Professional Documents
Culture Documents
2016 Edition
A Working Paper
Clyde Wayne Crews Jr.
To Clyde Sr.;
And to Fred L. Smith Jr. and Edward H. Crane for their devotion to advancing Classical
Liberalism, for their dedication in creating institutions that influence ideas and policy to make
the world a freer, fairer, more prosperous place; and for letting me try to help them a little bit.
www.CEI.org
www.TenThousandCommandments.com
If you are a non-journalistic American and dont want to read this book because its about
government, just buy it and let it lie around your house like A Brief History of Time.
P. J. ORourke
Parliament of Whores
It is hardly too strong to say that the Constitution was made to guard the people against the dangers of
good intentions. There are men in all ages who mean to govern well, but they mean to govern. They
promise to be good masters, but they mean to be masters.
Daniel Webster
Good government; Good government. Sit! Stay!
Winning entry in an essay contest on the theme of good government (OK, an old joke.)
A WORKING PAPER
Table of Contents
1. Introduction: The $1.885 Trillion Annual Cost of Regulation
7
2. Tip of the Costbergs Simple Framework
12
3. The Costs of Benefits
14
4. Cost In Dollars, Cost in Common Sense
18
Costs are Subjective
18
Incentives to Understate Costs Match Incentives to Overstate Costs
19
On the Hotheadedness and Partisanship Over Efforts to Calculate Regulatory Costs; Or, More
Reasons Official Disclosure Needs Amplification
22
A Note On The Administrative and Enforcement Costs of Regulation
25
5. Regulatory Costs In the Days Before Trillion: Or, Estimated Regulatory Costs at the Turn of
the Century (Give or Take)
26
6. A Sense of Proportion: What Is Not Reviewed Annually by OMB
30
7. A Baseline for Aggregate Annual Economic Regulation Costs: $402 Billion
33
8. A Baseline for Aggregate Annual Social/Safety Regulation Costs: $473 Billion
37
9. Additional Executive Agency Major Rule Costs Presented by OMB: $35.8 Billion
40
10. Executive Agency Major Rules Lacking Cost Information: $20 Billion
41
11. Independent Agencies Annual Regulatory Costs: $9.5 Billion
42
*
experiment with regulatory budgeting, review schedules, expiration dates and congressional
approval.9
The federal government seems busy fighting internally over regulatory costs magnitude. Former
OMB Office of Information and Regulatory Affairs (OIRA) director Cass Sunstein told a
congressional committee that the $1.75 trillion regulatory cost figures released in 2010 by the
Small Business Administrations (SBA) Office of Advocacy have become a bit of an urban
legend.10 But as well see, OMBs own estimates used to be in the same ballpark, and many
categories of cost once examined are now neglected by the bureau. Moreover, while OMB
officially reports amounts of only up to $133 billion in 2013 dollars based on data since the turn of
the century, the non-tax cost of government regulation of and intervention in the economy,
without performing a sweeping survey, appears to total up to $1.885 trillion annually. Give or
take.11 But probably give; See the pie below: Here are some numbers, but many interesting ones
are probably missing.
Financial, $80
All other,
$70
DoE, $13
FCC/Infrastructure,
$132
Economic
regulation, $399
Majors,
Int'l
untab,
trade,
$20
$3.3
Environment, $386
Tax compliance,
$316
DOT,
$80
DOL, $127
Health, $194
DHS, $57
Wayne Crews, Tip of the Costberg: On the Invalidity of All Cost of Regulation Estimates and
the Need to Compile Them Anyway, 2016 Edition. Available at Social Science Research Network
(SSRN) at http://ssrn.com/abstract=2502883 and at www.tenthousandcommandments.com.
See also Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention for a
detailed summary chart.
CHART: Principia Bureaucratica: The Total Annual Cost of Federal Regulation and
Intervention
http://bit.ly/1BMjiL5
Too often, regulatory impacts dont get measured. But further, the disruption of market processes
and the derailment of wealth, safety and health creating processes themselves are for the most part
wholly neglected. We can say, circa 2016, according to back of the envelope surveys, roundups
and placeholders, with gaps big enough to fit the beltway through, that up to $1.885 trillion
annuallyand in many categories perhaps considerably moreis a defensible assessment of the
annual impact on the economy of regulation and intervention. While there is much detail
contained here, this is not a top-down econometric analysis. There are no sigmas and epsilons to
be found; this isnt time travel. Im more apt to call the figures I assemble placeholders for a
subset of costs than concretely known costs, and in most instances the reader can interpret them
that way. After all, we measure GDP, and thats not measurable either; one cannot presume to
sum up the values of human interactions in such a manner (more about this later). So this is a
reckoning rather than a formal calculation, an assessment based on a subset of existing federal
regulations, mandates, transfers, bans, prohibitions and interventions of all kinds. Also impacting
costs, yet not tallied here, are the unfathomable costs of the unmeasured, the unmeasurable, and
the ignored and unacknowledged; more will be said about these at the conclusion.
My approach is to over time is to compile a series of markers for the costs of regulation and
intervention in society to converge on rather than calculate a baseline to which each years new
official governmental cost estimates may be added, and to anticipate the day when those annual
estimates are improved substantially. Still, since regulatory costs cannot be precisely measured,
elected members of Congress rather than bureau personal must approve every significant and
controversial rule and regulation.
As of now, officially reported regulatory costs (as will be seen) total up to $133 billion based on
OMBs annually reported information. The question for decision makers is whether such costs are
actually representative of the sweep of regulatory costs and thus of little concern, or whether real
regulatory costs lie beneath the surface, increasingly rendering federal spending ($3.504 trillion in
fiscal year 2014) the real tip of the costberg while the regulatory enterprise exists out of plain
view, unacknowledged. This exercise is about the need to establish baselines, and to address the
inappropriateness of acting as if regulatory costs dont matter. There is far more to the picture
than OMBs annual reports capture, and it must be disclosed.
Again it is important to clarify that these regulatory compliance costs and costs of intervention are
non-budgetary; that is, they are not what the federal government spends, or its outlays; they are an
amalgam of what the private sector spends on regulatory compliance, estimated economic
impacts of rules, some indirect costs (not much here), as well as some undifferentiated component
that consists of unfunded mandates on states and lower level governments
While this report contains much detail on the top and bottom components of this costberg, the
theme it highlights is how remarkably little is truly known, exemplified by the many glaring gaps
in what can be said about the cost of regulation, for example the relatively few costs quantified for
areas like electricity, telecommunications, transportation, and for categories of economic
intervention such as antitrust and trade barriers. Given uncertainties about regulatory costs and
the absence of infrastructure to tabulate them, the regulatory enterprisewhose compliance costs
rival taxation itselfis far more unmapped than many may suspect.
Best wishes to all pouring disdain on the Small Business Administrations assessment of the
regulatory enterprise, as Sunstein and several policy groups did; but even using OMBs own
numbers and acknowledgements from the recent past, the regulatory enterprise is considerably
larger than assumed at and reflected by todays Office of Management and Budget in its annual
reports to Congress on the benefits and costs of federal regulation (the $133 billion above). Tip of
the Costberg cannot give a perfect estimate, but it presents a defensible, and in the main, understated
estimate given omissions and areas where future researchers and the affected must fill in the gaps
that this report (partially) uncovers.
A wave of assumptions and guesses without scholarly pretension underlie this tally, and all data
and sources are subject to change at this authors discretion.12 Estimates for existing and pending
regulatory costs in future editions of Tip of the Costberg or in the annual Ten Thousand
Commandments13 arent merely subject to change, they are guaranteed to change at the discretion of
the author and upon receipt of new information.
In between annual reports, figures and data may be periodically updated at the Ten Thousand
Commandments web page (see www.tenthousandcommandments.com, or the code below), and
readers possessing knowledge and insight about regulatory costs in various sectors, businesses and
walks of life are encouraged to contact me at wayne.crews@cei.org or submit links via the
Contact field at tenthousandcommandments.com to include in future editions.
The policy circus of an executive office and even a Congressional Research Service study14 taking
taxpayer time and dollars to refute the federal governments sole comprehensive regulatory cost
study rather than compile its own alternative superior estimate is indicative of the state of affairs.
Over the years, whatever their flaws, the SBA has produced three of perhaps the most
comprehensive regulatory cost and incidence surveys in existence in the United States. These
reports were actually by law geared toward examining the incidence of regulations on small
businesses, with the aggregate cost number an incidental calculation. Disdain for taking regulatory
costs seriously and venom over the issue prompted me to pull together what I can find in a manner
that will allow building upon a baseline, to which official annual data will be appended annually.
Policymakers need not care about the tribes and partisans here, but they do need to book things, as
federal expenditures and deficits get booked. If citizens are to be subject to mandates, there exists
an absolute obligation on the governments part to catalog regulatory compliance burdens, just as
we know what taxes we pay as a result of government requirements. We must reiterate that
congressional accountability for whatever regulatory costs may be also matters, because in a
fundamental sense costs are not actually measurable by third parties and so accountability to
voters for impacts is a necessary but not sufficient check-and-balance.
both compliance and economic cost, haphazard distinctions between consumer and employer impacts,
consideration of economic transfers as well as compliance and efficiency costs, use of both high-end
estimates and best-estimates, old data set syndrome, and a disdain for general equilibrium analysis.
OK, Im exaggerating a little. But perhaps most damning, the author embraces a philosophical
stance holding that actual regulation and discipline require a different governmental posture than the
administrative-state model, one involving continually replacing government intervention (and
cronyism) with the evolution of private risk management and disciplinary institutions that surpass
government standards. The good things we wantfood safety, cybersecurity, financial stability,
environmental amenities and so onare forms of wealth and require competitive markets to
advance them. Actual regulation can be undermined by federal edict, good intentions of the
regulator notwithstanding. One rarely hears of tainted meat thats not USDA approved. A
regulatory agency isnt necessarily a regulatory agency if it replaces or interferes with what would
have been a better disciplinary regime.
On the use of general equilibrium models to quantify regulation, NERA Economic Consulting
notes that When evaluating policies that have significant impacts on the entire economy, one
needs to use a model that captures the effects as they ripple through all sectors of the economy
and the associated feedback effects.17
Elegance aside, unfortunately modeling never seems to convince critics even though the attempt to
gauge increases in costs of production that ripple through the economy is vitally important.
Researchers must continue to try however, despite the fundamental unquantifiable essence of
regulatory costs. An alternate approach for future researchers might be to better assess individual
agency costs instead, and direct the general equilibrium energy to specifying any cost overlap
across agencies that needs netting out, but that is a call others can make. It would also be useful to
indicate which rules no longer impose the same magnitude of costs.
The components of The Total Annual Cost of Federal Regulation chart include, generally:
OMBs pre-turn of the century baseline cost estimates for annual economic, social and
process regulations, but scaled down
Annual OMB compilations of a subset of executive agency major rules sporting both
annual costs and benefit estimates, since 2001
Rules featuring OMB-reviewed cost but not benefit estimates, compiled since 2001
Other executive agency major rules reviewed at OMB, but entirely non-quantified and
included as a placeholder
Independent agency costs (from the Government Accountability Office) where available
Paperwork cost estimates, based on hours reported by the federal Information Collection
Budget
Certain sector estimates and industry estimates to supplement governmental estimates
The final section of Tip of the Costberg notes numerous additional categories of costs left out of the
tabulation. For example, federal agencies do not generally consider job impacts as costs in their
regulatory analyses, a great national wonder that contributes to the consternation of many. Lost
liberties of the populace also do not register.
Alas, our descendants may learn that it is spending, not regulation, that is the tip of the costberg.
than one attuned to the context of agency decision-making when others pay the costs. There is no
single end of the political process: rather, there are conflicting goals.22 The private sector asks,
what is the impact on our bottom line if we do X? But such constraints are alien to agencies,
and discrete cost-benefit analyses are inapplicable tools. Even assuming agencies would not
overstate benefits, cost-benefit analysis has nothing to say about superior benefits that may have
accrued if an agencys budgetary allocation had belonged instead to another agency. (Conceivably
Congress, in a budgetary oversight capacity, can attempt to incorporate societal opportunity costs,
but accountability for significant or controversial regulations would be a better approach.)
The fact that costs of health and safety regulations are measured in dollars while benefits are often
presented as health effects when estimates are quantified, that ismakes objective benefit-cost
analysis satisfactory to all difficult. Do benefits outweigh costs if a rule costing $1 billion will save
1,000 lives? How about if the rule saves 75 lives, or only one life? No one argues that life is
priceless either way, but what if the resources could have saved even more or done more good
deployed otherwise. Even benefits of federal budgetary activities are difficult to compare, let alone
regulatory benefits. How does one for example, trade off benefits of federal outlays on air traffic
control versus money spent on welfare? Along with benefit estimates being possibly inflated,23
such ambiguities become greatly magnified in regulatory regimes that leave benefit assessments up
to separate agencies.
A benevolent dictator might save more lives and prevent more injuries by banning stairs and
requiring elevators in all homes (costly); painting white lines on rural roads (not costly), requiring
helmets in cars; or requiring, as one of my professors liked to note, a protruding dagger to replace
auto airbags to encourage safe driving and protect pedestrians (illustrative of risk tradeoffs).
The situation can deteriorate such that benefits become untethered from the alleged goal of the
regulation or agencys reason for being, as noted in new findings on the benefits of energy
efficiency standards by researchers from the Brookings Institution and Villanova University.24 In
Overriding Consumer Preferences With Energy Regulations, the bulk of benefits justifying
recent energy efficiency standards do not come from greenhouse gas reduction emissionswhich
are negligible and (in yet another departure) even ascribed as benefits to the world rather than
American citizens. Instead, the benefits derive from agencies correcting consumers irrational
behavior by forcing them to buy allegedly more energy efficient vehicles, lighting, washing and
cooling apparatus. This is abhorrent, and policymakers should discipline agencies to recognize
that compulsory reductions in consumer choices are costs, not benefits. Otherwise the potential
for abuse is strong; as the authors note, the burden of proof for any BCA conducted as part of a
review of regulatory proposals should be placed heavily on justifying any presumption of a
deviation from consumer sovereignty. To hold otherwise is to hold that regulators may
legitimately override any choices by individuals or firms that move them.
Moreover, persons enjoying the benefits of regulations and persons paying for those benefits are
not always, or perhaps rarely, the same people. Thus from the standpoint of society, the net-publicbenefit standard is not obviously fair. An agencys claim that a regulation produces net benefits
can skirt the question of whose benefits are promoted, and whose resources were used to achieve
those benefits, regardless of how benefits quantitatively exceed cost, and will likely ignore actions
of other agencies. Regulation can be made to appear cheap relative to everything else in the social
choice set, in economics jargon, and society induced to buy too much. Modern regulatory
control ought not entrench the ability for those who gain from regulation (including regulatory
bodies and rent-seeking businesses) to force a few to shoulder regulatory costs. As Wendy L.
Gramm, former administrator of OMBs Office of Information and Regulatory Affairs (again,
OIRA) noted in the Administrative Law Review:25
Enduring lessons from executive oversight over regulations are those we learn from economics: the
relatively few who derive large benefits from government actions have greater incentives to act to
influence policies than the many individuals who each pay small amounts for them. The voice of the
average consumer or taxpayer is not always heard or represented in the regulatory debate.
Regulation machinery can enable cronyism when it comes to liberalization, or removal of poor or
outdated rules. Economist Richard Williams writes: Most of the interest in any existing rules will
be by those who must directly comply with the rules and their incentives are usually to keep the
rules. Many of the rules, or at least a portion of them, were put into place at the behest of the
regulated industry in the first place, to raise the cost of rival firms.26 That creates pressures toward
regulation as an end in itself rather than for the benefit of society in general, and can render the
net-benefit discussion a phony one at the outset.
Regulatory benefits themselves can have opportunity costs. One could call it The Costs of
Benefits, and they can be wide-ranging. There are problems with priestly agency attitudes, the
costs of closing doors, distortions of industry structure (like antitrust, telecommunications,
electrical grid or cybersecurity regulation) and interference with normal market trajectories and
pricing experimentation. Such regulation can prevent superior pro-consumer, competitive
responses to alleged bad behavior, since companies dont operate in a vacuum. Supposedly
beneficial regulation can introduce consequences such that the private firms expected to carry out
the regulators decrees exit altogether (like small firms dropping health insurance). As weve noted
and will again, regulations can undermine institutions of liberty and principles of self-reliance, as
if these were non-benefits.
Many have stressed that regulation of the governmental kind can undermine real regulation. In a
1998 Cato Institute Policy Analysis, the author noted:27
But it is a mistake to assume that regulation necessarily involves the government. Much regulation in
the American economy is private, produced and enforced by independent parties or trade associations.
These private organizations can oversee market participants actions by different processes, such as
standard setting, certification, monitoring, brand approval, warranties, product evaluations, and
arbitration. ...The federal government should consider transferring regulatory functions such as
certification, inspection, monitoring, and product testing to independent parties; it should also consider
allowing independent parties to compete with federal agencies in setting standards.
None of this is to say that securing government-wide recognition of the significance of benefitcost tradeoffs (not just for a lone agency) and of the need to communicate benefits and costs in
common terminology wouldnt be an advance. It would be, but primarily because many
policymakers see no urgency for balancing rules against those of other agencies. Agencies think and
operate within their particular box; there is little means or inclination for agencies to assist with
government-wide priorities. The agency regulating one-wheeled SegWays or zip stix or motorized
unicycles may pay no heed to the one regulating bioengineered gills or five-foot squish-foam car
bumpers.
It took the rise of generally accepted accounting principles for large scale human free enterprise to
arise in the 19th century.28 The public sector is decades behind in conveying true costs for
endeavors that are compulsion rather than trade-based. Whether such initiatives as the
Department of Energys costly appliance energy efficiency requirements are net-beneficial will
never be agreed upon. Agreement doesnt even exist over whether house attic fans are an efficiency
net plus on balance, let alone complicated and highly regulatory green energy and conservation
proposals. So it makes more public policy sense for an agency cost focus.
Federal spending presumably generates benefits, but unlike regulation, the taxes individuals pay are
not offset by the benefits those taxes provide: No one speaks of a net tax benefit with the implication
that taxation costs nothing or that measurement is somehow secondary, and that we can increase
tax collection ad infinitum. Only grateful recipients would tolerate that, and only so long as the
plunder lasted. Similarly, regulations transfer wealth, benefits from those transfers do not accrue
equally to all, and costs do matter. Such fundamental disagreements argue for congressional
approval of regulations.
A technocratic pseudo-virtuous cost benefit approach neglects when command and control
undermines actual elevation of safety and health features as forms of wealth.
So here the emphasis will be costs.
cost measurement is inherent, stemming from basic subjectivity and the slipperiness of measuring
costs and the more profound reality that no objectively identifiable magnitudes are available to
the third-party regulator.
This is why regulatory reform actually requires congressional reform rather than exaltation of
cost-benefit analysis; somebody has to answer to voters because cost tabulations, let alone benefit,
will never be adequate enough or sufficient to validate the regulatory enterprise and legitimize
social choice tradeoffs on public policy concerns.
Sue and settle agreements are legal settlements, often the result of a lawsuit brought by
special interest groups that mandate subsequent regulatory action under a compressed timeline.
Rules issued in this manner are often unfair to job creators because they force specific agency
action often desired by environmental groups, while denying other stakeholders a seat at the
table.
Guidance documents, while not legally binding or technically enforceable, are supposed to be
issued only to clarify regulations already on the books. However they are increasingly used to
effect policy changes, and they often are as effective as regulations in changing behavior due to
the weight agencies and the courts give them. Accordingly, job creators feel forced to comply.
Finally, agencies often abuse the emergency rulemaking procedures provided for in the
Administrative Procedures Act (APA). The APA authorizes agencies to issue interim final and
direct final rules under emergency conditions. These rules are issued without the benefit of
initial public comment, yet they are legally binding as of the date of publication. Often times
the emergency is a merely an unrealistic deadline in a statute. Abuse of the emergency
procedures completely deprives the public and job creators of their right to provide the agency
with feedback on the expected impact of the regulation before that regulation takes legal effect.
Relatedly agencies can overstate some public harm or social cost, implicitly reducing the cost
of their regulatory interventions. A prominent 2013 example occurred with respect to a new
concept of the social cost of carbon incorporated in a Department of Energy rule on microwave
oven energy efficiency without congressional approval. As the Wall Street Journal put it:44
[T]he Administration slipped this mickey into a new rule about efficiency standards for microwaves,
significantly raising what it calls the social cost of carbon. Team Obama made no public notice and
invited no comment on this change that will further tilt rule-making against products and industries
that use carbon energy.
Federal law requires the government to calculate the costs and benefits of its rules and projects. The
regulatory agencies are expert at rigging these calculations, but even they havent been able to hide the
enormous costs of President Obamas regulations under traditional economic measurement. The
Administrations solution? Simply redefine the economic and social benefits of reducing carbon.
In essence, the administrations estimate of the social benefit of reducing carbon has gone from
zero to $21 to $36 per metric ton over the past few years;45 fuel efficiency standards were net losers
until these changes were made, and the changes will be used to justify aggressive energy rationing,
regulation, and project delays in the future.
There are separate unmeasured costs at hand when a government agency like the Energy
Department elevates one feature of a product, here its efficiency, so-called, above all other
concerns like affordability and future production and access to the necessity of energy. The
problem of misrepresentation of benefits and intervention biases is a multi-agency one. As the
Competitive Enterprise Institute (this authors organization) has noted, the Environmental
Protection Agency: 46
[H]as refused to share with Congress the data upon which the EPA bases its highly implausible claims
of hundreds of billions of dollars in health benefits from recent regulations.
And that:47
CEI has had to take EPA to court over seven different Freedom of Information Act requests to force
release of public records of conversations among top agency staffers and outside groups on the
administrations war on coal and its attempts to build support for a carbon tax.
Clearly, coping adequately with regulatory costs and honesty regarding benefits presents
substantial challenges. They are insurmountable if outright avoidance of cost analysis and an
inclination to overstate harms (and in turn overstate the benefits of regulation) dominates. But as
long as preemptive regulation dominates economic and social regulatory policy, one can do worse
than rough estimates that nonetheless help allocate regulatory dollars in loose correspondence to
relative hazards or inefficiencies if were explicitly naming the assumption that regulators believe
they know best (addressed already and elsewhere herein), and if elected representatives are
required to approve major and controversial agency lawmaking rather than sit idly by. Imperfect
cost estimates can still help directing policy to where an accountable Congress believes benefits to
lie, and internalize the need to answer for the adequacy of cost analysis. In fact this later detail is
one of the necessary but not sufficient steps to improve regulatory cost analysis.
In the final analysis, given entrenched incentives to overstate and understate (or given the
incompatible philosophies regarding the question), accuracy of initial cost calculations may not be
as important as requiring agencies to compete for the right to regulate under the supervision of a
Congress accountable to voters for costs and for the benefits those costs fund. That changes the
calculus. Congress can choose to experiment with regulatory budget48 constraints based on the
potential benefits that an agency provides relative to other agencies that, say, save more or fewer
lives. It can shift regulatory cost-imposing authority to agencies to maximize benefits within that
appropriate constraint. At some point, such institutional accountability mechanisms help make it
apparent when it becomes better for policymakers to step off of social engineering and
paternalism, and to instead trust (voting) individuals to allocate their own resources to medical
care, smoke detectors, fire extinguishers and safer cars etc. than for regulators to be making
inferior choices via top-down allocation of those same resources.
On the Hotheadedness and Partisanship Over Efforts to Calculate Regulatory Costs; Or,
More Reasons Official Disclosure Needs Amplification
Now the sole remedy for the abuse of political power is to limit it; but when politics corrupt business,
modern reformers invariably demand the enlargement of the political power.49
Isabel Paterson
The God of the Machine
We dispute their numbers. We dont have hard, concrete numbers, but we dispute them.50
Former White House press secretary Jay Carney addressing criticism
of administration claims regarding paid enrollments in Obamacare.
The two enemies of the people are criminals and government, so let us tie the second down with the
chains of the constitution so the second will not become the legalized version of the first.
Thomas Jefferson
The uncertainty over the aggregate costs of regulations despite over a decade of OMB reports to
Congress on the benefits and costs of the regulatory enterprise provides some backdrop for
reflecting on one of the days heavily cited comprehensive regulatory cost surveys, that prepared
by Nicole V. Crain and Mark Crain.
The newest edition of the report, with updated economic modeling, was published by the
National Association of Manufacturers, and the overall cost to the economy is estimated as $2.028
trillion annually.51 Crain and Crain break costs up into four main categories:
Economic:
Environmental:
Occupational Safety/Heath & Homeland Security:
Tax Compliance:
$1,448 billion
$330 billion
$92 billion
$159 million
The version of the report prior to the NAM publication had been prepared for the Small Business
Administrations Office of Advocacy. That report came under heavy attack for its $1.752 trillion
annual cost figure, 52 particularly for its employment of a general equilibrium model using World
Bank data to estimate the costs of economic regulation, the largest component.
Whatever flaws exist (and Crain and Crain responded in great detail to those), it was
inappropriate for the administration to distance itself in such dismissive fashion from the Small
Business Administrations overall effort to establish and clarify regulatory impacts. The SBA, after all, is
a part of the same executive branch of government (although it is technically an independent
agency), and OMBs duty is to strive to reconcile data differences and unify around some
defensible narrative regarding the aggregate scope of regulation. Instead, we had Mr. Sunstein
demeaning cost estimates not far out of line with what OMB itself once embraced back in an era
when costs were surely lower than today. An official White House blog post even lamented that
One group is even claiming that the regulations currently on the books cost the U.S. economy
$1.75 trillion in 2008.53 Note that dismissive one group? It was Obamas own SBA.
This official attack on the SBA by the very administration under which the report appeared was
inconsistent with Obamas Executive Order on Improving Regulation and Regulatory Review54
and with the reality that we know very little about the regulatory states impacts and we fail to
account for much of it, as well see in future sections. The SBA reports scope is not duplicated by
critics or by any other government department.
The latest SBA report broke regulatory costs into five components totaling $1.752 trillion annually.
For context and reference, this breakdown may be seen alongside several other turn-of-thecentury-era cost estimates in the chart Estimates of the Cost of Regulation: Late 20th Century, Early
21st Century. OMB formerly relied on similar SBA regulatory cost surveys, and although those
earlier SBA report iterations did not use the World Bank data, the OMB-tolerated overall cost
figure still exceeded $1 trillion over a decade ago, regarded in todays dollars. The Government
Accountabilty Office (GAO) weighed in during the 1990s as can be seen; and notably OMBs 2002
estimates exceeded those of SBA during that era.
CHART: Estimates of the Cost of Regulation: Late 20th Century, Early 21st Century
http://bit.ly/1meAgy6
The 2010 SBA reports findings were in line with the findings of its earlier compilations that
employed somewhat different approaches. The 2010 SBA report updated a 2005 report by Mark
Crain, which did not include the regression model based on World Bank survey data, and found
2004 regulatory costs of $1.1 trillion.55 All else equal, adjusting those various cost estimates would
put them in the ballpark of the more recent number not even including the cost of new rulemaking
regimes such as the Department of Homeland Security and the Dodd-Frank financial rules that
are seemingly included by implication in the new 2014 Crain and Crain report. In a still earlier
October 2001 report by Mark Crain and Thomas D. Hopkins, the authors noted regulatory costs
of $843 billion,56 which would be $1.1 billion in 2013 dollars, as Estimates of the Cost of Regulation:
Late 20th Century, Early 21st Century shows.
That report, in turn, had updated still earlier analyses, such as Thomas Hopkins original 1995
analysis for SBA57 that OMB employed in the mid-90s to early 2000s.
Thus recent criticisms of the current Crain and Crain report would also apply to some legacy and
modern OMB estimates, although, alas, critics do not present alternative defensible total cost
estimates that recognize the magnitude of federal economic and social intervention. For example,
a Congressional Research Service report entitled Analysis of an Estimate of the Total Costs of
Federal Regulations,58 which, rather than finally tabulating regulatory costs in an authoritative
fashion after all these years, shrugs over complexity and demeans the SBA effort. The
congressman who solicited the study was clearly not motivated by trying to find out what the cost
of regulations are. Again, Crain and Crain responded in detail to the criticism.59
Regulatory cost measurement is problematic, but much of the outrage seems geared toward
rationalizing agency regulatory intervention and diverting attention from over-reach. But there
exist 20 years of regulatory costs roundups; where OMB or lawmakers objected to findings,
demands for the creation of alternatives would have been an actual contribution compared to their
current behavior.
Much of the problem appears not to be with SBA/Crain and Crain but with the idea of
measurement as such. For some critics, the impulse seems to be to condemn the conservativeness
of those who called for disclosure and accountability. For example, a report called Setting the
Record Straight, editorialized, we concluded that the Crain and Crain report is sufficiently
flawed that it does not come close to justifying regulatory reform efforts, such as the REINS Act,
which seek to limit protection of people and the environment.60 No one wants to limit protection
of people and the environment, so the comment is belligerent. Rather, some disagree that
command and control regulation always best secures those values, and believe instead that top
down regulation can harm those values. There is a substantial body of research on that notion,
and most policy analysis of the laissez-faire persuasion routinely enough condemns crony
capitalism and various offshoots such that the absence of any recognition of regulatory abuse in
Setting the Record Straight make it a bad polemic. Crain and Crain responded to the Setting
the Record Straight critique also, including to questions about access to their data.61
There at least needs to be a balancing of concern with agencies self-calculating burdens of their
own rules, and business capability in exploiting the regulatory process. But there is none.
SBA should continue future editions of its regulatory costs studies. The universe of regulations
subject to review by the OMB is now far more limited compared to what SBA attempted to
encompass, as well see. Even the Crain and Crain report did not cover everything; the authors
noted that [T]he report does not account for a number of indirect or second-order costs of
regulations.62 That is, ripple effects of regulatory cost increases that flow from one sector to
another are not captured. Further, the report did not measure reduction in dynamic efficiency,
such as slowing innovations that would lead to productivity gains and therefore general economic
expansions over time.63
The magnitude of what can be assembled, plus that of the unmeasured, indicate substantial
unappreciated costs. Job number one is to measure better and build better tools to begin
supervision of an unsupervised regulatory process. Criticism would be more valuable if directed at
the fact that be that the U.S. Government doesnt have its own comprehensive data. Rather than
criticize the SBA use of a World Bank index, the criticism should have been, What? The United
States Small Business Administration was forced to resort to World Bank data to measure United
States regulation?
Because they were derived from pre-1990 programs, the GAO figures left out big-ticket regulations
flowing and yet to flow from such contemporary laws as the Clean Air Act Amendments of 1990,
the Americans with Disabilities Act, the Family and Medical Leave Act, a 27 percent hike in the
minimum wage, and the FDAs Nutrition and Food Labeling Amendments. (These were 20 years
ago; new regulations in homeland security, health care, environment and finance characterize the
current centurys great unknowns.)
It was in this post-GAO environment that, a little over a decade ago, before OMB management
took to calling SBA regulatory cost estimates an urban legend, OMBs own figures were within a
stones throw of the trillion-plus magnitude now reported by SBA. OMBs own regulatory cost
estimates for social, economic and process regulation in its Draft Report to Congress on the Benefits
and Costs of Federal Regulations in the March 28, 2002 Federal Register added up to $954 billion in
2001 dollars,72 or $1.255 trillion in todays dollars, without including the past decades new
mandates. Thats comparable to the current controversial Crain and Crain and to the earlier SBA
iterations, and even to the new NAM study finding $2 trillion in costs. A few more details on some
of the cost breakdowns will appear shortly, but OMBs aggregate estimates by category for the
handful of rules reviewed or surveyed as of 2001 appear in Total Annual Costs of Regulations as of
Sept 30, 2001 According to OMB.
