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Haven’t you always wanted to see just how much economic growth is lost to federal regulations? As of this week, you can, thanks to the Competitive Enterprise Institute (CEI) new draft report,“Tip of the Costberg,” which hammers the federal regulatory cost to the American economic system. The report, put together by CEI Vice President of Policy Wayne Crews, found that our economy is taking a $1.8 trillion hit through existing federal regulations plus those coming once the President’s health care law is fully implemented.

In the 92-page report, Crews absolutely tore apart the Office of Management and Budget (OMB) for saying the cost of regulations added since 2001 is only $88.6 billion per year. Crews did this for two major reasons: first, the OMB’s analysis was significantly lacking. Second, the OMB report was made to attack Small Business Administration (SBA), a federal agency that estimated the cost of regulations on the economy to be $1.7 trillion.

Let me repeat that: the OMB attacked an agency within its own administration for a devastating report on the cost of regulations to the American economy. In an e-mailed statement, Crews outlines how silly this infighting is:

The OMB takes pains to critique estimates of the cost of regulation, even calling the Administration’s own Small Business Administration’s estimates an “urban legend.”  There are several problems with this official dismissal of the reality of the regulatory state’s hidden costs:

First, the OMB annual reports clearly indicate that they cover only a portion of the entire scope of the regulatory state; Second, in a struggling economy like ours, all energy should be spent not on critiques of studies, but improving them; and third, as it turns out that OMB’s very own estimates of regulatory costs at the turn of the century–put in today’s dollars–are of a magnitude comparable to the heights it now critiques.

To provide some perspective, here are some critical numbers to consider:

  1. With an economy about $15.4 trillion in size, the CEI report means regulations have a financial cost equivalent to 11.69% of the economy.*
  2. If half of these regulations were not in place, the average income for each of the 22,606,150 unemployed Americans (including the unemployed, marginally attached workers, and people employed part-time for economic reasons) would be $39,812. If using the official number of unemployed Americans – 12,463,400 people – the average income would be $72,211.*
  3. CEI’s analysis shows the economic costs of regulations are over 20 times that which are claimed by OMB.
  4. The regulatory burden of the federal government is not new in this Administration. In his statement, Crews noted that many of these regulatory costs were in place before 2009:

Over-regulation is a bi-partisan endeavor. This regulatory burden should not be laid at the feet of the “Democrats” and “Obama.” For example, the turn of the century costs that in their own way rival today’s did not include the regulatory fallout from Republican President George Bush’s prescription drug benefit, or his homeland security regulations that include the despised TSA, or the Sarbanes-Oxley financial regulation law he signed that still burdens small business. And naturally they didn’t include President Obama’s health care mandates and the Dodd-Frank financial law he signed. The upshot? We are forced to infer that regulatory costs are overly neglected. The “tip of the costberg” may turn out to be not regulation, but spending, with a far more massive regulatory burden hidden out of view. Time will tell.

Not all regulations are bad, in and of themselves; after all, abuse of employees and destruction of the environment, for example, are both immoral and economically unsound. However, the CEI report shows that the American regulatory system is out of control. Unfortunately, this appears to be only getting worse, not better, and is certainly a major factor in how our economy is so slow to recover from the recession.

For those Patriots interested in the report but aren’t interested in getting a headache by reading the full 92 pages, The Washington Examiner has kindly provided a summary  of the main points and the costs by regulatory area.

Note*: The size of the American economy and estimates for the number of unemployed Americans come from USDebtClock.org,  which cites data from the Bureau of Labor & Statistics.