Ten Thousand Commandments An Annual Snapshot of the Federal Regulatory State by Clyde Wayne Crews Jr. Competitive Enterprise Institute Ten Thousand Commandments An Annual Snapshot of the Federal Regulatory State 2009 Edition by Clyde Wayne Crews Jr. Executive Summary President Barack Obama’s federal budget The “Hidden Tax” of Regulation for fiscal year (FY) 2010 proposed $3.552 trillion in discretionary, entitlement, and interest spending.1 The previous fiscal year, Those costs fully convey the federal govern- President George W. Bush had proposed the ment’s on-budget scope, and they are so- first-ever $3-trillion U.S. budget. President bering enough. Yet the government’s reach The government’s Bush was also the first to propose a $2-tril- extends even beyond the taxes Washington lion federal budget—in 2002, a scant seven collects and the deficit spending and bor- reach extends years ago.2 rowing now surging. Federal environmental, even beyond the safety and health, and economic regulations Now the administration projects actual cost hundreds of billions of dollars every year taxes Washington FY 2009 spending of almost $4 trillion over and above the costs of the official fed- ($3.938 trillion3) instead of Bush’s $3 tril- eral outlays that dominate the policy agenda collects and the lion, thanks to the late-2008 bailout and now. “stimulus” frenzy. The result: a projected deficit spending FY 2009 deficit of a previously unthinkable Firms generally pass along the costs of some $1.752 trillion.4 The Congressional Budget taxes to consumers. Likewise, some regula- and borrowing Office (CBO) paints an even more dismal tory compliance costs that businesses shoul- now surging. picture. der find their way into consumer prices. Precise regulatory costs can never be fully To be sure, many other countries’ govern- known; unlike taxes, they are unbudgeted ments consume more of their national out- and often indirect. But scattered government put than the U.S. government does;5 but in and private data exist on scores of regulations absolute terms, the U.S. government is the and the agencies that issue them, as well as largest government on Earth, whether one on regulatory costs and benefits. Some of looks at revenues or expenditures.6 that information can be compiled to make Crews: Ten Thousand Commandments 2009 1 the regulatory state somewhat more compre- Virginia jointly estimate that agencies hensible. That is one purpose of the annual spent $49.1 billion to administer and Ten Thousand Commandments report, high- police the 2008 regulatory enterprise. lights of which appear next: Adding the $1.172 trillion in off-budget compliance costs brings the total regula- • A very rough extrapolation from an tory burden to $1.221 trillion. estimate of the federal regulatory enter- • The 2008 Federal Register is close to prise by economist Mark Crain esti- breaking the 80,000-page barrier. It mates that regulatory compliance costs contained 79,435 pages, up 10 percent hit $1.172 trillion in 2008. from 72,090 pages in 2007—an all-time • Given 2008’s government spending of record high. $2.98 trillion, the regulatory “hidden • Federal Register pages devoted specifically tax” stood at 39 percent of the level of to final rules jumped nearly 16 percent, federal spending itself. (Because of the from 22,771 to a record 26,320. months-old spending surge, this propor- • In 2008, agencies issued 3,830 final tion will surely be lower next year.) rules, a 6.5-percent increase from 3,595 • Trillion-dollar deficits and regulatory rules in 2007. costs in the trillions are both unset- • The annual outflow of roughly 4,000 tling new developments for America. final rules has meant that well over Although FY 2008 regulatory costs 40,000 final rules were issued during the are more than double that year’s $459 past decade. billion budget deficit, the more recent • Although regulatory agencies issued deficit spending surge will catapult the 3,830 final rules in 2008, Congress deficit above the costs of regulation for passed and the President signed into law the near future. a comparatively low 285 bills. Consider- • CBO now projects 2009 federal spend- able lawmaking power is delegated to ing to hit $4.004 trillion and the deficit unelected bureaucrats at agencies. to soar to $1.845 trillion. The game has • According to the 2008 Unified Agenda, changed; although these spending levels which lists federal regulatory actions at eclipse federal regulatory costs now, un- various stages of implementation, 61 checked government spending translates, federal departments, agencies, and com- in later years, into greater regulation as missions have 4,004 regulations in play well. at various stages of implementation. • Regulatory costs are equivalent to 65 • Of the 4,004 regulations now in the percent of 2006 corporate pretax profits pipeline, 180 are “economically signifi- of $1.8 trillion. cant” rules packing at least $100 million • Regulatory costs rival estimated 2008 in economic impact. Assuming these individual income taxes of $1.2 trillion. rulemakings are primarily regulatory • Regulatory costs dwarf corporate income rather than deregulatory, that number taxes of $345 billion. implies roughly $18 billion yearly in • Regulatory costs of $1.172 trillion absorb future off-budget regulatory effects. 