CHART: Total Annual Costs of Regulations as of Sept 30, 2001 According to OMB
http://bit.ly/1pjtMc9
Note again in this more detailed breakdown of costs by environmental, economic and other
categories that OMBs official roundup for regulatory costs was $954 billion, in 2001 dollars and
well before the legislative/regulatory initiatives of the last decade and a half under Presidents
Bush and Obama. In 2013 dollars, the figure is $1.255 trillion.
Just for reference with respect to OMBs $954 billion turn of the century figures, in its subsequent
final 2002 Report to Congress on Benefits and Costs, by which time OMB had set out on its path of
disavowal of aggregate cost estimates, OMB presented a separate tally of costs of a set of selected
rules reviewed between April 1995 and September 2001 (a 6 year period) of $53.4 billion in
2001 dollars ($70 billion in 2013 dollars); see Estimates of Annual Costs of Major Federal Rules - 19952001).73
CHART: Estimates of Annual Costs of Major Federal Rules - 1995-2001
http://bit.ly/1qYui4K
What is interesting here is that OMB allowed that Based on the information released in previous
reports, the total costs and benefits of all Federal rules now in effect (major and non-major,
including those adopted more than 10 years ago) could easily be a factor of ten or more larger than
the sum of the costs and benefits reported.74 (Italics added.) This is an acknowledgement of the
inherent incompleteness of OMB reports, and that the aggregate number jettisoned since the 2002
draft report wasnt necessarily off base. Again, there is still nothing official to replace the numbers
apart from SBAs reports.
OIRA Administrator John Graham, under President George W. Bush, captured the tenor of the
times when aggregate estimates were downplayed:75
Although the Crain and Hopkins estimate is the best available for its purpose, it is a rough indicator of
regulatory activity, best viewed as an overall measure of the magnitude of the overall impact of
regulatory activity on the macro economy.The underlying studies were mainly done by academics
using a variety of techniques, some peer reviewed and some not. Most importantly, they were based on
data collected ten, twenty, and even thirty years ago. Much has changed in those years and those
estimates may no longer be sufficiently accurate or appropriate for an official accounting statement.
The factor of ten or more was repeated subsequently, for example in a February 3, 2003 OMB
memo, With New Information on Federal Regulations, OMB Releases Draft Cost-Benefit
Report76 as well as in the 2004 final report (but with ten year lookbacks rather than six year).77
The explicit emphasis that costs could be substantial was downplayed in future reports, replaced
by insistence that reported monetized benefits continue to be significantly higher than the
monetized costs.78
The disclosure ethic at OMB has weakened, where a relative handful of new regulations are
assumed to average a few billion in new costs annually, and where the prior 10 years has become
acceptable to the bureau as adequately capturing aggregate impacts. Alongside the loss of
aggregate estimates, a regular chart containing a lookback to 1981 of rules OMB reviewed under
E.O.s 12866 and 12291 no longer appears (the last time it did was in the 2009 annual report).79
So the 10 year focus characterizes all regulatory review now. For example, the Draft 2015 Report to
Congress on the Benefits and Costs of Federal Regulations from the OMB pegs the cumulative costs of
120 selected major regulations during the decade 2004-2014 at between $68.4 and $102.9 billion,
in 2010 dollars; Meanwhile, the estimated range for benefits spanned $260.9 billion to $981.0
billion.80 OMBs chart for the (only) 13 rules sporting both benefit and cost analysis added during
the fiscal year ended September 2014 shows costs of from $3.0 to $4.4 billion were added (2010
dollars).81
OMB had noted in the 2011 edition that On average, roughly $5 billion in annual costs have been
added each year to the total regulatory burden.82 Now OMB says $10 billion "As the figures
show, the monetized additional costs of private mandates tend to be around or below $10 billion
per year.83
Hahn and Hird and others deserve enormous credit for the groundwork they did, making the early
Hopkins, Crain and Hopkins, GAO and OMB reports possible in the first place. In my opinion
their analysisand the spirit of it and the urgency of preparing similar analysisdid not deserve
to be cast off by OMB, and left unreplaced. Moreover my reading of the Regulatory Right to
Know Act (the decrees of which OMB prefaces in its reports) requires OMB to prepare actual
aggregate regulatory cost estimates, not merely the 10-year roundup:84
[T]he Director of the Office of Management and Budget shall prepare and submit to Congressan
accounting statement and associated report containingan estimate of the total annual costs and
benefits (including quantifiable and nonquantifiable effects) of Federal rules and paperwork, to the
extent feasible(A) in the aggregate; (B) by agency and agency program; and (C) by major rule.
But it is more convenient to interpret aggregate as referring solely to the current year or decade.
The problem with that concession over a decade ago is weve got no OMB-sanctioned picture of
the cost of regulation for anything but a relative few rules of the first few years of the 21st century.
for example, the 3,554 rules finalized in calendar year 2014. Of these, only 14 featured both cost
and benefit calculations expressed in dollar terms. This is the block that OMB features
prominently in its annual expositions of net benefits of the regulatory enterprise. OMB estimates
that this subset of rules sports anticipated costs of between $3.0 billion to $4.4 billion in 2010
dollars.89 Thirty-three others implemented budgetary spending programs; such budget rules are
officially considered transfers rather than regulations.
Plenty gets left out. As Crain and Crain noted in 2010, [R]egulations implemented directly
through the legislative process are outside the OMB review process. Furthermore, the totality of
rules, both existing and new, with anticipated impacts below $100 million, and not subject to the
Paperwork Reduction Act, are also outside the OMB review process.90
Still further, OMBs cost-benefit roundup leaves out independent agencies compliance costs,
something well review later. As indicated over a decade ago in its 2002 Report to Congress, OMB
does not review regulations of the independent agencies or any regulations that are not
determined to be significant under the E.O. 12866 definition.91
OMB does acknowledge the non-triviality of the matter. Heres an OMB disclaimer from 2011:92
It is important to emphasize that the figures here have significant limitations. When agencies subject
to Executive Orders 13563 and 12866 have not quantified or monetized the benefits or costs of
regulations, or have not quantified or monetized important variables, it is because of an absence of
relevant information. Many rules have benefits or costs that cannot be quantified or monetized in light
of existing information, and the aggregate estimates presented here do not capture those non-monetized
benefits and costs. In fulfilling their statutory mandates, agencies must often act in the face of
substantial uncertainty about the likely consequences. In some cases, quantification of various effects
is highly speculative. In addition, and significantly, prospective estimates may contain erroneous
assumptions, producing inaccurate predictions... While the estimates in this Report provide valuable
information about the effects of regulations, they should not be taken to be either precise or complete.
The upshot is that measured and reviewed major, significant or economically significant rules at
any given time are a fraction of the total number of rules in the pipeline or finalized; and the
number with cost-benefit analysis an even smaller proportion despite repeated official emphasis on
official claims of regulatory benefits exceeding costs. Both benefit calculations and cost
calculations for the regulatory enterprise seem glaringly inadequate.
In a 2012 report Searching for a Regulatory Tsunami in Calm Seas, an unconcerned OMB
Watch (now Center for Effective Government), says of the $100 million threshold for
economically significant rules that: This number has not been adjusted for inflation since
centralized review by OIRA began in 1980, even though the costs of goods and services have
increased over the past 30 years.93 In their view, the rise in economically significant rules in recent
years is due to inflation rather than rules being more burdensome. Perhaps, but binding rules that
were never classified as economically significant rules years ago now may be significant.
So how much review happens? We require a sense of proportion. In its latest 2015 Draft Benefits
and Costs report, OMB tells us that From fiscal year 2005 (FY 2005) through FY 2014, Federal
agencies published 36,457 final rules in the Federal Register. OMB reviewed 2,851 of these final
rules under Executive Orders 12866 and 13563.94
OMB reviews significant rules, not just economically significant or major rules; nonetheless, still
fewer than 10 percent of all rules are reviewed whether or not costs and benefits enter into the
picture in any way. As for costs, we can also say a bit about claims that the overall regulatory state
provides more benefit than cost by looking at how many and what proportion of rules whose costs
we know anything about whatsoever.
The table The Funnel of Gov -- On the Depth of Regulatory Cost Review, 2001-Present, shows that of the
flow of several thousand rules issued by agencies, just a relative handful get OMB-reviewed cost
analysis, let alone cost-benefit analysis. The chart depicts major rules reviewed during the fiscal
years 2001 to the present, and shows the smaller proportion of rules that have any cost analysis
whatsoever. The proportion of major rules with cost analysis averages around 35 percent; the
proportion of all rules with any reviewed cost analysis at all as a percentage of the annual flow of
final rules in the Federal Register has averaged just .46 percent. In any given year, the percentage of
all rules that have cost analyses reviewed by OMB has never reached one percent; the highest was
.8 percent. Benefits fare even more poorly.
CHART: The Funnel of GovOn the Depth of Regulatory Cost Review, 2001-Present
http://bit.ly/YSMF0u
But the absence of relevant information does not discourage the passion for regulating. Even
agencies officially subject to the relevant orders may not supply cost estimates when they ought.
Nobodys head rolls if they dont.
Furthermore, as the Federal Register has noted:
The Regulatory Plan and the Unified Agenda do not create a legal obligation on agencies to adhere to
schedules in this publication or to confine their regulatory activities to those regulations that appear
within it.95
So if an agency prefers not to quantify costs of a rule, it simply may not, and it doesnt appear.
(This is why points of order for Congress to object to any rule need consideration, rather than
merely objections to major or economically significant rules tied to cost estimates). A related
concern is the imposition of federal mandates on states; agencies are interpreting their own quality
of adherence to mandate relief efforts, and may acknowledge too few of their rules that trigger
a mandate. While policymakers wouldnt dream of doing away with the fiscal budget that tracks
government spending, a lack of transparency and accountability for regulatory costs prevails
despite ever prominent regulatory intervention.96
Benefit analyses are highly sensitive to basic assumptions about how regulations translate into
benefits and whose opinions carry the day. Both there and on the cost side, vast gaps rule. The
bottom line here is the charge of urban mythology appears unwarranted, and even if it were valid,
its not obvious how OMB would know.
and into which future official OMB and other federal data on regulatory costs will be
incorporated.
So lets step back a bit. The United States has a GDP of over $17 trillion, and a capital stock of
wealth vastly larger.
Yet the last time OMB had anything quantitative to say on the matter of the aggregate cost of
economic regulation (that is, not solely the health- and safety-oriented social regulation
emphasized by OMB today in its annual benefits and costs reports covering only executive branch
agencies) was in Appendix C of its 2002 draft, not final, Report to Congress on Estimates of the
Aggregate Costs and Benefits of Regulation.101 Economic regulation, as defined by OMB in that
era, restricts the price or quantity of a product or service that firms produce including whether
firms can enter or exit specific industries.102
This category was real mess, given the lack of formal estimation and the assumptions and guesses
that necessarily went into establishing aggregate estimates. Today, given the fact that much
economic regulation is issued by independent agencies that escape even OMB review, the lack of
transparency remains.
In any event, OMB used to catalog economic efficiency costs and transfer costs. Referencing prior
research in the appendix of the 2002 draft report, OMB noted that the efficiency costs of
[domestic] economic regulation amounted to $80 billion.103 In support of a figure of an overall
$150 billion for efficiency costs of rules covering both domestic commerce and international trade,
OMB then referenced two studies of the time, one by the Organization for Economic Cooperation
and Development104 and one by the Council of Economic Advisers. OMB noted that the
contemporary Hopkins estimate of a trade barrier component of these economic efficiency costs
may be too low.105 OMB then invoked the 2001 Small Business Administration report by Mark
Crain and Thomas Hopkins in support of a larger estimate.106
Note those are efficiency costs, and may be seen in Total Annual Costs of Regulations as of Sept 30,
2001 According to OMB, a chart we also referenced earlier.
Also included in Total Annual Costs of Regulations as of Sept 30, 2001 According to OMB is $337
billion in transfer costs (shifts from one pocket to another). This is derived from Table 13 in OMBs
2002 Draft Report to Congress. Recognizing such costs is worthwhile given the analogy to income
transfers in the fiscal debate, and given that nowhere else are such economic interference costs
acknowledged. OMBs estimate of economic efficiency and transfer regulatory costs totaled $487
billion in 2001 dollars, or $641 billion if regarded in 2013 dollars. Meanwhile for comparison, the
economic regulatory cost component of Crain and Hopkins was $435 billion, as compared to their
total regulatory cost at the time of $843 billion.107 OMB at the time, then, reckoned higher costs
than Crain and Hopkins; for line-by-line comparisons in categories, refer back to Cost of Federal
Regulation: Late 20th Century, Early 21st Century.
Well adjust OMBs $641 down considerably, even though comparable cost magnitudes would
hold for 2001 to the present, making todays economic costs arguably considerably higher.
However were not making that assumption, merely noting that we could, especially since OMBs
yearlies only encompass a few dozen rules and leave out the most relevant independent agencies.
Beginning with the 2005 Crain report on regulatory costs, regression estimates were used in part
to assess economic costs, and some costs that herein I will refer to as social rather than
economic were merged into Crains economic category. Therefore, here I employ a fusion of
the OMB 2002 and the Crain & Hopkins 2001 report to SBA108 to designate a rough pre-turn of
the century annual cost of economic regulation. This helps to keep economic and social regulatory
costs segregated here and in future updates. It also helps with presenting ongoing departmental,
agency and sectoral estimates, with our turn of the century number occupying a sort of anchor
position.
Since newer figures for international trade impacts exist, here I subtract trade regulation cost
figures entirely from these earlier just-noted aggregates and instead include a placeholder for the
new. In 2013s eighth update (the ninth is tentatively promised for December 2015) of the U.S.
International Trade Commissions Economic Effects of Significant U.S. Import Restraints, the
Commission found that the simultaneous liberalization of all significant import restraints
quantified in this report would increase annual U.S. welfare by $1.1 billion per year by 2017.109
That is down from 2.6 billion in the 2011 update, and down from $4.6 billion in the 2009
update.110
Since, as Crain noted in the 2005 SBA report, The ITCs methodology takes into consideration
the direct efficiency losses associated with international trade restriction,111 the multiplier of two
that had also been employed in earlier reports including OMBs 2000 Costs and Benefits to estimate
transfer costs was employed. Here, that same approach would imply approximately $2.2 billion in
transfer costs from trade restrictions, for a total cost of international trade regulation of (only) $3.3
billion compared to $132 billion in Crain and Hopkins 2001.
As noted, the $435 billion Crain and Hopkins overall 2001 estimate of aggregate economic costs,
was less than OMBs estimate then of $487 billion, urban legends notwithstanding. Starting with
the lower Crain and Hopkins figure and subtracting the entire then-far-larger-estimate of
international trade restrictions of $132 billion (which they had apportioned within their estimates
of efficiency and transfer costs112) yields a rough $303 billion placeholder for general turn of the
century economic regulation, or $399 billion in 2013 dollars. This may be seen in Principia
Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention, as may be the mere $3.3
billion just noted for international trade regulation, understated though it may be.
By summing these estimates and then folding them in N-dimensional hyperspace, blowing on
them twice and taking the non-derivative, we arrive at an estimate of economic regulatory costs of
$402.05. Well, OK, we merely added them. Economic regulations and trade restrictions appear in
separate rows in Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention,
to enable regular updating of the latter and improvement of the former should it become possible.
Our $402 billion placeholder is considerably below OMBs $487 billion in original 2001 dollars, over
a decade later, let alone OMBs $641 billion in current dollars. It is also below the Crain and
Hopkins estimate at the time of $435 billion in the original 2001 dollars. Note that this
placeholder for economic regulations does not include environmental or workplace regulations.
An additional economic cost is generated by policy uncertaintyover regulations, monetary
policy, foreign policy, and fiscal policy and the national debt. A Vanguard study put this
cumulative drag on the economy at $261 billion just since 2011, noting that without this
uncertainty tax, real U.S. GDP could have grown an average 3% per year since 2011, instead of
the recorded 2% average in fiscal years 2011-12.113 These additional costs of government are
noted for context, but are not added to economic costs, since I will here regard such costs as captured
in the overall estimate we have, unlikely as that may be.
Note that here Ive not assumed any additional economic regulatory costs in the entire sweep of
time since the 1990s. Well look at such new policies as the Dodd-Frank financial reform and the
Patient Protection and Affordable Care Act later; well also note the relative paucity of
information on economic regulatory costs in sectors generally, such as railroads, the airline
industry, housing and elsewhere.
http://bit.ly/1wpQTrm
The first line, the pre-2002 figures, includes the compliance cost figures from the very first OMB
annual reports on aggregate regulatory costs and benefits, for which OMB acknowledges
substitutes still do not exist.116 The estimates are rooted in the same research noted above
underlying economic costs of that turn-of-the-century era. The $354 billion (in 2013 dollars) for
the first two rows is slightly less than the corresponding Total Social $364 billion figure in Total
Annual Costs of Regulations as of Sept 30, 2001 According to OMB and thus a tad more conservative,117
just as my placeholder for economic regulatory costs is lower than OMBs one-upon-a-time
estimates. The large EPA component will be discussed a little further later.
In any event, by this tally, the current annual cost of social regulation reaches up to $473 billion
annually in 2013 dollars, as detailed in the chart OMB-Tallied Social Regulation Subset Costs Up to
$473 Billion Annually. In addition to the turn of the century estimate, the figures represent
estimates of annual compliance costs created by 151 finalized major rules (see column one in the
chart), derived directly or indirectly by OMB from agencies Regulatory Impact Analyses and
other means. It must be stressed that these are solely rules for which OMB presents both cost and
benefit estimates. Multitudes of other rules exist so actual costs are higher; but these are the only
ones OMB quantified and itemized.
OMB presents an interval for costs, and I noted that here I use the high-end figure. The reason for
using the high end is because it is an acknowledged possibility, because of chronic underestimate
of costs otherwise, because most regulatory costs are off the books, because startup costs for
meeting a regulations requirements are omitted, because most rules arent reviewed or costed at
all, and because many rules cost-benefit ranges show the benefits could be negative. Apart from
the 20th century legacy placeholder, only 151 rules are incorporated during an interval in which
agencies issued many tens of thousands of rules. Ive preached the controversy. Moreover Ive
already made concessions toward conservatism on both economic and social legacy costs, which
is plenty, and justifies using OMBs own numbers to partly capture a piece of the far greater
components left out.
The table Major Rule Annual Cost Detail, OMB Costs and Benefits Reports, FY 2002-Present provides
detail on exactly what these 151 rules are, depicting both OMBs original 2001 numbers and 2013
figures for benefits and costs. One can readily see that federal regulations impacting entire
industries and sectors simply do not appear.
In later specific sector/industry sections in Tip of the Costberg that attempt to provide additional
regulatory cost detail, these figures will reappear as baseline placeholders, depicted in the 2013
dollars that, behind the scenes, will sum to the referenced $473 billion aggregate. These detailed
costs are summarized, by regulating entity and in the aggregate, in the Principia Bureaucratica:The
Total Annual Cost of Federal Regulation and Intervention.
CHART: Major Rule Annual Cost Detail, OMB Costs and Benefits Reports, FY 2002Present
http://bit.ly/1BMlna7
The upshot is that a certain subset of pre-21st century and to-the-present social cost categories
which leaves out substantial componentstotal up to $473 billion annually in 2013 dollars using
The chart Annual Costs of Independent Agency Final Major Rules presents these excerpted
independent agency costs for the past five years, which add up to $9.51 billion; I omit executive
agency costs included in the Heritage reports to avoid double counting of those where overlap
might exist (and in turn miss costs where there is no overlap). This also allows me to preserve an
emphasis on the OMB reports as primary documentation for incremental executive agency
regulatory costs as the basis for future editions of Tip of the Costberg and Ten Thousand
Commandments. Im also leaving out start-up costs of independent agency rules that Heritage
reportswhich add up into many tens of billionsreferencing only their annual costs in yet another
bow to conservatism and to offset the use of high-end executive agency estimates above given
that theyre some of the only numbers that exist. Finally Im using Heritages 2010 dollars rather
than 2013.
CHART: Annual Costs of Independent Agency Final Major Rules
http://bit.ly/1wDx4ji
In addition to leaving out start-up costs, which would otherwise increase totals here substantially,
the mid-point cost is used where a range existed, by a Heritage Foundation more tolerant than me.
Also, an obvious next step would be to tally the independent agency costs from the GAO database
from years prior to fiscal year 2009 since theres no indication that GAO, OMB or any other office
is interested in doing it. I consider it highly significant that we do not have official aggregate cost
estimates for decades of independent agency rulesmerely these few years partial numbers (most
rule costs are not quantified, as noted). It is more than a glaring gap in the discussion to follow
that, apart from the most recent rules, we have no real officially acknowledged estimate of the
costs of independent agency rules right through the turn of the century to the present, with the
exception of what may have been indirectly captured in the aforementioned Hahn & Hird,
Hopkins and OMB-aggregate compilations. Its another reason a placeholder for economic
regulation like that noted earlier must be maintained.
In any event, note we get a substantial increment over what OMB reports as its annual regulatory
cost tally when we recognize independent agency costs: as noted, OMB until very recently liked to
emphasize that executive agency regulations it reviews each year tend to average around $5 billion
annually by its reckoning,128 and has recently noted a change to $10 billion annually. Yet, these few
years of a few independent agency rules for which cost tallies were given or available add up to
another $9.51 billion annuallyequivalent to what OMB makes explicit as a total annual cost. In
the chart Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention and in
the relevant sections forthcoming in this report, these amounts will be disaggregated in the broad
transportation, energy and finance categories where they seem to best fit. Still, one may read the
$9.51 figure at the bottom of Principia Bureaucratica: The Total Annual Cost of Federal Regulation and
Intervention in the relevant column. While I include there the OMB Major rules with unavailable
costs placeholder of $20 billion, note that I do not do the same for the numerous uncosted
independent agency rules.
Whatever the shortcomings of efforts such as the SBA report series, which can be readily
improved upon even though tabulating regulations is not entirely germane to the legislative
mandate that particular report was designed to fill, no further critiques of it from other quarters of
the federal government can be seriously entertained. OMB examines a fraction of agencies actual
workloads and private sector compliance burdens.
We dont know how much regulations cost, nor do we have any idea, really, what their benefits
are. OMBs assumptions are not obviously materially much more justifiable than SBAs once were,
nor will knowledge of costs ever be fully available to us as a cognitive matter. We have to use
whats within the limits of the possible, and not systematically or deliberately understate. Thats
about it.
And frankly its not even the law; they dont like the law being enforced.134
Paperwork generated by independent agencies does not appear in the OMB annual report to
Congress, so we take a look at it here.
We noted that tax compliance accounts for most paperwork. We also noted that executive
agencies presumably already tallied paperwork cost sin the regulatory impact analyses that weve
covered already, so that leaves us (primarily) independent agency paperwork to examine.
hours, or 74 percent.
With respect to lost efficiencies generated by taxation, an OMB guideline reckons an excess
burden or deadweight loss associated with federal taxation equals 25 percent of revenues:152
Unless a tax is imposed in the form of a lump sum unrelated to economic activity, such as a head tax, it
will affect economic decisions on the margin. Departures from economic efficiency resulting from the
distorting effect of taxes are called excess burdens because they disadvantage society without adding to
Treasury receipts. This concept is also sometimes referred to as deadweight loss.
And thus:
The presentation of results for public investments that are not justified on cost-saving grounds should
include a supplementary analysis with a 25 percent excess burden. Thus, in such analyses, costs in the
form of public expenditures should be multiplied by a factor of 1.25 and net present value recomputed.
Both the GAO and the Tax Foundation approaches noted above include some efficiency or
deadweight costs (in addition to basic compliance and software such as that highlighted in the
$226 billion estimate from the National Taxpayers Union). GAO and the Tax Foundation each
reckon tax compliance and efficiency costs of well over $300 billion at minimum ($336 billion and
at least $368 billion, respectively). These estimates could have been, but were not, selected here,
nor were the still higher numbers that these entities studies could justify. Instead, with no way of
knowing actual indirect costs of taxation, and uncertainty with respect to hourly wage costs, we
may note here that assuming $47 an hour on the paperwork cost spectrum (less than the 2008 IRS
data regarding business paperwork hours costs) yields us a back-of-the-envelope placeholder for
Treasury paperwork costs (primarily but not exclusively tax compliance) of $316 billion. This
could be increased to match the GAO or Tax Foundation lower bounds in 2013 dollars, but I have
elected to not do so. Salaries do not encompass all the costs of paperwork, of course; pointing to
$47 here is a convenience, even though other costs exist.
The Patient Protection and Affordable Care Act, or Obamacare, will add significant complexity
to tax preparation, ending shortcuts like the 1040-EZ form for many who get subsidies among
other details.153 Tax preparation firm H&R Block alone has annual revenues of nearly $3 billion
already, pre-Obamacare.154 Some investors bank on H&R Block gaining new business, benefitting
from the cost imposed on others.155
Be that as it may, as Independent Agency Paperwork Burdens shows, these hours add up to 596.33
million, and at $35 (note Im not using the $47 used immediately above with respect to
tax/Treasury compliance), add another $20.871 billion in compliance costs.
CHART: Independent Agency Paperwork Burdens
http://bit.ly/1r9Qvgq
So, leaving aside paperwork presumably accounted for in executive agency Regulatory Impact
Analyses, total costs for paperwork burdens associated primarily with taxation of $316 billion and
independent agency paperwork of $20.871 billion amount to $336.87 billion. Therefore, the
baseline current, to-date cost of tax and independent agency paperwork to which I will add future
costs, while reserving the right to incorporate future information that convinces me to increase or
decrease the base, is up to $337 billion.
This figure is reflected in Treasury/taxation paperwork costs at the top of Principia
Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention as well as dispersed among
the respective independent agencies in that table. If better data appears on the regulatory
paperwork costs of financial services, health care, consumer safety rules, I might lower this some,
but my figure is lower than other governmental ones that could have been employed here.
13. Tip of the Costberg? Regulatory Cost Estimates Beyond the OMB
and SBA Tallies
He has erected a Multitude of new Offices, and sent hither Swarms of Officers to harass our People,
and eat out their Substance.
Declaration of Independence
The share of all employment in young firms has declined in all three sectors [Manufacturing, Retail,
Services], suggesting that factors that are not sector-specific are causing the decline in entrepreneurial
activity.
One possibility is that the business climate, broadly defined, has changed in ways that imped job
reallocationthat is today, by impeding entry, exit, expansion and contraction.
The loss in welfare and productivity arises because the increase in adjustment frictions reduces the
pace at which resources move away from less-productive to more-productive businesses. The same logic
applies to changes in regulations or institutions that affect the costs of starting up or expanding a
business, including regulations that raise the costs associated with expanding.156
Decker, et. al., The Role of Entrepreneurship
in U.S. Job Creation and Economic Dynamism,
Journal of Economic Perspectives, 2014
Having built a small business into a big one, I can tell you that today the impediments that the
government imposes are impossible to deal with. Home Depot would never have succeeded if wed
tried to start it today. Every day you see rules and regulations from a group of Washington
bureaucrats who know nothing about running a business. And I mean every day. Its become
stifling.157
Home Depot co-founder Bernie Marcus to Investors Business Daily
Now its time to pin a tail on this donkey.
OMBs tallies need supplementation given their incompleteness, and the SBA effort needs to be
resurrected, this time with support rather than interagency hostility and criticism not accompanied
by equally rigorous or serious official comprehensive estimates. All cost estimates have a
fundamental, irretrievable invalidity to them. But they can and should be upgraded over time, and
they should fill gaps and include more rules and types of rules.
The idea here is to start fresh with a new sheet of paper, and break up these aggregate estimates
gathered so far, where possible, into sectoral or department/agency estimates, and then to
supplement them with other available information on regulatory and paperwork costs. We seek a
total defensible but not precise regulatory cost estimate, including estimates for individual sectors
or pursuits. We wont separate every aggregate presented above into components, but we will try
here and in future editions of Tip of the Costberg as well as Ten Thousand Commandments to create a
more complete picture of the regulatory state.
The question is, in going beyond todays official reports, will future researchers be pinning a
modest tail on the pre-existing OMB/SBA donkey, or, to shift to another bad metaphor, will they
find a great regulatory tail wagging the federal dog (the OMB one in particular given its
constricted scope compared to SBA). Research like the Dawson and Seater Federal Regulation
and Aggregate Growth report mentioned earlier in A Baseline for Aggregate Economic
Regulation Costs would imply the latter, that regulation has a far greater importance than
presumed. This report, though biased toward suspecting high costs, wont fully answer the
question but begins the pursuit.
The already referenced aggregation table Principia Bureaucratica: The Total Annual Cost of Federal
Regulation and Intervention breaks rules up into executive and independent agency components. But
within those, I use categories that somewhat echo the OMB and SBA report breakdowns, loosely
based upon the governmental sector and sometimes specifically on the department doing the
regulating (Economic, Workplace, Homeland Security, Environmental, Health and Safety,
Paperwork and Information Collection). Again, for reference, the SBAs and others figures appear
separately in Estimates of the Cost of Regulation: Late 20th Century, Early 21st Century, but it will be
the OMB tallies incorporated as the base here. Since only OMB remains in the business of
presenting a portion of regulatory costs each year, that is the way it must be. We will incorporate
more ground-level or bottom-up cost figures as it becomes possible, subject to supplementation
and revision.
What follows will be a preliminary tally of regulatory costs, subject to perpetual future
adjustment, to supplement what we have assembled thus far from OMB, SBA and GAO. Some of
the detail behind the OMB numbers shown above (principally Major Rule Annual Cost Detail, OMB
Costs and Benefits Reports, FY 2002-present) will be directly referenced so that we might eyeball it and
look for future double-counting on the one hand and omissions on the other with respect to rules
with which the public contends but whose costs may not be acknowledged. A bottom-up approach
stays useful because, given the inappropriate silent treatment afforded the only 20th century studies
on comprehensive regulatory costs in existence, we need more information via a combination of
aggregate and yearly estimates alongside industry-specific information. Self-reported regulatory
costs should be sought by policymakers and should be increasingly useful. Firm level data is
important: for example an American Action Forum analysis of corporate annual report (10-k)
filings to the Securities and Exchange Commission by 30 large firms found $30 billion in
compliance costs for 2013.158
Generally, policymakers goal should be to develop much greater detail at the industry level,
perhaps using some of the North American Industry Classification System categories. 159 The
extraordinary complexity of the manufacturing and commercial sectors and the reality that
regulatory costs for the myriad components simply arent tallied may be observed with respect to
the huge range of entities that would be affected by (just for example) carbon dioxide
regulations.160
Some sectors do manage to self-evaluate. For example, construction industry data, with respect to
planning times for new buildings, show much longer planning times are associated with more
stringent regulations at the federal, state and local levels. A UCLA study finds average planning
time across 82,000 projects of 17 months (median 1 story) cost of $1.5 million; when weighted,
planning time rises to 28 months and is growing.161
A trade group for the industry, the Construction Industry Round Table, prepared a 2011 letter to
Rep. Darrell Issa (R-California) to identify existing and proposed regulations that have or may
negatively impact job growth. The CIRT highlighted streamlining that could save tens of billions
of dollars, and presented the following formula for regulatory costs for their industry:162
Regulatory Costs = 10% of the Annual $1.0 trillion in U.S. Construction or $100 Billion in costs
This sole industrys situation can be observed in the context of the several hundred billion Ive
noted so far with respect to economic, social/environmental and paperwork costs. More such
firm, industry and sectoral studies are needed, as is analysis of regulations impact on startup
rates, and on small businesses and their growth. It would be a breakthrough if results could be
portrayed in common, comparable terms across time and industries.
