The growth of government regulations has advanced 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. Consider the following:
- The annual cost of regulations is estimated at $2 trillion a year, which is higher than the Gross Domestic Product of all but nine countries in the world.
- In the last 22 years, federal agencies have published more than 88,000 final rules, of which 15,458 have been identified by federal agencies as having a negative impact on small business.
- In the last 60 years, the United States population increased by 98% while the federal regulatory code increased by 850%
- It is estimated that by 2025, the average additional cost of an automobile due to government regulations will be $7,200.
One specific example, my bank employer is a public company with over $1.5 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 voluminous number of internal reports. The law is extremely complex and the penalties for non-compliance are substantial; so much so, we choose 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 insurance 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. For a deep dive on this subject, visit the Reason TV channel on YouTube and search for “Great Moments in Unintended Consequences.” You will be shaking your head while you roll your eyes.
For the sake of the poor, small businesses, and rural America, we have to hold our politicians accountable to defeating this hidden enemy of rural communities by decreasing unnecessary and harmful regulations.
America, where freedom is just an illusion
For many years, I read the CFR as part of my job I worked in a heavily regulated industry). While the stats here are undoubtedly accurate, the cause-and-effect correlation that is trying to be made is pretty vaporous. The cost of living in Bourbon County is inverse to the population, economy, and competitive services offered. For a retail-based economy, the property taxes here are outrageous. The cost of housing is grossly inflated. Services offered seem to continue to dwindle requiring out-of-county vendors to be employed to accomplish tasks that are readily found just an hour north.
> The cost of housing is grossly inflated.
Is the cost of housing higher than somewhere else? Where do you feel the cost of housing is more reasonable?
The taxes alone in Bourbon County is ridiculous! Missouri and Arkansas are both MUCH cheaper! Property taxes are enough to make me start looking else where to live!
MA, you missed the point, then proved it in the last line. Why are there plentiful service providers “just an hour north?” They are able to create the economies of scale necessary to compete in a highly regulated business environment; rural service providers can’t compete. Housing is NOT overvalued here. A new house that cost $150 a square foot to build will appraise at $125 maximum. Government is the largest employer in KCMO. Who pays their salaries? You and I pay a large chunk, even though we do not know any federal workers here. The cost of federal government and its associated regulations is crushing rural America.
Years ago, there was a big push to make insurance policies “readable” using “plain language.” Policies were redone to government specifications and then the language had to be sorted out by court cases over the years. That in itself was an expensive process that someone paid for (that would be the customers, the policyholders). I like to ask people if they’ve read their insurance policies? The answer is invariably “no”. I don’t understand that because it’s “plain language” now. I guess the government just assumed everyone was reading their insurance policies.
We all know the federal government is to big and over reaching but our state government is also. In the last four years the state of Arkansas has shrunk its footprint by about 20% and that means less state employes also. Kansas should take note.