Report finds regulation compliance costs businesses $1.86 trillion

Over the past several years, think-tanks and market-related organizations have released reports that have given the United States low grades when it comes to red tape, bureaucracy and the cost of complying with regulations. Following each session of Congress, Republicans and Democrats usually add more regulations for businesses – small, medium and large – to follow.

How much does it cost? It’s more than the gross domestic product of some Western countries, according to a new report by the Competitive Enterprise Institute (CEI), which has pegged the number at close to $2 trillion. This isn’t surprising to some considering that the 2013 Federal Register maintained 79,311 pages, the fourth-highest in history.

Clyde Wayne Crews, vice president for policy at CEI, assessed compliance costs of federal regulations and reported that compliance with regulations cost businesses $1.86 trillion last year, more than the GDP of Canada, Australia, Spain, Mexico and South Korea.

A yellow folder with the label RegulationsAlthough federal, state and local taxes can hurt individual Americans and households, Crews says that regulations are the hidden costs of doing business in the U.S. and those burdensome regulations cost the average household nearly $15,000 per year.

“Every year, there are thousands of regulations compared to only a handful of new laws, which has created a situation in which unelected agencies and departments are doing most of the lawmaking. This is evident from looking at the sheer growth in the number of pages of the federal register, particularly during this administration,” said Crews in a statement.

Business experts present the case that regulations are not only concealed taxes but they can also increase costs and hurt overall productivity and economic growth. With both GOP and Democratic lawmakers likely not making any pushes to diminish the regulatory burden, it might worsen over time.

This isn’t the first study to highlight the consequences of intense regulations.

In March, a Heritage Foundation report found that the Environmental Protection Agency’s (EPA) new global warming efforts will cost the U.S. economy $2.23 trillion over the next two decades, while also lowering family incomes, eliminating 600,000 jobs and boosting energy prices.

Last summer, John Dawson and John Seater, economists at Appalachian State University and North Carolina State University respectively, analyzed the effects of regulations on the economy between the years 1949 and 2005. The report revealed that federal regulations hurt the aggregate growth rate by an average of two percent annually. In fact, if regulations stayed at their 1949 levels then households would have been nearly $130,000 wealthier.

“Considering that economic growth is an exponential process, that seemingly small 2 percent reduction annually has an enormous impact over the course of 57 years,” Patrick McLaughlin, a senior research fellow at George Mason University’s Mercatus Center, told Newsmax. “The authors highlight the cost to the economy when businesses are forced to use valuable resources and time for compliance rather than focusing on innovation, development, and research.”

Current regulations are even hurting future economic growth. Data indicates that entrepreneurship continues to decline, but research has shown that business-oriented individuals are disinclined to enter the market because of the complex, uncertainty and costly regulations in place today, and what might be in place tomorrow.

Free market scholars say that well-connected corporations don’t necessarily mind intense regulations because they can afford it and it hurts their smaller competitors as it could become too expensive for a small- or medium-sized business to do business.