Another industry, U.S. automobile dealers, also contends with over 60 regulatory burdens across
the health, safety, environmental, consumer protection and financial spectrum that impact the
economy by nearly $8 billion annually in compliance, lost revenues and lost consumer surplus. 163
The National Automobile Dealers Association notes that this does not include upstream
product regulations, such as federal fuel economy mandates imposed on vehicle manufacturers.164
Nor (as in Costberg) are state and local regulations included. (On the other hand, auto dealers do
not recognize as a cost the franchising laws that prevent automakers and upstarts like Tesla from
selling directly to consumers.)
Thats a couple industries relating impacts across the regulatory spectrum. Another study of
global regulations called Speed of Business by an international law firm estimated $1.2 trillion
in compliance cost for 250 businesses in six sectors in 10 countries.165 Another recent large-scale
study of the manufacturing sector provides another frame of reference and bridge to where we are
now. A comprehensive report prepared by National Economic Research Associates (NERA) for
the Manufacturers Alliance for Productivity and Innovation (MAPI) examined Macroeconomic
Impacts of Federal Regulation of the Manufacturing Sector. This report also used data from major
rules compiled by OMB, an OIRA dataset and industry surveys.
In their detailed report, MAPI concludes:166
Based on the data of cost and number of regulations, we estimate the current direct cost of compliance
with major regulations (those with an estimated cost greater than $100 million) issued between 1993
and 2011 to be between $265 billion and $726 billion (in constant 2010 dollars) a year for the economy
as a whole.
Direct cost of compliance means MAPI is not incorporating indirect costs of compliance, and
major means they are leaving out non-major. They elaborate:167
Note that these totals represent only rules with cost estimates from the OMB Reports to Congress. To the
extent these reports do not contain cost estimates for all regulations over the 1993 though 2012 time
period, the totals shown below understate the total cost of all regulations.
Weve recognized this situation earlier. MAPI notes that cumulative costs of regulations are
greater than the sum of individual regulations in isolation,168 and point to consequences of
layering an environmental regulation on top of a financial and an energy regulation.169
These interactive effects of increasing regulation imply that the total burden of major and non-major
regulations could be considerably greater than the sum of the individual regulations. Unless a lower
threshold for requiring cost estimates is set, the total cost of all regulation will continue to be
underestimated.
Super-additive is their helpful term for the phenomenon.170
MAPIs estimates primarily consist of what was once known as the social regulation category
identified by OMB, omitting components of economic regulation formerly categorized by OMB.
The MAPI estimate presumably could be used to enlarge components of my Costberg placeholders
of $398.75 billion in economic regulation and $473 billion for social regulation, particularly since
MAPI contends that:
[T]he costs of non-major regulations are not estimated, but comparing the number of non-major to
major regulations suggests that the aggregate burden of non-major regulations could well be as large as
the cost of major regulations.
Were that non-major equivalence to hold, and double the major rule estimate, it implies a range of
$530 billion to $1.452 trillion; plus, the MAPI report leaves out the independent agency,
paperwork and other costs that I attempt to incorporate here. So combined with extra material
compiled here and yet to be compiled, MAPI might have ended up with a larger overall number
than Costberg.
Let me emphasize that Costberg does not benefit from the econometric modeling sophistication
and technical rigor of the MAPI reports underlying economic framework (using instead the Legoblock approach to enable yearly updating). However the estimates from major rules since 1993
noted are of comparable magnitude with estimates described up to this point. This would seem to
hold particularly taking into account non-major regulations.
And to reiterate, as we noted before that the United States was not founded in 2002, nor was it
founded in 1993, the starting point for the MAPI results.
For the sake of not going overboard and for retaining comparability with annual OMB reports, Ill
not adopt MAPIs generous assumption regarding non-major rules, which would push the Tip of
the Costberg figure well over $2 trillion. Rather than enlarge, Costberg will for the time being
maintain the more conservative OMB baseline on which to incorporate future annual cost data.
not treating as a regulatory agency herein) for which such conditions hold. These are the
Departments of Agriculture, Commerce, Education, Health and Human Services (Housing and
Urban Developmenet also has a slight overage omitted here). The total amount exceeding what
OMB reports in the annual benefits and costs Report to Congress report is $8.6 billion overall for
those five (see Executive Agency Paperwork Burdens). Where non-governmental estimates exist
instead of or supplemental to OMB estimates, in this and future editions of Costberg I may or may
not add or subtract this Information Collection Budget-derived element of regulatory burdens;
they are presented here for reference and framing. Paperwork costs, incidentally, may also include
the myriad forms of guidance documents that agencies issue rather than just the regulations
primarily at issue here, so costs can be higher than what this report captures in that sense as well.
CHART: Executive Agency Paperwork Burdens
http://bit.ly/1BMm575
That noted, we may now survey executive agency annual regulatory costs.
Sugar costs are a major reason U.S. sugar-using companies have relocated their factories
abroad.
Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less
than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.
Imports of food products that use sugar as an input are growing rapidly.
At this point, the baseline current, to-date cost of agricultural regulation to which I will add future
costs, while reserving the right to incorporate future information that convinces me to increase or
decrease the base, is $8.506 billion as reflected in Principia Bureaucratica: The Total Annual Cost of
Federal Regulation and Intervention. This figure consists of OMBs $1.781, its untabulated $1.025
billion from Annual Costs of Untabulated Major Rules Reviewed at OMB By Department and Agency,
the $1.7 billion paperwork overage, plus a $4 billion placeholder for the sugar program and its
counterparts.
Note that costs and distortions of substantial USDA programs like milk and butter and other price
restrictions and the rest of the Terrible 12 items are omitted but ought to be included.
Still other omissions for the moment include rules on biotechnology regulation such as genetically
modified crops and organisms (these are regulated by several agencies along with USDA, such as
the FDA and the EPA). Certain firm-level data for categories such as development of insect
resistant corn total in the millions but are also omitted at this stage until more information is
gathered.184 For example, certain costs of compliance with biosafety regulations in the U.S., not
including R&D, product development, or commercialization and marketing costs, are estimated at
between $3,180,000 and $12,550,000.185
Regulatory concerns are global, and go beyond the scope of Costberg: The Secretary General of
EuropaBio in Brussels, Belgium, Willy De Greef, wrote more than a decade ago that for GM
crops the regulatory environment is far more complex and hostile, and that a rule of thumb is
that regulatory clearance of GM crops absorbs about half of the total product development
investment.186
Department of Defense
The Constitution supposes what history demonstrates, that the Executive is the branch most prone to
war and most interested in it, therefore the Constitution has with studied care vested that power in the
Legislature.187
James Madison (letter to Thomas Jefferson, April 2, 1798)
Ive not at this point added any DoD elements as regulatory or economic-impact costs; those who
would will not find any OMB cost data, but could use paperwork costs of $2 billion that appear in
Executive Agency Paperwork Burdens. The broader questions of the waging of war are beyond the
scope of this work, best thought of as captured in the loss of liberty section in the final chapter
on unmeasured costs if one is so inclined.
Within the DoD is the National Security Agency, a black agency whose budget we do not know
for sure but is reckoned at around $10 billion annually.188
The post-9/11 surveillance state most emphatically affects the American economy, and while
Costberg leaves it out as a government-interference cost the moment, that likely will not continue. It
is reported by the New America Foundation that economic costs could be staggering, and that,
for example, the NSAs PRISM program is predicted to cost the cloud computing industry from
$22 to $180 billion over the next three years and result in a widespread loss of trust in American
data firms and contribute to cybersecurity vulnerabilities.189 To some extent, this cost is captured in
a privacy regulation placeholder we recognize later.
Untabulated Major Rules Reviewed at OMB By Department and Agency. Another $3.087 billion in
paperwork costs appears in Executive Agency Paperwork Burdens, based, again, on the departments
hours as depicted in the Information Collection Budget. The excess paperwork cost over the explicit
rules cost amounts to $2.824 billion. The total of $3.087 billion is broken down and in Principia
Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention.
The unmeasured costs here are substantial; customization and freedom of choice is a crucial part
of every aspect of life, with certain glaring exceptions like education. Why 12 years, why
compulsory, why tolerate unions, why No Child Left Behind, why Common Core, why the
disconnect between supply and demand, why the denial of attending a school of ones choice.
There are at least 200 federal rules, and much with which to reckon at both the federal and state
level.195 One large scale study looking at federal legislations impact on the cost of higher
education on representative midsize private institutions encompassed over 200 laws, and
reckoned the impact was around 6.5 percent of operating budget (2000-01 fiscal year).196
raise $18 trillion in royalties. Thats more than the U.S. national debt, I say. He smiles.
By saying a certain now-restricted action will gain money for the Treasury, it implies a cost to the
broader industry/economy of current restrictions. $18 trillion seems wildly ambitious, but
whether it is or isnt, one could assume a fifth, or a tenth, or a thousandth, and recognize that the
implied costs of regulatory blockage of access to resources and the building of new wealth is not
something to ignore.
If access gains the U.S. Treasury $18 trillion (or instead some far more conservative amount) from
royalties, consider the amounts the treasury doesnt get; that is, the resources the economy keeps to
invest and expand. That loss is an implied cost of regulatory blockage now. (Dollarizing jobs to
be added from opening up access to energyis another flip-side approach to putting a cost on
current energy-access denial.) Hamms proclamation is particularly interesting and policymakers
should pursue and dollarize the implications more formally. Hamm is clearly talking about
multipliers down the line. But it would be nice to be able to articulate some number quantifying an
official observation that The (regulatory) cost to the economy of denial of access to energy/lands
is at least on the order of such-and-so billions of dollars.
For a more down-to-earth example, the opportunity costs of a moratorium on hydraulic fracturing
(fracking) just in New York State for example, can add into the billions of dollars under different
scenarios.200
But lets move along to what OMB has presented. Remarkably, for over a decade, there are only 23
rules for which the OMB reports costs (and accompanying benefits), all of them on energy
efficiency standards for this or that device, motor, boiler, washer, etc. See Major Rule Annual Cost
Detail, OMB Costs and Benefits Reports, FY 2002-present, which tallies OMBs figure for these rules in
2013 dollars at $12.62 billion. This figure is also carried over to Principia Bureaucratica: The Total
Annual Cost of Federal Regulation and Intervention. Meanwhile, again, the number of rules is far
greater than those for which calculations are presented: There have been 657 Dept. of Energy
rules since 2002, 74 of them rated as significant.
This report and future ones necessarily must expand on this, not at all representative of the cost of
federal intervention in the production of energy. A 2010 report on the Gulf Region moratorium
on offshore oil and gas exploration found costs of over $2 billion for a six month period.201 Still
another report put costs of lost Gulf production at over $18 billion combined for the years 201011.202
In any event, if we were to use Harold Hamms figure on gains to the treasury as a proxy for cost
to the economy as a whole, but use only one ten thousandth of his claim on an annual basis, we
arrive at $1.8 billion. Thats a national figure falling between the just noted impacts in the Gulf
region alone, and one even less than losses to fracking moratoria in New York. It compares well to
a CBO estimate of $7 billion in gains to the treasury over the coming decade,203 and is a pittance
compared to a Wood Mackenzie estimate of $800 billion to government by 2030.204 Ive placed this
$1.8 billion placeholder for Restrictions on Energy Access and Permitting under the
Department of the Interior (not here in Department of Energy) section in Principia Bureaucratica:
The Total Annual Cost of Federal Regulation and Intervention, where, as is becoming a pattern, little
else in costs from the Department of the Interior is revealed (as will be seen shortly).
Note that figures on savings and vast gains from the privatization of federal resources and the
wealth-enhancing impacts of that is not yet examined here. The federal government owns most
land west of the Mississippi, and seeks to own still more.
The Cato report noted that federal and state costs of regulation of health facilities, health
practitioners, health insurance, drugs and medical devices (the Food and Drug Administration
portfolio), and the medical tort system, could be as low as $174 billion, or as high as $921 billion.
The expected value by Conover is presented here. (As far as net benefits are concerned, Conover
finds health rules to have a net cost rather than net benefit, of $169 billion.)
Keep in mind that Conovers estimates all predate passage of President Obamas Patient Protection
and Affordable Care Act.
Conovers report covers state and federal costs. In Estimated Annual Costs of Health Services
Regulation, Federal and State Detail, we segregatevery imperfectlythe components of the
detailed costs he provides into relative state and federal categories and count only the federal
component of (around) $167 billion. (It is merely coincidence that its nearly the same as
Conovers net-cost figure.)
CHART: Estimated Annual Costs of Health Services Regulation, Federal and State
Detail
http://bit.ly/1wqfvjJ
As for the torts component (torts are primarily a state-level concern), despite documented cases of
tort abuse and defensive medicine, medical torts are controversial to advocates of deregulation. In
the absence of regulation, torts play an important free market disciplinary role. In fact, a newer
paper from Cato examines existing research to conclude (for a variety of controversial reasons not
the subject here) that caps on malpractice damages could cause some consumer harm by
protecting practitioners from discipline by medical malpractice insurers.208
Because of the role of the discipline of lawsuits in free markets, but given abuses in the current
system, I wish to ignore torts but leave a bit for defensive medicine, and so use only half the
medical malpractice number employed in the Conover study. Since medical torts are almost
entirely a state concern, the federal component in Conover is small to begin with.
Some costs embedded are likely to be updated and change over time. For example the Conover
report notes HIPAA (Health Insurance Portability and Accountability Act) costs. HIPAA is the
federal governments health privacy statute. For context, other researchers have noted how
HIPAA compliance can be a costly, Herculean taskThe average cost of $3.1 million from
surveyed firms is considerably more expensive than the projected average estimate of $450,000
that was done prior to implementation.209 An earlier 2000 American Hospital Association (AHA)
study found that hospitals, in the aggregate, could spend as much as $22.5 billion in the next five
years complying with just three of the privacy provisions of HIPAA, far exceeding the
governments original estimate of $3.8 million in costs for compliance with the entire privacy rule
across all healthcare entities.210
Some revisions of HIPAA do appear in the OMB annual roundups, but such estimates are
incomplete in that they do not address drawbacks to the law such as Death by HIPAA, which is
a potential consequence of the overcautious privacy rules of HIPAA.211
Technology is a blessing. It ought to be so in health care too, rather than create problems and
higher costs for consumers. The Wall Street Journal lamented that, Another big driver of healthcare costs is technology. In almost every other industry, innovation generally makes things more
efficient and less costly. But in health care, it often brings higher costs with little added value.212
Free markets are not the reason for this state of affairs. Technology should lower costs in medicine
as in other areas, as the well-to-do adopt technologies and help make it affordable for everyone
else. Indeed, the rich and well-informed can be the white mice of the medical profession, 213
helping bring down costs for all and expanding availability. Market competition can bring devices
and personal health information to individuals, but regulatory impulses loom.
Partial Costs of the Patient Protection and Affordable Care Act: A $5 Billion Placeholder
If youre interested in this bill and youre not fully hired up, youre stupid.214
a K Street consultant on the Affordable Care Act health reform law
[M]oving from 49 to 50 workers can cost an employer $40,000 a year. No wonder that many small
businesses are opting to stay at 49 workersCompanies can get around the penalty by hiring part-time
workers, because they do not owe the $2,000 penalty on those who work fewer than 30 hours a week.215
Diana Furtchgott-Roth
I have created an account on the site. I have not tried signing up, because I have insurance.216
Kathleen Sebelius
Former Secretary of Health and Human Services
during initial implementation of Obamacare
Since Im in charge, obviously we screwed it up.217
President Barack Obama on widespread cancellations
of individuals insurance policies.
ObamaCare has been an absolute boon for my business.Im making a lot of money thanks to that
law. Were up 8% this year. But its just terrible for the country. I see that firsthand every day.218
Businessman Bob Funk, interviewed in Wall Street Journal, 2013.
Reporter: Madam Speaker, where specifically does the Constitution grant Congress the authority to
enact an individual health insurance mandate?
Pelosi: Are you serious? Are you serious?
Its too early to lay down anything approaching a comprehensive cost number for the impacts of
the Patient Protection and Affordable Care Act, or Obamacare, but its too late to ignore it
particularly given the Supreme Courts upholding of the constitutionality of the individual
mandate as a tax and all exchange subsidies. Designating regulatory mandates as taxes has
implications for the entire regulatory state, but that is well beyond the scope of this edition of Tip
of the Costberg.
Complexity and cost is inevitable when 18 pages of regulation were needed just to define the term
Full-time employee.219 But there is so much more; regulations, at over 11 million words as of
October 2013, exceeded words in the law itself by a multiple of 30.220
Various estimates exist of fiscal and economic impact of the law. On the fiscal/spending rather
than regulatory side of things at issue in Costberg, the Affordable Care Act has been projected to
cost over $2 trillion over 10 years, rather than the $900 billion originally claimed during proposal
of the law.221
Thats the fiscal impact; the regulatory compliance cost side is less certain. A 2014 Congressional
Budget Office report finds additional costs such that the nation will lose the equivalent of 2.5
million workers by 2024, as people give up jobs they once held to maintain insurancewhich the
White House perversely attempted to spin as a positive.222 The departure of physicians from the
field of medicine, or disinclination of new talent to enter it, is a classic uncalculated cost as
reflected in one physician groups itemization of unintended consequences and costs such as
paper shuffling, fraud and government interference with decisions.223
News stories have shown widespread impacts from Obamacare, from rate shocks on health
insurance policies,224 to the seven foot stack of regulations as of 2013,225 to a survey finding 74
percent of small businesses claim the law will result in layoffs and reduced hours for workers.226
One Wall Street Journal article advised job seekers to learn the health care act, in order to help
others navigate it, and noted the billions in legal costs involved.227
One new trend to watch is that of restaurants adding surcharges to bills to cover employee
healthcare, such as the three percent add-on to upscale diner bills in Los Angeles.228 Thats one of
the obvious and forseeable effects that got ignored, other ramifications are more obscure and lead
to perhaps unexpected items cropping up now and in the future, such as how firms may be unable
to engage in stop-loss activities, making self-insurance almost unattainable.229
Indeed too many commentators to name have referred to the dozens of regulations and thousands
of pages of rules in the Federal Register just since passage on March 23, 2010, and to the 150-plus
agencies and commissions and other bodies required to be created if the law is fully implemented.
The thousands upon thousands of pages of regulations will dwarf the length of the law itself,
which was little read (one commentary noted the two relevant statutes consisted of 425,116
words230) but now binding nonetheless. The requirement that insurance companies, rather than,
say, 7-Eleven or Home Depot or eBay or ones mother-in-law, provide contraception without copayment became effective in August 2012; that one was set aside by the Supreme Court. Like
always, contraception remains available.
A speculative report by Benjamin Zycher on opportunity costs of expansion of comparative
effectiveness rules (part of the emerging ACA rules) suggests R&D investment in new and
improved pharmaceuticals and devices and equipment would be reduced by about $10 billion per
year over the period 2014 through 2025, or about 10-12 percent, and suggests $500 billion in
human life-year losses.231 Senators John McCain (R-AZ), Rand Paul (R-KY), and Rob Portman
(R-OH) in their Jobs thru Growth Act, during the 112th Congress held that the law imposes
over $300 billion in higher health care costs, and $2,100 in increased family insurance premiums
from employers and workers232 Similarly a report from the House of Representatives found a
range of cost impacts.233 Indeed, there are numerous analyses of the seemingly countless
budgetary, regulatory and family costs of Obamacare.234
Quantitatively significant in advance of Obamacare with respect to annual impacts was a 2009
National Federation of Independent Business report on the impact of the employer mandate on
small business that estimated economic contraction of $200 billion of real GDP between 2009 and
2013.235 Thats a $40 billion annual impact over the period. The study also estimated 1.6 million
job losses over the period. An anticipatory report by the Urban Institute, which defends the Act,
found that Large businesses costs increase 4.3 percent, overwhelmingly attributable to increases
in worker take-up of offered coverage, while costs for mid-sized businesses rise over nine
percent.236 The Institute claimed that for small businesses, reductions in per capita costs more
than offset coverage increases to slightly reduce spending overall.237
More recently a 2014 American Health Policy Institute conducted their own detailed survey of
large companies (10,000-plus employees), finding, over the next decade:238
Large firms costs would increase $4,800 to $5,900 per employee.
ACA-related incremental costs of between $163 million and $200 million per employer
Overall costs over 10 years of $151 to $186 billion.
The AHPI study pointed to the implied $11.8 billion increase in annual cost of the Urban Institute
report. Their own report implies annual costs of between $15.1 to $18.6 billion (on average) over
the next ten years. Note that these figures do not include costs to small- and medium-size firms.
Components of these costs include:239
Direct Costs
Patient Centered Outcomes Research Institute fee.
Temporary Reinsurance Fee.
General ACA implementation and administrative costs.
Excise tax on high-cost plans.
Mandate to cover adult-children up to age 26 as dependents.
Other benefit mandates including covering 100 percent of preventive care services.
Indirect Costs
New supply-chain taxes passed onto employers (e.g., medical device tax).
Increased take-up rates of employer offered coverage resulting from the individual mandate.
Increased cost-shifting from the expanded Medicaid coverage.
Costs of final rules issued related to the Affordable Care Act primarily issuing from HHS will
increasingly appear in Tip of the Costberg. So far, surprisingly and implausibly, none of the costs
show up in the OMB annual report survey of rules with both benefit and cost analysis. However,
ACA-related rules without benefit assessments are beginning to appear (and are included in
Annual Costs of Untabulated Major Rules Reviewed at OMB By Department and Agency).
Weve to this point reviewed OMBs cost roundups ($19.7 billion: $7.925 billion of which stems
from rules with both cost and benefit estimates, and $11.727 billion from rules with cost
assessments only, ), HHS paperwork costs as derived from the Information Collection Budget in
excess of OMB costs ($3.03 billion), the (estimated) federal component of the Conover study on
health services regulation ($167 billion). As for the impacts of the Affordable Care Act, the lower
figure from the AHPI study is $15.1 billion annually. Here I will use only $5 billion of that, or
one-third, as a placeholder for ACA in Costberg, and alter that accordingly as more major rules are
reported on by OMB, supplemented by future studies.
So, the baseline current, cost of health services regulation to which I will add future costs, while
reserving the right to incorporate future information that convinces me to increase or decrease the
base, is $194.37 billion annually, as may be seen in Principia Bureaucratica: The Total Annual Cost of
Federal Regulation and Intervention.
A Note on Future HHS-Related Regulatory Costs
The yet unrevealed and to-be-implemented costs of Obamacare will constitute perhaps the bulk of
future non-budgetary impacts on the private sector and lower-level governments.
Other campaigns are notable, such as proposed Food and Drug Administration menu labeling
rules would require nutritional information disclosure for chain restaurants with at least 20
locations and vending machine operators boasting 20 or more machines. FDAs regulatory
analysis estimates $44 million in annual costs for the chains ($1,100 per establishment), and $24
million in ongoing costs for vending operators ($2,400 per operator).240 Note these impact small
business significantly, yet do not count as significant rules to the federal government, a
phenomenon that holds widely across government. These will be added to the tally when final if it
is possible to do so.241 Not surprisingly, the Food Marketing Institute anticipates costs will be far
higher, such as over $1 billion in startup costs, and $300 million annually for restaurant chains to
comply with recordkeeping.242
The appropriateness of federal efforts to influence what others eat concerns citizens. Sometimes
those targeted by regulations such as the federal school snack food program championed by First
Lady Michelle Obama, are reluctant to criticize them. A revealing sentence in a Politico article
reflects intimidation felt by the private sector:243
I dont think anyone is going to be foolish enough to attack the first lady thats just stupid, said
one longtime food company consultant, who noted that the industry would likely be measured in its
public response, even if there are lots of things companies dont like about it. Its sort of a laundry list
of everything the industry didnt want.
Regulators, planners and elites who know best what others should do rarely care what companies
dont like, of course. In the case of school snacks, however, some school districts have rebelled
against the Obama menu proposals. While one never need look hard to find proponents of food
regulation,244 some humility is in order given such developments as the recent scientific pushback
against the decades-long anti-fat crusade that in certain respects has backfired and led to poor
dietary substitutes, and the human toll of such regulatory crusades as ethanol mandates.245 What a
shame that it is not enough to allow people to recognize that a pound of butter, about the densest
food available, contains 3,200 calories and have Washington leave us alone.
In another working paper on homeland securitys economic impacts, George Washington Institute
of Public Policy researchers itemized the kinds of costs at issue in homeland security rules, both
quantified and unquantified. They identified government expenditures, private expenditures, and
such burdens as time and delay costs of airport screening and more, as presented here:259
Measured Costs:
Increased City Security Presence
Police Presence Increased
Screening of People and Vehicles
Increased Wait Times At Airports
Increased Wait Times on Highways
Unmeasured Costs:
Increased Security for Private Industry
Decreased Tourism
Crisis Fatigue
Effects on Financial Markets
This report also references a prominent New York Federal Reserve study which, while regarding
homeland security costs a bargain relative to the size of the economy, allowed that the added
hour [of waiting time] translates into a monetary cost equivalent of approximately $11.8 billion.260
One cant blame it all on homeland security, but frustration with air travel leading to avoiding trips
is also a cost, pegged at $26 billion by the U.S. Travel Association at in 2008:261
A June 2008 study by the U.S. Travel Association revealed a deep frustration among air travelers that
caused them to avoid an estimated 41 million trips over the past 12 months at a cost of more than $26
billion to the U.S. economy. Air travelers expressed little optimism for positive change, with nearly 50
percent saying that the air travel system is not likely to improve in the near future. The effect of avoided
trips cost airlines more than $9 billion in revenue; hotels nearly $6 billion and restaurants more than $3
billion. Federal, state and local governments lost more than $4 billion in tax revenue because of
reduced spending by travelers.
In the 2005 report A Framework for Evaluating Couunterterrorism Regulations,262 Jerry Ellig,
Amos Guiora and Kyle McKenzie acknowledge benefits of security regulation, and present a
framework by which to judge rationality of rules that bears close reading. They examine direct
compliance costs, hidden/indirect costs and price distortions caused by regulatory interventions.
They warn of perverse effects of regulation: The Transportation Security Administrations (TSA)
provision of passenger and baggage screening has similarly diminished the incentives of airlines,
airports, and the insurance industry to reduce terrorism risks, because the federal takeover shields
these parties from liability for terrorist acts and thus private parties may underprovide
security.263 The security wealth not created is a cost beyond quantification.
Ellig, Guiora and McKenzie identify a deadweight loss associated with taxation that is not
included here (on the assumption that it might be captured in the cost of taxation section earlier).
But as for other deadweight costs of regulation: 264
The deadweight loss associated with some security related regulations, such as those affecting air travel,
is likely much higher than the [25 percent associated with federal tax collection] would imply, for two
reasons. First, specific taxes on airline tickets fund some federal expenditures on airline security. Second,
passengers ultimately pay the private expenditures on security in the form of higher ticket prices. Since
much air travel is price-sensitive, a small increase in the price can create a big drop in ticket sales.
Passengers forego the value that this air travel would have provided, and the aviation industry forgoes
the contribution to fixed costs that these passengers would have made if they had purchased tickets.
One rule these authors highlight: advance electronic presentation of cargo information on any
shipment arriving or departing the US by air, truck, rail, or sea costs an estimated $2.5 billion.
Certain specific rules like this one are already captured in my breakdown of OMB costs for DHS
noted above.
But as for costs not captured by OMB, the authors also expose the deadweight losses associated
with two per-flight fees collected by the TSA that totaled plus $1.75 billion in 2005 (here Im not
including the $600 million deadweight loss they associate with federal taxation to fund TSA).265
Service degradation, waits and travel delays are estimated to tack on another $2.76 billion in 2005,
but this figure uses TSAs own estimate of 10 minutes of added wait time. Ellig et. al. note that In
the US, an additional hour of time per passenger would entail a cost of $16.6 billion, assuming
454 million trips.266 Here Ill split the difference and settle on $10 billion for the time being,
reinforced by the New York Federal Reserves estimate cited above of $11.8 billion.
The situation could be worse than these authors presume. Some regard virtually all of the airline
security enterprise as worthless. A 2011 holiday season article in Vanity Fair captured the
enormitya word that does not merely mean bigof the problem; As you stand in endless
lines this holiday season, heres a comforting thought: all those security measures accomplish
nothing, at enormous cost.267
This article, incorporating insights of security expert Bruce Schneier, contends that the game has
changed with respect to attacks on airlines, and the two things that did have the greatest positive
impact are the change in culture among passengers and reinforcing cockpit doors. Bag matching
gets some credit too, but that doesnt require a new governmental agency. Future attacks will
involve targets other than airlines, and the waste and distraction (and cost) could be colossal. The
screen-the-passengers emphasis also ignores the multitudes with access to planes within the airport
(as well as the fact that terrorists can integrate and obtain jobs in these areas). And thats ignoring
how boarding passes can be faked with little effort undermining the entire Were on the job!
circus of TSA. Moreover, and as noted, using biometrics to identify a live pilot/copilot team in
order for a plane to fly at all would prevent the use of planes as guided weapons even if terrorists
were given first-class tickets as deliberate public policy. But bureaucracys tendency is never to
walk through a door when theres a wall to break down. On top of this came the revelation that
TSA allowed 25 illegals to attend a flight school owned by an illegal.268 Local police rather than
the TSA uncovered the matter.
Another indirect cost, of the type agencies would note when it works in their favor but would
ignore here, is the estimates of deaths from increased driving instead of flying owing to
burdensome security checks and inconvenience. Statistically, auto travel is much more dangerous
than air travel; per mile, the risk of fatality is 8.9 times greater, Ellig et al declare, and cite studies
noting that TSA rules lead to an additional 66.2 highway deaths per year, and another finding
116.269
Such fatalities arguably attributable to regulation are not systematically included in the Tip of the
Costberg report, but they are here; assume callously that each life is worth $5 million and the 100
is ballpark, thats another half a billion in cost of DHS. This demonstrates that, just as regulatory
advocates points to lives affected, lives are also affected by regulatory activism, even that
specifically directed at saving lives. Future iterations of the report may cost in more such factors.
In their 2011 book Terror, Security, and Money: Balancing the Risks, Benefits, and Costs of
Homeland Security (as well as in an article270 and a discussion paper on the matter271) John
Mueller and Mark G. Stewart assess the public and private costs of homeland security spending,
which they peg at a trillion dollars over the decade after September 11, 2001, and $132 billion in
2009. Of this latter amount, note that $75 billion is direct governmental expenditures (which are
not counted here); the remaining amount of $57 billion, relevant to this report, consists of the $10
billion in private Enhanced Direct expenditures and the $47 billion they compile in
Opportunity Costs.
