Regulation - The Sneaky Tax

Three years ago, this column addressed the cost of government regulation and projected a rising burden for the public and American industry. Estimates were low. Further, the bad congressional habit of deferring responsibilities to unelected bureaucrats to implement the intent of legislation is, as predicted, a serious and worsening problem. Revisiting this subject is warranted and made easy based on work done by the Competitive Enterprise Institute of Washington D.C., and their annual study entitled "Ten Thousand Commandments."

Governments spend money after collecting it in taxes or borrowing it in a budget process that is subject to public examination, which is purposefully obscured at times. Regulatory costs are "off-budget" and escape scrutiny; federal Legislative branch actions are interpreted by bureaucrats of the Executive branch agencies into a form that requires public adherence to regulation, but avoids specificity on who pays for these mandates. In fact, the tab for rules and regulations cost the nation $758 billion (B) in 1999 (8.2% of GDP and 44.5% of federal budget spending) and exceeds 1998 cumulative pre-tax corporate profits of $718 B. Agencies of government then spent an additional $18.8 B to administer and enforce federal mandates, increasing real costs to $777 B. Your government (the White House OMB report to Congress in January 2000) had the temerity to say that regulations cost between $174 B and $234 B and provide benefits of $264 B to $1,795 B. This was not a proper analysis, but a justification report neglecting to account for many cost elements arising from economic regulation and required paperwork. It can only come within a factor of seven in assessing benefit. Give me a break!

Total regulatory costs have increased 26% over the past decade and show greatest increase for environmental (71.4%) and paperwork (12.4%) cost categories. As America entered this year, 4,538 new rules were in the pipeline for completion in 2000, with 2,106 of them (46%) coming from five agencies (Agriculture, Commerce, Transportation, Treasury, and EPA). The 456 pending regulations from the EPA (of greatest interest to IH readers) will cover ozone and particulate ambient air quality standards, regional haze regulations, and control of emissions from non-road engines. And industry will just love this - fully 28 of the EPA pending regulations (and 137 of the total) are in the category acknowledged by OMB to cost $100 million or more annually. It is not comforting that government plans to impose 4,401 new regulations during this year, any of which could cost up to $100 million each and every year, and there is no practical or effective means for citizen oversight before such rules take force of law. The EPA has violated OMB direction and fewer than half of these economically significant or $100 million rules are accompanied by any quantitative benefit estimates.

It certainly makes sense for Congress to insist that OMB adhere to stated policy and that all agencies define regulatory costs on a finer-grained scale and specify actual or estimated costs. There should also be more disclosure in the process and a summary provided of detail equivalent to the federal budget. Try reading the "Unified Agenda" sometime to understand that the words "user-friendly" did not originate here.

As another example of government inefficiency, the Mandates Information Act (S.427) sponsored by Senator Spencer Abraham (R-MI) is an outgrowth of S.389 of three years ago. The House companion bill H.R.350 passed the full House on 10 February 1999 by a 274 to 149 vote, but S.427 has yet to be voted upon and is forecast not to receive attention in this session, requiring restart of the entire process in the next Congress. It is evident that the Republican controlled Senate has zero interest in doing its job. The thrust of both bills requires those regulations that affect small business to have cost impact reviews completed or that waiver of economic assessment be specifically voted by the House and Senate in a roll call. Manipulation and deceit by both Legislative and Executive branches of government allows infinite expansion of the federal role without taxation-an unhealthy protocol for America.

A perspective about the excessiveness of federal regulation is gained from the following. The number of words in a document is important; the Pythagorean Theorem contains 24 words, The Lords Prayer has 66 words, The Ten Commandments 79, the Gettysburg Address 286, the Declaration of Independence 1300. One U.S. government regulation controlling the sale of cabbage contains 26,911 words. Think about it.