In this election year, Americans will hear a lot about taxes.
Candidates for everything from President to village alderman
will present their plans on who should pay and how much. Yet in the
political frenzy, one type of tax will almost certainly be
overlooked: the hidden tax of regulation. The federal government
alone enforces thousands of pages of regulations that impose a
burden of some $1.1 trillion-an amount that is comparable to total
federal income tax receipts.
And the cost of regulation is getting higher. Despite the claims
of critics-and some supporters-of the Bush Administration, net
regulatory burdens have increased in the years since George W. Bush
assumed the presidency. Since 2001, the federal government has
imposed almost $30 billion in new regulatory costs on Americans.
About $11 billion was imposed in fiscal year (FY) 2007 alone.
Even more are on the way. Historically, the amount of regulatory
activity surges dramatically in the last year of a presidential
Administration, whether Republican or Democrat, as regulators,
freed from normal political constraints, clean off their desks. A
similar surge looks likely for the final year of the Bush
Administration unless the President and other policymakers
keep a tight hand on the regulatory leash.
Over 50 agencies ranging from the Animal and Plant Health
Inspection Service to the Bureau of Customs and Border Protection
have a hand in federal regulatory policy. Together, they enforce
over 145,000 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 others to protect the environment.
Certainly, many of these regulations are justified-and even
necessary. 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, imposition of a regulation is not per se
inconsistent with market principles. Some in fact reinforce
property rights and market mechanisms.
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. Hidden or not,
however, the tax is large. According to a 2005 study for the Small
Business Administration, the cost of all rules on the books is $1.1
trillion, about the same amount that Americans paid
in federal income taxes in 2007.
Even this staggeringly large number may underestimate the
cost of regulation, since many costs are by their nature
unknowable. For many economic regulations, the primary 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.
Moreover, regulations can also reduce Americans' health and
safety. Delays in new drug approvals by the Food and Drug
Administration have led to thousands of unnecessary deaths. By
encouraging the purchase of smaller cars, automobile fuel
efficiency standards have contributed to thousands of deaths in car
accidents.Rules banning health claims on wine bottles
have denied Americans information about the beneficial effects of
the moderate consumption of wine on heart health.
Regulation in the Bush Years: Still Going
To its credit, the Bush Administration during its seven years in
office has made significant efforts to rein in regulation, mostly
through enhanced review of regulatory proposals to ensure that any
new restrictions are necessary and impose as little burden as
possible. The White House agency responsible for reviewing
proposed new rules-the Office of Information and Regulatory Affairs
(OIRA), part of the Office of Management and Budget (OMB)-has taken
an active role as a gatekeeper. It has established
strict criteria for agencies' "regulatory impact analyses" of their
rules and for peer review of those analyses. In early 2007,
President Bush further strengthened the system by, among other
things, increasing the role of designated "regulatory policy
officers" within agencies.
Some have argued that regulatory reforms have gone too far and
that regulations have been dangerously weakened. Such
criticism has been especially frequent over the past year in the
wake of fatal mine accidents in West Virginia and Utah and
widespread recalls of toys made in China. For instance, these
incidents led USA Today to charge that Bush has let
Others go even farther. OMB Watch, a pro-regulation advocacy
group, charged that Bush has "left the public uncertain about
whether we can count on our government to provide adequate
safeguards." The Center for American Progress charged
that "[i]nstead of protecting the public, the administration has
weakened or thrown out a host of protective standards."
Regulation by the Numbers
The rhetoric is alarming, but it does not fit the facts. Far from
shrinking to dangerously low levels, regulation has actually grown
substantially during the Bush years. By almost every measure,
regulatory burdens are up.
Tracking year-to-year changes in regulatory burdens is no easy
task. Unlike on-budget expenditures, there is no single bottom
line figure to report. Yet a number of measures together can
provide a fair picture of what is happening in the regulatory
Regulatory Budget and Staffing Levels. Critics
of Bush Administration regulatory policy have argued that budget
cuts are evidence that restrictions are being loosened. Yet
according to an analysis by George Mason University's Mercatus
Center and Washington University's Weidenbaum Center,
appropriations for federal regulatory agencies have increased
during the Bush years from $27 billion in FY 2001 to $44.9 billion
in FY 2007-a 44 percent increase in inflation-adjusted dollars.
The total staffing of regulatory agencies went up nearly as much,
from 172,000 employees to over 244,000- a 41 percent increase.