Enhanced Costs of Homeland Security in 2009, in billions of 2010 dollars
Enhanced Direct Expenditures
Federal homeland security expenditures
Federal intelligence expenditures
Local and state expenditures
Private-sector spending
Total
Opportunity Costs
Terrorism risk insurance premiums
Passenger delays caused by airport screening
Increase in short-haul traffic fatalities
for people avoiding airport delays
Deadweight and consumer welfare losses
Total
TOTAL
50
15
10
10
85
4
10
3
30
$47
$132
Mueller and Stewart point to substantial additional costs that they do not include in their tally,
perhaps making the estimate conservative.272
In Placeholder for Annual Cost of Homeland Security Regulation, I incorporate OMBs figures
supplemented by elements of the various categories of costs from the studies noted above as a
placeholder for homeland securitys regulatory impact. The baseline current, to-date annual cost
of homeland security regulation to which I will add future costs, while reserving the right to
incorporate future information that convinces me to increase or decrease the base, $56.65 billion.
These costs are also included in the table Principia Bureaucratica: The Total Annual Cost of Federal
Regulation and Intervention.
CHART: Placeholder for Annual Cost of Homeland Security Regulation
http://bit.ly/1uHpYIc
Additional homeland security costs loom. As one example, costs of a couple hundred million
annually have been noted in Annual Costs of Untabulated Major Rules Reviewed at OMB By
Department and Agency regarding air cargo screening for shipments placed on passenger airlines.
But the aim of the TSAs Certified Cargo Screening Program is 100 percent physical air cargo
screening, on transport aircraft, not merely passenger airlines. Thus estimated costs here cover
only a fraction of whats likely to come. The Congressional Research Service notes that Given
that estimates cover only shipments placed on passenger aircraft, which make up about 10% of
all cargo shipped to and within the United States by air, the projected cost of physically screening
all air cargo could conceivably total several billion dollars annually.273 Weve acknowledged ten
percent so far, not the looming 90 percent that will add billions more to annual regulatory costs.
Its noteworthy that non-HUD-based federal and state regulations contribution to the cost of
housing are said by the National Association of Home Builders to be substantial: 276
[O]n average, regulations imposed by government at all levels account for 25.0 percent of the final price
of a new single-family home built for sale. Nearly two-thirds of this16.4 percent of the final house
priceis due to a higher price for finished lot resulting from regulations imposed during the lots
development. A little over one third8.6 percent of the house priceis the result of costs incurred by
the builder after purchasing the finished lot.
State regulations make up a substantial portion of these costs, while others may originate from
many governmental bodies such as the Environmental Protection Agency (stormwater regulations
for instance). These are not added in here but for the time being assumed included in other cost
aggregates herein such as EPAs total and the overall economic regulatory cost placeholder.
representing less than budgetary costs of a decade. This cost ignores such concerns as catastrophic
wildfires exacerbated by the Endangered Species Act and other Interior Department programs.
High costs of Interior Department ESA rules are invoked by affected parties. For example, a May
2011 press release from Rep. Cathy McMorris Rodgers (R-Wash) in support of legislation
requiring the Bonneville Power Administration to assess ESA costs for consumers, claimed that
the benefits of hydropower arent fully tapped because of billions of dollars in excessive
regulatory costs to mitigate unproven environmental effects.282
A survey of ideas for reforming, improving and adapting the Endangered Species Act appears in
the book Rebuilding the Ark, edited by Jonathan Adler.283 In the introduction Adler notes, The
Supreme Court, in Tennessee Valley Authority v. Hill, declared that the ESA sought to prevent
species extinction whatever the cost, and costs rarely come into play under the Act. Fittingly,
then, there is no comprehensive study of the ESAs economic costs or its benefits.284
Further, an article cited therein noted that (surprise): While there is data on governmental
spending on endangered species, there is no data on the costs that the ESA imposes on society at
large.285 While an April 2006 GAO report intones: Endangered Species: Time and Costs
Required to Recover Species Are Largely Unknown,286 other surveys hint at costs in the millions,
even potentially billions in GDP impact, from certain species recovery plans.287
Among many commentators on the matter, a group called Abundant Wildlife Society of North
America noted kinds of costs associated with the Endangered Species Act of the sort simply not
fully captured anywhere; they include the locking up vast areas of land from commodity use,
depriving individuals of their constitutional right of protection of private property, and
deprivation of their property without just compensation.288 The overcriminialization created by
the regulatory state is apparent with the forty-year old ESA.289 The same mentality that destroys
species is also reflected in the federal ivory ban that aggravates poaching rather than fosters
conservation.290
Other DOI proposals including one with respect to disclosure of chemicals used in hydraulic
fracturing do not register as major rules for the Interior Department at this point,291 but that
technique will be coping with additional pressures from Washington that will likely be included in
future Tip of the Costberg reports.
So, the baseline current, cost of Interior Department regulation to which I will add future costs,
while reserving the right to incorporate future information that convinces me to increase or
decrease the base, stands at a low $4.259 billion as described above and as presented in Principia
Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention.
component, the Heritage Foundation noted a $1 billion-plus annual price tag.292 The Costberg
figure based on OMB data is comparable to Heritages, and the DoJs final regulatory impact
analysis of the ADA accessibility rules is available for reference.293 Beyond these, unmeasured
interference from the Department of Justice includes imposition of university speech codes
prohibiting unwelcome speech.294
2001, Joseph M. Johnson, in a detailed bottom-up review of available literature on the costs
associated with 25 major statutory and executive provisions, estimated that workplace regulations
cost $91 billion annually in 2000 dollars.299 The categories of regulations Johnson reviewed
encompass labor standards, employee benefits, labor/management relations, occupational safety
and health, civil rights, and employment decision laws. Each one taken by itself represents a major
modern category of public policy.
The chart Cost of Workplace Regulation Through 2001 breaks out elements of Johnsons turn of the
century report and updates the original 2000 dollars to 2012 dollars to arrive at an overall figure of
$118.1 billion annually. This tally uses Johnsons best estimate category, not his high estimates.
CHART: Cost of Workplace Regulation Through 2001
http://bit.ly/1uGYXVg
Counting fines against employers, as Johnson does, may be arguable from some perspectives,
while not from others. It is unclear how far critics want to go for example in defending the
National Labor Relations Boards actions with respect to the Boeing aerospace corporation and
workers in South Carolina.300 Over-criminalization has become an important issue well beyond
labor rules. One could justify adding costs here for loss of liberty and the interference with the
ability of firms to decide where to locate production facilities, but we havent done so yet.
Much like the indignation heaped upon the 2010 Crain and Crain report for the Small Business
Administration, opponents made clear their disdain for the Johnson labor study. The Crain and
Crain report made use of Johnsons OSHA (Occupational Safety and Health Act) sub-component.
OMB Watch and other groups protested a multiplier employed by researcher Harvey S. James in a
much earlier study (upon which Johnson relied) in examining the OSHA Act.301 I wont go into
the Economic Policy Institute criticism of Crain and Crain with respect to the labor estimate here
(such as the protests that the regulations are old and that compliance costs will have declined,
which is suspect since compounding matters), but rather urge readers to read the EPI article, note
its tone and focus, and decide for themselves whether that entitys goal is to acknowledge any
reality of regulatory costs whatsoever and contribute to the derivation of better estimates, or rather
to be dismissive at best and to intimidate researchers from pursuit of openness about cost at
worst.302
With respect to Johnsons OHSA component, a multipliers use seems a reasonable stance
certainly more reasonable than ignoring costs altogether, and since we havent generally employed
such multipliers elsewhere. As in most regulatory compliance compilations, Johnson already
focuses on first-order direct cost and doesnt emphasize second-order indirect costs, a more
conservative approach that, while it cannot satisfy critics of a certain political persuasion,
nonetheless results in a lower cost estimate than might be arguable.303 We already know noneconomically significant DoL rules are omitted from official tabulations and that rules issue forth
at a not-insignificant rate. If a multipliers use as a simplifying mechanism is a sin, it seems a
greater transgression when parties actively cheerleading regulations rather than complying with
them do not regard the bulk of rules as having any cost impact. Willful disregard of regulatory
costs impacts is a bias that extends far beyond the OSHA instance here. In other chapters of
Costberg, apart from a tiny amount noted for indirect costs of trade restrictions, and in the core
assumptions of OMBs 2002 estimate of aggregate regulatory costs, multipliers are not used but
perhaps should be.
Incidentally, for labor rules not involving safety and health matters, Johnson leaves out costs of
minimum wage mandates entirely (to either employers or to the unseen dispossessed workers).304 I
do so here as well, further understating labor regulation impacts. I also do not address what is seen
as a failure of labor regulation such as the Fair Labor Standards Acta measure directed at
sweatshop conditionsto keep up with a modern, mobile, telecommuting, digitally connected
workforce for whom its old rules are not suitable.305
The tens of billions in impacts of labor regulation and compulsion in the labor market observed
here may greatly understate actual economic drag. The aforementioned Dawson and Seater
Aggregate Growth study finding U.S. GDP to be affected by regulatory accumulation such that
what is a $15 trillion GDP should be $54 trillion instead implies such. So does a 2014 report by
Lowell Gallaway and Jonathan Robe for the Competitive Enterprise Institute, which analyzed the
economic impact of unionization on the states and found the 1935 Wagner act to be responsible
for long-term economic trauma.306 The small cumulative decreases in worker wages resulting
from unionization significantly affect economic growth over a long period of time, resulting in as
much as a 10-12 percent cumulative loss of GDP over a 50 year period.
A 10-12 percent cumulative GDP loss sounds like a lot, and it is. In dollars, the impact of the
presence of compulsory unionization alone dwarfs OMB estimates and the Johnson estimates of
the entire labor sector. Certain states without right-to-work laws have suffered more than others in
terms of foregone economic growth. In a prior (2002) report translating these cumulative GDP
impacts into dollars, Gallaway and Richard Vedder conclude that labor unions have reduced U.S.
output by trillions of dollars over decades. In an evaluation of the 1947-2000 deadweight loss of
U.S. national income resulting from the presence of trade unions, they conclude:307
The results ...are striking. By 2000, our simulations show a shortfall in current real GDP (1992-1994
dollars) of about $3.5 trillion dollars--about forty percent of current GDP.
This may seem to be an astoundingly large number. However, it must be remembered that the
deadweight economic losses that are being measured are not mere one-shot impacts on the economy.
They recur, every year, relentlessly, cumulating in their impact. What our simulations reveal is the
powerful effect of the compounding over more than a half-century of what appears at first glance to be
small annual effects. An even more dramatic statement of the economic cost of unions is provided by
cumulating the lost income and output over the entire 54-year period under consideration. The result
exceeds $50 trillion (1992-1994 prices), a breath-taking total.
By this reckoning, unionizations impact exceeds everything else discussed so far by a great
magnitude. Nonetheless, for present purposes Ive not added these astronomical figures to the total
cost of labor regulation, but certainly could have. I shall employ solely the Johnson figures and
OMBs.
The Johnson-derived figure for all 2001 labor costs $118.1 billion annually (in 2012 dollars; for
reference again, Johnsons own best estimate in 2000 dollars was $91 billion in direct costs).
Recall that OMBs figure for turn of the century labor regulation costs, which overlap with the
period of Johnsons study, was $28.2 billion. (And to clarify again, OMBs $28.2 billion for labor is
not part of the turn of the century economic regulation costs noted by OMB and addressed
earlier; such sums were designated social costs at the time, so there is no double-counting in that
respect.)
We can assume that Johnsons turn of the century $118.1 billion annually and OMBs $28.22
billion encompass the same universe of rules and regulations. Actually, thats not precisely the
case since OMBs number from that era included some second-order or indirect costs that
arguably could be added to rather than subtracted from Johnson, who noted throughout his work
the categories of costs he omitted).
Still, subtracting OMBs $28.22 billion from Johnsons $118.1 to net them yields $89.88 billion
to capture the Johnson component of ongoing annual costs of workplace regulations that were
effective by 2001. By breaking the figures up this way, the chart Principia Bureaucratica: The Total
Annual Cost of Federal Regulation and Intervention retains for legacy purposes the OMB figure for
Department of Labor costs up to the year 2000, and presents the Johnson-derived overage f
$89.88 on a separate row rather than his entire 118.1 billion).
The OMB and Johnson legacy figures, plus the OMB partial estimates of $8.516 billion since 2001
brings total workplace regulatory compliance to $126.62 billion. This figure serves as the baseline
current, to-date cost of workplace regulation to which I may add future costs (such as a new major
OSHA hazard communication rule308 and the Gallaway and Robe data) while reserving the right
to incorporate future information that convinces me to increase or decrease the base.
Department of State
Ive not incorporated any State Department international relations elements as regulatory costs;
just for reference, State Department paperwork costs of $1.46 billion appear in Executive Agency
Paperwork Burdens but are not added to the Costberg total. Portions of such costs might relate to
restrictions on foreign labor that will be discussed briefly later (immigration is regulated by State,
DoL and DHS). But like DoD, these costs are not at this point incorporated into Tip of the Costberg
as embodying private sector compliance or governmental impacts.
appear in these same two charts; they are projected to cost up to $18.456 billion annually. All these
figures are summarized in Principia Bureaucratica: The Total Annual Cost of Federal Regulation and
Intervention.
The rules just noted encompass those for which both cost and benefit estimates exist. A lone rule,
of $61 million annually on procedures for dealer participation for recycling traded-in automobiles,
appears in OMB data accompanied by costs only. It appears in Annual Costs of Untabulated Major
Rules Reviewed at OMB By Department and Agency and in Principia Bureaucratica: The Total Annual
Cost of Federal Regulation and Intervention.
These 39 rules referenced so far comprise a fraction of the 11,893 rules issued by DOT issued
since 2001 (391 of them presumed significant).310 For present purposes, paperwork costs of $11.1
billion that appear in Executive Agency Paperwork Burdens are assumed accounted for.
Cars and Trucks
Other industry estimates merit attention that might sometimes supplement OMB figures. One can
see in Major Rule Annual Cost Detail, OMB Costs and Benefits Reports, FY 2002-Present for example
that several categories and designated vehicle model years of CAF requirements appear over the
decade. The EPA/DoT rule to affect 2017-25 model years of cars and light trucks would double
fuel economy to 54.5 miles per gallon by 2025, and comes with an expected overall cost of $157
billion.311 It would boost cost to consumers of cars and trucks alike well over $1500 per unit,
according to the administration.312
But the National Association of Automobile Dealers claims the agencies have underestimated
the increased consumer prices resulting from their proposal by a factor of 1.6, and that the per
vehicle price increase increases from $2,937 to $4,803.313 Relatedly an earlier Center for
Automotive Research report estimates automakers will spend an additional $3,700 to $9,000 per
vehicle to achieve a government fuel-economy standard of 47 to 62 miles per gallon by 2025.314
None of these additional costs are added here, however.
I havent located anything to supplement government-reported truck/automobile regulatory costs
for the past decade, but a turn of the century study appears capable of supplementing OMBs turn
of the century figures a bit, but we wont add a great deal more, just a placeholder. A 2004 report
headed by Daniel Sperling of the Institute for Transportation Studies and the University of
California found that the cost of emissions and safety regulations to beabout one-eighth of the
total vehicle price for 2001 cars, or around $2500 per vehicle.315 Note that these safety and
emissions costs exist prior to the newer CAF requirements that are built into existing OMB
estimates, however inadequately as NADA and Center for Automotive Research contend.
Benefits of regulations far outweigh costs in Sperlings view, but the study authors underscore the
complexities involved in assessing regulations price and impact: Even in the most sophisticated
analysesrarely are long-term or secondary impacts considered. The challenge was more
daunting than we initially imagined. We soon found that little is known about the effects of
previous regulationseven direct cost impacts. They conclude, though, that regulatory actions
have not distorted or perturbed automotive markets and industry much over the last few decades.
If we take that $2,500 figure, and assume no increase in the cost of pre-2001 regulation and apply
it to 2010 car and truck sales based on Wards Automotive Group sales figures,316 a rough overall
annual regulatory cost figure of $29.4 billion emerges, for 2010, but rooted in pre-2001 regulation.
A 2010 Estimate of Cost of 2001-Era Automotive Health and Safety Regulation (based on 2010 Sales)
Cars:
5,635,433
SUVs and Trucks:
6,137,787
Total:
11,772,220
Overall cost at $2,500 per unit:
$29.4 billion
Overall cost at $2,000 per unit:
$23.5 billion
OMBs turn of the century safety regulation figure for the overall transportation sector (not just
automotive) was $26.737 billion. If one were to assume 60 percent of OMBs figure, or $16.04
billion, belongs to automotive transportation, the ITS/University of California study would imply
an additional $13.6 billion in automotive regulatory costs ($29.4 billion minus $16.04 billion). But
lets assume instead an even lower per-vehicle cost than Sperling, of $2,000 per unit ($23.5 billion
overall), and not inflate the 2001 $2,000 figure to 2010 dollars as would be appropriate. This yields
a placeholder overage for vehicle safety and efficiency costs to supplement OMB of $7.46
billion ($23.5 billion ITS/UC estimate, minus the $16.04 billion were assuming OMB is
attributing to cars and trucks). This is what I include in Principia Bureaucratica: The Total Annual
Cost of Federal Regulation and Intervention.
This is far from exact, its even arbitrary, but it seems better than positing nothing in the face of the
fact that little is known and with few other non-governmental studies available to supplement
Costberg and the existence of so many regulations beyond those for which DOT reports costs.
Whether regulations costs are known or not, compliance remains mandatory.
The trucking industrys overall regulatory costs, apart from that contained in OMBs figures, is not
yet examined here. But with respect to future regulatory costs, the Heritage Foundation noted
that:317
Under a provision buried in the 600-page transportation bill recently passed by the Senate, truckers
large and small would be required to buy and maintain electronic on-board recorders (EOBRs) that
would document their travel time and distance. The annual cost to truckers and trucking firms: $2
billion.
Much of what we all own spent part of its time on a truck somewhere. Policymakers should pay
closer attention, and better quantify costs to this industry of its transportation and environmental
mandates. But so far, no such costs are added here.
Trains
The introduction of so powerful an agent as steam [to a carriage on wheels] will make a great change in
the situation of man.318
Thomas Jefferson, 1802
Independent estimates for the costs of regulation to the freight railroad industry are lacking. A
notable rule, however, which does appear among OMBs figures is a $1.6 billion rule on positive
train control technology to automatize stopping or slowing in certain cases. Other cost figures are
sparse, but examples include the claim by some in the industry that AmTrak access to freight rail
tracks costs some $240 million annually.319 Most coal transport is by rail, so anti-coal regulations
affect the rail industry as well. The report Slow Train Coming by Marc Scribner describes
misguided attempts to re-regulate rail, some supported by shippers in the agricultural, coal and
petrochemical sectors a rebounding threats.320 It is remarkable that nothing tangible to add as an
annual cost to train regulation is otherwise available. Costberg, at this point, only includes
governmental figures.
Planes
Itll never fly, Orville.321
Unknown
Aeronautics was neither an industry nor a science. It was a miracle.
Igor Sikorsky
A few rules among those issued since 2001 affect the aviation industry. These may be seen in
Major Rule Annual Cost Detail, OMB Costs and Benefits Reports, FY 2002-Present, and include rules on
Washington, D.C. area flight restrictions, fuel tank flammability, pilot age limit, but little else. The
net costs, apart from making an assumption that some of the pre-turn of the century $26.737
billion ascribed to DoT contains some aviation costs, amount to only a few tens of millions.
Its hard to imagine airline interventions and regulations cost that little. The American Aviation
Institute provides some figures on regulatory costs (such as tarmac limitations) and taxation in the
airline industry. Their 2011 report noting such impacts as flight cancellations and compliance
costs finds that Consumer regulations introduced since 2009 have added $1.7 billion per year in
cost to airlines. Higher fares resulting from these costs will result at least a $3.5 billion annual
impact on the national economy. 322 Here, in the absence of any other information on overall
aviation regulatory costs, we include the $5 billion total in Principia Bureaucratica: The Total Annual
Cost of Federal Regulation and Intervention. These enhanced passenger protections do not appear as
major rules, at least as far as what OMB compiles, which seems inappropriate.
An important, comprehensive study of the U.S. transportation system by Clifford Winston surveys
numerous categories of costs and interventions ranging from inefficient labor regulations in
highway projects and EPA regulations that delay runways, to welfare gains available from
adopting congestion pricing on highways, better gate management at airlines, repealing the Jones
Act in shipping, and much more.323 These costs (or implied savings and improvements in welfare
from liberalization) would sum into the many billions of dollars. Ill assume here, however, that
Ive covered EPA and labor costs elsewhere in Costberg, and will for the time being let OMB figures
and the placeholders we have (inadequately) stand in for the remainder. The baseline current, todate cost of transportation regulation to which I will add future costs, while reserving the right to
incorporate future information that convinces me to increase or decrease the base, is $80.395
billion, as may be seen in Principia Bureaucratica: The Total Annual Cost of Federal Regulation and
Intervention.
most prominent: Of the 651 total complaints [from 113 organizations], 334 of those pertained to
EPAa whopping 51 percent.329
The major EPA programs started over 40 years ago with:
The Clean Air Act of 1970
The Federal Water Pollution Control Act of 1972 (now the Clean Water Act)
With these two acts, responsibility for establishing and enforcing pollution control requirements
was shifted largely to the federal government.330
Continuing with subsequent major programs, we encounter:
is associated with an increase in total cost (at the margin) of $10-11, of which $9-10 are hidden in
other accounts.334
The complexities involved in tabulating environmental regulatory costs were made apparent in
RFFs 2003 Calculating the Costs of Environmental Regulation when Pizer and Kopp described
their task:335
At the broadest level, we distinguish between partial and general equilibrium costs. Partial equilibrium
costs represent the burden directly borne by the regulated entity (firms, households, government),
including both pecuniary and nonpecuniary expenses, when prices are held constant. General
equilibrium costs reflect the net burden once all good and factor markets have equilibrated. In addition
to partial equlibrium costs, these general equilibrium costs include welfare losses or gains in markets
with preexisting distortions, welfare losses or gains from rebalancing the governments budget
constraint, and welfare gains from the added flexibilty of meeting pollution constraints through
reductions in the use of higher-priced, pollution-intensive products.
For framing, the OMB, in its 2002 Draft Report on Benefits and Costs of regulations noted turn of the
century environmental costs of up to $203 billion (in 2001 dollars), which appears in Total Annual
Costs of Regulations as of Sept 30, 2001, According to OMB. That would be $267 billion in 2013
dollars, also shown in the chart. Elements of EPAs Cost of a Clean Environment report were
instrumental in these OMB estimates of environmental regulatory costs. The estimated
environmental cost component noted by other observers hovers in this general $200-$300 billion
area as well, if one were to express those figures in 2013 dollars, as previously seen in Estimates of
the Cost of Regulation: Late 20th Century, Early 21st Century.
OMBs assessments of the aggregate, overall costs of environmental regulations (as opposed to the
incremental, piecemeal yearly figures the public gets now) also appeared in both its 2000 and 2001
Benefits and Costs reports, and all were the basis for the turn-of-the-century figures seen herein.
OMBs 2000 report, for example, incorporated the EPA Environmental Investments report as part of
its environmental cost estimate: OMB tallied a total of up to $170 billion in total environmental
costs at the time (that was 1996 dollars). The lower bound was comprised of $96 billion noted by
EPAs air rules assessment plus the newest cost data from Regulatory Impact Analyses
accompanying rules issued between 1995 to 1999; other amounts consisted of OMBs collation of
other researchers work and its own estimates regarding EPA costs between 1988 and 1995.336
Given this picture that emerges from all these, for a pre-turn-of-the-century (not recent decade)
costs of environmental regulation, I use OMBs 2001 report as depicted in OMB-Tallied Social
Regulation Subset Costs Up to $473 Billion Annually showing EPA costs of up to $252.52 billion in
2013 dollars as a placeholder for legacy environmental costs. This figure (which is less than
OMBs $267 just noted from its 2002-based Total Annual Costs of Regulations as of Sept 30, 2001)
appears in Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention as
EPA historical cost per OMB.
Weve experienced well over a decade of environmental rulings since this short-lived official flurry
of EPA aggregate cost estimates. Total EPA costs over the past decade-plus of up to $59.65 billion
using OMB Benefits and Costs reports and detail on exactly what these more recent rules are
appears in Major Rule Annual Cost Detail, OMB Costs and Benefits Reports, FY2002-present. These also
appear in Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention as EPA
per OMB C&B Reports 2002-present. To reiterate the parallel with other agencies, this $59.65
billion represents only rules for which both cost and benefit estimates were provided by OMB,
which is only a fraction of EPAs major rules.
Other independent reports put such EPA costs in context. For the manufacturing sector alone, the
study by NERA for MAPI described earlier (Macroeconomic Impacts of Federal Regulation of the
Manufacturing Sector), described an Environmental Protection Agency cumulative component over
the period 1993 through 2011:
[L]ooking at the ranking of the agencies in terms of total estimated costs of major regulations affecting
the manufacturing sector from 1993 through 2011, the Environmental Protection Agency ranks as the
top agency with total cost estimate of $117 billion. This cost figure far exceeds the cost of all other
agencies.
These particular data in the NERA/MAPI report are derived from a model based on OMB
Reports to Congress just as Costberg figures are (minus the model, of course, in the case of the latter).
The authors of the NERA/MAPI study reiterate, as has been cited earlier and similarly stressed in
Costberg:
[T]hese totals represent only rules with cost estimates from the OMB Reports to Congress. To the extent
these reports do not contain cost estimates for all regulations over the 1993 though 2012 time period, the
totals shown below understate the total cost of all regulations.
As for EPAs overall 1993-2011 cost to the economy (not just the manufacturing sector),
NERA/MAPI arrived at $158 billion.337 This figure is superficially comparable to the interval
represented by Costbergs 2002-present $54.61 billion annualized figure, which includes a
substantial $10.89 billion component for 2013 alone. NERA/MAPI make the same word-for-word
caveat in this section of their report as just cited above regarding omitted costs.338
A small additional cost component for EPA rules (with costs but not depicting benefits) of $1.191
billion appears in Annual Costs of Untabulated Major Rules Reviewed at OMB - by Department or
Agency. For more than a decade, alongside the economically significant rules that OMB
highlights, EPA has issued hundreds of rules not regarded economically significant, creating huge
gaps in what gets counted. Since 2001, EPA has issued 6,866 rules, 382 of them significant.
Among these, some environmental regulations and proposals not fully unveiled in OMBs
roundups and proposals are regarded as exceedingly costly, referred to in the House Energy and
Commerce Committee as long and growing list of billion-dollar rules.339
While OMB practices benign neglect of its aggregate estimates in play around 2001, these three
OMB-based components of environmental regulations total up to $313.36 billion, as depicted in
Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention. Again, this omits
recent costly rules, and numerous unanalyzed rules, a small portion of which will be noted shortly.
But first, circling back to the future: EPA clearly saw, and necessarily still sees given its policies,
the two-percent-of-national-income cost of environmental protection as a terrific bargain and
investment to celebrate rather than downplay. When the Agency prepared Cost of Clean
Environment it even eagerly anticipated programs yet to be fully implemented, and projected that
their costs would be $158 billion (still 1990 dollars) in 2000, and to reach 2.4 percent of GNP by
than the total primary cost estimates of $53 billion in 2010 and $65 billion in 2020. The difference is
attributable to secondary effects of compliance costs on the overall economy, a large portion of which
are likely the result of increases in energy prices, which has broad effects on overall production. Another
factor is that investment in pollution control capital can divert capital from the purpose of enhancing
long-term productivity within the industrial sector.
So with this incremental portion of the Clean Air Act alone, we are looking at EPA-estimated
2010 economic impacts of $132 billion ($53 billion direct plus $79 billion GDP reduction).
All regulatory cost summations are apples and oranges, yet, nonetheless, for still further context,
with respect to air quality regulations impacting manufacturing plants, particularly ozone rules, a
September 2012 report by the National Bureau of Economic Research found annual economic
cost from the regulation of manufacturing plants of roughly $21 billion, about 8.8 percent of
manufacturing sector profits during the 1972-1991 period under review.344 These also appear not
to have figured into EPAs analyses of itself.
So far we have pondered mostly air-related regulations. Further adding context for our OMBbased $313.36 billion subtotal in Principia Bureaucratica: The Total Annual Cost of Federal Regulation
and Intervention is the range of Clean Water Act regulations that, as of 2001, totaled up to an
estimated $93.1 billion annually; 345 Like the Clean Air incremental just noted, these again are not
added but assumed to be (theoretically) captured in the EPA base estimate we already have, and in
the newer economically significant rules issued since the turn of the century in OMB benefits and
costs reports.
Along with all rules not deemed economically significant, many impose costs that are not
captured in EPA regulations over the past decade-plus. For example, with respect to gasoline
content regulations, one academic study found:346
There is no evidence, however, that the RVP (Reid vapor pressure) or RFG (reformulated gasoline)
regulations result in significant ozone reductions. These two regulations nonetheless impart substantial
costs on consumers, since the entire country is subject to one of them during the summer months. Given
U.S. non-California 2008 summer gasoline consumption of 47 billion gallons and a $0.01 - $0.015 per
gallon price effect estimated in Brown et al. (2008), the VOC standards imposed by these regulations
increase U.S. annual gasoline expenditures by $524 - $784 million.
Ive not added the half-billion-plus in costs of these regulations here, but could have. The point is
to show that of the many hundreds of EPA rules not folded into OMB cost estimates, some
matter. So lets assume for the time being they and others like them are captured in our OMBbased $313.36 billion subtotal in Principia Bureaucratica: The Total Annual Cost of Federal Regulation
and Intervention.
Beyond OMBs roundups, other costs of ethanol-related programs and a new water program will
be noted.
Ethanol-into-fuel
Government Moonshine347
The Freeman, March 24, 2010.
The market for ethanol would not exist without its policy privileges.348
The mandate for ethanol use in gasoline, the Renewable Fuels Standard, creates substantial costs
for consumers through the Environmental Protection Agency and the Agriculture and Energy
Departments. These costs include budgetary costs like corn and soybean subsidies, crop insurance
subsidies and maintenance of an ethanol reserve. As budgetary costs rather than regulations, these
tens of billions are not included here.349
However, the costs to consumers beyond these budgetary expenditures do need to be addressed by
policymakers, and they do not appear in any of the detail from OMB in its benefits and costs
reports, as far as I can tell. These costs need to be added to turn of the century and recent costs
since they are a newer development. In the book Corn Ethanol: Who Pays? Who Benefits?, author
Ken G. Glozer notes budgetary costs during the 2008-2017 period of $143 billion; but he also
delineates Consumer Cost Increases for the same ten-year period, as follows:350
Consumer Cost Increases (billions of $)
2008-2017
Mileage penaltyLower BTU ethanol blend
115
Increase in food costs
198.1
Increase in domestic ethanol price resulting from
Fee on imported ethanol
35.2
Increase in vehicle costs for flexible fuel vehicle upgrade
15.4
Total estimated consumer costs ten-year period):
$363.7
The grand total for Glozers estimated impact of federal corn-ethanol policy on consumer and
federal taxpayer costs, 2008-2017 is $506.7 billion, a huge sum. The consumer cost increase
component alone, a proxy for regulatory costs, is $363.7 billion or $36 billion annually over the
period. For present purposes, I downscale the number to $25 billion and include it in Principia
Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention. The situation is worsened
by the finding that biofuels created from corn waste and residue are worse for emissions than the
gasoline they replace.351
Next, I highlight here a factor that Ive deliberately avoiding in assigning regulatory costs, except
for a small component in homeland security regulation earlier. The Glozer study does not
incorporate health effects; but by raising the price of basic food around the globe, industrialized
countries ethanol-into-fuel policies exacerbate world hunger and human mortality. In October
2011, the Competitive Enterprise Institute and ActionAid USA filed with EPA a joint request for
correction of information under the Data Quality Act, asking the agency to take account in its
analyses of the resulting risks of hunger and death.352 EPA refused their Request for Correction
of information under the Data Quality Act, and the groups filed a Request for Reconsideration in
March 2013.353
These groups demand highlights peer reviewed work by Indur M. Goklany suggesting that EPAs
lowball estimates of the costs of its ethanol-into-fuel program ignore global deaths due to
hunger:354
[B]y increasing food prices, biofuel mandates have caused chronic hunger in developing
countries, and that at least 192,000 deaths annually may be occurring as a result of
emission standards as cavalier and unscientific.360 This industry estimates that cost of a slate of
proposed and enacted rules will cost several billion annually.361
Its not the approach in Tip of the Costberg to include such proposed, not yet effective regulations
but in dramatic instances like EPA it is worthwhile to note them.
