The Hidden Enemy of Rural America by Gregg Motley

Gregg Motley. President of the Regional Economic Development, Inc. Submitted photo.

The growth of government regulations has proceeded at a vigorous pace over the last several decades, and is accelerating.

From 1970 to 2017, the number of words in the Code of Federal Regulations nearly tripled from 35 million to over 103 million, according to a 2019 article published on Forbes.com, authored by Adam A. Millsap.

His study showed that a 10% increase in regulation increases consumer prices by 1%.

This excess hurts all of us, but the burden falls disproportionately on the poor and rural Americans.

Estimates are that the national poverty rate is 2.5% higher because of government regulations.

For example, a 2013 article on Meatonomics.com, written by David Simon, noted that a Big Mac cost a consumer $4.56 that year.

The price includes the costs that McDonald’s incurs to comply with laws enforced by the EPA, OSHA, EEOC, USDA, IRS, and FDA, just to name a few.

The author points out that the price tag to produce the sandwich costs the consumer even more in the form of additional taxes required to pay for government expenses such as animal cruelty enforcement, environmental clean-up of farms, meat and dairy subsidies, and health care costs borne by the government due to unhealthy eating.

The final tab for you and me? $12.00 per Big Mac, including the cost of the sandwich and the taxes you have paid for the privilege.

Another example, my bank employer is a Kansas public company with over $1 billion in assets managed. We are required to comply with the Sarbanes-Oxley Act passed in 2002 in response to the Enron scandal which requires the generation of a substantial number of internal reports. The law is extremely complex and the penalties for non-compliance are substantial; so much so, we are required to undergo an independent audit just to make sure we are in compliance with this one law. The internal cost to comply is hard to discern, but we do know that we spend $220,000 annually on the external audit alone.

The result of this additional cost of regulation requires a business to grow revenue or watch profits go away. In banking, the number of charters has gone down 73% since 1970, and the shrinkage has occurred disproportionately in rural counties. Why is Western Insurance gone? The primary culprit is the cost of increased regulation that required consolidation in the industry.

Some amount of regulation is necessary for public safety, but we have created a huge bureaucracy whose incentive is to advocate for more laws to enforce in order to perpetuate their own existence.

Politicians love the chance to make their mark on what they perceive as the public good.

Case in point is the proposed law to require banks to provide confidential financial information to the IRS on their customers on a regular basis. Can we trust the government to do the right thing with this information and protect its confidentiality?

For the sake of the poor and rural America, we have to hold our politicians accountable to defeating this hidden enemy of rural America by decreasing regulations.

Leave a Reply

Your email address will not be published. Required fields are marked *