Monday, August 01, 2011

Red Tape Rising at a Rising Rate

On July 25, James Gattuso and Diane Katz at Heritage Foundation released the latest iteration of their overview of increasing federal regulatory mandates. "Red Tape Rising: A 2011 Mid-Year Report on Regulation" spotlights the continuing growth of federal bureaucratic rules and their corresponding burden on the economy.

As Gattuso and Katz point out, regulatory costs aren't merely a business problem since "the costs of regulation are inevitably passed on to consumers in the form of higher prices and limited product choices." Moreover, "[u]nlike the budgetary accounting of direct tax revenues, Washington does not track the total burdens imposed by its expensive rulemaking."

But even a glimpse at the first half of fiscal year 2011 is enough to give one a sense of the problematic growth of new regulatory burdens. Relying on Government Accountability Office numbers, Gattuso and Katz observe that over 1,800 rulemakings were completed in the first half of FY 2011. Thirty-seven of those rulemakings were classified as "significant/substantial" or "major," meaning they had an expected economic impact of $100 million per year. And fifteen of those thirty-seven impose new mandates or limits on private-sector activity. According to Gattuso and Katz, "[t]he annual costs of the 15 new major regulations total more than $5.8 billion and impose nearly $6.5 billion in one-time implementation costs. And just as significant is the fact that "[n]o major rulemaking actions decreased regulatory burdens during the first half of fiscal 2011."

The problem is worse than new regulatory burdens, however. Gattuso and Katz make the point that the rate at which regulatory burdens are growing is itself increasing. As Gattuso and Katz go on to describe new regulations currently in the works:

The spring 2011 Unified Agenda…lists 2,785 rules (proposed and final) in the pipeline. Of those, 144 were classified as 'economically significant.' With each of the 144 pending major rules expected to cost at least $100 million annually, they represent at least $14 billion in new burdens each year.

This is an increase of 15.2 percent in the number of economically significant rules in the agenda between spring 2010 and spring 2011. Moreover, in the past decade, the number of rules has increased a whopping 102 percent, rising from 71 to 144 since 2001.

Policymakers considering even more regulatory mandates would do well to consider this backdrop of regulatory burdens and the already increasing regulatory burden rate. Reversing the trend of increasing regulatory burdens means not only reducing the rate at which we adopt new rules, but also undertaking new rulemakings that eliminate older rules and reduce the overall regulatory burden.