Government Regulations & The Economy

Government Regulations & The Economy


Government regulation — whose purpose is to create social or economic benefits that presumably would not occur naturally in a pure market economy — has a profound effect on the American economy. According to the Institute for Research on the Economics of Taxation (IRET), the “[b]enefits of regulation may be real, as with the prevention of accident, injury, or disease, or the reduction of damage from pollution.” But those benefits “are not without costs.” For example, says IRET, “Regulation of drugs may prevent the introduction of products with harmful side effects, but it may also delay the release of lifesaving products. Inspection of food may prevent disease, and safety features on cars may prevent injury, but they also raise the price of food and transportation.”

According to the Competitive Enterprise Institute: “Federal environmental, safety and health, and economic regulations cost hundreds of billions—perhaps trillions—of dollars each year over and above the costs of official federal outlays…. Precise regulatory costs can never be fully known, because, unlike taxes, they are unbudgeted and often indirect.”

On the first day of his presidential administration, Donald Trump declared U.S. regulations “out of control” and “in need of 75% or more reduction.” A week later, he signed an executive order requiring the repeal of two existing rules for every new one implemented by government agencies.

“The fact is that cutting regulations is as critical as tax relief in turning the U.S. economy around,” says the Mises Institute. “The two are the holy grail to repatriate a large part of the $2.5 trillion in offshore corporate capital, stimulate domestic investment, and create jobs — all central to ‘making America great again.’ And it’s economic growth and broadening the tax base that can — in the longer run — finance rebuilding US infrastructure and the military without adding to deficits and national debt.”

“The Federal Register records regulations[that]  are imposed on business,” adds the Mises Institute. “Its annual pages generally grow with every administration, with a 19% year over year increase in Obama’s last year — setting a record-breaking 95,000-plus pages. Professor Alan Dershowitz notes that, ‘today the average professional commits three felonies a day without realizing it, thanks to the complex layers of regulation and legal requirements that have been built up over time.’ The Small Business Administration estimates the compliance costs of regulations may be upward of $2 trillion a year — an enormous hidden tax nearly six times greater than the aggregate $350 billion in corporate tax revenue collected annually by the IRS in recent years.”

Additional Resources:

Government Regulation and Economic Stagnation
By Peter St. Onge (The Mises Institute)
May 19, 2015

Our Huge Hidden Tax: Government Regulations
By Scott Powell (The Mises Institute)
February 19, 2017

Government Regulation: Another Hidden Tax
By D. Brady Nelson (The Mises Institute)
March 16, 2015

How Government Regulation Makes Us Poorer
By The Mises Institute
November 28, 2016

A Primer on Regulation
By The Mises Institute
May 1, 2004

The Cost of Government Regulation: Beyond the Initial Impact
By The Institute for Research on the Economics of Taxation
March 9, 2005

Monetary Policy and Financial Regulation
By The Cato Institute

Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State
By The Competitive Enterprise Institute

Red Tape Rising: A 2011 Mid-Year Report [on Government Regulation]
By James Gattuso and Diane Katz
July 25, 2011

The ‘Hidden Tax’: Report Estimates Regulation Costs Economy $1.75 Trillion
By Chris Moody
April 19, 2011

How Government Regulation Affects the Price of a New Home
By Paul Emrath
July 5, 2011


All I Want to Do Is Make Cookies
By Prager University
October 7, 2019

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