Industry estimates for the rules that have appeared over the past decade are sometimes
considerably higher than the EPA estimates. Utility Maximum Achievable Control Technology
(MACT) standards on mercury and other air toxics were pegged by EPA at $500,000 annually,
while the National Economic Research Associates (NERA) point to costs of many billions and
substantial job impacts for the final rule.362 NERA pegged additional costs to power companies of
the Clean Air Transport Rule and the Utility MACT rule at an extra $17.8 billion annually363
compared to lower EPA claims.
The industrial boiler/process heater MACT rule is another example of divergent views. EPA
estimated annualized costs at $2.9 billion.364 The Council on Industrial Boilers released a report
estimating job impact and capital outlay costs far exceeding the EPAs capital costs of $9 billion,365
a plea met immediately by the requisite assertions that the rules arent burdensome.366 The
American Forestry and Paper estimated the portion of boiler MACT affecting pulp and paper
mills alone at $4.6 billion in capital costs, more than half EPAs overall capital cost estimate. As
the National Association of Manufacturers (NAM) noted, the House of Representatives in 2011
did vote to delay the rules367 but the Senate never did. The NAM contends that The Boiler
MACT rule will cost manufacturers more than $14 billion in valuable capital that could be spent
on investments to create jobs.368
States sometimes raise alarms about EPAs long reach. In Milwaukee, WI, the president of
Wisconsin Manufacturers and Commerce proclaimed: 369
EPAs war on fossil fuels hit Wisconsin harder than most other states because nearly 70 percent of our
energy for residential, commercial and industrial use comes from coal-fired plants...The Boiler MACT
rule alone could lead to the closing of 11 paper mills in Wisconsin and the loss of up to 7,500 jobs by
forcing companies to pay more than $400 million to meet new emissions standards.
Administrations occasionally find themselves compelled to back off a high-dollar upcoming rule
by economic and political realities. President Obama withdrew the Reconsideration of the 2008
Ozone National Ambient Air Quality Standard that could cost up to $90 billion (the rule would
lower the allowable concentration of ozone from 0.075 parts-per-million to between 0.060 and
0.070 parts per million).370 The Administration contests the claim, but the Manufacturers Alliance
pegged costs of meeting the regulation at $1.013 trillion and 7.3 million jobs between 2020 and
2030.371 Sen. John Barrasso (R-WY.) called EPAs temporarily delayed ozone rule the single most
expensive environmental regulation in history.372 That distinction now belongs to the EPAs Clean
Power Plan rule, which is also the target of 2015 resolutions of disapproval. A 2014 Chamber of
Commerce report anticipated that a version of this rulemaking on restricting carbon dioxide
emissions from fossil-fuel powered plants would reduce GDP by some $50 billion annually
through 2030 (and impact over 200,000 jobs),373 but the Obama administration shows no sign of
backing off this one, despite protests from some coal state Democratic senators.374
Also on the subject of pending regulatory costs, several of the just-noted rules among them,
President Obama sent an August 30, 2011 letter375 to then-House Speaker John Boehner in
response to a request for a list of pending rules with costs in excess of $1 billion. Dominant
among the total of seven were four EPA rules that cost up to $105 billion, the ozone rule among
them:376
Agency
EPA/AR
Title
Primary Cost Estimate
Reconsideration of the 2008 Ozone National Ambient
Air Quality Standards
$19-$90 b
EPA/AR
National Emission Standards for Hazardous Air
Pollutants for Coal- and Oil-Fired Electric Utility
Steam Generating Units
$10 b
EPA/AR
National Emission Standards for Hazardous
Air Pollutants for Major Source Industrial,
Commercial & Institutional Boilers and
Process Heaters
$3 b
EPA/SWER Standards for the Management of Coal
Combustion Residuals Generated
by Commercial Electric Power Producers
$0.6-$1.5 b
Speaker Boehners reaction was one of alarm, and he requested cost estimates of the remaining
economically significant rules.377 Skirmishes will continue over whether regulations are
misguided or laden with public benefits.378
Regulators recognize that these rules are costly, despite their challenges of industry estimates.
Actions are louder than words, and political considerations creating delays demonstrate this.
Senator James Inhofe provided a list in October 2012 of strategically delayed rules in a report
whose title partly read, Numerous Obama EPA Rules Placed on Hold until After the
Election.379 The Washington Post later detailed how EPA in particular held back on rules prior to
the 2012 national elections: As we entered the run-up to the election, the word went out the
White House was not anxious to review new rules, one official acknowledged.380 This
demonstrates that Washingtons regulators and leaders know regulations can be costly. Still, rules
delayed are not rules terminated; expect any rules delayed to return in some form when more
politically convenient accompanied by even more rules.
To seek better control of environmental regulatory costs isnt to disregard safety. We all have
children and grandmothers, so such arguments are obnoxious. Agency creativity with benefit
estimates, such as the arrogance of assuming benefits from correcting consumer irrationality in
EPAs analysis of the newest set of proposed CAF greenhouse gas and fuel economy rules is
widespread.381 EPAs interference with access to affordable heating and cooling imposes health
risks all on its owncosts that are not included here but should be. The agencys eagerness to act
without congressional authority, a move in violation of the Constitutions separation of powers,
yet encouraged by President Barack Obama, should alarm citizens and policymakers alike.382
Other costly rules usurp what should be state authority, even going so far as to regulate scenery
rather health and safety.383
People want environmental protection and increased environmental amenities. They differ over
whether EPA and central planning and public ownership of resources are the best means of
securing them. It is interesting to witness the rare occasions when even regulatory proponents
acknowledge that other existing regulations (federal, state and local), fear of tort liability, and
simple market forces induce companies to take some minimal level of environmentally protective
action all the time.384 These are worth exploring as alternatives to further command and control.
OMB cost estimates do not include assessment of antitrust regulations economic costs. Even
during its period when it did address aggregate costs, the OMB left antitrust out (so it is not a
component of the $397.75 billion in aggregate non-trade legacy economic costs described in the
earlier chapter A Baseline for Aggregate Annual Economic Regulation Costs). As OMB stated
back in its 2000 Report, our definition of economic regulation does not include antitrust
activities such as preventing the formation of monopolies through mergers or anticompetitive
behavior.390
Antitrust regulation is not to be regarded as a benign power, and its costs merit recognition. Large
companies may enjoy market power for a period of time (firms have life cycles like industries and
products), but they possess nothing that matches the near-absolute power antitrust authorities
wields over the entire economy as a whole. Antitrust intervention is capable of changing entire
industry structures (and it does so) and in the process it reorients economic trajectories and
generates outcomes that do not resemble what market competition would have delivered. As far as
deadweight losses are concerned, they can hardly get more injurious.
OMB itself in certain instances has shared the view that antitrust regulation may not be entirely
beneficial. As noted on p. 18 in the 2000 Report:
Economic regulation may produce net social benefits when natural monopolies are regulated to
simulate competition. Although ... the dollar amounts of such efficiency benefits are small and short
lasting in a dynamic and technologically vibrant economy, this is a judgment that is not the result of
an empirical study. It is, however, based on the increasingly accepted view that the U.S. economy is
becoming more competitive over time, with fewer long-lasting natural monopolies, and on evidence that
much economic regulation seeks primarily to enhance one group at the expense of another.
The U.S. Department of Justice collected $1 billion in payments related to criminal antitrust
investigations in FY2011.391
Apart from such assessments, costs of antitrust regulation (not including the governments onbudget enforcement costs) have been estimated at $1.9 billion annually for 2003, as seen in Costs of
U.S. Antitrust Regulation (with benefits said by practitioners to almost surely outweigh costs).392
What that author may consider a benefit, I would probably consider a cost.393 Be that as it may,
assuming no added costs and putting this estimate in 2010 dollars, we have indirect antitrust costs
of around $2.34 billion that were using in this report and including in Principia Bureaucratica: The
Total Annual Cost of Federal Regulation and Intervention. These costs include responding to
government investigations; costs of private litigation; and indirect costs such as opportunity costs
of management time spent on compliance and litigation, and distraction and deterrence of
beneficial firm activities.
Costs of U.S. Antitrust Regulation
http://bit.ly/1DkuMY4
This is a low figure, insufficient for capturing antitrusts enormous impacts on the economy. While
not disputing claims that benefits of enforcement outweigh costs, Robert W. Crandall and Clifford
Winston provide some context for the billions involved annually:394
Total resources consumed by antitrust enforcement, however, amount to much more than government
antitrust agency expenditures....Firms involved in antitrust cases must pay for legal advice, particularly
in obtaining approvals for mergers and acquisitions. Fisher and Lande (1983) estimate that a merger
case cost a rm as much as $1.5 million during the 1980s. Firms that face a lawsuit must pay for their
defense, which could involve a lengthy trial and subsequent appeals. Antitrust cases also require the
time and resources of management and critical staff to address issues of rm conduct, to provide
nancial information and so on. We are not aware of estimates of the costs to rms caused by antitrust
investigations and court proceedings, but they undoubtedly run into the billions of dollars per year.
Finally, the largest cost of antitrust enforcement may be that rms are discouraged from pursuing
potentially efcient mergers, taking competitive pricing actions, developing new products or making
new investments for fear of being embroiled in an antitrust action, especially if competitors use the
antitrust authorities to block one another.
Another survey notes, regarding cost of a failed merger attempt alone, that:395
The failure of a merger attempt can entail significant direct and indirect costs to the acquirer, target, or
both firms. From the time of a merger announcement to the time when it is completed or canceled, the
acquiring firm discloses information that it would not otherwise disclose, incurs substantial legal
expenses, and faces production activity disruptions as well as management distraction. If the deal falls
through, then competitors are in a better position to use such information to their advantage. Ekbo and
Wier (1985) find evidence that rival firms benefit from the news of a merger proposal and that a delay
in completion of the deal gives rival firms additional time to exploit the news. Bates and Lemmon
(2003) find that the inclusion of target termination fees is more frequent in merger deals where the
potential for information expropriation by third parties is significant. The target, on the other hand,
has to seek other means of restructuring, including being taken over by a different firm, which may not
be possible within a short period of time.
Second-order and indirect regulatory effects not reflected in OMB and SBA estimates permeate
antitrust activism. And so do direct effects; for example AT&Ts abandoned merger with T-Mobile
entailed a breakup fee of $4 billion. This cost was caused entirely by governments interference
with one free market transaction, a derailment from which rivals benefit and avoid the need to
respond competitively. This cost and others like it are not added here but could have been.
Also not included are lost synergies and inefficiencies created by conditions forced upon
transactions, such as the spinoffs of business elements that frequently occur with respect to
mergers. Such meddling is standard now, even with respect to something as mundane as ecigarettes.396 It happened before with intense mints.
So, the baseline current, to-date cost of antitrust regulation to which I will add future costs, while
reserving the right to incorporate future information that convinces me to increase or decrease the
base, will stand at $2.34 billion for now.
Net neutralitythe idea that data on the Internet should be moved without regard to content,
destination or sourcehas the potential to distort the parameters built into the business models of
broadband operators in such a way that will increase expected risk and significantly discourage further
industry investment. As a result, the average American citizen will pay the price.
For purposes of this analysis, of the many possible net neutrality costs to incorporate, I am
include only $15 billion, or a portion of the increased operator costs in the total. This leaves out
industry revenue impacts and non-network service providers and so on, even though I regard the
costs of a sustained public policy of centralizing control over tomorrows network infrastructure
decisions as exceedingly high and well beyond what I am employing here. A superb narrative
covering the impacts of net neutrality regulation, and that addresses FCCs failure to acknowledge
neutrality as a major rulemaking and the lack of offsetting benefits, is contained in Larry Downes
The True Cost of Net Neutrality.404
At this point, the baseline current, to-date cost of telecommunication regulation to which I will
add future costs, while reserving the right to incorporate future information that convinces me to
increase or decrease the base, is $131.58 billion. This consists of the $2.891 billion for FCC
paperwork in Independent Agency Paperwork Burdens; $113.69 billion for general
telecommunications regulation (which consists of Elligs $116.58 billion, less the $2.891 billion
captured in FCC paperwork costs to avoid assumed double counting). Some spectrum
liberalization has occurred which argues for lower costs than Ellig presented, so Ive not inflated
the number to 2013 dollars in recognition of that. But on the other hand, the value of spectrum
and opportunity costs of persistent suboptimal access to it due to FCC policy has increased since
2004 given the rise of mobile broadband and multimedia and apps, so the figures may understate
costs. The process for spectrum auctions remains lengthy as well as controversial.405 Incidentally,
restrictions on the bidding for spectrum could cost the federal treasury money as well.406
The noted $15 billion as a partial placeholder for the wide range of net neutrality cost impacts
surveyed in the Frost and Sullivan report rounds out the tally, but it serves as a placeholder for
more than that. The net neutrality rule is the only instance in Costberg for which I include cost of
an initiative in such a state of flux. However as I detail in a series I refer to as Before Net Neutrality
Eats the World,407 the widespread nature of central regulation of infrastructure creation and
infrastructure wealth as such gets too little attention. This placeholder is my only means of
capturing the significance of the siloed nature of all infrastructure regulationwater, sewer,
fuel, telecommunications, electric power, transportationthat keeps these industries perpetually
segregated from one another and synergies underutilized.408 I suspect the costs are far higher.409
The crucial test of private property is the attitude of government toward money. Devaluation of
currency is outright expropriation. 411
Isabel Paterson
The God of the Machine
Unlike most areas of economic activity where efforts to calculate regulatory costs are few and far
between, numerous estimates exist of financial regulations impacton aggregate cost of certain
financial regulation elements, on annual costs, on GDP, on small business. The problem is the
difficulty in consolidating all the disparate pieces into some coherent picture. One major catalyst
for modern financial sector regulatory costs is the 848 page Dodd-Frank Wall Street Reform and
Consumer Protection Act,412 signed by the president on July 21, 2010. (The Senate Banking
Committee summary itself was 15 single-spaced pages.413) Thousands of pages of regulation have
since been generated.414
But financial regulation didnt start with Dodd-Frank, of course, and rules issue from numerous
independent agencies. The Federal Reserve was founded in 1913. Silver and gold certificates long
ago were replaced by Federal Reserve Notes. The Securities and Exchange Commission was
created in 1934, about which public choice-oriented analysis may have interesting things to say,
such as Nobel Laureate George Stiglers conclusion that the SECs control over issuance of new
shares did not enhance investor returns.415
Still, no turn of the century estimate of financial regulation from OMB exists, except to the extent
one might ascribe financial regulation costs to OMBs economic regulation figure of $640.89
billion that appeared in Total Annual Costs of Regulations as of Sept 30, 2001 According to OMB. Recall
that, as detailed earlier, a far lesser placeholder of $399 billion is used here for costs of economic
regulation in the total cost roundup. Even so, nothing in the derivation of OMBs estimate was
directly traceable to financial regulation.
Financial rules do not appear in OMBs annual Benefits and Costs compilations either. Some of the
more recent financial regulatory costs do appear in Annual Costs of Independent Agency Rulemakings,
but only for the past few fiscal years. Some also appear in Independent Agency Paperwork Burdens.
But these small amounts hardly capture the magnitude of financial regulation and intervention
and the politicization of money and credit as a phenomenon. The federal government directly
regulates the supply of money and credit, and long ago decoupled money from a stable store of
value. Yet there is zero acknowledgment of any cost to this, nor even to the costs of the inflation
of the money supply and devaluation of savers dollars over the decades. Nor are the costs of the
federal governments manipulation and expansion of home ownership via Fannie Mae and
Freddie Mac captured anywhere in regulatory cost estimates. As it stands, even the limited
acknowledgement of regulations we observe is on modern regulations, not the phenomenon of
fiat money and unbacked legal tender,416 currency debasement and economic manipulation via
that mechanism, or the costs of financial social policy that backfire on colossal scale. The Feds
zero-interest rate policy alone could cost more than four times the $80 billion placeholder I engage
here as a marker for all financial regulatory/intervention costs. One wealth management firm
called the zero-rate policy an invisible tax that costs savers and investors roughly $350 billion a
year, costing yields, stifling consumption and pushing people into riskier securities.417
There are also grave costs involved in replacing free competitive enterprisein which businesses
come and gowith entities forevermore deemed too big to fail per the Dodd-Frank legislation.
This policy has intentionally birthed political regulatory entities far more powerful than the private
entities that could have been otherwise disciplined by insurance, competition and other market
mechanisms, and fostered cronyism. Now, alongside entities too big to fail are regulators too
big to succeed plus cronies too big to jail. Quantification of the political distortion that
saturates the entire financial services industry and that governs its trajectory would have to sum in
the tens or hundreds of billions, but theres no obvious means of doing it. Before misguided
interventions like Dodd-Frank were implemented, authorities were told in no uncertain terms that
attempts to forge ahead legislatively without allowing prior distortions to work themselves out will
lead to future failures and catastrophes created by the regulation itself.418 All such arguments were
dismissed, yet one may safely assume that future collapsescosts of regulationwill be blamed on
the market rather than the political opportunism and cronyism at root, just as long-ago warnings
about the moral hazard of deposit insurance and about the credit overextension campaigns by
Fannie Mae and Freddie Mac were dismissed by those with the power to do anything about it.419
Compounding these systemic errors, too big to fail is being expanded to non-banking institutions
by the Financial Stability Oversight Council (FSOC). This has alarmed some experts:420
What the FSOC has done will be seen in the future as the most damaging action taken under the
authority of Dodd-Frank. It has the potential to turn what are today competitive industries into
financial sectors dominated by large, government-backed firms, exhibiting all the indicia of crony
capitalism. The fact that it was done in the shadow of our disastrous experience with Fannie Mae and
Freddie Mac, and while Congress was concerned about firms that are too big to fail, only demonstrates
how mindless it really was.
Current financial regulations and interventions are swimming in the vastly larger sea of
government control of money and credit populated by entities untethered from market realities
and disciplines. And its not just the U.S. that is comfortable with regulation, the inclination has
long since gone global. A September 2012 report on Estimating the Costs of Financial
Regulation prepared by the International Monetary Fund seems unperturbed.421
As for costs, its impossible to disentangle the sweep of financial regulation here, and probably
anywhere else; there are many non-governmental studies of various parts of the elephant, and we
are only beginning to witness the impacts of modern interventions like Sarbanes-Oxley and costs
of Dodd-Frank beyond those captured in the independent agency tally reviewed earlier. What
follows is a hodgepodge way of dealing with the tangle of financial regulation. Official costs
estimates are skimpy when it comes to rules enacted. Where possible Ill use the governments
(limited) data and supplement it with other annualized cost estimates.
As detailed in Annual Costs of Independent Agency Rulemakings, limited annual cost estimates
available since 2008 regarding regulations from independent agencies affecting the financial sector
total as follows:
$3.582 billion
$1.44 billion
$4.10 billion
$10 million
Also, Independent Agency Paperwork Burdens depicts some paperwork associated with some of these
$472 million
$1.38 billion
$260 million
$8.2 billion
$420 million
These, hardly indicative of the sweep of financial regulation, appear itemized in Principia
Bureaucratica: Total Annual Cost of Federal Regulation and Intervention.
With respect to the broader scope of securities industry regulation, a survey by the Securities
Industry Association finds that the sector spent $23 billion on compliance in 2004, and projected
$25.5 billion for 2005. Mandates that firms regarded as significantly burdensome in the SIA
survey included:422
I will retain the federal paperwork estimates just noted, but include only half of the SIA
regulatory cost figure for 2005 as 2014s cost, or $12.75 billion annually, in Principia Bureaucratica:
The Total Annual Cost of Federal Regulation and Intervention (depicted as Securities industry, various
rules). None of SIAs cost overlaps with the independent agency costs noted immediately above,
since those have all appeared after fiscal year 2009, while the SIA study appeared back in 2006.
Unfortunately, independent agency costs prior to that time are for all intents and purposes
unknown except perhaps to those monitoring the GAOs databases on major rules.
Sarbanes-Oxley Placeholder
The post-Enron, post-WorldCom Sarbanes-Oxley legislation that reformed corporate accounting
and auditing in 2002 is argued to have imposed significant costs. For example SarbOx
requirements raise the cost of capital by making it more difficult for smaller companies to raise
funds through public equity markets.
The Securities and Exchange Commission found that the Sarbanes-Oxley Section 404 internal
control procedure and reporting mandates cost individual companies an average $2.3 million
yearly;423 for even the smallest public companies, a 2010 study estimated costs at an average of
over $1 million annually,424 a sizable burden with obvious implications for those affected. The SEC
report concluded that Effects of this order of magnitude could cause private companies to simply
forgo growth opportunities and stay small.425 The American Electronics Association (now AeA)
during that era estimated a huge early impact of $35 billion.426 Since that time, the JOBS Act
(Jumpstart Our Business Startups) of 2012 has reduced this small business compliance burden.
One study from the William E. Simon Graduate School of Business at the University of
Rochester posits extraordinary Sarbanes-Oxley impacts: In this model, The loss in market value
around the most significant rulemaking events amounts to $1.4 trillion, which likely reflects direct
compliance costs, indirect costs and expected costs of future anti-business legislation.427
Many effects of Sarbanes-Oxley are being explored, and studies consistently find that it creates
incentives for public companies to go private and eject themselves from listing on U.S. stock
exchanges, where SarbOx reporting is not required.428 The true costs of Sarbanes-Oxley are varied
and probably much will remain fundamentally unknown. Here we will use $10 billion annually as
a placeholder. This assume the financial impacts are just a fraction of the Simon/Rochester level
to allow for overestimation on their part as our way of dealing with a $1.4 trillion impact. In so
doing, I am not counting AeAs $35 billion or SECs $2.3 million per company, or the like. Other
anecdotal material on the costs to firms of compliance that could boost totals and/or complement
the placeholder here was compiled by the American Enterprise Institute.429 A survey by Protiviti
Risk and Business Consulting of firms 10 years after the implementation of Sarbanes-Oxley finds
that, once firms are in compliance, by the fourth year, most spend between $100,000 and $500,000
annually.430 As yet, these are not added here beyond the $10 billion Im using as the SarbanesOxley placeholder element appearing in Principia Bureaucratica: The Total Annual Cost of Federal
Regulation and Intervention.
Dodd-Frank Wall Street Reform and Consumer Protection Act Placeholder
[A]dmit itYou havent read it all either.431
Bono
The Fed, in short, can literally occupy the boardrooms of the largest financial institutions in America
and influence how they deploy capital.
Rep. Jeb Hensarling, Chairman of the House Financial Services Committee
The possibility that the pre-Dodd-Frank, Sarbanes-Oxley law alone could have costs surpassing $1
trillion is a sobering thought. The newer Dodd-Frank Wall Street Reform and Consumer
Protection Act imposes many costs, but unsurprisingly, the federal government does not know
what those are.432 The placeholder for Dodd-Frank used here will be $37.6 billion annually, just a
portion of the costs described below.
The Dodd-Frank law raises the cost of borrowing and a Durbin Amendment provision
imposing price controls on what banks can charge retailers to process debit card transactions has
largely eliminated free checking, and added fees to many consumers and entrepreneurs bank
accounts.433 The laws contribution to main street community banks' decline as a portion of
America's nationwide commercial banking assets has often been remarked upon.434 Alongside
Dodd-Frank, it is noteworthy that the international financial sector has faced massive new global
rules since the 2008 financial crisis occurred. The Financial Times highlighted a Thomson Reuters
finding of an amazing 14,215 regulatory changes globally over a years time period.435
In a report called Over-regulated America, The Economist had this to say about Dodd-Frank:436
The home of laissez-faire is being suffocated by excessive and badly written regulation ... Consider the
Dodd-Frank law of 2010. Its aim was noble: to prevent another financial crisis. ... But Dodd-Frank is
far too complex, and becoming more so. At 848 pages, it is 23 times longer than Glass-Steagall, the
reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill
in further detail. Some of these clarifications are hundreds of pages long.
The New York Times described how one consulting firm offers subscriptions costing $7,000 to those
trying to keep up with Dodd-Frank, while another firm charged $100,000 to compose one 17 page
client letter. The sobering article spotlights what is effectively an entire industry spawned by the
law:437
[T]he broadest financial overhaul since the Great Depression, the law has spawned a host of new
businesses to help Wall Street comply and capitalize on the hundreds of new regulations.
Besides the lawyers, there are legions of corporate accountants, financial consultants, risk management
advisers, turnaround artists and technology vendors all vying for their cut.
These jobs and businesses are all costs of regulation, not a productive gain to the economy.
An ongoing survey by the Davis Polk firm tracks the hundreds of rules required to be issued under
Dodd-Frank, and compares the proportion of rules actually issued to those that, by statute, should
have been issued but have not.438 For the 390 rulemakings required under the act, as of thirdquarter 2015, deadlines for 271 of them have passed. Of the total 390, 249 (63.8%) have been
met with finalized rules and rules have been proposed that would meet 58 (14.9%) more. Rules
have not yet been proposed to meet 83 (21.3%) rulemaking requirements.439 So there is still
considerably more to come. There are other efforts at surveying the scope of Dodd-Frank. For
example, a compendium of financial rules of the new century, appeared as the Financial Services
Roundtables Cumulative Weight report, which assembled various studies and reports on the
impact of modern financial regulations on the economy/GDP, credit, consumers, jobs and
industry affects like costs of financial services.440 The financial blog site ZeroHedge also prepared
an early breakdown of Dodd-Frank cost categories.441
Commenting on Dodd-Franks fifth anniversary in 2015 about certain major rules issued, the
American Action Forum wrote that the law has imposed more than $24 billion in final rule costs
and 61 million paperwork burden hours. From a housing market still experiencing mediocre
growth, to an uneven labor picture, its clear the law has fundamentally altered capital markets and
added layers of complexity for consumers and financial institutions.442 This estimate is based
largely on governments own numbers, its own regulatory impact estimates of the costs imposed
by certain major rules. Another AFF report by president and former Congressional Budget Office
Director Douglas Holtz-Eakin modeling the much broader economic growth implications of
Dodd-Frank, rather than the costs of particular rules, found "roughly $895 billion in reduced
Gross Domestic Product (GDP) over the 2016-2025 period, or $3,346 per working-age person."443
Thats an average of $89 billion a year over the ten year timeframe.
The AFF report unsurprisingly came under intense criticism from champions of the law444 But
such advocates claim as a reduction in costs of Dodd-Frank interventions such as cuts in executive
compensation and the (forced) investment into information technology and data reporting.445
Such narrow views, along with the general lack of concern over the role of GSEs, over
government control of money and credit, or over indirect effects of regulation that persist beyond
an arbitrary implementation timeline are worrisome. There are costs to such alleged benefits,
among them an unaudited central bank whose power is growing and even less accountable under
Dodd-Frank, and an escalation of the too big to fail that allegedly justified the law.446
Irreconcilable world-views regarding Dodd-Frank further illustrate my claim in this report that
there is no securing agreement on the cost of regulations, even when the central too big to fail
justification for the law is now aggravated rather than reduced.
Alongside those big-picture costs, lets now look at a couple additional examples of the many
kinds of costs at issue. For context, in 2010, the International Swaps and Derivatives Association
had estimated U.S. firms could face an additional $1 trillion in capital/liquidity requirements. 447
Also, a 2012 Standard and Poors report estimated that Dodd-Frank as a whole could reduce
pretax earnings for the eight largest banks by $22 billion to $34 billion annually.448 While much can
be added, we will ultimately use the magnitude represented by this latter figure to designate our
(for the time being) Costberg placeholder to proxy the many costs of Dodd-Frank that we have
already discussed and are about to discuss.
A 2014 report from Federal Financial Analytics, Inc. found selected rule costs for the six of the
largest systemically important banks doubled, from $34.7 billion in pre-crash 2007, to $70.2
billion in 2013.449 In other words, regulations cost $35.5 billion more for these entities now, largely
but not entirely attributable to Dodd-Frank; moreover the report advises that it is not possible to
quantify some of the rules often ascribed as among the most costly.450 Quantifiable costs in the
Federal Financial Analytics report included capital costs, interchange fee restrictions, FDIC
premiums and supervisory assessments fees. Given such studies, for Dodd-Franks non-Volckerrule bank impacts generally, I will use $8 billon in Principia Bureaucratica: The Total Annual Cost of
Federal Regulation and Intervention. This is less than a third of the amounts that affect certain
banking entities, as just noted above from Standard and Poor (up to $34 billion annually) and
Federal Financial Analytics (incremental costs of $35 billion). This also is a way of conservatively
assuming some overlap with independent agency costs already covered.
Next we will address the Volcker rules direct and indirect costs, and following that, interchange
fees, and include placeholders for them.
The Volcker rule, or the section 619 component of Dodd-Frank, places restraints on proprietary
trading and hedge fund participation on the part of banking entities. It receives much attention,
but was not included in the just-noted Financial Analytics report. An analysis of the Volker Rule
from the several agencies now overseeing it estimates that the costs associated with the final rule
range from $412 million to $4.3 billion, and acknowledges that the estimate does not capture
some costs that are quantifiable but difficult to estimate, such as indirect costs due to decreased
market liquidity and the impact this decrease in liquidity may have on the market value of some
assets and the cost to corporations of issuing debt.451 For starters, we will use the $4.3 billion here
in Principia Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention.
The indirect costs of any regulation, of course, are where much of the action is. The lack of
official analysis is alarming. The Mercatus Centers Hester Peirce warned, Despite the sweeping
nature of the Dodd-Frank changes, Dodd-Frank does not generally require regulators to conduct
economic analysis. The organization issued a report describing just how little high-quality
economic analysis the federal financial regulators charged with implementing Dodd-Frank and
The new rules require that interchange fees charged to retailers be reasonable and proportional to
the cost of processing. What it will take for those conditions to obtain to the satisfaction of
regulators and rent-seekers remains to be seen.459 The Heritage Foundation noted that the banking
industry asserted that the July 20, 2011 Federal Reserve Board rule on Debit Card Interchange
Fees and Routing, for which the Federal Reserve made no cost estimate, will cause losses of $6.6 billion
annually (impacting reward programs, and checking account and credit card annual fees).460
According to the Financial Services Roundtable, Overdraft and interchange rules have cost the
industry about $12.2 billion annually, translating into 20% higher fees for consumers. (Javelin
Study of February 2012 cited in FSR).461 Given these ranges, well use $8 billion as a placeholder
representing interchange fee regulation in Principia Bureaucratica: The Total Annual Cost of Federal
Regulation and Intervention.
