Yet that’s enough time to illustrate the complex blend of federal regulations and their effects.Regulation runs the gamut from important things like air quality, water quality, and pipelinesafety to seemingly trivial things like fruit size.Overall, the effects of federal regulation are big. The Office of Management and Budget (OMB),relying on regulatory agency estimates, reports that major regulations it reviewed during the pastten years produced annual benefits worth between $128 billion and $616 billion, at a cost of between $43 billion and $55 billion. OMB readily admits that these figures are incomplete,because for some rules agencies do not calculate costs, or benefits, or both.
A report by NicoleV. Crain and W. Mark Crain for the Small Business Administration’s Office of Advocacy pegsthe total annual cost of regulation much higher, at $1.75 trillion.
Appropriations for regulatoryagencies provide another measure of the importance of federal regulation; Congress appropriated$56.3 billion for regulatory agencies in fiscal 2010.
We count on regulation to accomplish some important goals that private markets don’t achieve.We also sacrifice a lot of other things to obtain the benefits regulation provides. Fundamentally,this is what much regulation does: it changes the mix of goods and services society produces andconsumes.The subject of today’s hearing is regulation’s effect on jobs. The Mercatus Center’s director of policy research, Dr. Richard Williams, supplied a summary of academic research on this topic inresponse to a request from Chairman Issa.
Regulation can affect employment in two majorways. First, uncertainty about future regulation can prompt firms to delay investments until theyhave a better idea about what the “rules of the game” will be. This delayed investment delays jobcreation. Where there is either extended uncertainty or regulation that goes well beyond whatother countries are doing, investment capital will find more stable or less onerous places to go,and the resulting jobs will be created overseas. Second, regulation can alter employment inparticular industries by changing the mix of goods and services our economy produces. Whilethe aggregate effect of particular regulations on overall employment is minimal, the effects onparticular industries can be large.
Office of Management and Budget,
2010 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities
Nicole V. Crain and W. Mark Crain, “The Impact of Regulatory Costs on Small Firms,” Report produced for theSBA Office of Advocacy under Contract No. SBA-HQ-08-M-0466,http://www.sba.gov/sites/default/files/rs371tot.pdf .
Susan Dudley and Melinda Warren,
A Decade of Growth in the Regulators’ Budget: An Analysis of the US Budget for Fiscal Years 2010 and 2011
. Washington, DC and St. Louis, MO: Regulatory Studies Center, The GeorgeWashington University, and Weidenbaum Center, Washington University in St. Louis,http://wwwregulatorystudies.gwu.edu/images/pdf/regbudget20100518.pdf .
Richard Williams, “The Impact of Regulation on Investment and the U.S. Economy,”http://mercatus.org/sites/default/files/publication/House%20Oversight%20Response%20on%20Regulations%20and%20Economy.pdf , posted January 11, 2011.