Federal Fiscal Follies – So, Just What Do Federal Regulations Cost the US?

| September 20, 2012

Ever wondered just how much Federal regulations cost the US economy?  Well, we now have a couple of reasonable estimates of that cost under “Obamacare”.

It ain’t pretty.

The libertarian-leaning Competitive Enterprise Institute estimates the cost will be approximately $1.8 trillion annually when “Obamacare” is fully implemented in 2014.   That’s in relatively good agreement with a similar estimate from the Small Business Administration of $1.7 trillion annually.

For comparison, the current US GDP is approximately $15 trillion.  It’s currently growing at a rate of less than 2% annually.

Yes, your mental math is correct.  That means the cost of complying with governmental regulations in 2014 will consume well over 10% of the value of all goods and services produced in the USA.

Some amount of governmental regulation is necessary.  But the cost of compliance with necessary regulations shouldn’t consume anywhere near 10% of the total output of the domestic economy.

No wonder the US economy is in trouble.  We’re slowly strangling ourselves with red tape.

 

Author note:  the title of this article was edited to make it apparent that this article was the first in a series.  No other changes were made to the article other than adding this note.

Category: Economy

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Joe

Yeah, we saw what happens when there are no regulations, or the regulators are asleep at the wheel: the financial crisis for one. Regulatory overhead is absolutely necessary because many people are dishonest at some level. Not having the regulations, and enforcing them, is a lot more expensive than the money you save not having them. Or was that regulation thing just a petext for you to rail against “Obamacare”?

Old Tanker

These estimates are always low.

Joe, regulators were trying to do something and your pall Bawney Fwank said “nothing to see here folks, everything is fine”

Jonn Lilyea

Joe, please explain to me which regulations were not effect then that are in effect now, and which regulators were asleep at the wheel, to use your metaphor. It’s funny, but, a large portion of my job has to do with banking regulations and I haven’t seen this administration implement anything new that would significantly change anything in the past several years. So instead of just exhaling here, let’s hear some substance for a change. Or did you type that out just to make yourself feel better about your upcoming vote in November?

UpNorth

Hey everyone, it’s the rock-climber. Maybe you’d care to peruse the article over at Forbes, Joey? It addresses some of the “benefits” of Obamacare. http://www.forbes.com/sites/aroy/2011/08/09/medicare-actuary-obamacare-will-triple-the-growth-rate-of-net-insurance-costs/
We saw what happens when idiots decide that people that have no way of making payments on the house they want deserve to have that house, just because.

Veritas Omnia Vincit

Joe, I think the point is that health care is already 2.6 trillion a year which represent a tenfold increase over 30 years, if adding in 2 years what took 15 previously I can’t see a positive outcome for this program. I don’t buy for a moment the “potential” savings in the CBO report, the accounting is a little sketchy at best.

Nik

I suspect that cost estimate is a bit low. We’re talking about an industry that’s roughly 1/7th of our economy. Overhauling and expanding it won’t be cheap either.

As far as the CBO goes, just citing what they say the results will be is bullshit. The CBO takes the inputs given them by the questioner and computes the answer.

I could ask them “Hey, CBO…what would be the net effect if 30% of Americans captured a leprechaun and forced him to give up the location of his pot-o-gold…would that expand the net wealth of the country?” Their answer would indicate in the positive.

Knowing what their answer is without knowing all of the inputs to the question is worse than useless. It’s potentially misleading.

Nik

@7

It’s a small step on a short road. Destination? Norwegian style taxation. 70% of income.

Anonymous

@Joe I would argue that the crisis was caused by over-regulation and the revolving door status between regulators and market makers. Executives played big and against the odds because they expected precisely the kind of bailout they got if they failed. Capitalism is about profit AND loss. Subsidizing failure promotes bad business practices. Letting the market correct (i.e. these companies go out of business, new businesses take their place) is the only appropriate way to fix this kind of problem.

OWB

If you want to observe the cost of regulation, you need look no further than the creep of no smoking in public places.

Take a restaurant or bar, for instance. First it was smoking and no smoking sections of the seating space. Then walls had to be built between the two. Then smoke eaters. Then no smoking at all in the building. Each of these stages cost the business, therefore the customers. All the while, children were being taught to accost people they saw smoking.

