Wrapped in red tape

Whatever deal eventually is struck between the White House and Congress on raising the debt ceiling, our “hidden” taxes will continue to multiply. These are regulatory costs that inflate the prices of almost every product and service, and they’re growing at an unparalleled pace — with little relief in sight.


During President Obama’s first 26 months in office, in fact, the annual cost of new major regulations ballooned by more than $38 billion. This constitutes a major drag on an anemic economy. No other president has burdened individuals and businesses with a higher number and larger cost of major regulations in a comparable time period.

President Bush was in his third year before new regulatory costs hit $4 billion. President Obama achieved the same in a mere 12 months.

The regulations imposed include fuel economy and emission standards for cars and trucks (annual cost: $10.8 billion); energy conservation standards for light bulbs ($700 million); constraints on “short sales” of securities ($1.2 billion); and a slew of other costly regulations related to the vast Dodd-Frank financial-regulation law and the government takeover of health care.

This torrent of red tape continues a multi-year trend of heavier burdens placed on the U.S. economy and the American people. This trend did not begin with the presidency of Barack Obama; the Bush administration generated more than $60 billion in additional annual regulatory costs.

However, the rate at which burdens are growing has accelerated under Obama.

Washington doesn’t track the total burdens imposed by its expansive rulemaking, but we at The Heritage Foundation do catalog the number and costs of new major regulations (i.e., those with an expected economic impact of at least $100 million per year). As documented in our latest report, the Obama administration unleashed 15 new major regulations in the first six months of the 2011 fiscal year, with annual costs exceeding $5.8 billion and one-time implementation costs approaching $6.5 billion. No major rulemaking actions were taken to reduce regulatory burdens during this period. Overall, from January 2009 to mid-FY 2011, the administration has imposed 75 new major regulations costing more than $38 billion annually.

The mounting regulatory costs will not end any time soon. The regulatory pipeline is chock full of proposed rules. One government report (the spring 2011 Unified Agenda) lists 2,785 pending rules. Of those, 144 were classified as “economically significant,” thereby representing at least $14 billion in new burdens annually. In the past decade, the number of major rules in the Agenda has increased a whopping 102 percent.

Many people may think that regulatory costs are a business problem.

Indeed they are, but the costs are inevitably passed on to consumers in the form of higher prices. Basic items, such as toilets, showerheads, light bulbs, mattresses, washing machines, dryers, cars, ovens, refrigerators, television sets and bicycles, all cost significantly more because of government decrees on energy use, product labeling, and performance standards that go well beyond safety—as well as hundreds of millions of hours of testing and paperwork to document compliance.

In January, responding to criticism that the regulatory burden had grown too onerous, President Obama issued an executive order calling for a review of existing regulations. But it is too soon for Americans to breathe a collective sigh of regulatory relief. The promised reductions are only a fraction of the new burdens being constantly created. And they’re a stark contrast to the massive regulatory ramp-up now taking place as regulators implement health-care legislation, Dodd-Frank and a slew of regulations related to the Environmental Protection Agency’s global-warming crusade. Moreover, many of the reforms identified are the low-hanging fruit of regulatory excesses. They should have been plucked long ago.

To protect Americans and the economy against runaway regulators, additional oversight is necessary. Specifically, Congress should take several steps to increase scrutiny of new and existing regulations to ensure that each is necessary, and that costs are minimized. Congress should create a Congressional Office of Regulatory Analysis to review proposed and existing rules independently; require congressional approval of new major rules promulgated by agencies; and establish a sunset date for federal regulations.

Without such decisive steps, the red tape will continue to engulf us — and our economy will languish further.

• Katz is a research fellow in regulatory policy at The Heritage Foundation.


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