Cost of Government Day (COGD)
[2005] [2004] [2003] [2002] [2001]

THE BURDEN OF REGULATION

Regulations as a percent of national income rose slightly in 2007 and have remained unchanged at 16.9 percent since 2004.  Despite the relative stabilization of regulatory costs, the regulatory burden remains elevated following the substantial jump in 2002.  In 2007, the average American will have to work 62 days out of the year to pay for all regulations.  

The elevated costs of regulations as a percent of national income pose significant concerns.  As regulatory costs are largely invisible to the average American shareholder and consumer, it is difficult to ascertain the full costs of the burden.  Also, with the combination of the Democrat Congress and lobbying by the new constituencies created by recent regulations, the upward trend of regulations will continue in future years.     

Total Regulatory Burden 1977-2007

ATR’s conservative estimate of regulatory costs includes only the cost of complying with regulations.  This includes the material resources and labor needed to carry out compliance with this regulatory requirement.  For example, if a regulation requires new pollution control equipment for power plants, compliance costs include the costs of manufacturing, installing, operating and maintaining the equipment.

This estimate ignores the negative economic effects of the costs of regulatory requirements.  These hidden costs slow the economy, as they introduce inefficiencies and distortions, and reduce the economic reward left over for productive activity.  The regulations may prevent new firms from entering the market, or stop existing ones from expanding.  They may even force some existing firms out all together.  The end result is less overall output, fewer jobs, lower wages and lower economic growth.

These economic costs may be as large as the direct compliance costs of regulation.  Economists at Washington University at St. Louis, leaders in the study of regulation, have estimated these costs to be over $1.5 trillion per year in current dollars.  The full, true burden of regulatory costs may consequently be twice as large as estimated above.  This makes reform to reduce regulatory costs twice as urgent.

<-- Back Next -->