June 2015

President Obama’s Regulatory Disaster

By John Hendrickson

Clyde Wayne Crews Jr., who serves as Vice President for Policy at the Competitive Enterprise Institute, has released the annual Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, which details the enormous increase in burdensome regulations on the nation’s economy.[1] Although more attention is often focused on the escalating $18 trillion national debt and the out-of-control spending by the federal government, the enormous regulatory power of governmental agencies is often forgotten by the general public. This is dangerous because federal regulations are not only complicated, but also place tremendous financial burdens on the economy.

“The estimated cost of regulation exceeds half the level of the federal spending itself, which was $3.5 trillion in 2014,” noted Crews.[2] In addition Crews notes that “regulatory costs of $1.88 trillion amount to 11 percent of the U.S. GDP [Gross Domestic Product] which was estimated at $17.4 trillion in 2014 by the Commerce Department’s Bureau of Economic Analysis.”[3] The costs of regulation not only impact the economy, but also taxpayers as well who, along with business, have to shoulder the impact of regulations. As Crews states:

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 healthcare, food, transportation, entertainment, apparel and services, and savings.[4]

A recent report from The Heritage Foundation stated that under President Barack Obama’s administration regulations have escalated:

The number and cost of government regulations continued to climb in 2014, intensifying Washington’s control over the economy and Americans’ lives. Twenty-seven new major rules pushed the tally for the Obama Administration’s first six years to 184, with scores of other rules in the pipeline.[5]

In fact it is hard to even think of one area of life that is not impacted in some form by the federal government. It is also difficult to truly estimate the economic impact of regulations upon the economy:

The cost of just these 184 rules is estimated by the regulators to be nearly $80 billion annually, although the actual cost of this massive expansion of the administrative state is obscured by the large number of rules for which costs have not been fully quantified.[6]

Some of the economic impact of regulations on the economy can be substantial, as Crews explains:

Of the 3,415 regulations in the pipeline, 200 are ‘economically significant’ rules, which the federal government defines as having annual effects on the economy of $100 million or more. Assuming that those rulemaking effects are primarily regulatory implies roughly $20 billion yearly in future off-budget regulatory costs.[7]

The escalating number of regulations results in not only a threat to economic growth, but it also brings forth a constitutional question. Over time the Congress has surrendered much of their authority to the executive branch, especially the numerous executive agencies such as the Environmental Protection Agency. “The five most active rule-producing agencies — the departments of the Treasury, Interior, Commerce, Transportation, and Health and Human Services — account for 1,453 rules, or 43 percent of rules…,” stated Crews.[8]

Congress has also passed enormous pieces of legislation which are unclear such as the Dodd-Frank and Patient Protection and Affordable Care Act bills, which leave enormous discretion to federal regulators to “interpret” the new rules and regulations. “A major source of overregulation is the systematic over-delegation of rulemaking power to agencies,” argues Crews.[9] Crews provides an example to illustrate the vastness of this problem:

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 ‘Unconstitutional 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.[10]

As the report from The Heritage Foundation states, “the White House, Congress, and federal agencies routinely ignore regulatory costs, exaggerate benefits, and breach legislative and constitutional boundaries…”[11]  In order to rein in the out-of-control regulatory power of the federal government Congress must begin to reclaim their proper constitutional powers and exercise oversight and review of federal regulations. Otherwise, “absent substantial reform, economic growth and individual freedom will continue to suffer.”[12]

Crews reports that the “Federal Register finished 2014 at 77,687 pages, the sixth-highest level in its history.” The Federal Register officially records the new rules and regulations that are initiated by the federal government.  It is clear the economic impact of over regulation by the federal government is an albatross on the economy and it is a threat to constitutional government. In sizing up the enormous largess of federal regulations Crews notes that if regulations were their own country it “would be the world’s tenth-largest economy, ranking behind Russia and ahead of India.”[13]

It is time for policymakers to begin rolling back the administrative state. The best solution to get our national economy growing again is to liberate it from excessive regulation, spending, and taxation.

John R. Hendrickson is a Research Analyst at Public Interest Institute.

The views expressed herein are those of the author and not necessarily those of Public Interest Institute or Tax Education Foundation. They are brought to you in interest of a better-informed citizenry.

[1] Clyde Wayne Crews Jr., Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, 2015 Edition, Competitive Enterprise Institute, <https://cei.org/sites/default/files/10%2C000%20Commandments%202015%20-%2005-12-2015.pdf> accessed on May 15, 2015.

[2] Ibid., p. 2.

[3] Ibid.

[4] Ibid.

[5] James L. Gattuso and Diane Katz, “Red Tape Rising: Six Years of Escalating Regulation Under Obama,” Backgrounder, No. 3015, May 11, 2015, The Heritage Foundation, Washington, D.C., <http://www.heritage.org/research/reports/2015/05/red-tape-rising-six-years-of-escalating-regulation-under-obama> accessed on May 28, 2015.

[6] Ibid., p. 1.

[7] Crews, p. 3.

[8] Ibid.

[9] Ibid., p. 2.

[10] Ibid.

[11] Gattuso and Katz, p. 1.

[12] Ibid.

[13] Crews, p. 3.