Tangled Up in Washington's Red Tape

Mike Brownfield

July 27, 2011

For months, Washington has focused on solving its uncontrolled addiction to spending. But while Congress and the White House use one hand to reach into your back pocket to take and spend your hard-earned dollars, they’re using another hand to wreak a different kind of nefarious harm—the proliferation of regulations, rules, and red tape, all of which impose heavy costs on America.

In the just-released “Red Tape Rising: A 2011 Mid-Year Report,” The Heritage Foundation’s James Gattuso and Diane Katz explain the pervasiveness of government’s intrusive regulatory hand (that oftentimes goes go well beyond ensuring product safety) and how it controls nearly every facet of your daily life. Do you heat your home? Light your rooms? Buy and cook food? Watch TV? If the answer is “yes,” then you’ve fallen under federal regulation. And you’re paying for it, too. Gattuso and Katz explain how every product imaginable costs more because of regulations:

The costs of regulation are inevitably passed on to consumers in the form of higher prices and limited product choices. 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.

The annual cost of regulation—$1.75 trillion by one frequently cited estimate—represents twice the amount of individual income taxes collected last year. Overall, from the beginning of the Obama Administration to mid-fiscal year (FY) 2011, regulators have imposed $38 billion in new costs on the American people, more than any comparable period on record. Consider Washington’s red tape to be a hidden tax.

The mountain of regulations didn’t begin under the Obama Administration. Under the Administration of George W. Bush, for example, $60 billion in additional annual regulatory costs were imposed on Americans. But as Katz and Gattuso write, the rate at which burdens are growing has accelerated under the Obama Administration:

During its first 26 months—from taking office to mid-FY 2011—the Obama Administration has imposed 75 new major regulations with reported costs to the private sector exceeding $40 billion. During the same period, six major rulemaking proceedings reduced regulatory burdens by an estimated $1.5 billion, still leaving a net increase of more than $38 billion.

The actual cost of the new regulations is almost certainly higher due to under-estimation, agencies’ failures to analyze costs, and the fact that “non-major” rules aren’t even calculated. Amid the overwhelming weight of the evidence that government regulations are weighing down the American economy (consider how the economic recovery stalled after Obamacare was enacted), President Obama issued an executive order calling for an agency-by-agency review of existing regulations.

But Gattuso and Katz say it’s too early for Americans to rest easy. The changes the Obama Administration has identified, if implemented, could reduce regulatory costs by about $1 billion per year—just a fraction of the new costs imposed every year.

Meanwhile, American businesses and the American people continue to suffer under the regulatory burden, all while the government workforce keeps expanding and the number of regulations keep growing, with 2,785 rules in the pipeline.

There are things Congress can do to protect Americans and the economy against the regulatory tide: require congressional approval of new major rules promulgated by agencies, create a Congressional Office of Regulatory Analysis to review proposed and existing rules independently, and establish a sunset date for federal regulations.

Despite Obama’s pledge to eliminate burdensome regulation, his Administration has in the first half of FY 2011 created 15 new major regulations imposing $5.8 billion in additional annual costs and $6.5 billion in one-time implementation costs. All the while, the U.S. economy continues to drag forward with a 9.2 percent unemployment rate, adding only 18,000 new jobs in June. Perhaps Washington should stop growing the size of government and regulations and allow the U.S. economy to grow instead.

Quick Hits:

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