NCPA - National Center for Policy Analysis

Washington's Ten Thousand Commandments

June 20, 2012

Deficits, taxes and spending are the defining issues of the 2012 campaign, but regulation deserves a seat at the table, too.  The current regulatory environment places an enormous burden on the American economy by crushing small businesses with nonsensical rules and making the United States a toxic country in which to locate a business, say Ryan Young and Wayne Crews of the Competitive Enterprise Institute.

Of course, efforts have been made to check this growing problem.  The Obama administration recently targeted five regulations for elimination that will save $6 billion over the next five years.  However, $1.2 billion per year is a drop in a bucket compared to the overall impact of these regulations.

  • According to the Small Business Administration (SBA), the annual cost of complying with federal regulations has exceeded $1 trillion since around 2005.
  • Last year alone, 3,807 new final rules were published in the Federal Register -- more than 10 per day.
  • During that same period, Congress passed only 81 new laws.
  • Furthermore, of the new rules, 212 are classified as "economically significant," which means they cost more than $100 million per year.

These regulations have a grossly distortionary impact on private markets.  For example, their aggregate impact favors large businesses over small ones, undermining politicians' claims that they care greatly for the needs of undersized operations.

  • Big businesses with more than 500 employees pay about $7,755 per employee to comply with federal rules each year, according to the SBA.
  • But small businesses with fewer than 20 employees pay $10,585 per employee per year -- that's a built-in competitive advantage for big business of nearly $3,000 per employee.
  • Consequently, a recent Kauffman survey of 6,000 small businesses found that "small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business-friendliness of their state or local government."

There is now a bill, however, that would do much to address this problem.  By requiring Congress to vote on all economically significant rules, the Regulations from the Executive in Need of Scrutiny (REINS) Act would lighten the regulatory burden.  It has passed the House, but is stalled in the Senate.

Source: Ryan Young and Wayne Crews, "Washington's Ten Thousand Commandments," American Spectator, June 5, 2012.

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