compliance costs

America’s Ever-Expanding Regulatory Swamp

Maybe I’m biased because I mostly work on fiscal policy, but it certainly seems feasible to come up with rough estimates for the damage caused by onerous taxes and excessive spending.

On a personal level, for instance, we have a decent idea of how much the government takes from us and we know the aggravation of annual tax returns. And we tend to have some exposure to government bureaucracies, so we’re familiar with the concept of wasteful spending.

But how do you quantify the cost of regulation and red tape? Well, here are some very large numbers to digest.

Americans spend 8.8 billion hours every year filling out government forms.

The economy-wide cost of regulation is now $1.75 trillion.

For every bureaucrat at a regulatory agency, 100 jobs are destroyed in the economy’s productive sector.

The Obama Administration added $236 billion of red tape in 2012 alone.

In other words, the regulatory burden is enormous, but I worry that these numbers lack context and that most of us don’t really grasp how we’re hurt by government intervention.

So let’s look at some additional data.

Regulatory State Gone Wild

Ten Thousand Commandments

Americans spend $1.8 trillion each year — nearly $15,000 per family — complying with regulations passed down by the federal government. That’s the estimate given by the Competitive Enterprise Institute (CEI) in the latest edition of Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.

“The 2012 Federal Register ranks fourth all-time with 78,961 pages, but three of the top four years, including the top two, occurred during the Obama administration,” noted the statement accompanying the report. “The 2010s are on pace to average 80,000 pages per year—up from 170,000 in the 1960s and 450,000 in the ‘70s.”

“There are more federal regulations than ever—the Code of Federal Regulations, which compiles all federal regulations, grew by more than 4,000 pages last year and now stands at 174,545 pages, spread over 238 volumes. Its index alone runs to more than 1,100 pages,” CEI added. “Government has added more than 80,000 regulations in the last 20 years—3,708 in the last year alone. That’s one new rule Americans must live under every 2½ hours. Today, 4,062 sit in the pipeline. Those will add at least $22 billion in compliance costs and probably much more.”

The cost to Americans as result of the regulations is perhaps the troubling aspect of the report. But another startling point is the way in which these rules and regulations are being imposed on Americans. Because the Obama Administration cannot pass many of these regulations through Congress, it is bypassing the legislative branch altogether, meaning that there is little to no oversight by Congress.

The report also notes that there has been a jump in “economically significant rules” — those that bring $100 million or more in compliance costs — on President Obama’s watch.

CaliforniaCare: The Employer Mandate on Steroids

employer mandate

California AB 880: “This bill would make it unlawful for a large employer to, among other things…reduce an employee’s hours or work…if the purpose is to avoid the imposition of the penalty. A violation of those provisions would result in a penalty of 200% of the penalty amount the employer would have paid for the applicable period of time.”

ObamaCare’s employer mandate is off to a disastrous start even before it kicks in.  The CBO has already scored the measure to cost employers $150 billion in draconian excise taxes over the next eleven years, and there’s no telling how much the compliance costs will total.  Most employers are in no position to shoulder this burden.  How have they responded?  For many, the only hope has been to reduce employees’ hours because the employer mandate and its associated penalty taxes apply only to employees who average at least 30 hours per week. Regal Entertainment Group recently announced that it would join the long line of mega-sized employers to be reluctantly forced down this road.

Regulatory Compliance Costs Don’t Always Have a Dollar Figure Attached

Cross-posted from Friction Tape.

Francois Hollande

Recently elected socialist French president François Hollande.

While I’m not sure I always buy whole-hog the amorphous concept of “regulatory uncertainty,” brought on by the administrative state, as a catch-all explanation for everything wrong with the private sector and our nation’s current unemployment crisis, a fascinating Bloomberg Businessweek Global Economics feature from May 2012 looks at French labor policy (emphasis mine):

[France] has 2.4 times as many companies with 49 employees as with 50. What difference does one employee make? Plenty, according to the French labor code. Once a company has at least 50 employees inside France, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

French businesspeople often skirt these restraints by creating new companies rather than expanding existing ones.

Obamacare regulatory burdens outweigh benefits

The heavy regulatory and paperwork burdens that Obamacare has brought to businesses and states is not worth the costs, according to a new study by the American Action Forum, a conservative think tank.

While most have focused on the premium and deductible increases that many Americans are seeing when they sign up for a health plan, the study, authored by Sam Batkins, takes a look at another aspect of the law that hasn’t received nearly as much attention.

“From a regulatory perspective, the law has imposed more than $27.2 billion in total private sector costs, $8 billion in unfunded state burdens, and more than 159 million paperwork hours on local governments and affected entities,” wrote Batkins. “What’s more troubling, the law has generated just $2.6 billion in annualized benefits, compared to $6.8 billion in annualized costs.

“In other words,” he continues, “the [Affordable Care Act] has imposed 2.5 times more costs than it has produced in benefits.”

To put the paperwork hours into perspective, Batkins compared the burden under the Dodd–Frank Wall Street Reform and Consumer Protection Act to that of Obamacare. “At more than 159 million paperwork hours, the ACA is in a class by itself,” he noted. “To date, Dodd-Frank, an equally transformational law, has imposed ‘only’ 60 million hours of paperwork.”

The study, for example, notes that Americans will spend 7.5 million hours complying with the individual mandate and business owners will have to spend 40.2 million hours dealing with reporting requirements.

ObamaCare Compliance to Cost Businesses $24 Billion

Douglas Holtz-Eakin

During a House Small Business Committee hearing last week, Douglas Holtz-Eakin, who served as director of the Congressional Budget Office from 2003 to 2005, explained that the compliance costs of ObamaCare — passed as the “Patient Protection and Affordable Care Act” — could cost businesses up to $24 billion and 80 million hours of paperwork.

“The [Affordable Care Act] is very costly,” Holtz-Eakin explained to the committee. “It has about $24 billion in reported regulatory compliance costs. These are estimates that come from the administration itself. Eighty million hours of paperwork time spent complying with those regulations. To give you some perspective - that’s 40,000 full time employees filling out paperwork for a year nonstop”

Responding to a question from Rep. Tom Rice about the affects of the bill on the economy and ostensibly the American people, Holtz-Eakin said, “This is a negative; I don’t think there’s anyway around that.”

“Whatever your other objects might be, if you set out to enhance job creation and growth in the United States, you wouldn’t pass a bill with a trillion dollars of tax increases, a large entitlement program, and this amount of regulation,” Holtz-Eakin continued. “That isn’t a good strategy.”

Holtz-Eakin also noted that the insurance tax will be passed onto consumers in their health insurance premiums. He also agreed with Sen. Max Baucus’s recent comments that the implementation efforts of ObamaCare will be a “train wreck.”

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