An Abundance… of Regulation
Concern about the economic cost of regulation has become a bi-partisan affair. President Obama has called for a "government-wide review of regulations already on the books." Sen. Mark Warner (D-VA) and Sen. Jim DeMint (R-SC) and Rep. Goeff Davis (R-KY) have all introduced bills that would reform the nation's regulatory state.
A deep recession and a prolonged economic slump has had the effect of focusing policymakers on obstacles to economic growth. It's not surprising then that attention is turning to what role regulation might be playing in holding the economy back.
No one advocates getting rid of all regulation. Instead, we are confronted with practical questions about the scope, extent, and growth of regulation. To envision a sensible path forward, it's important to have a good handle on trends and developments in regulatory policy so that reforms are rooted in reality.
To that end, a new report by NERA Economic Consulting, conducted at the behest of the Manufacturers Alliance for Productivity and Innovation, is worth a read. The researchers, led by David Montgomery, sought to get a better handle on the costs of regulation in recent decades. They found some eye-opening trends.
For example, the growth of regulation has far outpaced overall economic growth; between 1998 and 2011 the cost of complying with major new regulations grew by 7.6% annualized, while the broader economy grew at only 2.2% annual rate.
And these figures likely understate the total cost increase as they don't include the growth in state and local regulations. They also don’t include regulations issued by independent agencies that are not subject to Congressional review.
And Figure 17 in their study, shown above, illustrates nicely the relative cost of regulation in the context of the wider economy.
As policymakers scramble to boost America's economic growth, a serious look at the nation's regulations might be worth a shot.