What exactly did all this accomplish besides costing a bunch of money and inconveniece?

Well, it gave a bunch of regulators something to do for a couple of decades instead of simply taking the no cost approach of making everywhere off limits for smokers. Or an even more sensible approach – let the owner decide then clearly mark the entrance. Either way would have been no expense to the customers or the taxpayers.

That is just one example. Multiply that through every industry. It’s all about control. That loss of freedom cannot be quantified, but much of the other costs can be.

Miss Ladybug

My job exists because of regulation, US & international. The department I work in is growing and my employer is having to spend a lot of money to comply with the new regulations included in ObamaCare. Since my employer is in the medical device industry, we are affected even more than a non-healthcare business…

Insipid

Actually I think it is going to be twenty trillion annually when it is fully implimented! No, wait, it’s really going to be 125 trillion billion zillion when it is fully implemented! And mountains will fall and the earth will crumble and the sun will explode and we will all disipate in a fiery death as soon as this is fully implimented!

Really Hondo, do you believe ANYTHING as long as it is negative about the administration? This is a Koch brothers funded organization whose entire purpose is to fight against and lie about ALL regulation. You’ve already made a fool of yourself once when you argued with me about the legality of healthcare. The ENTIRE cost of health care in the United States is about 2 trillion dollars. You honestly believe that regulation are going to double the cost of health care? Do you think that the regulation includes wiping patients asses with hundred dollar bills? Because unless if that’s part of the regulations there is NO FUCKING WAY IN HELL that these regulations can cost that and anyone who believes a study that says that is just fucking stupid.

There are some things that are so stupid that believing it makes you look stupid. And this is true of the right or the left. If i stated that the institute of pulling facts out of my ass says that Obamacare will cut health costs by 90% without cutting treatments, you would be very wise to say i’m an idiot for believing it. We can have an open debate on the efficacy of Obamacare. In fact I welcome that debate. But if you’re just going to believe ANY study, no matter how impractical the numbers than i submit that you’ve turned off the rational part of your brain.

Mr. Blue

Koch Brothers Two Minute Hate GO!

Insipid

I would settle for 2 minutes of reality. The two major regulations that I am aware of both save money and improve service 1. that all providers impliment electronic records by 2015 and 2. That they improve to a more efficient and detailed coding system.

Pretty much the same plan exists in Mass. and there’s been nothing like what this article is talking about. I don’t care if you’re Conservative or Democratic those are fantasy numbers. I’m not even being partisan here. If a liberal organization claimed that it would save 1.8 trillion PER YEAR and that there was 20 times the savings as predicted, i would take that with a whole truck load of salt.

NHSparky

I would settle for 2 minutes of reality

Then take your meds and come back when they kick in. We’ll all be the better for it.

UpNorth

In fact, sippy, why don’t you OD on your meds, you will be better for it.

Insipid

Let’s put asside the rancor for just a moment. Let’s be honest, does 1.8 trillion PER YEAR and 20 times the cost sound like real numbers to you?

NHSparky

Do you have anything to counter those numbers, sippy?

Thought not.

Twist

“Really Hondo, do you believe ANYTHING as long as it is negative about the administration?”

Really Insipid, do you believe ANYTHING as long as it is positive about the administration?

OWB

In answer to the question in the title of this post – Way too much! Of course, any cost which does not have sound national security implications, or a few other things itemized in the Constitution, is too much when imposed upon US citizens. Doesn’t really matter whether it is a dime or tens of millions of dollars.

