August 31, 2003
Ten Thousand Commandments?
That is the name of this report from the Cato Institute that looks at the state of the Federal ruglatory behemoth.
Some things to condsider:
- The Federal Register is at an all time high of 75,606 pages a 9 percent increase since 2001.
- 4,167 new rules were issued by various agencies in 2002. (Its those Republicans for smaller government.)
- Congress passed and the President signed into law 269 bills in 2002.
- There are 4,187 regulations in various stages of implementation in 2002.
- Of those 4,187 135 of them have a significant economic impact, i.e., they have at least a $100 million impact (or a minimum impact of $13.5 billion).
Yes it is clear that the Republican party is the party of smaller government.
The report also notes something significant; that issuing rules and regulations is a more subtle way for the government to fund programs. Instead of raising taxes and paying for these programs itself (thus making some of the costs of the program quite obvious) the government can simply issue regulations that require the private sector or lower levels of government to pay for the these prgorams.
For example, environmental regulations can come with a cost. There are benefits and costs associated with pollution. The benefits are the profits and welfare the goods and services generate. The costs are what we traditionally think of as costs such as labor and capital costs. In addition, there are environmental costs--i.e., the loss of welfare due to a degredation in the environment (smog, dirty water, etc.). Now if the marginal benefits "curve" is inelastic (not that responsive to changes in price) then a regulation that controls pollution via a quote will achieve a goal easier in the sense that it will not require as large a tax. The impact of such a policy will be hard to measure since you wont have the actual tax there to help you calculate the costs.
So this can indeed allow the government to pursue a policy for what appears to be lower costs. And in politics appearances are everything. Look at the gyrations candidates go through over health care and their claims at providing cheaper health care.
Speaking of health care, here are two examples that show quite nicely how regulations hide government mandated costs.
From Dean's Plan:
- Employers offering insurance must pay their share of premiums for two months after employees leave a job.
- Family plans of employers offering insurance must cover dependents up to age 24.
- New Net Business Costs Of Employer Mandates $2.9 billion
From Gephardt's Plan:
- All employers must offer insurance to all employees working 20 hours/week, and must pay at least 60% of the premiums.
- New Net Business Costs Of Employer Mandates $36 billion $90 billion in new mandated business expenses, partially offset by 60% tax credit. (Italics in original)
Dean's plan would obviously increase the costs per employee for employers. Same for Gephardt's plan. So both of these politicians want to use the governments regulatory authority to spend more money, but instead of raising taxes they figure they'll just order the private sector to do it for them. Nice, they don't have the added costs showing up in the governments costs and they get to take the credit for all the good that may result from these policies.
Needless to say the effect of these policies will be to drive down employment (cateris paribus). This will have additional costs in that people being unemployed will incur a loss in welfare (by welfare I mean well being not the government transfer program). This cost wont be measure at all. Some of the people unemployed by these types of programs might qualify for government unemployment compensation which would show up on the governments balance sheet. Another cost that wouldn't be captured is that some people might not get hired for various jobs. That is, suppose a company wanted to add 10 new workers to a production line, but now after these policies will only add 8 new positions. Do the two fewer positions get counted somewhere? Nope.
Miracuously enough those who support these kinds of policies don't get dinged for their bad effects, probably because these effects are hard to isolate and quantify. However, those who oppose these policies are villified.
This post of mine has another example of regulation basically spending the private sector's money via proclomation. California's Paid Family Medical Leave Act. This act basically puts in place a policy that allows employees to take paid time off (at the disability rate, which I believe is 60% of your pay) for tending to a family member who is sick or needs care. The sentiment is nice, but the simple accounting costs are around $1 billion while the benefits are about a 10th of that. The actual total costs in terms of lost labor, hiring temps, etc. are not known and probably can't be calculated easily, but will in all likelihood be much more than $1 billion. And this comes at a time when California is in a recession. Making labor more expensive via government fiat is probably not a good way to promote job growth.
Cato's estimates of some of these costs put the dollar figure at about $860 billion dollars for 2002 alone. The Federal budget for 2004 is $2.23 trillion, if we make the heroic assumption that the cost of regulations in 2004 are the same as in 2002 the total Federal budget balloons to over $3 trillion dollars. Or think of it this way, the $860 billion in regulatory costs exceeds the GDP of Mexico and Canada!
Posted by Steve at August 31, 2003 05:20 PM