To a significant degree, these increases are due to the federal
takeover of airport screening operations by the Transportation
Security Administration (TSA). But even with the TSA excluded, the
increases were still sizeable, with regulatory budgets still
increasing by 30 percent and non-TSA staff levels rising almost 11
While homeland security functions garnered the largest
increases, expansion has not been limited to that area. Agencies
responsible for consumer safety and health have received budget
increases of 33 percent in real terms since 2000 and staff
increases of over 9 percent. Other areas with increases include
transportation, energy, and general business regulation.
Environmental regulation declined in real (although not nominal)
terms, from about $6 billion to $5.6 billion. However, because
environmental spending increased during the 1990s by about
one-third, today's funding is still well above its 1990 level.
Regulatory Page Counts. What are regulators
actually doing with their resources? Perhaps the most commonly
cited yardstick of regulatory activity is the size of the
Federal Register. Before any new federal rule can be
proposed or finalized, the agency involved must publish it in this
daily publication. In 2007, the Federal Register declined
slightly in size, weighing in at 72,090 pages. That figure is less
than its all-time record of over 75,000 pages but still higher than
any year before 2000.
Unlike the Federal Register, which is in effect a
posting board for all sorts of agency actions, the Code of Federal
Regulations (CFR) is the regulatory equivalent of a statute
book that includes only the text of existing regulations. In number
of pages, the CFR makes the Federal Register look
Lilliputian, with the 2007 edition totaling 145,816 pages, more
than 4,500 pages longer than in 2001, when Bush took office,
and almost 8,000 pages longer than in 2000.
However, the Federal Register and CFR page counts have
significant drawbacks as measures of regulation. The Federal
Register contains more than regulations, including discussions
of rules, determinations under rules, requests for public
comment, and more. In addition, agencies must publish all rule
changes in the Federal Register, both actions to eliminate
or reduce regulatory burdens and actions to increase them.
CFR page counts have similar limitations. Most notably, the
number of pages in a regulation does not necessarily indicate a
heavier burden. A 500-page regulation could impose a lesser burden
than a simple one-line prohibition of an activity.
The Number and Cost of Major Rules. More
important than the mere number of pages in the Federal
Register or the CFR is the content of those pages: How many
rules are being adopted, and what do they cost Americans?
Many thousands of regulatory actions are taken each year: 3,595
rules were printed in the Federal Register in 2007
alone. However, a large number of these are not
"regulatory" in the commonly understood sense of the word because
they do not limit or impose mandates on private activities. Many
rules each year are fiscal in nature, such as those that establish
rules and conditions for federal spending programs.
Others are annual determinations, such as the number of birds
that can be hunted in certain areas, based on preexisting
Excluding these "non-regulatory" rules still leaves many
thousand agency actions each year that increase or decrease
regulatory burdens. Each has a real cost, but the size of their
impact varies widely. Perhaps as much as 90 percent of regulatory
costs comes from "major" or "economically significant"
regulations-regulations that have economic impacts of more
than $100 million. While costly, relatively few regulations
reach this threshold, making it feasible to examine them
During the first seven years of the Bush presidency, 98
such major rules were promulgated by federal agencies. Of those, 75
(more than 10 per year) increased regulatory burdens on Americans.
This is significantly less than the rate during the Clinton
Administration, which adopted major increases in regulation at a
rate of some 19 times per year from 1997 to early 2001.
Although the Bush Administration imposed fewer new burdens on
Americans, the total regulatory burden continued to increase
in absolute terms. Compared to the 74 rule changes that
increased regulatory costs, only 23 rule changes reduced burdens.
In other words, for every case in which regulators reduced a
burden, they increased burdens over three times.
Interestingly, independent agencies such as the Federal
Communications Commission (FCC) and Securities and Exchange
Commission (SEC), which are not under the President's direct
control and are not subject to White House regulatory review
procedures, have accounted for more than half of all
The reason for the higher percentage of deregulatory
actions at these independent agencies is unclear. One factor may be
that both the FCC and the SEC administer 1930s-era economic
regulations that have been undergoing significant change. The FCC's
deregulatory record was due largely to proceedings
liberalizing radio spectrum rules. However, regardless of the
deregulatory actions of the independent agencies, they are still a
major source of new regulation, accounting for about a quarter of
all rules that increased burdens.
Cost Estimates. The costs and number of
regulations are increasing substantially. Based on
regulatory impact analyses prepared by agencies, over $28
billion in new regulatory costs has been imposed on Americans since
the beginning of the Bush Administration.
Regulatory costs went down only in one year (2001) due to the
repeal of an ergonomics rule promulgated by the Department of
Labor under the Clinton Administration. After remaining relatively
low for the next couple of years, average new costs for 2004
through 2006 ranged between $4 billion and $6 billion.
