How big is big? How about keeping the national GDP down to about one-fourth of where it could be?
Research by Appalachian State’s John Dawson and N.C. State’s John Seater estimated the cost of expanding federal regulations over the past 50 years and concluded (emphasis added):
Federal regulations added over the past fifty years have reduced real output growth by about two percentage points on average over the period 1949-2005. That reduction in the growth rate has led to an accumulated reduction in GDP of about $38.8 trillion as of the end of 2011.
That is, GDP at the end of 2011 would have been $53.9 trillion instead of $15.1 trillion if regulation had remained at its 1949 level.
Look at that again: The U.S. economy has red-taped itself out of nearly $40 trillion in GDP and left itself with a mere $15 trillion.
That finding highlights a key reason why I argue for regulatory reform. As I put it in my most recent Spotlight report:
- Overregulation is a well-recognized problem by members of both political parties. Regulation imposes significant costs on the economy through deadweight loss — i.e., labor and capital employed in complying with government edicts and red tape, as opposed to being used for productive purposes.
- Unlike cutting taxes, cutting regulations doesn’t require having government make do with less revenue in Year One.
- Regulations are taxes on time, which for industry translate into real monetary costs. Reducing regulation allows more time to be spent instead on productive activities, encouraging more entrepreneurship, more job opportunities, and more economic growth — which in turn means government collecting more revenue in a more vibrant economy.
P.S. James Pethokoukis helpfully points out that “the study does not attempt to quantify the costs of the Affordable Care Act or Dodd-Frank financial regulation.” And just wait till we get that tidal-wave-or-train-wreck onslaught of EPA regulations: over 4,100 threatening to consign another half-trillion dollars to deadweight hell.
