Controlling regulatory costs

The USA federal government is expected to post a budget surplus in 2000, putting an end to nearly three decades of deficit spending. If maintaining the surplus is a priority, policymakers must control regulatory costs, says Clyde Wayne Crews, Jnr.

The federal government can fund its programmes in three ways: taxing, borrowing money or regulating. Through regulation, the government can avoid using tax dollars to fund its programmes. However, complying with excessive regulations requires spending and borrowing, and like ordinary taxes, the "hidden tax" of regulation can affect the consumer’s pocket by increasing the cost of groceries, utilities, health services and housing.

Approximately 20 percent ie $7,410 (R52,000)) of the average American family's after-tax budget of $41,846 (R290,000) is consumed by regulatory costs.

In 1999, regulatory costs in the US were $758 billion (R5,300 billion) - exceeding the output of Canada or Mexico.

The 1999 Federal Register, the daily depository of all proposed and final rules and regulations, contained 71,161 pages - a 42,9 percent increase from 1990.

Of the 4,538 regulations at various stages of implementation in 1999, 137 are "economically significant" rules that will have at least $100 million in economic impact - imposing projected future costs of at least $13.7 billion yearly.

Source: Clyde Wayne Crews, Jr., "Ten Thousand Commandments," April 2000, Competitive Enterprise Institute, 1001 Connecticut Avenue, N.W., Suite 1250, Washington, D.C. 20036, (202) 331-1010.

For text http://www.cei.org/pdfs/tenthou2000.pdf

For more on Compliance Costs of Regulations http://www.ncpa.org/pd/regulat/reg-3.html

RSA Note:
South Africa suffers from a similar over-regulation syndrome. The Free Market Foundation and the Friedrich-Naumann-Stiftung have published a series of booklets called Laws Affecting Small Business which document how over-regulation detrimentally affects small business. However, individuals and large businesses also have substantial costs imposed on them by unnecessary regulation. Parliamentarians and civil servants appear to believe that if they are not churning out legislation and regulations they are not doing their jobs. The truth is that if the South African government and Parliament were to spend five years doing nothing else but repeal laws and regulations - to the point where the legal system is manageable, knowable and optimal for growth-creation, wealth-creation and unemployment-reduction - they would go down in history as the greatest ever.

Eustace Davie, Director, FMF