In 2007, costs shot up to their highest level yet in the Bush
Administration. OIRA has not yet released figures for FY 2007, but
some $11.8 billion in new costs was imposed, based on
estimates from individual agencies. Most of this cost ($6.7
billion) comes from a single regulation: the fine particle
implementation rule from the Environmental Protection Agency
(EPA). Almost $1.4 billion comes from the Department of
Homeland Security's anti-terrorism standards for chemical
facilities. The Department of Transportation's rules on electronic
stability control systems for automobiles cost $985 million
per year, and new side-impact collision rules cost about $764
million per year.
While substantial, these numbers likely underestimate the
total cost of the new regulations. Costs for many rules, including
those by most independent agencies, are not quantified.
Moreover, the estimates are drawn from analyses produced by the
regulators themselves, who have an incentive to minimize the
Whatever the exact number, the cost of new restrictions dwarfs
the savings to Americans from actions reducing regulatory burdens.
In FY 2007, federal regulators completed eight major
proceedings that reduced burdens: five from the SEC, two from
the Department of Agriculture, and one from the EPA. Of
these, cost savings were quantified for three, totaling just under
$684 million, or about 1/17th of the new costs imposed.
In both number and cost, the trend is clear: Rather than
shrinking, the burden of regulation expanded during the Bush years.
That growth was relatively slow during the first several years but
has accelerated during the President's second term. Contrary to
much popular rhetoric, significant deregulation has been virtually
The Expected Regulatory Surge
Looking ahead, the growth of regulatory burdens is likely to
accelerate further. Historically, regulatory activity surges
at the end of a presidential Administration. In the months before
(and for several months after) President Bill Clinton left
office, a rush of "midnight regulations" were adopted, pushing the
total for 2000 to $13.1 billion-over one-third higher than for any
other year of his Administration.
Yet the pattern is not limited to Democrats. In 1992, the last
year of President George H. W. Bush's Administration, regulatory
costs hit $12.5 billion. Regulatory costs even surged in 1988, at
the end of the Reagan Administration.
These surges are not random. The most likely explanation is that
regulators have an institutional incentive to clear their desks
before turning over the office keys to new occupants. In the
process, the normal review procedure may be overwhelmed, with
more costly rules slipping through the screens.
There are already signs that such a regulatory surge is on the
way for 2008. Reams of new rules are in the pipeline for 2008,
ranging from Department of Agriculture rules on genetically
modified food to Food and Drug Administration rules on dietary
supplements to Americans with Disabilities Act rules for
The EPA looks to be particularly busy, with rules being adopted
or nearing completion on everything from ozone to electric
generator emissions. However, the most costly EPA agenda item could
be regulation of carbon dioxide and other greenhouse gases
from motor vehicles. In April 2007, the U.S. Supreme Court ordered
the EPA to determine whether or not such gases endanger the public
health and must be regulated under the Clean Air Act.
The EPA had argued (unsuccessfully) that ubiquitous substances such
as carbon dioxide should not be considered "pollutants" and that
the agency was therefore not directly required to regulate. If
it does regulate greenhouse gas emissions, the costs could be
The Federal Communications Commission is also considering new
regulation. Most notably, FCC Chairman Kevin Martin has proposed a
variety of new restrictions and mandates on the cable
television industry and rules on how network managers manage
traffic on their networks. The cost of such regulation is
unknown-the FCC does not produce cost-benefit analyses-but it would
likely be significant.
What Is to Be Done?
No single magic bullet will stop the growth of regulation, but
policymakers can take steps to increase scrutiny of new and
existing rules, both to ensure that each is necessary and to
minimize costs. Specifically, they should:
- Continue to strengthen the Office of Information
and Regulatory Affairs. OIRA has long played a key role in
ensuring that proposed new rules are well scrutinized before
adoption. During the Bush Administration, it has played a
particularly significant role, strengthening and systematizing
regulatory review procedures so that they are more consistent,
transparent, and effective. However, OIRA is still badly
outgunned in regulatory battles, with almost 5,000 regulatory
agency staffers per OIRA staffer. OIRA should be provided with
additional resources to regulate the regulators.
- Establish a Congressional Regulation Office.
While Congress receives detailed information from the Congressional
Budget Office on the state of the budget and on proposals that
would affect the budget, it has no similar source of information on
regulatory programs. A Congressional Regulation Office would
help to fill this gap. Such an office could review the regulatory
impact of legislative proposals and report on the cost and
effectiveness of rules adopted by agencies. In this way, it
would act as both a complement to and a check on OIRA.
