The regulatory burden presents a two-pronged problem: first, taxpayers are subject to growing costs of sustaining a growing regulatory regime. Second, the dead-weight loss of onerous government overreach constitutes a major threat to the American economy, choking entrepreneurship and eliminating the prospect of economic growth. While it impossible to fully quantify this impact, it represents a perilous threat to the American free market enterprise.
The Center’s 2011 Cost of Government Day Report showed the budget for federal regulators has grown by 72.5 percent over the last decade, with a projected budget of $54.85 billion in 2012. The report also demonstrates that the regulators’ budget provides a financial gauge of regulatory activity. It estimates that the projected budget increase of $2.5 billion in 2011 will cause the economy to shed 6.2 million jobs over five years. This data suggests that the macroeconomic benefits of cutting regulations are very large.
The hidden costs of dead-weight loss caused by regulations stifle the growth of the economy because they introduce inefficiencies and distortions, while reducing the economic reward left over for productive activity. Regulations may prevent new firms from entering the market or stop existing ones from expanding. They may even force some existing firms out of business altogether.
In fact, regulations place small manufacturers at a competitive disadvantage relative to large manufacturers since compliance costs per worker are twice as high. Overbearing regulations could be disastrous for job creation since 64 percent of net jobs in the last 15 years were created by small businesses. The end result of regulation is a reduction in overall output, fewer jobs, lower wages and suppressed economic growth.
What’s more, aggressive regulatory action is normally undertaken without proper cost-benefit analysis, leading to capricious and harmful rulemakings. The Center works to combat these effects of aggressive regulatory action by opposing federal regulatory overreach.
Click on the links below to learn more about the Center’s work on regulation: