Economic burdens, like economic relief, trickle down – or, if you prefer the metaphor, cascade outward – throughout the entire economy, touching every economic decision made by a household. Douglas Holtz-Eakin, president of the American Action Forum, told the House Judiciary Committee last summer that 36 major rules issued by the Obama administration alone “were estimated to increase consumer prices by more than $11,000 – everything from a more expensive car ($3,100), mortgage ($362), microwave ($14), and air conditioner ($320).”
More perniciously, he said that “annually, regulators also estimate food is at least $14 more expensive and energy $135 pricier because of rules.”
An AAF website, RegRodeo.com, records that 3,074 federal regulations have been issued since 2009, costing $900.7 billion and requiring nearly 559 million hours of paperwork.
President Trump’s executive order will help reduce that cost. Ryan Bourne at the Cato Institute suggests ways the measure could be improved.
Why regulations matter
Regulations pose a multi-layered problem for a free and virtuous society. They erode popular control of government, approaching a form of taxation without representation. They stigmatize companies’ reactions, rather than the overreaching regulatory agency that drafted them, and often touch off a vicious cycle of further government intervention. They complicate entry into markets and fall most heavily upon small businesses, consumers, and employees at the lower rungs of the economic ladder.
While some rulemaking is authorized by legislation, federal edicts generated by the regulators’ own forward momentum – often not subject to oversight by elected officials – undermine democratic governance. Republican lawmakers hope to exercise greater discretion over regulations by passing the REINS Act and trimming back President Obama’s regulatory thicket, beginning with his $157 billion in midnight regulations.
Like their authorship, the economic cost of regulations is also largely invisible. The government forces businesses to carry out expensive – not to mention often unnecessary and self-contradictory – actions under penalty of law. When firms pass on the cost of these new requirements to consumers, demagogues decry the inevitable reaction as “price-gouging,” often setting off another round of harmful regulations to cap prices.
When their business costs cannot be added to the price of their goods, firms do not simply absorb the loss. Instead, it is employees – both current and prospective – who pay the price. Raises are deferred, lay-offs may begin, and new people who would otherwise have been given the opportunity to begin work in their chosen field are denied employment.
Regulations disproportionately affect small businesses, whose proprietors cannot afford to hire the lawyers and personnel necessary to fulfill – or even understand – what the ever-changing bureaucratic landscape requires of them. Setting the regulatory bar too high has long been a favorite tactic of corporatists, who lobby the government to establish standards only they can meet, putting their competitors out of business. A study by the CFIB found that one-in-four Canadian small business owners would not advise their children to follow their footsteps because of the high cost of regulatory compliance.
The core principles of the Acton Institute hold that “those who have the power to interfere with the market are duty-bound to remove any artificial barrier to entry in the market.”
This executive order, traveling from Victoria to Ottawa to London, is a good step toward that end.