The chart Annual Costs of Independent Agency Rulemakings contains the Securities and Exchange
Commission rule, required by Dodd-Frank, on conflict minerals and transparency for the
extraction industry. Note that this is a topic unrelated to addressing the financial crisis, and
diverts attention from government-sponsored enterprises and their culpability, not to mention the
harm the rule can cause in African nations, hurting those they are presumably intended to help.
The conflict mineral rule is, in fact, as Hester Peirce and James Broughel of George Mason
Universitys Mercatus Center wrote, a clear example of how a statute invoked as the answer to
the financial crisis is, in reality, an odd conglomeration of responses to issues, many of which had
nothing to do with the financial crisis.462
The conflict mineral rule within Dodd-Frank will cost billions. An independent study from Tulane
regarded a National Association of Manufacturers estimate of $9-$16 billion as too high, but that
of the SEC regulators as too low:463 The $7.73 billion Tulane estimated it would take to implement
Section 1502 would constitute a one-time cost/investment (not included in Costberg). Thereafter,
the most notable external cost incurred annually is $207 million in commissioning independent
Conflict Mineral Report audits, per the Tulane report. SECs costs have already been noted in
Annual Costs of Independent Agency Rulemakings, so no additional costs for conflict minerals are
added here at this point,464 although the degree to which the SEC is adequately accounting for
these costs is unclear.
In summing up Dodd-Frank, I wish to note here that the total placeholder amount so far for the
many components of Dodd-Frank stands at $37.6 billion. Note that this amount is a few billion
more than the $34 billion annually by which the 2012 S&P report estimated that the law would
reduce annual pretax earnings for the largest banks; thus we are effectively using that one cost as a
placeholder for all the Dodd-Frank costs noted herein. Naturally I reserve the right to increase the
size of the Dodd-Frank placeholder used here (note Ive not used the implied $80 billion-plus in
economic impacts uncovered in the AAF report, for example, but could have). Indeed, the growth
of financial guidance documents and other such regulatory dark matter push costs up in other
not-calculated and perhaps incalculable ways not even remotely addressed here. For example, The
St. Louis Federal Reserve Banks compiles lists of federal banking guidance that it deems
significant (as well as compilations of ordinary notice-and-comment regulation); the current
tally stands at 69,465 Meanwhile, the Federal Agency Guidance Database from the Conference of
State Bank Supervisors contains over 1,400 items in effect as of August 2015, including directives,
bulletins, manuals, notices, announcements and more from numerous agencies.466 Such regulatory
dark matter deserves scrutiny similar to what standard notice-and-comment rules implementing
The Federal Reserve, too, shows interest in rulemaking without Congress. It issued a consultation
document demonstrating further intent to centrally manage the financial system. The Fed
presumably wants real-time payments rather than rapid payments for financial transactions in
which we all engage, regarding this as a market failure, and wants to replace the private electronic
payments system with its own.476 The unaudited Federal Reserve Bank wants to enter the
electronic payments business, competing against or replacing the private entities that do the job,
and which it regulates, with no congressional oversight.
Another undocumented cost is the fact that in the wake of modern financial regulation our
privacy will suffer. An expansion of a database operated by the aforementioned Consumer
Financial Protection Bureau along with the Federal Housing Finance Agency means as many as
227 million Americans may be compelled to disclose intimate details of their families and
financial lives.477 Again, privacy regulation will be touched on later in this report.
Another example of an upcoming costly proposal not designated economically significant: Iain
Murray of the Competitive Enterprise Institute notes that, The IRS has rolled out a new rule that
will force deposit institutions, such as banks and credit unions, to report how much interest
nonresident aliens have earned on their U.S.-held accounts to the IRS, who will then report it to
their home country governments.478 He explains the significance:
The IRS doesnt tax foreigners interest on U.S. deposits, but this new reporting rule would actually be
worse than if it did. Conservative estimates of a previous version of the rule, which affected just 15
countries, found that it will suck at least $87 billion out of the economy. This is because foreigners often
invest in the U.S. because their money is protected from their home government. Consider that as much
as one third of all bank deposits in Florida are owned by foreigners.
The American Action Forum referred to the same non-resident alien interest reporting rule as the
most expensive rule you never heard of.479 The Treasury Department called the time required to
fill out paperwork minimal, and maintained that the rule does not impose a significant
burden and therefore no regulatory flexibility analysis was required, this dismissing comments to
the contrary.480
Unfortunately I believe the official disclosures we get only scratch the surface of the burden
federal regulation of the financial sector inflicts upon the economy and the public.
For our ancestors, fire and light were the same thing. Electricity is largely regulated at state public
utility commissions. Still, the only acknowledged regulatory costs for the Federal Energy
Regulatory Commission, an entity that oversees wholesale power grids and sales, energy mergers,
oil and gas pipeline transmission, network siting and more, are $377 million in the annual
paperwork costs. These are displayed in Independent Agency Paperwork Burdens and in Principia
Bureaucratica: The Total Annual Cost of Federal Regulation and Intervention. The case of is another
example demonstrating the need for far greater regulatory cost reckoning than we have.
A recent notable product ban was the CPSC suit against the Buckyballs magnetic desk toy, despite
the companys marketing to adults and warnings about use. Bans are an interesting category of
regulation, since an agency simply issues a prohibition, and escapes acknowledgement of
compliance costs of the normal sort.485
Cost-benefit analysis is banned at the Consumer Product Safety Commission, but some private
research indicates that, in assessing the impact of product recalls using measurements of change
in stock price, losses averaged 5.4 percent of net worth, and excess returns were negative in 67
percent of the cases. Evidently the market imposes strong penalties on firms when products are
deemed defective. 486 But apart from the $1 billion relevant to the firms in this study sample, there
appear to be no systematic overviews of CPSC regulatory costs. The finding of substantial market
impacts indicates that competitive pressures and reputational impacts apart from CPSC
governance would and do play an important disciplinary role that may deserve more credit and
study.
Indeed, an article published in The Hill by two CPSC commissioners points to a number of rules
that deserve greater attention, including outdated and sometimes duplicative standards on bicycle
safety, fireworks, and redundant mattress flammability standards.487 The costs of these, and others,
however, appear to be unknown.
coffee shops. This bit of remarkableness and other costs associated with employment issues but
not counted for the time being are assumed here to be captured in the earlier-cited Johnson study
A Review and Synthesis of the Cost of Workplace Regulations.
noted earlier, where, with respect to privacy and loss of trust in the cloud computing industry, the
New America Foundation reckoned the cost to the industry of the NSAs PRISM at $22 to $180
billion over the coming three years. That alone vastly outstrips the $1 billion placeholder here.
In the future, better estimates are necessary. New online privacy rules from the FTC implementing
the Childrens Online Privacy Protection Act requirements for parental consent before collecting
online information could be very costly, particularly to small website developers. Application
Developers Alliance head Jon Potter said the rules could mean that that talented and responsible
developers will abandon the childrens app marketplace, hardly the desired result.496 Another
forthcoming costly regulation impacting privacy is a National Highway Traffic Safety
Administration (NHTSA is part of the Department of Transportation) rule mandating black
boxes in all cars by 2014.497
Loss of liberty with respect to the federal governments unprecedented meddling in our private
affairs and disdain for the First and Fourth Amendments is noted at the end of Costberg in
Unfathomed, Unmeasured Omissions: On Regulatory Costs Absent From Tip of the Costberg.
welfare.
These costs have been estimated at between $14,000 and $42,000 per worker and family (shared
equally by migrants and host governments). The global net benefit of the increased flow of migrants for
25 years is between $13 trillion and $39 trillion close to the median estimated gains from the Doha
round. The benefits are between 28 and 220 times higher than the costs.
Thats trillion with a t. Annualizing the U.S. portion of that $13 trillion would amount to many
tens of billions of dollars annually if this kind of analysis regarding liberalization of cross-border
worker productivity is sound. But more modestly, looking at technology or skill-related
immigration, a report by Arlen Holen of the Technology Policy Institute finds:500
In the absence of green card and h-1B constraints, roughly 182,000 foreign graduates of U.S. colleges
and universities in STEM fields would likely have remained in the United States over the period 20032007. They would have earned roughly $13.6 billion in 2008, raised the GDP by that amount, and
would have contributed $2.7 to $3.6 billion to the federal treasury.
Much is notable in both these analyses but comparable to the annualized cost approach in Tip of
the Costberg is the annual contribution to GDP of nearly $14 billion. Holen further claims another
annual $23 billion in GDP gain:
In the absence of green card constraints, approximately 300,000 H-1B visa-holders
whose temporary work authorizations expired during 2003-2007 would likely have been
in the United States labor force in 2008. These workers would have earned roughly $23 billion in
2008, raised the GDP by that amount, and would have contributed $4.5 to $6.2 billion to the federal
treasury.
Another study, from the Center for Economic and Policy Research, describes estimated gains from
freer trade in professional services:501
The potential gains to consumers from freer trade in professional services are enormous. Assuming that
a reduction in trade barriers led to a 15 percent increase in the supply of four types of highly paid
professionals doctors, dentists, lawyers, and accountants the paper calculates that the gains to
consumers would range from $160 billion to $270 billion a year. By comparison, the cost to consumer
of the steel tariffs imposed last year has been estimated at just $3 billion a year.
The efficiency gain from having access to an influx of foreign professionals would be between $12 and
$20 billion annually. This efficiency gain is a benefit to the economy beyond the transfer from
professionals to consumers.
Competing research claims that increased foreign student influx into particular doctoral field had
a significant adverse effects on the earnings of other contemporary graduates.502 Labor markets
respond like any other to supply and demand, so such a finding is not unexpected. Lower wages
are not necessarily inconsistent with gains otherwise in a dynamic environment, but dislocations
clearly happen for some. Objections will naturally persist, but it does appear that scholars
examining different components of the question of freer migration estimate mitigating certain
restrictions could generate many tens of billions of dollars in benefits, for discrete types of
restrictions alone.
A gain from removal of a restriction is not the same as the cost of imposing one, but it is
worthwhile to include a placeholder for certain foreign work restrictions in Tip of the Costberg.
While recognizing the utility of the stratospheric costs implied in Lomborg and Holen, we will go
conservative here. The baseline current, to-date cost of immigration restrictions to which I will
add additional or future costs, while reserving the right to incorporate any future information that
convinces me to increase or decrease the base, is $12 billion, which is a fraction of all the gains
estimates described here. Just reducing paperwork and bureaucracy alone could provide large
savings, since related paperwork across various agencies reaches $29 billion.503
unharmed. With his pen and phone, President Obama asserts authority not granted by
Congress.514 A Virginia politician of similar persuasion wants to force doctors to accept Medicare
and Medicaid patients.515 And even though knowledge is dispersed on the Internet and parents
may know more than the Federal Trade Commission does, parents are not permitted to decide for
children since the FTC (naturally without cost estimates) seeks to regulate marketing online to
children. Whether the issue is big or small, liberty must yield and authorities must decide.
The nanny state convinced of its wisdom is often explicit; other times, it seeks to nudge us
toward ends that it sees fit.516 One example are the weight loss nudges described by Michael L.
Marlow in a Mercatus Center working paper, in which Marlow tells of those who believe welldesigned nudges devised by choice architects can steer individuals toward wiser decisions that
enhance their welfare.517 Yes, behavioral economists actually say choice architect. Bureaucrats
do intend to change your mind about things, as Richard Williams, another Mercatus Scholar,
notes. Sure, people make mistakes:518
But if we begin to recognize the correction of these errors as a legitimate function of government
with no constitutional constraintsthere is absolutely no area of our personal lives that bureaucrats
cannot try to shape. We the unwitting children in this scenario, along with our personal liberties and
consumer preferences, will take a back seat to the preferences of the supercilious bureaucrats and
special interests.
Nudge on the surface seems trivial but is tyrannical in its own way. And to challenge it, one
must now battle other professors who have concluded that nudge is better at making you do the
things they want you to do than taxes, subsidies or other regulations.519
More obvious a worry to many has been the noted the loss of liberties brought to bear in the
aftermath of the Patriot Act, such as the creation of the Department of Homeland Security and its
issue such as the Transportation Security Administrations nudie scanners. To that list we must
now add the revelations regarding National Security Agency data sweeps, and now, DHS
guidance to retailers on monitoring buying habits of customers.520 These costs also are omitted
in Tip of the Costberg apart from the homeland security costs placeholder.
Perhaps the need for there to have been introduced something called the Regulatory Agency
Demilitarization Act in the wake of Department of Education SWAT teams and Department of
Agriculture machine gun requests best illustrates the decay.521 It would be worthwhile if citizens
watched and regulated government to the extent it watches and regulates them. As Marlo Lewis
noted regarding recent high profile regulatory intervention, the biggest hidden costis the
damage to our constitutional system of separated powers and democratic accountability.522 One
cant put a price on it.
Bertrand de Jouvenal
Men must choose between the market economy and socialism. The state can preserve the market
economy in protecting life, health and private property against violent or fraudulent aggression; or it
can itself control the conduct of all production activities. Some agency must determine what should be
produced. If it is not the consumers by means of demand and supply on the market, it must be the
government by compulsion.524
Ludvig von Mises
Planned Chaos
Mere economic costs of regulations are supposed to be the easy part, the stuff we can really get
a grip on. As it turns out, most economic interference is unmeasured and probably unmeasurable
too. The market mechanisms touted as alternatives to command and control regulation often
represent an expansion of government. As time passes, the burdens of past regulation expands, as
deadweight builds upon deadweight, and the market failure rationale for intervention reveals
itself to be at the core cost of government on which other costs accumulate. Policymakers need to
focus on the costs of regulation to innovation and opportunity.
The grave economic, social and cultural costs of enabling a regulatory environment and its close
cousin, the interventionist environment, get too little attention. Here follows a non-exhaustive
rundown of some economic costs not included in the rough $1.885 trillion annual regulatory cost
placeholder that I have so far.
Antitrust: Most of the cost of antitrust intervention in the economy is untabulated.
Permitting restrictions and denial of access to resources:
The meek shall inherit the Earth, but not its mineral rights.
J. Paul Getty
The meek arent inheriting mineral rights, and sometimes the strong arent getting them either. The
federal government owns a large portion of Americas lands, and access for resource extraction
and other uses is a constant battle.
No one is working and jobs are not created while awaiting permits for access to energy resources,
obviously. The Environmental Protection Agency and the Interior Department are notorious (such
as EPAs interference with the Alaska Pebble Mine project525), but costs of most of their
restrictions do not appear in OMB reporting. On the resource drain of regulations and job impact
of permit delays, one might note:526
The [U.S.] Chambers Project No Project study found that in March 2010, 351 proposed new power
plant projects were unable to secure permits. These projects alone, if constructed, would have resulted in
a direct investment in our economy of $577 billion and would have created 1.9 million jobs per year
during the seven years of construction.
Costs created by proposed rules that halt commercial activity: Agencies count costs, in the rare
instances they do it, of life under enactment, not the incentives changed by the existence of and
uncertainty created by a proposed rule. The late 2013 EPA proposed rule to limit carbon
emissions from all coal plants, even without enactment of the final rule, means that the United
States will build no more coal-fired power plants.
As the Competitive Enterprise Institute put it, During the several years it will take to finalize the
rule and then overturn it in federal court, no electric utility will invest in planning or building a
new coal-fired power plant. American consumers and manufacturers will be denied the benefits of
the low-cost electricity produced by coal.527 This phenomenon applies across the regulatory
enterprise.
Costs of policy uncertainty: Wynn Resorts CEO Steve Wynn called Washington:528
...the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it
and I could spend the next 3 hours giving you examples of all of us in this market place that are
frightened to death about all the new regulations, our healthcare costs escalate, regulations coming
from left and right.
A Vanguard study on the uncertainty created by regulations and fiscal, trade and debt policy
matters estimated $261 billion in such costs just since 2011.529 The consequences of uncertainty
are severe: business startups have recently hit a record low,530 the number of self-employed
Americans is down. 531 In food service, regulations are driving restaurants out of business and
abroad,532 even causing reflection on the part of a former Democratic lawmaker trying to make a
go of free enterprise.533 Business is made more risk averse in uncertain regulatory environments. 534
At this point such costs are not added in Costberg, but likely will be in some fashion in the future
since they are not likely to be already embedded in the $402 billion placeholder for Aggregate
Annual Economic Regulation Costs noted herein. A lot of bad ideas get generated to reach the
one that is a winner; overregulation and uncertainty cut down on breakthroughs. Moreover the
threat of regulation can induce companies to behave in reactive ways and incur costs, distort
markets and create economic inefficiency.
The costs of rent-seeking: Also disruptive are firms seeking regulation deliberately in order to
disadvantage their competitors and rivals, allowing them to capture their customers and markets.
Environmental rules, privacy mandates and antitrust are examples (for the latter I included an
inadequate placeholder number). The unseen cost here is the dampening effect of rent seeking and
exploitation of bureaucracy, the businesses not created and other distortions. OMB reports neglect
the phenomenon. Even Ralph Nader once agreed, writing in Yale Law Journal with co-author
Mark Green:535
The verdict is nearly unanimousthat economic regulation over rates, entry, mergers, and technology
has been anticompetitive and wasteful. Such regulation undermines competition and entrenches
monopoly at the publics expense.
The same rent-seeking impulses occur in the public sector as in the private, as government seeks
new powers and domains. There is nothing saintly about government compared to the rest of
humanity, and the merging of the two types of self interest is the source of cronyism.
Diversion of resources and private initiative created by government funding: More mundane
that government steering of technologies is simply government funding in general. The taxes we
pay are, of course, counted in the federal budget. But related to the phenomenon of deadweight
cost is the distortion caused when government assumes a role or conducts investments that should
be vetted and carried out by the competitive private sector. Diversions like Farm Bill spending and
the market interference created by highway spending and transportation research are examples.
This cuts to the core of the central planning vs. free enterprise debate, the age-old debate of why
one should think a government employee spends someone elses money better; yet funding of
productive activity and the resultant crowding out is not recognized as a cost of government
requiring measurement. Such spending is more likely, in defiance of Says Law, 540 to be regarded
as stimulus. In public/private partnerships, contemporaries involved in related and unrelated
endeavors remain free to compete, but they dont get any of these advantages of government
support. Meanwhile, such support also comes with strings attached for the recipient.541
Differential effects of rules on contemporary businesses: Also related to rent-seeking but
perhaps inadvertent for the sake of argument, the very existence of regulation ends up picking
winners when something new comes along, in that there are complex differential effects on
incumbents with hands tied relative to newcomers. The communications industry is an example,
where incumbents face impediments that dont apply to newer entrants. Much of regulatory costs
impacts are not measured because they involve this unseen effect on business models. Other ISPs
were not free do what Google did with its Google Fiber project,542 since they face impediments
that didnt apply to the newer firm, so we are likely years behind in infrastructure development.
Differential effects of regulation on business clearly matter, but the estimated costs? Generally
wont be found. But wealth creation and technology wont advance at same rate in a regulated firm
as a less regulated one.
Indirect costs of regulation: Direct costs are already impossible to compute; indirect cost occupy
a higher plane of impossibility. Indirect costs, as opposed to obvious regulatory impacts like
compliance costs, include ventures not pursued, economic distortions created by reaction to being
a regulated vs. unregulated entity. Other indirect costs involve the way regulatory impacts ricochet
from one sector of the economy to another, such as a smoking ban in private restaurants that
could have instead been addressed by the marketplace creation of newer forms of air filtering
equipment, and in turn new forms of wealth that preserved choice and freedom besides.
Indirect costs can take many forms. While agencies may attempt to incorporate opportunity costs
according to OMB guidance; emphasis is on compliance. Still, efforts are sometimes made to
assess dynamic effects, such as in the EPAs lookback on Clean Air Act amendment costs.
Sarbanes-Oxley and other financial cost estimates above contained some indirect impacts. In
recognition of indirect effects, recent proposals Sen. Olympia Snowes FREEDOM Act featured
an explicit requirement that indirect effects be accounted for in small business regulatory flexibility
analyses.543 Indeed, even the unapologetic EPA acknowledges that it still does not hear enough
from small business, and that public comment is limited 544 But a problem with thinking that small
businesses do not adequately register their complaints regarding regulation arises from the reality
that small businesses that were never created never comment on negative impacts of regulations.
Ventures not pursued are a critical indirect cost of a heavily regulatory environment that we do
not capture.
Finally, product bans and their costs also are hard to tabulate and arent fully incorporated herein.
Those might be regarded as indirect costs but the target firm would see it as direct. The Consumer
Product Safety Commissions targeting of Buckyball magnetic toys might be seen as an
example.
Economic effects of the minimum wage: The impact of the minimum wage on the needlessly
unemployed but voiceless worker population is of no concern to the policymaker establishment,
and these individuals get no sympathy in any official tally of government-imposed cost of a
minimum wage.545 Those unemployed because of a minimum wage may not know it, while those
not affected may not care. Those imposing the minimum wage know of its detrimental effects,
however. In 2014, the Congressional Budget Office declared that Once fully implemented...the
$10.10 option would reduce total employment by about 500,000 workers, or 0.3 percent.546 It
could be less, on the other hand it could be double that, says CBO.
Destructive environmentalism: Failure to address tragedy of commons as an economic matter,
the failure to extend the institutions of property rights in the name of stewardship, and the failure
to bring resource expansion into the wealth creating sectors as an alternative to political oversight
undermines conservation and resource expansion.547
Perpetuation of early-20th century style infrastructure regulation:
What if the government built this thing?
I doubt it.
Why?
Because it works.548
Television pilot episode of Stephen Kings novel Under the Dome
The costs of siloed, regulated infrastructure could be far more significant than many realize.
Weve seen some costs for the FCC on the one hand, but on the other, little for the Federal Energy
Regulatory Commission. A placeholder for infrastructure costs does appear herein, but is
inadequate.
Early electricity and telecommunications were characterized by competing, overlapping,
redundant, maybe even ugly, infrastructurebut not by natural monopoly. Cronyism is not new,
and regulatory commissions outlawed competition and guaranteed returns for some. Instead of
changing that, the modern approach is to sustain this model while blocking major private projects
like pipelines. Other incarnations seek to force access and deny infrastructure property rights, such
as the FCCs net neutrality rules.
The stock of infrastructure could be far larger. Today, infrastructure banking is proposed rather
than liberalization.549 Network industrieswater, sewer, telecom, Internet, electricity,
transportationcould work together to build infrastructure rather than invest separately and be
regulated separately. The persistence of regulation that keeps infrastructure eternally segregated
has left us with less robust networks, less overlap and redundancy than would be optimal. 550
Armageddon-proof mega-assets may be possible, but whether regulation is the way to have them is
debatable. Vulnerabilty that otherwise might not exist feeds the drive for cybersecurity and critical
infrastructure rules, which perpetuates dependence. Regulation spawns calls for more regulation
over the most important assets and wealth-enabling infrastructure in society. The cost is accounted
for nowhere, nor acknowledged, in officialdom, however I did include a placeholder for such
impacts in the telecommunications regulation section of Costberg.
Net neutrality was covered, but is only symptomatic of the impulse to politically compel open
infrastructure and technology sharing rather than allow the blockage and rivalry that is the
lifeblood of competitive infrastructure and that could serve consumers, robustness, wealth and
GDP. Cyber and critical infrastructure security benefit from property rights too, for that matter.551
Politicians should avoid policies that prevent networks from being regarded as proprietary, from
being controlled by their owners; but the philosophical capability to make that case is rare among
policymakers. Perhaps capitalism and free enterprise are themselves too young.
Alongside the perpetuation of inappropriate regulatory models for infrastructure is the explicit
blockage of new infrastructure for alleged environmental reasons, such as the EPA blockage of the
Keystone XL pipeline from 2008 through late 2011, stalling an estimated $20 billion. 552 The U.S.
State Department had issued an environmental impact statement of the Canada-to-Texas project,
saying it would pose no significant impacts to most resources along its proposed corridor if the
company follows through on environmental protection measures, though it could have
significant adverse effects to certain cultural resources.553 It is misleading to speak of just the
cost of Keystone; there should be dozens of such projects underway, including perhaps water
transport.554
Patent inefficiency: Potential costs of a flawed patent system including delays and other
imperfections on the one hand, and the costs of abuses that could sum in the billions on the
other,555 are omitted here. The costs of inefficiencies in intellectual property recognition or
transfersshould they exist; it is not a settled matter among commentators, and I am not taking a
position on it here, apart from noting the issue will increasingly matter as intangible wealth plays a
greater role in the economy relative to tangible wealth, and protections for intellectual property
matter more, not less. Further, the interference with private fencing of intellectual property, such
as antitrust, compulsory licensing are not examined here either.
AlasMost economic regulations impacting mostly every industry and sector: Actually, apart
from a relative handful of rulesonly a few dozen, when all is said and donethat appear over
the past decade in the OMB roundups with which we are concerned, plus some paperwork tallies
and a few industry reports, interventions impacting mostly every industry and sector (like
railroading, aviation, energy, electric power and telecommunications) are not officially tabulated.
Also, review and conceptualization of entire categories of interferencelike antitrust, central
federal control of the money supply, federal manipulation of housing markets, the embrace of a
too big to fail stance and its consequenceshave no cost estimates. Not merely, shucks,
independent agencies get left out, but entire abstract categories of human action get ignored by those
manipulating them.
A baseline placeholder regarding various elements of economic regulatory costs at various points
since the turn of the century appears in Estimates of the Cost of Regulation: Late 20th Century, Early
21st Century. But new estimates since then are few, some more sparse than others: In railroading,
only positive train control; in the airline industry only fuel tank flammability, pilot age and hours
of service; and in HUD only Real Estate Settlement Procedures rules.
Indeed, benefits are best seen as forms of wealth. When regulation as a phenomenon
removes values like risk reduction, or privacy, or cybersecurity or safety from the competitive
pressures required to advance them, the actual regulation that needs to take place in society can be
undermined. A regulation can supersede or make unnecessary a superior pro-consumer,
competitive response to some real need. Complex frontier industries and technologies in particular
require that private risk-management institutions like insurance and liability emerge alongside the
innovation itself (consider nuclear energy, homeland security, nanotechnology, biotechnology,
financial instruments, cybersecurity). Government now preempts the requisite private risk
management in almost every respect, from flood insurance on wealthy seashores to too-big-to-fail
financial institutions, to ordinary health care, to, probably soon, driverless cars. This demonstrates
how the very philosophy of central, administrative regulation is flawed. When agencies substitute
their one-size-fits-few policies for actual advancements, they impose incalculable costs and cause
harm to values that should constantly increase and improve.
The same wealth status also applies to information available and useful to the public, which
means that information mandates such as those affecting concerns like privacy standards and food
labeling can backfire. Government can interrupt the processes needed for the right information on
health, safety, privacy, financial or other benefits to get created in the first place. It is irresponsible
for government to undermine self-reliance, to induce people into becoming overly dependent on its
vision of correct information while at the same time pursuing a philosophy of regulation that, on
the one hand, sometimes positively injures the public, and on the other undermines real
regulation.
Government-created risks resulting from efforts to allegedly do good are the costs of benefits for
which no one is accountable. The ways risks are identified and society made safer and healthier
have not all been discovered by a priestly elite. Still another cost of benefits occurs when a
regulator pursues a benefit that simply not one. Denial of choice by an energy efficiency
mandate purportedly to help an ignorant consumer conserve energy, for example, is a cost, not a
benefit. Compulsion is a negative, a denial of options.
There are costs of closing doors, of distorting industry structure (like antitrust,
telecommunications, electrical grid or cybersecurity regulation). There are costs of interfering with
normal market trajectories and pricing experimentation. There are costs to ignoring limits on the
role of government, costs to ignoring the extent of risks created by regulation itself, and costs to
ignoring alternatives for which the public might have used resources wasted on some regulatory
campaign.
Sometimes reality dictates that an agency scale back in favor of the emergence of new human
institutions to discipline market power, risk and uncertainty. Agencies do not accept this, and
instead seek solely to expand, such as regulation of net neutrality, low-earth orbit
experimentation, and nanotechnology. There is such a thing as pretense of knowledge, and it is
costly. It took the emergence of generally accepted accounting principles for large scale human
free enterprise to arise in the 19th century. The public sector is decades behind in conveying the
true costs for endeavors that are compulsion rather than trade-based.
The accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of
one, a few, or many, and whether hereditary, selfappointed, or elective, may justly be pronounced the
very definition of tyranny.559
James Madison, Federalist No. 47.
Applying computer technology is simply finding the right wrench to pound in the correct screw.
Old computer joke
States, like men, have their growth, their manhood, their decrepitude, their decay.560
Walter Savage Landor
English Poet
Systemic omissions rather than disclosure define the regulatory enterprise. Regulations have
compliance costs, of course, but some costs of government arise from how regulations are enacted
and accounted for (or as is actually most often the case, unaccounted for). Here we explore some
of these shortcomings of the regulatory process that leave wide gaps in our knowledge about
impacts. If lawmaking up on Capitol Hill is compared to sausage making, it gets even worse down
here in the agency packing houses. Angelo M. Codevilla, Professor emeritus of international
relations at Boston University, described the administrative state this way:561
Todays America, ruled over by an administrative state, is ever less different from the rest of the world.
Virtually all of the rules by which we live are made, executed, and enforced by administrative
agenciesfrom the IRS to the EPA and countless othersthat are responsible only to themselves, to
those who appoint them, and to the interest groups with which they are affiliated. Ordinary people have
virtually no recourse against them.
Yet it is even worse than that. The notice and comment the Administrative Procedure Act does
successfully enable is increasingly insufficient since final rules are not properly submitted to the
Government Accountability Office and to Congress as required under the Congressional Review
Act (CRA).562 That undermines the ability of Congress choose to introduce a formal Resolution of
Disapproval of an agency rule under the CRA, significantly impairing oversight and
accountability. This matters also because these GAO reports are the only spot independent
agency rules get picked up and disclosed Furthermore even simplest of disclosure is allowed to
lapse, such as delayed appearances of the semi-annual Unified Agenda of Federal Regulations in
recent years.563 With regulation we have little accountability, costs imposed off-budget and
problems readily blamed on business implementation by proponents of regulation.
The pretense of knowledge/fatal conceit cost: Regulatory agencies, and increasingly the
executive operating outside even the regulatory process, see alleged market failure everywhere. But
they remain unconcerned with the downsides of the static, man-made institutions with which they
would replace dynamism. Seemingly the more governmental institutions need to scale back as
new human institutions emerge to discipline new endeavors, they instead they seek to expand,
such as regulation of driverless cars, net neutrality, low-earth orbit experimentation,
nanotechnology, science investment, infrastructure, health care, financial services. The regulator
seems to think he knows best; that creates a mindset that aggravates the other costs we cover in
this section.
Independent agency regulations startup costs: A small fraction of independent agency costs was
analyzed in Tip of the Costberg, but these are not reviewed by the Office of Management and
Budget (OMB) as executive agency rules (theoretically but not really) are. However, the onetime startup costs of such rules, while reported by agencies in a handful of cases, are not
included here at all, even though some are available. The GAO database, and in turn the Heritage
Foundations Red Tape Rising series, notes tens of billions of dollars in this category. Congress
needs to address the matter.
Cumulative effects of rules: As rules accumulate, their overlap can worsen regulatory outcomes.
Underbrush never gets cleared, a problem noted across the political spectrum.564 Even the
Progressive Policy Institute regrets the regulatory accumulation and calls for a bipartisan
commission to reduce them.565 There is a cost to neglecting basic regulatory housekeeping.
