Heritage Foundation Leadership for America

Essential Reading on Regulation

The Impact of Regulatory Costs on Small Firms, W. Mark Crain, Office of Advocacy of the Small Business Administration (2005)
This research updates and further dilineates the disproportionality of the burden imposed by federal regulations on small businesses. Previous research by the Office of Advocacy, Hopkins (1995) and Crain and Hopkins (2001), has established that regulatory and paperwork costs were found to be more onerous on small firms than on larger ones.

Final 2005 Report to Congress on the Costs and Benefits of Federal Regulations, Office of Management and Budget (2005)
This annual report, released in draft form for public comment, summarizes the costs and benefits of federal regulations and federal regulatory activity over the past year. Highlights include an analysis of 45 major rules promulgated in fiscal 2004, an analysis of regulatory trends since 1981 and of the impact of major rules on local governments, small businesses, wages, and economic growth; regulatory trends since 1981.

Reining in the Regulators: How Does President Bush Measure Up? James Gattuso, The Heritage Foundation (2004)
This report provides several yardsticks for measuring the changing burden of regulation, including statistics on the number and type of major regulations adopted each year, estimated total costs of major regulations, and changes in the number of pages in the Code of Federal Regulations and Federal Register. It also summarizes the history of executive branch regulatory reform efforts, evaluates President Bushs performance, and offers recommendations for reform.

Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State (2007 edition), Competitive Enterprise Institute, Clyde Wayne Crews Jr.
This report provides a host of facts and figures on the size and scope of federal regulation, including figures on the number of rules in the regulatory pipeline and number of pages in the Federal Register over time.

Moderating Regulatory Growth: An Analysis of the U.S. Budget for Fiscal Years 2006 and 2007, Susan Dudley and Melinda Warren, The Mercatus Center and the Weidenbaum Center (2006)
This annual report the provides statistics on the on-budget costs to taxpayers of regulatory agencies from 1960, as well as figures for total staffing of regulatory agencies since 1970.

Reviving Regulatory Reform: Options for the President and Congress, Competitive Enterprise Institute, Marlo Lewis, Jr., Competitive Enterprise Institute (2005)
This report provides a detailed look at the effects of regulation and a history of regulatory reform efforts in Congress, and evaluates a comprehensive catalog of proposed reforms.

Regulation Experts at The Heritage Foundation

James L. Gattuso
Research Fellow in Regulatory Policy, Thomas A. Roe Institute for Economic Policy Studies

Ronald D. Utt, Ph. D.
Herbert and Joyce Morgan Senior Research Fellow

Alison Acosta Fraser
Director, Thomas A. Roe Institute for Economic Policy Studies

David C. John
Thomas A. Roe Institute for Economic Policy Studies Senior Research Fellow

Robert E. Moffit, Ph.D.
Director, Center for Health Policy Studies

Becky Norton Dunlop
Vice President, The Heritage Foundation

Stuart M. Butler, Ph.D.
Vice President, The Heritage Foundation, Domestic and Economic Policy

Ben Lieberman
Senior Policy Analyst, Thomas A. Roe Institute for Economic Policy Studies

List of Experts and Organizations

How the Numbers Were Calculated

These numbers are based on a review of major rules promulgated each year by federal agencies, as reported to Congress by The Government Accountability Office, and posted at at www.gao.gov/decisions/majrule/majrule.htm. A major rule is one with an estimated economics impact of $100 million or more each year. Each rule reported by the GAO was evaluated by Heritage Foundation staff to determine if the net effect was to increase or to decrease the regulatory burdens on individuals and the economy, as compared to prior law. These evaluations were based primarily on the rule summaries and the economic impact analyses provided by the GAO, supplemented where necessary by consultation with experts in specific fields. If a rules effect was not primarily to increase or decrease regulatory burdens, or if its effects were so mixed as to make categorization impossible, it was not included in the total.




The Costs of Regulation
(excerpted from Reining in the Regulators: How Does President Bush Measure Up?, Heritage Foundation Backgrounder no. 1801, September 28, 2004)

Over 60 agencies have a hand in federal regulatory policy/, ranging from the Environmental Protection Agency (EPA) to the Securities and Exchange Commission (SEC). Together, they enforce over 144,000 pages of rules, with purposes and impacts as varied as the agencies themselves. Some rules are meant to protect health and safety, some to protect (or suppress) economic competition, and some to protect the environment.

Certainly, not all of these regulations are unjustifiedmany, in fact, are quite beneficial. For instance, most would agree on the need for security rules to protect citizens against terrorism, although the extent and scope of those rules may be subject to debate. Moreover, regulations are not necessarily inconsistent with free-market principles. Somesuch as anti-fraud rules and, arguably, do-not-call rules for telemarketersactually reinforce individual and property rights.[1]

Nevertheless, all rules come at a cost: a regulatory tax imposed on all Americans. Of course, Americans do not file regulatory tax forms on April 15, and there is no bottom line indicating how much they pay for these regulations. Yet hidden regulatory costs are staggering by almost any measure. According to the Office of Information and Regulatory Affairs (OIRA), the White House office responsible for reviewing and tracking federal rules, regulations adopted in the past 10 years cost Americans $34 billion to $38 billion annually.[2] All federal regulations, OIRA states, could be costing Americans 10 times this amount: some $380 billion.

However, these numbers are low compared to estimates prepared by economists Mark Crain and Thomas Hopkins for the Small Business Administration.[3] In 2000, Crain and Hopkins concluded that regulations cost Americans $843 billion (over $8,000 per household).[4] This is almost half of the amount collected in federal taxes and close to the $1 trillion paid in personal income taxes that year.[5] Put another way, the total is almost a tenth of Americas gross domestic product and more than half of the manufacturing sectors output.[6]

Even these numbers may underestimate the negative effects of regulation. For instance, the CrainHopkins study does not include indirect costs. A regulation that increases energy costs would also affect other industries that require energy to produce their products.

Perhaps more important, the magnitudes of some burdens are, by their natures, unknowable. For many economic regulations, the major cost may not be any direct burden placed on consumers or businesses, but constraints on innovation. Assessing such losses is impossible because inventions that never existed cannot be measured. In todays 21st century economy, these unmeasurable costs are perhaps more harmful than the direct, measurable burdens.

In any case, regulatory burdens cause substantial economic harm by reducing economic growth, slowing job growth, and reducing Americans income. The actual effects vary tremendously depending on the type of regulation,[7] but the effect is clear. Most recently, a World Bank study of regulation around the world underlined the connection between economic growth and regulation, finding that [h]eavier regulation is generally associated with&more unemployed people, corruption, less productivity and investment.[8] Interesting, the authors did not find a correlation with better quality of private or public goods.

However, the costs are not just economic. Regulations canand often doreduce Americans health and safety as well. Delays in new drug approvals by the Food and Drug Administration have led to thousands of unnecessary deaths.[9] By encouraging the purchase of smaller cars, automobile fuel efficiency standards have contributed to thousands of deaths in car accidents.[10] Rules banning health claims on wine bottles have denied Americans information about the beneficial effects of wine on heart health.[11]