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.