Costs of rules not deemed economically significant by the agencies but that in fact are
significant: Many of the thousands of regulations issued by agencies may exceed $100 million in
cost annually, but no one actually knows and they never get counted (See The Funnel of Gov
above for perspective) and the public never gets told. The net neutrality order is an example, but
input on others is needed. Congress needs to take steps to address significance of non-major.
Others have noted, for example, an EPA navigable water rule that became a $1.2 billion rule, and
diversity training that left out cost of scheduling and attending meetings.566
Sue and Settle Agreements: Sue and settle agreements are mock adversarial stagings in which
environmental pressure groups sue an agency that is all too happy to be sued to have its power
increased over private actors.567 The settlement becomes a regulation without congressional input
or a public disclosure process. The revolving door between the EPA and green pressure groups has
become something of a scandal, but it took Freedom of Information Requests to reveal the
unsurprising.568
Budget or Transfer Rules, and Associated Deadweight Costs: Budget rules implement
federal budgetary programs, primarily income transfers from taxpayers to beneficiaries. Program
changes involving Medicare and Medicaid are examples. Transfer rules are those implementing
Federal budgetary programs, which primarily caused income transfers, usually from taxpayers to
program beneficiaries.569 Such wealth transfers, like taxes, were not a primary concern in Costberg,
but this neglect can no longer be the approach, since expansion of federal authority over private
action (Obamacare) and regulatory dark matter (Federal Reserve takeover of electronic payments)
mean that governmental programs are displacing what the private sector could or would otherwise
do. No matter ones philosophy concerning who ought to be primarily in charge of health care,
retirement and other matters, such wealth transfers matter and it is more important than ever that
their effects are measured.
Some budget rules are reported on, but not included in OMBs annual net benefit tally in the
Report to Congress. OMB does note that these entail transfer costs (which matter to the parties
not on the receiving end) and deadweight losses thus far unaccounted for:570
[T]ransfer rules mayimpose real costs on society to the extent that they cause people to change
behavior, either by directly prohibiting or mandating certain activities, or, more often, by altering prices
and costs. The costs resulting from these behavior changes are referred to as the deadweight losses
associated with the transfer. The Regulatory Right-to-Know Act requires OMB to report the social costs
and benefits of these rules, and OMB encourages agencies to report these costs and benefits for transfer
rules; OMB will consider incorporating any such estimates into future Reports.
OMB has reviewed 354 major budget rules over the course of the decade, with vastly more nonmajor ones among the 50,284 rules finalized since 2001 as seen in The Funnel On the Depth of
Regulatory Cost Review, 2001-present.
Deadweight costs of budget regulations comprise a potentially significant category of government
induced cost that doesnt get addressed. The deadweight loss of social programs (now at $2.3
trillion annually) is compounded by the fact that agencies cannot even determine how many
exist.571 In this report, deadweight losses associated with taxes noted by OMB, a small component
of homeland security costs and some telecom costs are the only ones noted, but presumably others
could have been. One we might see in the future is deadweight loss associated with an online sales
tax, if Congress affirms state compacts on them.572
Executive Orders, Guidance Documents, Memoranda and the Rise of Regulatory Dark
Matter573:
And though we sung his fame
We all went hungry just the same
Steely Dan
Kings, on the album Cant Buy a Thrill.
A song about the transition from Richard the Lionheart
to King John, prior to the Magna Carta.
Also published in the Federal Register are executive orders and presidential and agency memoranda
(which may or may not be official guidance documents) that have unmeasured impact. The
recently amplified presidential component has been popularized by President Obama as the pen
and phone approach to policymaking without Congress. 574
Decisions may be made by agencies, and parties pressured to act without formal regulation or
appreciation of costs. Examples include EPA Clean Water Act jurisdictional guidance on Waters
of the United States,575 and the Federal Trade Commissions guidance on disclosure of paid
search engine results.576
As noted in a July 2012 U.S. House Committee on Oversight and Government Reform
publication:577
Guidance documents, while not legally binding or technically enforceable, are supposed to be issued
only to clarify regulations already on the books. However they are increasingly used to effect policy
changes, and they often are as effective as regulations in changing behavior due to the weight agencies
and the courts give them. Accordingly, job creators feel forced to comply.
A researcher in Law Library Journal noted ambiguity in even what counts as an agency and
that there is an amorphous border between regulations and guidance. The body of guidance
documents (or non-legislative rules) is growing, both in volume and in importance.578
In my own examination as far as the presidents pen and phone is concerned, the vehicle most
regulatory in impact appears not to be executive orders (with major exceptions like a minimum
wage requirement for federal contractors), but instead presidential Memoranda.579 Presumably
most of what emerges from memoranda would and will need to traverse the Administrative
Procedure Act public notice and comment phases, but that has not been the case with such
matters as joint presidential/Internal Revenue Service implementation delays for Obamacare that
appear as hybrids of memoranda, notices, press releases and announcements on federal agency
blogs. The Mercatus Center at George Mason University, in the Harvard Journal of Law and Public
Policy, put together the most detailed set of reports yet on what they call quasi-regulatory
activity. 580
These nonstandard rulemaking vehicles indicate that, as governmental oversight of various sectors
in our economy expands, it will become even less necessary to bother with even formal guidance
documents, let alone enacting a law or adhering to APA notice-and-comment procedures. On the
upside, one thing that matters for this regulatory dark matter category and that needs
exploration is that, if the pen and phone can be used to curtail liberty, it can also be used to
expand it (within the rule of law). Re-orientation of the executive branch to better oversee
regulation (a stance that has prevailed in the past), and congressional reform of the regulationmaking process itself awaits.581
Unfunded mandates On States and Localities: Congress should consider fuller treatment of
unfunded mandates both on the budgetary and regulatory side.582
Mandates impacts get reviewed in the annual OMB benefits and costs reports and thus to some
extent are included herein presumably, but Congress should consider fuller treatment both of the
budgetary and regulatory impacts. According to the National Conference of State Legislatures
(NCSL) Mandate Monitor report, from 2004 to 2006, Congress had shifted $131 billion in costs to
the states.583 It would be useful to have better appreciation of the cost of the regulatory
component of mandates compared with other private sector regulatory costs.
Regulation by International Treaty: International treaty costs and impacts are terra incognita.
Treaties regulate: attempted greenhouse gas agreements, the Law of the Sea Treaty, the Outer
Space Treaty; exploration of their costs is an omission. OMB does not track such costs.
when companies are forced to devote ever more of their employees time to activities that deliver no
benefit beyond keeping the expanding army of federal bureaucrats and regulators at bay. ...
Jobs are a cost already, and regulation-induced ones unavoidably raise cost and are destructive of
wealth otherwise possible. The amount spent on each regulation-induced one represents the seen,
the observable: But as Frederic Bastiat says in What Is Seen and What is Not Seen, in reference to the
broken window regarded as magically creating employment for the glazier, To break, to destroy,
to dissipate is not to encourage national employment, or more briefly: Destruction is not
profitable.587 In the current instance, Society has lost the value of the unnecessary jobs, (to
borrow his phrasing). The what is not seen is what a firm would have done with their resources
had it not been for diversion.
Ignoring distributional effects is emblematic of the social planner convinced of the legitimacy of
doing good via compulsion; he may be doing good, and he may be stopping something bad. But
dislocation of capital and workers, the difficulty and unmeasured cost of moving resources
disrupted by regulation and forced to be redeployed must be substantial, particularly in times of
recession.588 The Bureau of Labor Statistics displaced worker studies589 can contribute to
understanding the magnitude in the future.
Still, the meme remains entrenched that regulations dont cause job loss, they dont affect
economic growth. Jobs may be lost in one area, but they are gained in another, goes this line of
thought, captured in a much cited study Jobs versus the Environment (We find that increased
environmental spending generally does not cause a significant change in industry-level
employment.) 590
Typical is the tone of a recent Washington Post story, Does government regulation really kill jobs?
Economists say overall effect minimal. A blocked-and-featured reader comment on the story
proclaims: The notion that deregulation will engender any significant increase in jobs is a
laughable lie sold to people who have no basic understanding of economics or real life.591 One
cant infer how many employees that individual has, or how he might respond to a rule requiring
that he hire some more, but he captures the mood.
A Gallup Poll differs though, noting that small businesses put government regulation at the top of
a list of complaints in a recent survey.592 And some legislators do stress job impacts, naturally. In a
Washington Times article, Rep. Tom McClintock noted:593
[T]he Congressional Budget Office estimates that Obamacare by itself will cost the economy a net loss
of 800,000 jobs. A few weeks ago, the House Natural Resources Committee received testimony that just
by getting government out of the way and opening up American energy resources to development, the
economy could generate 700,000 jobs and $660 billion of direct revenue to national and state treasuries.
Together, thats 1.5 million permanent jobs.
Regulations defenders do sometimes acknowledge that regulation can cause employment
problems when theres recession, such that it might be harder for workers to relocate and/or find
other jobs. Buy why high unemployment exists in the first place, and its possible linkage to the
body of regulation, simply doesnt register with regulators. Those affected do try, however; for
example the HRPolicy Association in comments to OMB, noted significant ways in which human
resources regulation impacts decisions on whether to hire or not.594)
Regulation must impact not only jobsbut also impact on the creation of them in the future.
Society cant lose jobs that havent been created and thus cant measure them, so we dont grasp
the dampening effect of a trillion dollar-plus regulatory enterprise.
In response to the claim that regulations create jobs, what needs stressing by policymakers is that
the doings595 being created are not jobs, from the perspective of the criterion by which benefits
are normally judged. If all jobs are a cost, regulatory jobs are more so, since theyre not jobs the
producer required. Moreover somebody has to stress that created is not a valid term to use with
regard to something compelled in a market economy.
Washington will continue to downplay job impacts of its rules, and say its all a wash or a net
plusexcept when it finally becomes politically unpalatable to do so. In late 2011, President
Obama had EPA back off $1 trillion ozone regulations temporarily during the election cycle. That
very act was an outright albeit reluctant acknowledgement of job impacts that otherwise go
unmeasured. 596
So today, job costs and delays-in-hiring costs that need to be counted and could be counted arent
by convention. This may change as we start to better incorporate opportunity costs on the one
hand (the broken window if it had been left intact) and, given our global economy, further
compare innovation rates in more regulated markets compared to less encumbered ones on the
other. We are beginning to see some push now to include jobs and distributional effects, to
acknowledge that worker dislocation is a cost that somebody externally imposed and needs to be
held accountable for. Cass Sunstein, the former director of OMBs Office of Information and
Regulatory Affairs, regards whether regulation can kill jobs an empirical question, does
acknowledge in a Bloomberg article that, Yes, Regulation Can Kill Jobs.597 Sunstein calls for a
separate treatment of job impacts, which is a good thing to do. Executive Order 13563 already
calls for assessing adverse effects on employment, but not with much vigor, and other OMB
guidance on cost-benefit analysis is lukewarm.
Another reason we need to account for jobs is the reality that rent seeking is a fixture of a mixed
economy. Regulation used to boost employment in certain sectors will create an adversarial
economy whereby demand at large can be impacted. Unemployment can be lower than the
national average in these industries (subsidized green energy, say), but that does not count as
evidence that regulation does not undermine jobs.
The real point is to consider far broader economic liberalization of energy, manufacturing, health
care, finance, communications, science and technology and more from disruptive political
interventions; to avoid misguided regulations that amount to prohibitions on hiring. This is the
source of magnification of jobs across industries, and expansions of national output. It would be
nice to double job creation and GDP again, the way we now double spending and regulations.
This report isnt the venue for it, but the claim that a lack of demand rather than regulation as a
culprit in the downturn doesnt quite work as a complete explanation. Lack of demand, properly
regarded, is actually a supply restriction, not a demand lapse; it is the perpetuation of non-marketclearing prices for all labor, goods and services.598 Government-elevated prices and wages must
adjust to market-clearing levels for recovery to resume; many policies deliberately prevent that
correction. Governments classical functions are maintaining order and thwarting contrived
scarcity (i.e., the holding of prices above market-clearing levels). Economic problems are
misunderstood when the diagnosis is insufficient demand and the prescription an artificial
stimulus political constraints on the creation of supply are the culprit.
Ive noted the need to measure regulations impact on jobs created and lost, and also to
acknowledge the jobs not created in the future. But of course, ours is a global economy. As the
book Lessons from the Poor: Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa notes,
regulations can contribute to worldwide poverty.599 A Bloomberg article recounted a law
professors conversation with an airline seatmate, who lamented:
How can I hire new workers today, when I dont know how much they will cost me tomorrow? ...
I dont understand why Washington does this to us....I dont understand why Washington wont
just get out of our way and let us hire.600 That was 2011, three years ago. Understanding
regulatory costs and their job impacts should be a priority.
taxation that emerges as the real tip of the costberg while growing costs of regulation looming
unseen below the surface at last come into greater relief. Much more investigation needs to be
done.
Time to get busy.
Joyfully to the breeze royal Odysseus spread his sail, and with his rudder skillfully he steered.605
Homer
The Odyssey
www.CEI.org
www.TenThousandCommandments.com
2013 Draft Report to Congress on the Benefits and Costs of Federal Regulations and Agency Compliance with the
Unfunded Mandates Reform Act, Document ID: OMB_FRDOC_0001-0118, July 31, 2013.
http://www.scribd.com/doc/157252365/Comments-of-Wayne-Crews-Competitive-Enterprise-Institute-on-2013-DraftReport-to-Congress-on-the-Benefits-and-Costs-of-Federal-Regulation.
22
Christopher C. DeMuth, The Regulatory Budget, Regulation: AEI Journal on Government and Society, March/April
1980, pp. 30.
23
See for example Sherzod Abdukadirov and Deema Yazigi, Inflated Benefits in Agencies Economic Analysis, Mercatus
On Policy No. 112. Mercatus Center, George Mason University. August 2012.
http://mercatus.org/sites/default/files/InflatedBenefits_MOP112.pdf.
24
Ted Gayer and W. Kip Viscusi, Overriding Consumer Preferences With Energy Regulations, Mercatus Center Working
Paper, No. 12-21, July 2012.
http://mercatus.org/sites/default/files/Energy_regulations_GayerViscusi_WP1221_1.pdf
25
Wendy L. Gramm, Administrative Law Review, p. 36.
26
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/comments/williams.pdf
27
Yesim Yilmaz, Private Regulation: A Real Alternative for Regulatory Reform, Cato Policy Analysis No. 303, April 20,
1998. http://www.cato.org/pubs/pas/pa-303.pdf
28
John Steele Gordon, An Empire of Wealth.
29
Alexis de Tocqueville, Democracy in America, Book Three, Chapter XXI.
http://www.columbia.edu/cu/tat/core/tocqueville.htm.
30
Robert Higgs, Eighteen Problematic Propositions in the Analysis of the Growth of Government, Review of Austrian
Economics, Vol. 5, No. 1, p. 4. http://www.independent.org/publications/article.asp?id=158
31
H. L. Mencken, The Divine Afflatus, A Mencken Chrestomathy, chapter 25, p. 443
(1949).http://www.bartleby.com/73/1736.html.
32
James M. Buchanan, Cost and Choice: An Inquiry in Economic Theory, University of Chicago Press: Chicago and
London, 1969, p. 42 43.
33
Edward Kosner, Shut Up, He Explained, Wall Street Journal, August 27, 2013.
http://online.wsj.com/news/articles/SB10001424127887324139404579014772021013960.
34
H. L. Mencken In Defense of Women, 1918. p. 38.
http://books.google.com/books?id=85hd6A6XlsUC&pg=PA38&lpg=PA38&dq=Civilization,+in+fact,+grows+more+and+
more+maudlin+and+hysterical&source=bl&ots=wyIax7lHGa&sig=kNdDKdXLxPCxCzd5ZS4yDkA7Z8Y&hl=en&sa=X&
ei=jcHWU9TdOoL8oATY6YGwBw&ved=0CC8Q6AEwAg#v=onepage&q=Civilization%2C%20in%20fact%2C%20grow
s%20more%20and%20more%20maudlin%20and%20hysterical&f=false.
35
Pew Environment Group, Industry Opposition to Government Regulation, October 2010.
http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Fact_Sheets/Global_warming/PEG_IndustryOpposition_Oct201
0.pdf?n=4067
36
Hart Hodges, Falling Prices: Cost of Complying With Environmental Regulations Almost Always Less Than
Advertised, Economic Policy Institute, 1997, EPI Briefing Paper #69.
http://docs.google.com/viewer?url=http://www.epi.org/page/-/old/briefingpapers/bp69.pdf&hl=en_US&embedded=true
37
On the other hand, some point to a lack of confirmable bias either way. David Simpson, Do Regulators Overestimate the
Costs of Regulation? Working Paper. 2001. http://ideas.repec.org/p/nev/wpaper/wp201107.html.
38
Charles Murray, Why Capitalism Has an Image Problem, Wall Street Journal, July 30, 2012.
http://online.wsj.com/article/SB10000872396390443931404577549223178294822.html
39
Measuring the Impact of Regulation: The Rule of More, The Economist, February 18, 2012,
http://www.economist.com/node/21547772.
40
Frederic Bastiat, That Which is Seen, and That Which is Not Seen, 1850. http://bastiat.org/en/twisatwins.html.
41
Andrew Hale, David Borys and Mark Adams, Regulatory Overload: A Behavioral Analysis of Regulatory Compliance,
Mecatus Center Working Paper No. 11-47. November 2011. http://mercatus.org/sites/default/files/publication/MoreRegulations-Less-Safety.pdf.
42
Randall Lutter and Richard B. Belzer, EPA Pats Itself on the Back, Regulation, Cato Institute, Vol 23., No. 3, p. 23.
https://www.cato.org/pubs/regulation/regv23n3/lutter.pdf.
43
U.S. House of Representatives, Committee on Oversight and Government Reform, Staff Report, Broken Government:
How the Administrative State has Broken President Obamas Promise of Regulatory
112th Congress, September 14, 2011. p. 7. http://oversight.house.gov/wpcontent/uploads/2012/01/9.13.11_Broken_Government_Report1.pdf.
44
The Social Cost of Carbon Gambit, Wall Street Journal, June 30, 2013.
http://online.wsj.com/article/SB10001424127887323566804578551672709633396.html?mod=hp_opinion.
45
The final 2013 rule for microwaves is here: https://www.federalregister.gov/articles/2013/06/17/2013-13535/energy-
Office of Management and Budget, Report to Congress on the Costs and Benefits of Federal Regulation, 2000, p. 11.
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2000fedreg-report.pdf
68
Office of Management and Budget, Stimulating Smarter Regulation: 2002 Report to Congress on the Costs and Benefits
of Regulations and Unfunded Mandates on State, Local, and Tribal Entities, p. 40.
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2002_report_to_congress.pdf
69
See Thomas D. Hopkins, The Costs of Federal Regulation, Journal of Regulation and Social Costs, Vol. 2, No. 1, March
1992, pp. 5-31.
70
Thomas D. Hopkins, Costs of Regulation: Filling the Gaps, Report prepared for the Regulatory Information Service
Center, Washington, D.C., August 1992.
http://www.thecre.com/pdf/COST%20OF%20REGULATION%20FILLING%20THE%20GAPS.pdf
71
General Accounting Office, Briefing Report to the Ranking Minority Member, Committee on Governmental Affairs, U.S.
Senate, Regulatory Reform: Information on Costs, Cost-Effectiveness, and Mandated Deadlines for Regulations,
(GAO/PEMD-95-18BR), March 1995. http://archive.gao.gov/t2pbat1/153774.pdf
72
Derived from Office of Management and Budget, Draft Report to Congress on the Costs and Benefits of Federal
Regulations, Federal Register, March 28, 2002. Pp. 15037-8.
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/cbreport.pdf
73
Office of Management and Budget, Stimulating Smarter Regulation: 2002 Report to Congress on the Costs and Benefits
of Regulations and Unfunded Mandates on State, Local, and Tribal Entities, p. 40.
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2002_report_to_congress.pdf, Table 8, p. 39.
74
OMB, 2002, p. 37.
75
STATEMENT OF JOHN D. GRAHAM, PH.D., ADMINISTRATOR, OFFICE OF INFORMATION AND
REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT
OF THE UNITED STATES, BEFORE THE COMMITTEE ON GOVERNMENT REFORM UNITED STATES HOUSE
OF REPRESENTATIVES, July 22, 2003. http://www.whitehouse.gov/omb/legislative_testimony_graham_030722_graham
76
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/pubpress/2003-04.pdf
77
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2004_cb_final.pdf
78
OMB, 2011. P. 14. http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf
79
2009 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and
Tribal Entities, Office of Management and Budget
Office of Information and Regulatory Affairs, Figure 2-1: Annual Costs of Major Rules (1981-2008), p. 32.
http://www.whitehouse.gov/sites/default/files/omb/assets/legislative_reports/2009_final_BC_Report_01272010.pdf
80
U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, 2015 Draft Report to Congress on
the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities, 2015, Table 1-1,
Estimates of the Total Annual Benefits and Costs of Major Federal Rules by Agency, October 1, 2004September 30, 2014
(billions of 2001 or 2010 dollars), pp. 10-11,
https://www.whitehouse.gov/sites/default/files/omb/inforeg/2015_cb/draft_2015_cost_benefit_report.pdf.
81
Table 1-5, p. 24.
82
Office of Management and Budget, 2011 Report to Congress on the Benefits and Costs of Federal Regulations and
Unfunded Mandates on State, Local, and Tribal Entities, June 2011, p. 19.
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf.
83
OMB, 2015. p. 21.
84
Regulatory Right-to-Know Act (Pub. L. 106554, 1(a)(3) [title VI, 624], Dec. 21, 2000, 114 Stat. 2763, 2763A161.
Appearing on https://www.federalregister.gov/blog/2012/04/benefits-costs-of-regulations.
85
Clyde Wayne Crews Jr., Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, Competitive
Enterprise Institute: Washington, D.C., 2015 Edition. p. 3
https://cei.org/sites/default/files/10,000%20Commandments%202015%20-%2005-12-2015.pdf.
86
Ten Thousand Commandments, 2015 Edition, p. 21.
87
OMB, Benefits and Costs, 2011. p. 17.
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf
88
OMB, 2015 Draft Report.
89
OMB 2015 Draft Report, Table 1-5, pp. 24.
90
Crain and Crain, p. 4, footnote 5.
http://www.sba.gov/sites/default/files/The%20Impact%20of%20Regulatory%20Costs%20on%20Small%20Firms%20(Full)
.pdf
91
Office of Management and Budget, Stimulating Smarter Regulation: 2002 Report to Congress on the Costs and Benefits of
Regulations and Unfunded Mandates on State, Local, and Tribal Entities, p. 38.
http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/2002_report_to_congress.pdf
67
92
OMB 2011, p. 4.
Searching for a Regulatory Tsunami in Calm Seas, Center for Effective Government, July 10, 2012.
http://www.foreffectivegov.org/node/12135.
94
OMB, 2015 Draft Report, p. 8-9.
95
Federal Register, Vol. 74, No. 233, December 7, 2009, p. 64133.
96
Concern about regulatory costs on state and local governments resulted in the Unfunded Mandates Reform Act during the
104th Congress.
97
Friedrich A. Von Hayek, Economic Control and Totalitarianism, The Road to Serfdom. p. 101.
http://www.amazon.com/Road-Serfdom-IntellectualsSocialism/dp/0255365764/ref=sr_1_1?s=books&ie=UTF8&qid=1382900187&sr=1-1&keywords=0255365764.
98
Cited in Merrill D. Peterson, The Jefferson Image in the American Mind, University of Virginia Press.
http://books.google.com/books?id=0QNrZoAgGAsC&pg=PA368&lpg=PA368&dq=jefferson+%22when+we+must+wait+f
or+washington%22&source=bl&ots=u0jv5Xh_J&sig=JV53bLIq7KlBmymt08yB4pSnkX4&hl=en&sa=X&ei=4mxuUsvSKJel4APuloDwBw&ved=0CCwQ6AEw
AA#v=onepage&q=jefferson%20%22when%20we%20must%20wait%20for%20washington%22&f=false.
99
John W. Dawson and John J. Seater, Federal Regulation and Aggregate Economic Growth, Journal of Economic
Growth, January 2013. http://www4.ncsu.edu/~jjseater/regulationandgrowth.pdf.
100
Ronald Bailey, Federal Regulations Have Made You 75 Percent Poorer, Reason, June 21, 2013.
http://reason.com/archives/2013/06/21/federal-regulations-have-made-you-75-per.
101
OMB Draft Report to Congress 2002, http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/cbreport.pdf
102
Draft Report to Congress, 2002, p. 15024, footnote 16.
103
Draft Report to Congress, 2002, p. 15037.
104
Organization for Economic Cooperation and Development, Regulatory Reform in the United States, OECD Reviews of
Regulatory Reform, Paris 1999. http://www.oecd.org/dataoecd/23/46/2756360.pdf
105
OMB Draft Report, 2002, p. 15,038. http://www.whitehouse.gov/sites/default/files/omb/assets/omb/inforeg/cbreport.pdf
106
Crain and Hopkins, 2001. http://www.sba.gov/advo/research/rs207tot.pdf
107
Crain and Hopkins, 2001. Table 8. Total Cost of Federal Regulatinos: By Type and Allocation Between Business and
Others (in billions of 2000 dollars). p. 25. http://www.sba.gov/advo/research/rs207tot.pdf
108
Crain and Hopkins, 2001. http://archive.sba.gov/advo/research/rs207tot.pdf
109
United States International Trade Commission, The Economic Effects of Significant U.S. Import Restraints, Eighth
Update, Investigation No. 332-325, December 2013. p. vii. http://www.usitc.gov/publications/332/pub4440.pdf.
110
United States International Trade Commission, The Economic Effects of Significant U.S. Import Restraints, Seventh
Update, Investigation No. 332-325, August 2011.http://www.usitc.gov/publications/332/pub4253.pdf.
111
http://archive.sba.gov/advo/research/rs264tot.pdf
112
Crain and Hopkins, 2001, p. 11.
113
Bill McNabb, Uncertainty is the Enemy of Recovery, Wall Street Journal, April 28, 2013.
http://online.wsj.com/news/articles/SB10001424127887323789704578443431277889520#printMode.
114
White House lawn speech to American Chemical Society, April 1924. Quoted In H. Hale, American Chemistry (1928), 8.
115
Alexis de Tocqueville, Democracy In America, Chapter 4, p. 180.
http://fys1831.voices.wooster.edu/files/2013/08/Tocqueville-Freedom-of-the-Press.pdf.
116
Two commenters stated that the report should not rely on the Hahn/Hird study to provide aggregate estimates of the
benefits and costs of environmental, health and safety rules (14, 22). Last years report carefully outlines some of the
shortcoming of this study and we have repeated some of these concerns in the final report. At the same time, it is the only
study available that offers a comprehensive estimate of the benefits and costs of environmental, health, and safety
regulation.Report to Congress on the Costs and Benefits of Federal Regulation, Office of Management and Budget, 2000.
117
The reason is that by using OMBs 2001 report rather than its 2002, I am able to retain separate 2002 social regulationspecific data for use here and in future versions of this report.
118
Mercatus Center Regulatory Cost Calculator, Mercatus Center, George Mason University.
http://mercatus.org/sites/default/files/CostCalculatorSurvey_v1.pdf.
119
See Appendix B: Interview Framework Document in The Impact of Federal Regulations on Franchised Automobile
Dealerships, Center for Automotive Research for the National Automobile Dealers Association. April 2014.
http://www.nada.org/NR/rdonlyres/A873EF86-8A0D-4C28-A072F8AF94D619F1/0/CAR_The_Impact_of_Federal_Regulations_on_Franchised_Automobile_Dealerships_.pdf. p. 1.
120
Remarks to the White House Conference on Small Business, August 15, 1986.
http://www.pbs.org/wgbh/americanexperience/features/general-article/reagan-quotes/.
121
Henry David Thoreau, Chapter 8, The Village, Walden. 1854. http://thoreau.eserver.org/walden08.html.
122
OMB 2011, p. 31. http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf
93
123
http://www.gao.gov/legal/congressact/congress.html
Compiled from OMB, 2015 Draft Report, Table 1-10, p. 35-38.
125
OMB, 2015 Draft Report, Table C-1, p. 84.
126
OMB, 2015 Draft Report, Table C-2, p. 85.
127
Several of the Red Tape Rising reports were very useful in deriving some independent agency costs from GAOs
database:
(1) James L. Gattuso and Diane Katz, Red Tape Rising: Five Years of Regulatory Expansion, Heritage Foundation
Backgrounder No. 2895, March 26, 2014. http://thf_media.s3.amazonaws.com/2014/pdf/BG2895.pdf;
(2) James L. Gattuso and Diane Katz, Red Tape Rising: Regulation in Obamas First Term, Heritage Foundation
Backgrounder No. 2793, May 2, 2013. http://thf_media.s3.amazonaws.com/2013/pdf/bg2793.pdf;
(3) James L. Gattuso and Diane Katz, Red Tape Rising: Obama-Era Regulation at the Three-Year Mark, Heritage
Foundation Backgrounder No. 2663, March 13, 2012. https://thf_media.s3.amazonaws.com/2012/pdf/bg2663.pdf
(4) James Gattuso and Diane Katz, Red Tape Rising: A 2011 Mid-Year Report on Regulation, Heritage Foundation
Backgrounder No. 2586, July 25, 2011. http://thf_media.s3.amazonaws.com/2011/pdf/bg2586.pdf
(5) James L. Gattuso, Diane Katz, and Stephen A. Keen, Red Tape Rising: Obamas Torrent of New Regulation, Heritage
Foundation Backgrounder No. 2482. October 26, 2010. http://thf_media.s3.amazonaws.com/2010/pdf/bg2482.pdf
(6) James Gattuso and Stephen Keen, Red Tape Rising: Regulation in the Obama Era, Heritage Foundation Backgrounder
No. 2394, March 31, 2010. http://thf_media.s3.amazonaws.com/2010/pdf/bg_2394.pdf
128
OMB stated, On average, roughly $5 billion in annual costs have been added each year over this [2001-10] period to the
total regulatory burden. OMB, Benefits and Costs, p. 19.
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/2011_cba_report.pdf.
129
David Young, Great Funny Quotes. 2011. http://books.google.com/books?id=2rL9yP6UwYC&pg=PA43&lpg=PA43&dq=paperwork+%22the+embalming+fluid+of+bureaucracy%22&source=bl&ots=rqlbXR
Y-si&sig=Eg231vxzhnisGjm9G0h01xMpMB4&hl=en&sa=X&ei=3ZtUtqeFabP2QXw4YGgAg&ved=0CDoQ6AEwAg#v=onepage&q=paperwork%20%22the%20embalming%20fluid%20o
f%20bureaucracy%22&f=false.
130
Conn Carroll, Study: Government Regs Waste $46 Billion Every Year, Examiner, May 30, 2013.
http://washingtonexaminer.com/article/2530806.
131
Hammer, B. and C. H. Stinson, Managerial Accounting and Environmental Compliance Costs, Journal of Cost
Management, Summer 1995. pp. 4-10. http://maaw.info/ArticleSummaries/ArtSumHammerStinsonl95.htm.
132
Gregory J. Millman and Samuel Rubenfeld, Compliance Officer: Dream Career? Wall Street Journal January 15,
2014. http://online.wsj.com/news/articles/SB10001424052702303330204579250722114538750.
133
Daniel Pinto, The West has killed its entrepreneurs and replaced them with bureaucrats, City A.M. February 24, 2014.
http://www.cityam.com/article/1393214482/west-has-killed-its-entrepreneurs-and-replaced-them-bureaucrats.
