Regulatory Spending Escalation

September 3, 2002 • Commentary
This article originally appeared The Washington Times on September 3, 2002.

In the new 2003 federal budget, President George W. Bush proposed $2.01 trillion in spending. While these costs encompass the on‐​budget scope of the federal government, there is more going on — much more. Federal environmental, safety and health, and economic regulations cost hundreds of billions of dollars every year on top of official federal outlays. The government spends your money to come up with rules that force you to spend more of your money to obey those rules.

New regulatory proposals in the 64,431-page Federal Register encompass workplace slip and fall hazards and indoor air quality; labeling of sausage casings and exported caviar; ingredients acceptable for bathroom grout; smoke alarm location requirements for prefabricated homes; and bans on frowned‐​upon backyard play sets. The Transportation Department is busy with new automobile rules on daytime running‐​light glare, door retention and brakehose reliability standards, side and roof crashworthiness, and radiator safety caps. Many such rules are well‐​intended. Others are questionable.

The exact cost of federal regulations can never be fully known. Assorted data exist on the numbers of regulations and on their costs and benefits that can provide something of a snapshot. For example:

  • Last year, 4,509 regulations were at various stages of implementation throughout the 50‐​plus federal departments, agencies, and commissions.
  • Of the 4,509 regulations now in the works, 149 are “economically significant” rules that will have at least $100 million apiece in future off‐​budget costs.
  • The five most active rule‐​producing agencies (the departments of Transportation, Treasury, Interior, and Commerce, and the Environmental Protection Agency) account for 48 percent of all rules under consideration.
  • Of the 4,509 regulations now in the works, 996 impact small business. Rules impacting small businesses are up 36 percent over the past five years.
  • Estimated costs of meeting the demands of off‐​budget regulations hit $854 billion in 2001. That’s 46 percent the size of the $2 trillion in federal outlays, and 8 percent of U.S. gross domestic product.
  • Regulatory costs rival the $946 billion in corporate pretax profits, and they exceed Canada’s gross domestic product ($689 billion).
  • In 1998, the median two‐​earner family’s after‐​tax income of $41,846 contained $7,400 in hidden regulatory costs. Thus, regulatory costs eat up about 18 percent of the after‐​tax family budget.

Sincere policymaking must seek to control regulation and its costs, not merely control taxing and spending. Think of it this way: The maximum anticipated federal budget surplus is $641 billion in 2012. But regulatory costs already exceed that number.

Moreover, regulations and taxes can be substitutes for one another; a new government program requires increasing spending — or imposing new rules and regulations. Thus, unless regulatory activity is better monitored, the push for a balanced budget may tend to invite Congress to adopt new off‐​budget private‐​sector regulations, thereby avoiding new spending that would chip away at the surplus.

Cost‐​benefit analysis of rules is the typical remedy proposed to police excess regulation; however, it’s largely a form of agency self‐​policing. Agencies have little incentive to admit when benefits of a rule do not justify the costs.

Instead, regulations should be treated the way federal spending is treated: Along with cost disclosure, Congress should be held directly accountable for the compliance costs — as well as the benefits — that federal regulations confer. If Congress were to vote on agency rules (in an expedited fashion) before they are binding, it would fulfill citizens’ right to “No regulation without representation.”

Clyde Wayne Crews Jr. is director of technology studies at the Cato Institute. This article is derived from the new 2002 edition of his annual report “Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.”