- Establish a sunset date for all new federal
regulations. While every new regulation
promulgated by executive branch agencies undergoes a detailed
review, no similar process is in place for reviewing regulations
that are already on the books. Old rules tend to be left
in place even though they may no longer be necessary.
Policymakers should create a process under which the
regulatory closet is regularly cleaned by establishing a sunset
date on all new regulations, after which they would expire unless
they are explicitly renewed by regulators. Ideally, such a sunset
date should apply to all regulations, but given the vast number of
regulations in place, such a requirement would not be feasible. By
limiting review to new regulations-perhaps on the 10th anniversary
of a rule-agencies could adequately review the merits of and need
for each regulation.
- Require independent agencies to submit cost-benefit
analyses to OIRA. Independent agencies (e.g., the FCC
and SEC) produce a substantial share of the major new rules
that are finalized each year. The overall impact of these agencies
is even greater because they cover some of the economy's most
dynamic and vital sectors. Yet their rules are not reviewed by OIRA
before they are promulgated, and often their costs and
benefits are never formally analyzed. This problem could be
resolved by subjecting independent agency rules to the OIRA review
process. If that cannot be done, agencies should at least be
required to prepare cost-benefit analyses of all planned
significant rules and forward these analyses to OIRA for
Contrary to much popular rhetoric about massive regulatory
rollbacks, the regulatory burden on Americans has grown, not
shrunk, during President George W. Bush's tenure. This growth was
relatively slow during the first few years of the
Administration, but it has been accelerating. Consistent with
past trends, a surge in regulation may be in the cards for the
President's final year.
Policymakers should be on guard to prevent this surge in the
short run. In the longer run, they should adopt sensible reforms to
ensure that both new and old rules are thoroughly vetted to ease
the burden of this regulatory tax on Americans.
James L. Gattuso
is Senior Research Fellow in Regulatory Policy in the Thomas A. Roe
Institute for Economic Policy Studies at The Heritage Foundation.
Jack Khayoyan, an intern at The Heritage Foundation, assisted in
the research for this study.
Ben Lieberman, "The Power of Positive Drinking: Are Alcoholic
Beverage Health Claims Constitutionally Protected?" Food and
Drug Law Journal, Vol. 58, Issue 3 (2003).
James L. Gattuso, "Regulating the Regulators: OIRA's Comeback,"
Heritage Foundation Executive Memorandum No. 813, May 9,
2002, at www.heritage.org/Research/Regulation/EM813.cfm,
and "Who Will Regulate the Regulators? The Battle over Susan Dudley
and OIRA," November 9, 2006, Heritage Foundation WebMemo
No. 1250, at www.heritage.org/Research/
Curtis W. Copeland, "Changes to the OMB Regulatory Review Process
by Executive Order 13422," Congressional Research Service
Report for Congress, February 5, 2007, at www.fas.org/sgp/crs/misc/RL33862.pdf
(March 10, 2008).
For an earlier assessment of regulatory trends in the Bush years,
see James L. Gattuso, "Reining in the Regulators: How Does
President Bush Measure Up?" Heritage Foundation
Backgrounder No. 1801, September 28, 2004, at www.heritage.org/
The discussion and analysis in this paper focus primarily on
regulation as imposed by rules promulgated by agencies, as opposed
to regulation imposed by Congress through legislation. Regulation
by legislation, while certainly important, is largely outside the
scope of this paper.
Jerry Brito and Melinda Warren, "Growth in Regulation Slows: An
Analysis of the U.S. Budget for Fiscal Years 2007 and 2008," George
Mason University, Mercatus Center, and Washington University at St.
Louis, Weidenbaum Center on the Economy, Government, and Public
Policy, Regulator's Budget Report No. 39, June 2007, at
(March 10, 2008).
The Mercatus-Weidenbaum report does not provide agency-specific
details for 2001.
U.S. National Archives and Records Administration, Office of the
Federal Register, "Chart 7: Federal Register Pages Published,
1936-2008." This total excludes blank pages.
U.S. National Archives and Records Administration, Office of the
Federal Register, "Chart 12: Code of Federal Regulations-Total
Pages 1938 Through 1949, and Total Volumes and Pages 1950 through
U.S. National Archives and Records Administration, Office of the
Federal Register, "Chart 10: Federal Register Documents,
Such rules can burden the private sector. For instance, Medicare
rules are a major burden on doctors and hospitals. While these
rules pose substantial problems, they are outside the scope of this
Office of Management and Budget, Office of Information and
Regulatory Affairs, Progress in Regulatory Reform: 2004
Report to Congress on the Costs and Benefits of Federal
Regulations and Unfunded Mandates on State, Local, and Tribal
Entities, pp. 26-27, at www.whitehouse.gov/omb/inforeg/2004_cb_final.pdf
(March 10, 2008).