134
Ben Goad and Julian Hattem, Businesses hire up to deal with more regs, The Hill, November 9, 2013.
http://thehill.com/blogs/regwatch/business/189770-businesses-hire-up-to-deal-with-mounting-regulations.
135
Office of Management and Budget, Office of Information and Regulatory Affairs, Information Collection Budget of the
United States Government, September 2014. p. 9 and p. 63.
https://www.whitehouse.gov/sites/default/files/omb/inforeg/icb/icb_2014.pdf.
136
Ibid. OMB, September 2014, p. 63.
137
http://www.whitehouse.gov/sites/default/files/omb/inforeg/icb/2011_icb.pdf
138
Anne Kim, When Paperwork Attacks! Five Ideas for Smarter Government, Progressive Policy Institute Policy Brief,
March 2012. p. 3. http://progressivepolicy.org/wp-content/uploads/2012/03/03.2012-Kim_When-Paperwork-Attacks-FiveIdeas-for-Smarter-Government.pdf.
139
http://www.411sbfacts.com/files/paperwork.pdf
140
http://www.bls.gov/oes/current/oes113121.htm
141
http://www.bls.gov/oes/current/oes132011.htm
142
http://www.bls.gov/oes/current/oes131041.htm
143
http://quoteinvestigator.com/2011/03/07/einstein-income-taxes/.
144
Crain and Crain, Table 4, Sources and Estimated Costs of Compliance with the Federal Tax Code. p. 29.
145
Crain and Crain, p. 29.
146
Government Accountability Office, Summary of Estimates of the Costs of the Federal Tax System, Report to
Congressional Requesters, GAO-05-878, August 2005. http://www.gao.gov/new.items/d05878.pdf
147
GAO, 2005,
148
U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, Gross Domestic
Product, Third Quarter 2015 (Advance Estimate), October 29, 2015.
https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm. Simlar data is also available at The World Bank.
124
Washington, DC, Data: GDP (Current U.S. $); Data: Chart at http://data.worldbank.org/indicator/NY.GDP.MKTP.CD.
149
Tax Foundation, Total Federal Income Tax Compliance Costs, 1990-2015, October 26, 2006
http://www.taxfoundation.org/research/show/1962.html
150
Joel Slemrod, Varsha Venkatesh THE INCOME TAX COMPLIANCE COST OF LARGE AND MID-SIZE
BUSINESSES, A Report to the IRS LMSB Division, Submitted by the Office of Tax Policy Research, University of
Michigan Business School, September 5, 2002 http://www.bus.umich.edu/otpr/WP2004-4.pdf
151
$224 Billion, 6.1 Billion Hours, Lost to Complex Tax Code According to New National Taxpayers Union Study,
Reuters, April 15, 2014. http://www.reuters.com/article/2014/04/15/taypayers-union-studyidUSnPn8BvY6Y+95+PRN20140415.
152
Office of Management and Budget, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs,
Circular No. A-94 Revised, Transmittal Memo No. 64, October 29, 1992.
http://www.whitehouse.gov/omb/circulars/a094/a094.html.
153
Philip Klein, H&R Block CEO Says Obamacare to Add Significant Complexity to Tax Season, Washington
Examiner, September 3, 2014. http://washingtonexaminer.com/hr-block-ceo-says-obamacare-to-add-significantcomplexity-to-tax-season/article/2552801.
154
http://www.hrblock.com/press/Article.jsp?articleid=58800
155
Noted in Klein, September 3, 2014.
156
Ryan Decker, John Haltiwanger, Ron Jarmin and Javier Miranda, The Role of Entrepreneurship in U.S. Job Creation
and Economic Dynamism, Journal of Economic Perspectives, Volume 28, No. 3. Summer 2014, pp. 3-24.
http://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.28.3.3.
157
John Merline, Home Depot Co-Founder: Obama Is Choking Recovery, Investors Business Daily, July 20, 2011.
http://www.investors.com/NewsAndAnalysis/Article/578920/201107201835/Marcus-Home-Truths-On-Jobs.aspx.
158
Sam Batkins, A Regulatory Flurry: The Year in Regulation, 2013, American Action Forum, January 8, 2014.
http://americanactionforum.org/research/a-regulatory-flurry-the-year-in-regulation-2013.
159
North American Industry Classification System, United States Census Bureau, http://www.census.gov/eos/www/naics/
160
http://www.uschamber.com/sites/default/files/CO2/files/regulatory_burden0809.pdf
161
Stephen D. Oliner, How Long Did it Take to Plan That Building?, UCLA Economic Letter, January 2013.
http://www.anderson.ucla.edu/Documents/areas/ctr/ziman/UCLA%20Economic%20Letter_Oliner_1-15-12.pdf.
162
Letter from the Construction Industry Round Table to Congressman Darrell Issa, Chairman, Committee on Oversight and
Government Reform. January 6, 2011.
http://www.cirt.org/resources/Documents/CIRT%20Letter%20Excessive%20Regs.PDF.
163
The Impact of Federal Regulations on Franchised Automobile Dealerships, Center for Automotive Research for the
National Automobile Dealers Association. April 2014. http://www.nada.org/NR/rdonlyres/A873EF86-8A0D-4C28-A072F8AF94D619F1/0/CAR_The_Impact_of_Federal_Regulations_on_Franchised_Automobile_Dealerships_.pdf. p. 1.
164
Ibid.
165
The Cost of Regulation Just Topped $1 Trillion: Report, CNBC.com, November 21, 2013.
http://www.cnbc.com/id/101216338.
166
NERA Economic Consulting for the Manufacturers Alliance for Productivity and Innovation (MAPI), Macroeconomic
Impacts of Federal Regulation of the Manufacturing Sector. August 21, 2012, p. 8.
www.mapi.net/system/files/NERA_MAPI_FinalReport_0.pdf.
167
NERA, 2012, p. 35, footnote 37.
168
NERA, 2012, p. 6.
169
NERA, 2012, p. 6.
170
NERA, 2012, p. 6.
171
Josh Marks, Obama: If Congress Doesnt Act on Climate Change, I Will, The National Memo, February 13th, 2013.
http://www.nationalmemo.com/obama-if-congress-doesnt-act-on-climate-change-i-will/.
172
Law/Culture Blog, Columbia University School of Law. http://blogs.law.columbia.edu/lawcultureproject/tag/quotes/#.
Alternate version is Ltat cest moi. (I am the State.) http://www.wideworldofquotes.com/authors/l/king-louis-xiv-offrance.html.
173
Appearing in Paul Leicester Ford, Essays on the Constitution of the United States Published During Its Discussion by the
People, 1787-1788. Brooklyn, N.Y., Historical Printing Club. 1892. The Project Gutenberg EBook of Essays on the
Constitution of the United States by Paul Leicester Ford http://www.gutenberg.org/files/31891/31891-h/31891-h.html.
174
Countless versions of the joke exist; this one appears at ClintonLibrary.gov in a book chapter on history of the USDA.
http://www.clintonlibrary.gov/assets/storage/Research%20-%20Digital%20Library/ClintonAdminHistoryProject/8190/Box%2089/1756276-history-u-s-dept-agriculture-1993-2000-3.pdf.
175
Ingo Potrykus, Regulation Must Be RevolutionizedRegulation Must Be Revolutionized, Nature, Vol 466. p. 561.July
29, 2010. http://www.nature.com/nature/journal/v466/n7306/full/466561a.html. See also Matt Ridley, GM crops dont kill
less-than-high-school-dropouts/?tid=pm_politics_pop.
195
For the history and impact and approaches to reform of public education, see Sheldon Richman, Separating School and
State: How to Liberate Americas Families. Future of Freedom Foundation: Fairfax, VA. 1994.
http://www.amazon.com/Separating-School-State-Liberate-Americas/dp/0964044722.
196
Bonnie Hunter and Dondald D. Gehring, The Cost of Federal Legislation on Higher Education: The Hidden Tax on
Tuition, NASPA Journal, 2005, Vol. 42, No. 4, pp. 478-497.
197
Press Release, Send Your Underwear to the Undersecretary, Competitive Enterprise Institute. May 16, 2007.
http://cei.org/news-releases/send-your-underwear-undersecretary.
198
http://www.blm.gov/wo/st/en/prog/energy/oil_and_gas/statistics.html
199
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216
Susan Jones, Sebelius: Im Not Signing Up for Obamacare, CNS News. October 23, 2013.
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Roberta Rampton and Susan Cornwell, Obama Says We Screwed It Up On Health Law Debut, Reuters, December
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Stephen Moore, Bob Funk: Where the Jobs Areand How to Get One, Wall Street Journal, September 20, 2013.
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Paul Bedard, Feds Need 18 Pages to Define Full-Time for Obamacare, Washington Examiner, September 10, 2012.
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OBAMACARE: A BUDGET-BUSTING, JOB-KILLING HEALTH CARE LAW; A REPORT ON THE ECONOMIC
AND FISCAL CONSEQUENCES
OF THE PATIENT PROTECTION AND AFFORDABLE CARE ACT (PUBLIC LAW 111-148) & THE HEALTH CARE
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241
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242
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244
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251
OMB, Benefits and Costs, 2008. p. 11-12
252
OMB, Benefits and Costs, 2008. p. 12.
253
OMB, Benefits and Costs, 2008. p. 12, footnote 17.
254
OMB, Benefits and Costs, 2009, pp. 16-17.
255
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http://mercatus.org/sites/default/files/publication/20060908_PS_terrorism_Complete.pdf p. 32.
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See Johnson 2001, p. 7: Indirect costs are more difficult to measure than direct costs. They include the second-order
effects of regulation, which spread from the regulated industry to other industries through price and quantity changes
instigated by the regulation. These involve real economic losses to society as a whole from regulatory distortions in markets
and decision-making; in essence, lost GDP or consumer and producer surplus from the promulgation of regulations. It
cannot be stated strongly enough how difficult it is to measure indirect costs, for the most part because isolating the effect of
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304
Johnson 2001, p. 12.
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311
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Mike Jude, Net Neutrality: A Tax on the Internet, The Street. June 6, 2010.
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404
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408
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409
Adam Thierer and Clyde Clyde Wayne Crews Jr. Jr., Whats Yours Is Mine: Open Access and the Rise of Infrastructure
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411
Isabel Paterson, The God of the Machine. G. P. Putnams Sons: New York, 1943. p. 171.
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412
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413
http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf
414
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415
George J. Stigler, The Tactics of Economic Reform, The Citizen and the State: Essays on Regulation, University of
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416
After all, the idea that inflation is counterfeiting is an old one. See Keith Weiner, Inflation is Counterfeiting,
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417
Gretchen Morgenson, Debts Deadly Grip, New York Times, August 21, 2010.
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418
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419
Fred L. Smith, Jr. Testimony Before the House Banking Committees Subcommittee on Capital Markets, Securities, and
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Kate Davidson, "Dodd-Frank Supporters Argue Safer Financial System Justifies Cost of Regulation," Wall Street
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445
Americans for Financial Reform, 2015, p. 4.
446
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447
News Release, US Companies May Face US $1 Trillion in Additional Capital and Liquidity Requirements As a Result
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448
Joe Mont, Standard & Poors: Dodd-Frank Could Cost Big Banks $34 Billion Annually, Compliance Week. August 13,
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449
The Regulatory Price-Tag: Cost Implications of Post-Crisis Regulatory Reform, Federal Financial Analytics, Inc., July
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450
Federal Financial Analytics, Inc., 2014, p. 1.
451
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452
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455
Oliver Wyman, "The Volcker Rule Restrictions On Proprietary Trading: Implications for Market Liquidity, February
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456
Douwe Miedema, Fed Gives Banks More Time On Volcker Rule Detail, Reuters. April 7, 2014.
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457
Douglas Holtz-Eakin, Cameron Smith & Andrew Winkler, Regulatory Reform and Housing Finance: Putting the Cost
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458
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Chris Bayer, A Critical Analysis of the SEC and NAM Economic Impact Models and the Proposal of a 3rd Model in
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470
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473
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474
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475
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478
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479
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480
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481
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482
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Ken Shepherd, Nanny-State Obama CPSC Files Lawsuit Against Maker of Perfectly Safe Magnetic Desk Toy,
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Hans Bader, Minimum Wage Increase to Wipe OUt 500,000 Jobs, CEI OpenMarket, February 19, 2014.
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490
Jack Spencer, "Competitive Nuclear Energy Investment: Avoiding Past Policy Mistakes," Heritage Foundation
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Nicola Jentzsch, The Regulation of Financial Privacy: The United States vs. Europe, ECRI Research Report No. 5,
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Anton Troianovski and Danny Yadron, U.S. Expands Child Online Privacy Law to Cover Apps, Social Networks, Wall
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Fred L. Smith Jr., Sustainable Development? How About Sustainable Growth? Wall Street Journal Europe, May 31,
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512
http://www.fed-soc.org/publications/detail/overcriminalization-administrative-regulation-prosecutorial-discretion-andthe-rule-of-law.
513
Hans A. von Spakovsky, The Administrations Latest Abuse: Impeding IGs and Hiding the Truth From the American
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Josh Marks, Obama: If Congress Doesnt Act on Climate Change, I Will, National Memo, February 13, 2013.
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David Martosko, Federal Nudge squad Led by 20-Something Wunderkind Gears Up to Change Americans Behaviors
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Michael L. Marlow, Weight Loss Nudges: Market Test or Government Guess? Mercatus Working Paper, September 3,
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Stephen Dinan, DHS will ask stores to watch customers buying habits for terrorist clues, Washington Times,
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521
Walter Olson, Lets Demilitarize the Regulatory Agencies Too, Overlawyered, August 18, 2014.
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Introduction by William L. Kovacs to EPAs New Regulatory Front: Regional Haze and the Takeover of State Programs,
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Bill McNabb, Uncertainty is the Enemy of Recovery, Wall Street Journal, April 28, 2013.
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U.S. Business Startups Rate at Record Low, Reuters, May 2, 2012.
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Michael Snyder, They Are Murdering Small Business: The Percentage Of Self-Employed Americans Is At A Record
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532
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Ben Casselman, Risk-Averse Culture Infects U.S. Workers, Entrepreneurs, Wall Street Journal, June 2, 2013.
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Mark Green and Ralph Nader, Economic Regulation vs. Competition: Uncle Sam the Monopoly Man, 82 Yale L.J. 871
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539
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515
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540
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541
Testimony of Clyde Wayne Crews Jr. Vice President for Policy/Director of Technology Studies, Competitive Enterprise
Institute, Before the: Committee on Science and Technology, U.S. House of Representatives, The Future of Manufacturing:
What is the Role of the Federal Government in Supporting Innovation by U.S. Manufacturers? Wednesday, March 17, 2010.
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542
http://techliberation.com/2012/08/07/what-google-fiber-says-about-tech-policy-fiber-rings-fit-deregulatory-hands
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Press Release, Senator Snowe: Now More Than Ever, Small Business Job Creators Need FREEDOM, June 9, 2011.
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544
http://epa.gov/oig/reports/2012/20120719-12-P-0579.pdf
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This Republican Leader Board memo pointed to several sources that predict job losses from minimum wage hikes.
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546
The Effects of a Minimum-Wage Increase on Employment and Family Income, Congress of the United States,
Congressional Budget Office. February 2014. http://www.cbo.gov/sites/default/files/cbofiles/attachments/44995MinimumWage.pdf.
547
Fred L. Smith Jr., Markets and the Environment: A Critical Reappraisal, Contemporary Economic Policy, January
1995. http://cei.org/pdf/3832.pdf.
548
Under the Dome, Episode 1. http://www.youtube.com/watch?v=uwOdp2FjcMo
549
Clyde Wayne Crews Jr., Obamas Jobs Agenda: An Infrastructure Bank that Robs You, Forbes.com, September 7,
2011. http://www.forbes.com/sites/waynecrews/2011/09/07/obamas-jobs-agenda-an-infrastructure-bank-that-robs-you/.
550
Clyde Wayne Crews Jr., The Free Market Alternative to Mandatory Open Access, Electricity Journal, 1997, vol. 10,
issue 10, pages 32-43. http://econpapers.repec.org/article/eeejelect/v_3a10_3ay_3a1997_3ai_3a10_3ap_3a32-43.htm.
551
Thierer and Crews, 2003
552
Noted by participants in What Factors Should Drive Keystone Pipeline Decision? National Journal, symposium on the
Energy Experts Blog, October 11, 2011. http://energy.nationaljournal.com/2011/10/what-factors-should-drive-keys.php.
553
Tennille Tracy & Edward Welsch, Keystone Poses No Significant Impacts to Most Resources Along Path, Dow Jones
Newswires, August 26, 2011.
http://downstreamtoday.com/news/article.aspx?a_id=27703&AspxAutoDetectCookieSupport=1
554
For example see testimony of Wayne Crews, Competitive Enterprise Institute, Reauthorization of Water Desalination Act
of 1996, House Resources Committee, Water and Power Subcommittee, United States House of Representatives, May 23
2013. http://www.scribd.com/doc/143263731/Wayne-Crews-House-of-Representatives-Testimony-Gov-t-Role-inInvestment-Water-Desalination-Policy-May-23-2013.
555
James Bessen, Michael J. Meurer, The Direct Costs from NPE Disputes, Working Paper, Boston University School of
Law, June 28, 2012.
http://www.bu.edu/law/faculty/scholarship/workingpapers/documents/BessenJ_MeurerM062512rev062812.pdf.
556
Macaulay, Thomas Babington, Lord. Sir Thomas More; or, Colloquies on the Progress and Prospects of Society, by
Robert Southey, Esq., LL.D., Poet Laureate. 2 vols. 8vo. London: 1829. http://www.econlib.org/library/Essays/macS1.html.
557
Do More Regulations Equal Less Safety? Mercatus Center, http://mercatus.org/sites/default/files/publication/MoreRegulations-Less-Safety.pdf.
558
Bjorn Lomborg, How Green Policies Hurt the Poor, The Spectator, April 5, 2014.
http://www.spectator.co.uk/features/9176251/let-them-eat-carbon-credits/. See also Caleb S. Rossiter, Sacrificing Africa for
Climate Change, Wall Street Journal, May 4, 2014.
http://online.wsj.com/news/articles/SB10001424052702303380004579521791400395288?mod=hp_opinion&mg=reno64wsj; and see also TheGatesNotes on YouTube, Bjorn Lomborg: Saving Lives with Fossil Fuels:
https://www.youtube.com/watch?v=ptTdEoHklmE#b06g30f20b14.
559
James Madison, The Particular Structure of the New Government and the Distribution of Power Among Its Different
Parts, The Federalist Papers: No. 47. From the New York Packet, Friday February 1, 1788.
http://avalon.law.yale.edu/18th_century/fed47.asp.
560
From Imaginary Conversations Pollio and Calvus in Works of Walter Savage Landor, 1876, Vol. 2. Cited in Oxford
Dictionary of Quotations. Oxford University Press, 1999.
http://books.google.com/books?id=o6rFno1ffQoC&pg=PA450&lpg=PA450&dq=walter+savage+landor+%22states,+like+
men%22&source=bl&ots=Qyf5JhNp2Z&sig=tO0Vu0iFIEVPCEWrv2t5j8FSNO4&hl=en&sa=X&ei=ro1uUuvVOO-
w4AO1toCoCg&ved=0CDMQ6AEwAQ#v=onepage&q=walter%20savage%20landor%20%22states%2C%20like%20men
%22&f=false.
561
Angelo M. Codevilla, Administrating the Decline in American Citizenship, Online Library of Law and Liberty, May 4,
2014.
http://www.libertylawsite.org/2014/05/04/administrating-the-decline-in-american-citizenship/.
562
Curtis W. Copeland, Congressional Review Act: Many Recent Final Rules Were Not Submitted to GAO and Congress,
July 15, 2014. White Paper. http://www.washingtonpost.com/r/2010-2019/WashingtonPost/2014/07/25/NationalPolitics/Advance/Graphics/CRA%20Report%200725.pdf.
563
Clyde Wayne Crews Jr., Red Tapeworm 2014: Federal Regulatory Disclosure Becomes More Confused, CEI
OpenMarket, July 17, 2014. http://cei.org/blog/red-tapeworm-2014-federal-regulatory-disclosure-becomes-more-confused.
564
Wayne Crews and Ryan Young, Federal Rules Cost $10,000 Per Employee, Washington Times, December 18, 2012.
http://www.washingtontimes.com/news/2012/dec/18/federal-rules-cost-10000-per-employee/
565
Michael Mandel and Diana G. Carew, Regulatory Improvement Commission: A Politically Viable Approach to U.S.
Regulatory Reform, Policy Memo, Progressive Policy Institute, May 2013. http://www.progressivepolicy.org/wpcontent/uploads/2013/05/05.2013-Mandel-Carew_Regulatory-Improvement-Commission_A-Politically-Viable-Approachto-US-Regulatory-Reform.pdf.
566
Noted in presentation by Ronald Bird, U.S. Chamber, at American Action Forum Capitol Hill Conference.
567
See William L. Kovacs, Keith W. Holman, Jonathan A. Jackson, Sue and Settle: Regulating Behind Closed Doors, U.S.
Chamber of Commerce, May 2013.
https://www.uschamber.com/sites/default/files/documents/files/SUEANDSETTLEREPORT-Final.pdf.
568
Chris Horner, Improper Collusion Between Environmental Pressure Groups and the Environmental Protection Agency As
Revealed by Freedom of Information Act Requests, Interim Report, Energy & Environment Legal Institute Report,
September 2014. http://www.cnsnews.com/sites/default/files/documents/E%26E_Legal_FOIA_Collusion_Report_9-152014%20%281%29.pdf.
569
Noted for example in OMB 2013, p. 22.
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2013_cb/draft_2013_cost_benefit_report.pdf
570
OMB, Draft Report, 2013, p. 22.
571
See Nicholas Eberstadt, Yes, Mr. President, We Are a Nation of Takers, Wall Street Journal, January 24, 2013.
http://online.wsj.com/news/articles/SB10001424127887323539804578259940213918254.
572
A report, not addressing deadweight losses specifically but complexity, is Larry Kavanagh and Al Bessin, The RealWorld Challenges in Collecting Multi-State Sales Tax for Mid-Market Online and Catalog Retailers, TruST White Paper,
September 2013. http://truesimplification.org/wp-content/uploads/Final_Embargoed-TruST-COI-Paper-.pdf.
573
What my colleague Sam Kazman called it when I was discussing how most costs of regulations dont get measured in
any way.
574
See Philip Rucker, Obamas 7 State of the Union talking points. No. 6: The Pen and Phone strategy, Washington Post,
January 27, 2014. http://www.washingtonpost.com/blogs/the-fix/wp/2014/01/27/obamas-7-state-of-the-union-talkingpoints-no-6-the-pen-and-phone-strategy/; See also Stephanie Simon, Obamas Power Play, Politico, January 31, 2014.
http://dyn.politico.com/printstory.cfm?uuid=628212B8-5D37-453F-AB5C-2BCA2A2EE131.
575
Clean Water Act Definition of Waters of the United States, Environmental Protection Agency.
http://water.epa.gov/lawsregs/guidance/wetlands/CWAwaters.cfm.
576
Alexei Oreskovic, U.S. Regulator Tells Web Search Firms To Label Ads Better, Reuters, Jun 25, 2013.
http://www.reuters.com/article/2013/06/26/us-internet-search-idUSBRE95P01O20130626
577
U.S. House of Representatives, Committee on Oversight and Government Reform, Staff Report, Broken Government:
How the Administrative State has Broken President Obamas Promise of Regulatory
112th Congress, September 14, 2011. p. 7. http://oversight.house.gov/wpcontent/uploads/2012/01/9.13.11_Broken_Government_Report1.pdf.
578
Mary Whisner, Some Guidance About Federal Agencies and Guidance, Law Library Journal, Vol. 105:3, 2013. 385.
http://www.aallnet.org/main-menu/Publications/llj/LLJ-Archives/Vol-105/no-3/2013-19.pdf .
579
See for example, Clyde Wayne Crews Jr., Despotism-Lite? The Obama Administrations Rule By Memo, Forbes.com.
July 1, 2014. http://www.forbes.com/sites/waynecrews/2014/07/01/despotism-lite-the-obama-administrations-rule-bymemo/.
580
This important recent exploration of ways federal regulatory agencies circumvent formal procedures during the
rulemaking process appears as a series of five studies published by Mercatus Center scholars. For links to all of them, see
Media Advisory Mercatus Releases Five Academic Articles in Harvard Journal of Law and Public Policy, May 23, 2014.
http://mercatus.org/expert_commentary/mercatus-releases-five-academic-articles-harvard-journal-law-and-public-policy.
581
Clyde Wayne Crews Jr., The Federal Office of No Enhancing the Executive Branch Role in Challenging Federal
Regulation, Comments of the Competitive Enterprise Institute On
The Office of Management and Budgets 2014 Draft Report to Congress on the Benefits and Costs of Federal Regulations
and Agency Compliance with the Unfunded Mandates Reform Act,
Document ID: OMB-2014-0002, September 2, 2014.
http://cei.org/sites/default/files/Crews%202014%20Comments%20to%20OMB%20on%20Cost%20Benefit%20Reporting.p
df.
582
On unfunded mandates legislation, see Wayne Crews and Ryan Young, Even After Cuts, Regulation Pushes Up Cost of
Government, Investors Business Daily, April 10,2013. http://news.investors.com/ibd-editorials-perspective/041013651395-regulations-relentlessly-push-up-cost-of-government.htm?p=full.
583
http://www.ncsl.org/StateFederalCommittees/BudgetsRevenue/MandateMonitorOverview/tabid/15850/Default.aspx
584
Tom Richardson, "Small Companies Tend to Stay That Way In France," Letter to the Financial Times, July 18, 2013.
http://www.ft.com/cms/s/0/3107fbfe-ef1c-11e2-9269-00144feabdc0.html.
585
Richard Williams, The Impact of Regulation on Investment and the U.S. Economy, Mercatus Center,
http://mercatus.org/sites/default/files/publication/House%20Oversight%20Response%20on%20Regulations%20and%20Eco
nomy[2].pdf.
586
Bill Frezza, Putting the Jobs Cart Before the Growth Horse, RealClearMarkets, September 19, 2011.
http://www.realclearmarkets.com/articles/2011/09/19/putting_the_jobs_cart_before_the_growth_horse_99264.html.
587
http://www.econlib.org/library/Bastiat/basEss1.html
588
See for example, Clause and effect: The business cycle matters when assessing the cost of new regulations, The
Economist, October 29 2011. http://www.economist.com/node/21534767.
589
Economic News Release, Displaced Workers Summary, Bureau of Labor Statistics, August 26, 2010.
http://www.bls.gov/news.release/disp.nr0.htm.
590
Richard D. Morgenstern, William A. Pizer, and Jhih-Shyang Shih, Jobs versus the Environment: An Industry-level
Perspective, December 1998 (Revised November 1999, Revised June 2000) Resources for the Future Discussion Paper 99
01REV, http://www.globalurban.org/Jobs_vs_the_Environment.pdf.
591
Jia Lynn Yang, Does government regulation really kill jobs? Economists say overall effect minimal, Washington Post,
November 13, 2011.
http://www.washingtonpost.com/business/economy/does-government-regulation-really-kill-jobs-economists-say-overalleffect-minimal/2011/10/19/gIQALRF5IN_story.html.
592
Dennis Jacobe, Govt Regulations at Top of Small-Business Owners Problem List: One in three small-business owners
are worried about going out of business, October 24, 2011. http://www.gallup.com/poll/150287/Gov-Regulations-TopSmall-Business-Owners-Problem-List.aspx
593
Rep. Tom McClintock, Putting Freedom Back to Work, Washington Times. November 7, 2011.
http://www.washingtontimes.com/news/2011/nov/7/putting-freedom-back-to-work/.
594
http://www.whitehouse.gov/sites/default/files/omb/inforeg/2011_cb/comments/yager.pdf
595
Doings (or more correctly in the southern, doins) is a term my grandma would use for whatever somebodys engaged
in that wasnt quite clear to an obersver). It may be a better term than jobs when regulation is the impetus.
596
President Postpones Trillion-Dollar Ozone Rule Until After 2012 Presidential Election, Press Release, Competitive
Enterprise Institute, September 02, 2011. http://cei.org/news-releases/president-postpones-trillion-dollar-ozone-rule-untilafter-2012-presidential-election.
597
Cass R. Sunstein, Yes, Regulation Can Kill Jobs, Bloomberg View, March 4, 2014.
http://www.bloombergview.com/articles/2014-03-04/yes-regulation-can-kill-jobs.
598
See Clyde Wayne Crews Jr., Still Stimulating Like Its 1999: Time to Rethink Bipartisan Collusion on Economic
Stimulus Packages, CEI Issue Analysis 2008, No 1. February 2008. http://www.scribd.com/doc/178751423/Wayne-CrewsStill-Stimulating-Like-It-s-1999-Bipartisan-Collusion-on-Economic-Stimulus-Packages-CEI-February-2008-pdf.
599
Alvaro Vargas Llosa, ed. Lessons from the Poor: Triumph of the Entrepreneurial Spirit, Independent Institute, 2008.
http://www.independent.org/store/book.asp?id=73.
600
Stephen L. Carter, Economic Stagnation Explained, at 30,000 Feet, Bloomberg View. May 26, 2011.
http://www.bloombergview.com/articles/2011-05-26/carter-economic-stagnation-explained-at-30-000-feet.
601
Happy Hawk In the Hen House. Time, 111, May 8, 1978: p. 63.
http://content.time.com/time/magazine/article/0,9171,919618,00.html. Fuller quote: In addition, instead of following his
predecessors and limiting the number of airlines flying any route, Kahn has sought to increase competition on all routes.
Two weeks ago, the Senate approved a bill that would ease the way for new airlines to enter the industry, cut fares even
lower and permit lines to spread onto other routes with little or no Government interference. The bill, which the
Administration thinks has a good chance of passage in the House this summer, would drastically weaken the powers of the
CAB. But that does not worry Kahn, who contends that I will consider myself a success in this job if there is no job when I
leave it.
602
Online review at Rotten Tomatoes: http://www.rottentomatoes.com/m/sightseers/.
603
Clyde Wayne Crews Jr., Jump, Jive an Reform Regulation: How Washington Can Take a Swing at Regulatory Reform,
Competitive Enterprise Institute, February 2000.
604
Clyde Wayne Crews Jr., Promise and Peril: Implementing a Regulatory Budget, Policy Sciences 31, no. 4 (January 1,
1998): 343369. http://cei.org/sites/default/files/Wayne%20Crews%20%20Promise%20and%20Peril%20Implementing%20a%20Regulatory%20Budget.pdf
605
Homer, The Odyssey.
http://books.google.com/books?id=SWcqAAAAYAAJ&pg=PA80&lpg=PA80&dq=%E2%80%9CJoyfully+to+the+breeze+r
oyal+Odysseus+spread+his+sail,+and+with+his+rudder+skillfully+he+steered.%E2%80%9D&source=bl&ots=Cu7BCCtq
FY&sig=tthod_z2PVwJtsZq9AUZI3VyCPo&hl=en&sa=X&ei=uDdxUsPGrjdsAS92IC4DA&ved=0CDsQ6AEwAg#v=onepage&q=%E2%80%9CJoyfully%20to%20the%20breeze%20royal%20Od
ysseus%20spread%20his%20sail%2C%20and%20with%20his%20rudder%20skillfully%20he%20steered.%E2%80%9D&f
=false.