Casey

Insipid demonstrates a method of reasoning well in line with his name.

trackback

[…] Fiscal Follies – Part II September 22nd, 2012 I wrote the other day about the ridiculous economic cost of Federal regulation – which is estimated by two different credible sources to exceed 10% of the US GDP by 2014 if […]

Insipid

Actually it is not my “reading comprehension” but you’re poor writing that is the problem. Because your opening few paragraphs clearly states that the cost of Obamacare will be 1.8 trillion, not the cost of regulations for the entire Federal Government. Either you were trying to purposely mislead over the cost of obamacare or you had a bad-writing moment. Either way you were very clear in what you wrote. It’s hard to take seriously a report that has the following disclaimer: ============================================================= A wave of assumptions and guesses without scholarly pretension underlie this tally, and all data and sources are subject to change at this author’s discretion. Estimates for existing and pending regulatory costs in future editions of Tip of the Costberg aren’t merely subject to change, they are guaranteed to change at the discretion of the author and upon receipt of new information. ============================================================= Translation: I’m taking a wild fucking guess, but 1.8 trillion sounds REALLY scary don’t it? Oh, and it’s probably more than that! But let’s assume for one moment that the figure is true. So what? I had my first speeding ticket ever about 4 months ago. I hated paying it but I have to admit that I’m glad that there are traffic laws. So I have to weigh the cost of my ticket against the realization that traffic laws make it possible for me to get to work. Does FAA regulations cost airlines money? Undoubtedly, but do you want to step on a plane where none exists? In fact do you want to bite into a burger (assuming you’re a meat-eater) without a working FDA? Yes, the EPA and CWA cost money. But you no longer have to check for smog alerts before leaving the house if you live in LA or New York and we no longer have rivers that are considered fire hazards. In all, a report that ONLY considers the cost of government regulations is dishonest. It’s no different then looking at a business balance sheet and only considering the expenses and concluding the company is a loser or only considering the… Read more »

Insipid

Oh, stop with the full of shit back pedaling. You know you were unclear and by your own actions you prove that. If you were so crystal-clear why would you bother clarifying the fact that you were talking about all regulations in post #7. Your actions are an admission. If it was so clear, why’d you clarify?

The reason you won’t address the rest of my points is because I revealed the fact that your article is deeply full of shit. Kind of like you.

Insipid

So…. it wasn’t clear to them, or me but you’re SURE it was TOTALLY clear. The fact is that going from general to specefic is a fairly common paragraph structure and you clearly seemed to be talking about Obamacare alone.

The use of the word that was not even close to definitively about all regulations or Obamacare regulations and your third paragraph first sentence was as clear as mud:

“The libertarian-leaning Competitive Enterprise Institute estimates the cost will be approximately $1.8 trillion annually when “Obamacare” is fully implemented in 2014”.

How in the world is anyone supposed to get that you’re talking about the entire Federal budget from that? You ONLY mention obamacare in that sentence and the following or previous sentences does nothing to clarify it.

Again, by your own admission it wasn’t clear to others either. So if you had any class you’d surrender gracefully and just admit to being unclear. It actually may add to your credibility.

UpNorth

” So if you had any class you’d surrender gracefully and just admit to being unclear. It actually may add to your credibility.” So says the troll who has no class or credibility.

NHSparky

While I might have been tempted to fall under the same trap as “only Obamacare” costs as related to governmental mandate compliance, that’s only because under the current system we have, administrative costs of pretty much ANY governmental system is a significant chunk of the total cost.

So when you’re dealing with a single issue (health care) that takes up 1/6 of the entire economy, 10 percent of GDP is not only not that far off, but sadly, probably closer to the mark than one would expect.

Ask yourself these simple little questions, sippy–what “government mandates” do you face in your daily work, and not just the paper hat and asking for fries mandates. Taxes for your wages, OSHA, et al, just to name a few. Some necessary and good, some a fucking worthless bullshit PITA.

Insipid

Your insistance that I must read every post or click on every link is an admission that nothing you say can be taken at face-value.

I’ll admit that i didn’t read comment seven. But that still doesn’t change the fact that your initial post was certainly not clear. I don’t feel obligated to read every post before I comment on an article, especially if i’m ONLY commenting on the article. I also admit that i didn’t read your links. I trusted you to accurately report what the links said and you didn’t do it.

If someone were to say Here’s a holocaust denial site or here’s an earth is flat site with links to follow would you bother reading the sites? No, because any site that says the holocaust never happened or that the earth is flat doesn’t really deserve any attention. You purported to link to a site that was claiming 1.8 trillion dollars in obamacare costs. Why should i click on that?