Based on major rules reported to Congress by the Government
Accountability Office (GAO) pursuant to the Congressional Review
Act of 1996. U.S. Government Accountability Office, Federal Rules
Database, at www.gao.gov/legal/congress.html (March 10,
2008). For the purposes of this analysis, only rules reported by
the GAO after March 2001 are attributed to the Bush Administration.
Rules before 1997, the first full year of GAO reports, are not
included. Fifteen of the rules attributed to the Clinton
Administration were "midnight regulations," finalized in early
Because of a quirk in the law, the GAO data do not include FCC
decisions implementing the Telecommunications Act of 1996.
Totals are net of savings from deregulation but not of claimed
benefits from regulatory actions. Calculations are by OIRA through
FY 2006. FY 2007 totals are based on regulatory impact analyses by
individual agencies for rules finalized in FY 2007. In its
estimate, OIRA adjusted the numbers to a standard
inflation-adjusted level and made other changes for consistency.
For FY 2007, such modifications were not made. Where agencies
provided a range of numbers, the midpoint was used unless another
figure was indicated. For 2007, the cost of the EPA's particulate
matter rule adopted in October 2006 was not included because this
was redundant with the EPA's implementation rule for particulate
matter adopted in April 2007.
Other rules finalized during FY 2007 and their estimated annual
costs include Food and Drug Administration rules on blood
transfusions ($10.3 million) and dietary supplements ($153
million); Department of Homeland Security rules on electronic
transmission of manifests ($123 million), hazardous materials
transport ($247.5 million), and documents for Western Hemisphere
travelers ($649 million); SEC rules on proxy materials ($24.8
million); Department of Agriculture rules on the use of stunning
devices ($171.2 million); Department of Energy rules on reliability
of bulk-power systems ($131.76 million); EPA rules on air pollution
from mobile sources ($359.4 million) and drinking water ($62.05
million); Treasury and Health and Human Services rules on the
"wellness market" ($11.5 million); and Department of Labor rules on
mine evacuations ($42.6 million).
Independent agencies are not required to prepare regulatory impact
analyses. For instance, the FCC almost never calculates the costs
of its rules, but the SEC routinely does so, although it is not
The cost savings from the rule changes were as follows: SEC rules
on termination of a foreign private issuer's registration ($200
million), management reports on internal controls (no estimate),
Internet availability of proxy materials ($144.85 million),
periodic reports (no estimate), and mutual fund redemption fees
($175.4 million); Department of Agriculture rules on bovine
importation ($37.1 million) and milk marketing orders (no clear
estimate); and EPA rules on oil spill prevention ($126.5
The totals in Chart 3 are costs of new regulations minus cost
savings from reductions of regulation. They are not net of
quantified benefits of regulations. While estimates of benefits are
critical to the consideration of a particular regulation, the
purpose of this paper is to examine the total burden of regulations
imposed. Just as the federal budget includes the full cost of each
spending program, not just the net cost of presumed benefits, these
figures are meant to reflect the full costs of regulation.
Massachusetts et al. v. Environmental Protection Agency et
al., No. 05-1120 (U.S. April 2, 2007).
This can be done without additional budget expenditures by shifting
a small portion of the approximately $45 billion that is spent on
regulatory agencies to OIRA.
Under Section 610 of the Regulatory Flexibility Act, agencies are
now required to review rules that have a "significant economic
effect on a substantial number of small entities" 10 years after
adoption to determine whether the rules should be changed. However,
this does not require agencies to make an affirmative determination
that the rule is necessary. See Small Business Administration,
Office of Advocacy, "Section 610 of the Regulatory Flexibility Act:
Best Practices for Federal Agencies," October 2007, at www.sba.gov/advo/r3/r3_section610.pdf
(March 10, 2008). If an agency does nothing, the rule continues.
The proposal above would reverse that presumption.
On several occasions, OIRA has solicited comment from the public on
rules that should be reformed. However, the recommendations
received are only suggestive. Although OIRA encouraged agencies to
consider the changes, it has little or no ability to initiate
action on any such reforms. In 2007, the Small Business
Administration launched a similar effort called the Small Business
Regulatory Review and Reform Initiative. This initiative solicited
ideas from small businesses regarding regulations that should be
modified and has garnered a substantial number of recommendations.
However, like OIRA, the Small Business Administration has no power
to force agency action.