Red Tape Rising www.Heritage.org
Next January the Environmental Protection Agency (EPA) is set to issue new regulations on emissions from boilers used in facilities like oil refineries, paper mills, and shopping malls. The EPA claims their new regulations will only cost the economy $9.5 billion by 2013. But the American Chemistry Council says the cost will surpass $20 billion and kill 800,000 jobs. Who is right? We don't know. But what we do know is that if you total up all of the new regulations already passed by the Obama administration last year, using their own cost estimates, fiscal 2010 saw the largest increase in regulatory burdens placed on the U.S. economy in the nation's recorded regulatory history.
According to a report released last month by the Small Business Administration, existing total regulatory costs already amount to about $1.75 trillion annually. This "hidden tax" on the economy is nearly twice as large as the sum of all individual income taxes collected last year. Adding to this burden, federal agencies promulgated 43 new rules during the fiscal year ending September 30, 2010. The total cost of these rules, each one individually calculated by the Obama administration itself, was $28 billion. Only two of these new rules reduced regulatory costs, and then by only $1.5 billion. On net, the Obama administration inflicted $26.5 billion in new regulatory costs on the economy last year. The biggest costs last year all came from the EPA including:
Fuel economy and emission standards for passenger cars, light-duty trucks, and medium-duty passenger vehicles. Annual cost: $10.8 billion.
Mandated quotas for renewable fuels. Annual cost: $7.8 billion.
Efficiency standards for residential water heaters, heating equipment, and pool heaters. Annual cost: $1.3 billion.
Limits on “effluent” discharges from construction sites imposed by the EPA. Annual cost: $810.8 million.
As high as this $26.5 billion total is, as the above boiler example shows, the actual costs of all these new regulations is almost certainly much higher. First, the cost of non-economically significant rules—rules deemed not likely to have an annual impact of $100 million or more—is not calculated. Second, no costs were given for 12 of the rules that were deemed economically significant. But most importantly, the costs that were given are likely minimized because the regulators are allowed to make up the cost of their own regulations. A 2005 Office of Management and Budget Report to Congress found that regulators underestimated the costs of their rules 34% of the time.
As bad as last year's rising tide of red tape was it does not hold a candle to the tsunami of regulation the Obama administration is planning to inflict on the U.S. economy during their final two years in office. The 2,319 page financial regulation bill requires 243 new formal rule-makings by 11 different federal agencies. The 2,700 page Obamacare bill contains more than 1,000 instances where Congress instructed HHS Secretary Kathleen Sebelius to regulate the health care industry. And the Federal Communications Commission is considering implementing, for the first time in the history of the internet, "net neutrality" regulations that will undermine investment incentives, thereby robbing the nation of much-needed broadband upgrades.
The left likes to peddle the myth that President George Bush deregulated much of the U.S. economy. But this is just plain false. By every objectively measurable metric, the size and scope of the regulatory state grew significantly under his tenure. But President Obama's regulatory regime is currently rising at more than twice the rate as President Bush's did. No wonder our nation's job creators can't help us escape near double digit unemployment.