There is no nettiquete that says i must read every single post before commenting on a story. In fact in some blogs, such as Huffington Post, that’s an impossiblity because you’ll have THOUSANDS of comments for each story. Nor is anyone required to do research before commenting- especially since your claim was obviously foolish at face value.

I’m not really that into fighting with you on this, Hondo. You made a mistake in your writing. I honestly don’t believe you had an intent to deceive. I’ll admit that I’ve made mistakes before. It happens, you want to be clear, but you have other shit to do besides blog here all day. If you would just say “my bad” (the way you did with the posters prior to #7) instead of launching into a diatribe about my alleged lack of reading comprehension this would be over.

Insipid

Sparky admits he wasn’t clear!

Moving on- The regulations that I know of concerning Obamacare are mostly money savers- at least for consumers. They are as follows:

1. That insurance companies operate within a loss ratio of 80%.
2. That providers convert to electronic records by 2014.
3. That providers switch to ICD-10 coding by 2014.
4. That providers give up fee for service and instead charge based on condition by 2015.
5. That insurance companies allow children to remain insured with pre-existing conditions.
6. That insurance companies not turn down anyone with pre-existing conditions after 2015.
7. That insurance provide free preventive care.
7. That everyone should be covered or pay a penalty.

The regulation regarding coding and medical records will be a savings all the way around for everyone. With the exception of the penalty all these regulations are money savers for consumers. Yeah, it will cut into the profits of insurance companies. But I have significant problems with for-profit health insurance anyway, so cry me a river. There will be a few not happy about paying the penalty, but if they can afford insurance and refuse to buy it- even if subsidies are offered- well, tough shit.

Frankly Opinionated

Insipid, read this: “Yes, your mental math is correct. That means the cost of complying with governmental regulations in 2014 will consume well over 10% of the value of all goods and services produced in the USA.”
That is paragraph 5, or so, of the original post. I just had Surgery on one of my eyes, (the better of the two), and with my other eye this was still quite clear to me. But then, I am not a drinker of Kool-ade with unknown additives.

Ex-PH2

Hondo, did I miss an entry of yours? No. 7 WAS your initial post, yes? It was in this order: 1-Joe, 2-Tank, 3-Jonn, 4-UpNorth, 5-VOV, 6-Nik, 7-Hondo — did I miss something?

The real issue is not just the cost of federal regulations, but also the prolonged and very high unemployment rate, whether new claims or continuing, as well as those who are no longer able to get UE benefits. That entire population group is not paying into the section that supports Social Security and Medicare, putting a strain on the already strapped working populace. Social security tax on earned income is capped but Medicare is not, but not all people with high income are paying EARNED income taxes, as opposed to ORDINARY income taxes (meaning dividends and interest), because they are not in the EARNED income section of taxpayers. The number of new jobs being created is NOT offsetting the number of jobs lost, period.

“For comparison, the current US GDP is approximately $15 trillion. It’s currently growing at a rate of less than 2% annually.” Unless job growth picks up and unemployment rates begin to decline, this sluggish growth rate will very likely become worse.

At this point, despite what appears to be an uptick in the housing market and the stock market, there is a world-wide indicator of a reversal coming up:

“We have this phenomenon appearing all over the world known as “intermarket bearish divergence.” But I don’t think it is quite over – not until the Fed accomplishes its mission of a new all-time high in the DJIA before the election. In fact, if that happens in October 2012, it will create a perfect “Lorusso 5-point reversal” signature, with a slew of Fibonacci time ratios, based on the recent studies of noted market technician Rick Lorusso.”

This is from a financial analyst, someone I’ve known for nearly 20 years. His accuracy is high, and while he doesn’t like making predictions, when he does so, I pay attention. Another slide like that in March 2009 will have serious side effects.

Ex-PH2

OK, I get it. I was only looking at the comments section, not taking the article (which I found quite clearly written) into consideration.

NHSparky

Uh, sippy? I never said it wasn’t clear. RIF, dipshit.

Your insistance that I must read every post or click on every link

Well, if you’re going to attack something, you might want to know a bit about what you’re debating or trying to counter.

I know, little knowledge, dangerous thing, shit like that.

