemporary studies, this report highlights estimated regulatory compliance and economic costs of $1.88 trillion annually.
- In 2014, 224 laws were enacted by Congress during the calendar year, whereas 3,554 rules were issued by agencies. Thus, 16 rules were issued for every law enacted last year. The “Unconstitutionality Index,” the ratio of regulations issued by agencies to laws passed by Congress and signed by the president, was 16 for 2014 and 51 for 2013. The average for the decade has been 26. This disparity highlights the delegation of lawmaking power to unelected agency officials.
- If one assumed that all costs of federal regulation and intervention flowed all the way down to households, U.S. households would “pay” $14,976 annually on average in regulatory hidden tax. That payment amounts to 23 percent of the average income of $63,784 and 29 percent of the expenditure budget of $51,100. The “tax” exceeds every item in the budget except housing. More is “spent” on embedded regulation than on health care, food, transportation, entertainment, apparel and services, and savings.
- The estimated cost of regulation exceeds half the level of the federal spending itself, which was $3.5 trillion in 2014.
- Regulatory costs of $1.88 trillion amount to 11 percent of the U.S. GDP, which was estimated at $17.4 trillion in 2014 by the Commerce Department’s Bureau of Economic Analysis.
- When regulatory costs are combined with federal FY 2014 outlays of $3.5 trillion, the federal government’s share of the entire economy now reaches 30.6 percent.
- The costs of the regulatory “hidden tax” surpass federal income tax receipts. Regulatory compliance costs exceed 2014 total individual income tax revenues of $1.386 trillion.
- Regulatory compliance costs vastly exceed the 2014 estimated U.S. corporate income tax revenues of $333 billion and rival corporate pretax profits of $2.235 trillion.
- If it were a country, U.S. regulation would be the world’s tenth-largest economy, ranking behind Russia and ahead of India. U.S. regulatory costs exceed each of the GDPs of Australia and Canada, the highest income nations among the countries ranked most free in the annual Index of Economic Freedom and Economic Freedom of the World reports.
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