8 percent of the U.S. gross domestic • “Economically significant” rules in- product (GDP), estimated at $14.3 tril- creased by 13 percent between 2007 and lion in 2008. 2008 (following a 14-percent increase • Combining regulatory costs with fed- the year before). As noted, high federal eral FY 2008 outlays of $2.978 trillion budgetary spending now likely implies implies that the federal government’s higher future regulatory costs as well. share of the economy now reaches • The five most active rule-producing 29 percent. agencies—the departments of the Trea- • The Weidenbaum Center at Washington sury, Agriculture, Commerce, and the University in St. Louis and the Mercatus Interior, along with the Environmental Center at George Mason University in Protection Agency—account for 1,837 2 Crews: Ten Thousand Commandments 2009 rules, or 46 percent of all rules in the public view, regulating will become increas- Unified Agenda pipeline. ingly attractive compared with increasingly • Of the 4,004 regulations now in the unpopular taxing and spending. works, 753 affect small business. Liberate to Stimulate Disclosure and Accountability The short-lived string of budgetary surpluses Like federal spending, each agency’s flow of enjoyed from 1998 to 2001 (the first since regulations and their costs should be tracked 1969) seems like ancient history—even in- and monitored each year. Cost-benefit analy- conceivable—in today’s spending culture.7 In- sis of rules is the usual approach to policing The short-lived deed, CBO projects no surpluses whatsoever excess regulation. A problem with cost- over the coming decade.8 However, if regain- benefit analysis, however, is that it largely string of budgetary ing and maintaining an honest surplus ever amounts to agency self-policing; agencies again become political priorities, policy mak- that perform “audits” of their own rules surpluses enjoyed ers must control regulatory costs as well. The would rarely admit that a rule’s benefits do dramatic fact of regulations and deficits now not justify the costs involved. At the least, from 1998 to each costing over $1 trillion a year is an unset- some third-party review is needed. 2001 seems tling new development for America. The defi- cit is already widely—and rightly—criticized Going further, Congress should answer for like ancient by the media, citizens, and policy makers, but the compliance costs (and benefits) of federal reducing the scope of the regulatory state and regulations. Requiring expedited votes on eco- history—even fostering a “deregulatory stimulus” should oc- nomically significant or controversial agency cupy policy makers as well. When it comes rules before they become binding on the inconceivable—in to stimulating a limping economy, reducing population would reestablish congressional both deficits and regulations is critical. accountability, helping to fulfill a principle of today’s spending “no regulation without representation.” Indeed, without better regulatory oversight culture. and monitoring—that is, without an effort Disclosing regulatory costs remains impor- to “liberate to stimulate”—the urgency of tant even if Congress approves all rules. deficit reduction invites lawmakers to opt for Openness about regulatory facts and figures off-budget regulations on the private sector is critical, just as disclosure of program costs rather than new deficit spending. Taxation is critical in the federal budget. Simple fed- and regulation can substitute for each other; eral regulatory report cards, similar to the a new government program (job training, presentation in Ten Thousand Command- for example) would mean either increasing ments, could be officially issued each year to government spending or imposing new rules distill information to the public and policy and regulations requiring such training. If makers about the scope of the regulatory regulatory costs remain largely hidden from state. Crews: Ten Thousand Commandments 2009 3 Overview Toward Ending “Regulation without Representation” If regulatory The federal government funds new pro- expenses for new initiatives, the federal gov- grams either by raising taxes or by borrow- ernment can require the private sector (and compliance costs ing money—with a promise to repay, with state and local governments) to pay for fed- interest, from future tax collections. How- eral initiatives through compliance costs. prove burdensome, ever controversial government spending programs are, taxpayers can examine costs Because disclosure of and accountability for Congress in the federal budget. Congress’s spending regulatory costs are both spotty, policymak- accountability, though not perfect, is a nec- ers can afford to be cavalier about impos- can escape essary condition for government’s account- ing regulatory costs relative to undertaking ability to voters.