Regulatory growth since 1980 has contributed to at least $4 trillion in less U.S. economic output, according to research by the Mercatus Center.
To let that sink in, this amount is equal to Germany’s economy, the size of the federal budget, and the combined economies of California and Texas. But, more importantly, it equals lost prosperity of roughly $13,000 for every man, woman, and child in America.
While some regulations may serve a purpose regarding health and safety, they are often just another example of government overreach. Instead of giving bureaucrats more control over our lives, many regulations and associated bureaucracy should be eliminated.
Government interference not only poses a significant threat to our civil liberties, but also our economic prosperity. President Reagan said, “The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it.”
Unfortunately, Americans have long seen their government infringe upon their civil liberties and economic prosperity.
For example, the Bush administration added $68 billion in additional regulatory burden while the Obama administration added almost twice that at $120 billion, according to the Heritage Foundation. These regulatory costs are significant because they’re a hidden tax on each of us.
Fortunately, the Trump administration has so far reined in part of the excessive growth of the regulatory state. In fact, it’s put to rest 22 regulations per new rule issued in some fashion. This is a huge step towards reducing the regulatory stranglehold on Americans.
For example, the figure below shows that the Trump administration approved just 156 regulations in 2017, which was about one-third of those approved in the first year of the Bush or Obama administration.
The regulatory relief is also depicted in the figure below that shows the number of actions taken by the Trump administration in 2017 were the lowest since at least 1996.
Many of the regulatory costs fall hardest on small business owners, who are generally considered the entrepreneurial foundation of the American economy.
Just the largest federal regulations cost small business owners at least $40 billion per year, putting their businesses at risk because they often operate at slim profit margins. Moreover, regulatory costs across the nation crowd out an astounding $83,000, on average, of a small business owner’s budget in the first year, contributing to a large failure of startups. It’s no surprise then that since 1980 the U.S. population increased by 40 percent while startups declined by 11 percent.
Texas is known for its model of relatively less government spending, no personal income tax, less tax burden, and less labor market regulation, according to the Fraser Institute. But the Lone Star State is burdened by escalating regulatory costs, particularly small business owners who employ almost half of the private sector workforce. For example, a recent CNBC ranking ranked Texas as the best place to do business but placed Texas 18th for the cost of doing business and 21st for business friendliness—not where we expect Texas to rank.
Texas also has some of the most burdensome administrative codes with 226,898 restrictions and 14.9 million words. Restrictions include phrases such as “shall,” “must,” “may not,” “prohibited,” and “required,” potentially indicating legal constraints and obligations. While these may be questionable indictors, they highlight the real regulatory issues facing what’s thought to be a business-friendly Texas and likely contribute to a dwindling rate of startups.
Collectively, these data indicate Texans and all Americans could have a much higher standard of living of at least $4 trillion with a reduction in regulations and the bureaucratic deadweight loss that goes with it. The Trump administration’s actions to reduce the regulatory nightmare has been pro-growth, helping business confidence reach record levels and economic growth rise to rates not seen in years.
For Texans and all Americans to flourish, economic and civil liberties must be well-protected, so Congress and the Texas Legislature should act to reduce and eliminate frivolous regulations. Freedom and prosperity go hand in hand, so eliminating burdensome regulations would help achieve both.