Insipid

Yes, when you clarified it, it was clear. I did not read post #7. If you want to say my problem is laziness, have at it. Either way, you’re admitting that your first post wasn’t clear and i’m admitting that I didn’t read post #7. So your whole “reading comprehension” comment is- by your own admission- bullshit. I do not think it’s fair for you to expect me to read every comment before posting about a blog. Most people don’t. My purpose in posting was to comment on the article. I did that. The fact that you did not write it clearly is on you. Not me.

Insipid

@40- So EX-ph2 gets to make a comment without carefully reading every post and clicking on every link but I don’t?

Ok….

Insipid

@36- I hope your surgery went well. My mother may need to get eye surgery soon. A little worried as she is 81. In great shape, but still….

Government regulations could of very well meant health care though.

Insipid

Illustration #1025 as to just why you’re about to get your ass handed to you this November:

=============================================================
Ask yourself these simple little questions, sippy–what “government mandates” do you face in your daily work, and not just the paper hat and asking for fries mandates. Taxes for your wages, OSHA, et al, just to name a few. Some necessary and good, some a fucking worthless bullshit PITA.
=============================================================

I’ve already told you what i do for a living. So if anyone here lacks reading comprehension, it is you. That being said, your obvious contempt for workers- joined by the elites in your party- is the reason why you’re losing. And the reason why you’re going to continue to lose. Your candidates sneering at the 47% has not only doomed his chances to win the Presidency but it’s doomed the GOP’s chances of retaking the Senate. And if he keeps putting his elitist foot in his class-warfare mouth, and then shooting it- he may cost them the house too. So you go right ahead with that class-warfare “you want fries with that” right wing “humor”.

I’ll be the one laughing on November 7th.

NHSparky

Contempt for workers? Moi? A bit of projection there, scooter. I’m typing this from work on my lunch break. Yeah, that’s right–nearly 1:30 on a Sunday morning. I’ll dare say I’ve turned a few more wrenches than you, sippy. But the fact that I do this work that you dain to be beneath you pays me quite well, thanks for asking.

If anything, Romney didn’t go FAR ENOUGH. It IS true–ever since FDR, and made doubly so with LBJ and the “Great Society” of the 1960’s, the main goal of Dem “security” programs has never been security but rather securing the votes of those too fearful of the POSSIBILITY of doing without or too short-sighted to put away for a rainy day or old age. IOW, the Dems for the last 70 years have played the fear card, and to their credit done it quite well.

49.5 percent of Americans have either no or a negative federal tax liability. I, OTOH, far from being part of the “1 percent” you so feebly claim are the root of all our problems, paid a significant (over 40 percent) of my income in federal, state, and local taxes.

I see what your well-intentioned “help” has done–from assisting those who could not, to being a handout for those who will not. If a person is working but only for a few months a year, then quitting so they can maintain eligibility for food stamps, SCHIP, Section 8, EIC, etc., is that truly on me, or on THEM? Who is to blame allowing such sloth to not only continue, but EXPAND at the expense of my hard-earned labor?

At what point is the average person going to up and say, “Fuck this shit?”

Believe me, you might well be laughing on November 7th, but I guarantee you won’t be laughing for long afterwards.

NHSparky

And no, you’ve never said what you do for a living. Being a janitor in a law firm might TECHNICALLY qualify as “working in a law office” but it’s still not a description of what you do.

As for me:

http://www.census.gov/hhes/www/ioindex/ioindex02/txtnew02.html#49-2095

There’s about 60 people who do what I do in NH. But before you think I’m in a limited field, consider I get about 2-3 calls a month from people asking if I want to work anywhere from CA to Saudi Arabia.

A small career field has its advantages too.

Insipid

So “turning wrenches” is good manual labor and serving fries or cleaning law offices is something that it’s ok to scorn? Yeah, you’re a real champion of work there, skippy. I’m a paralegal. A fairly well-paid one. Whether you believe it or not is up to you. If you insist on saying otherwise, i’ll just assume it’s evidence of an inability to comprehend basic facts. You’re certainly showing great ignorance of history. SS and Medicare have together nearly eradicated what once was a staggering blight on our society- horrible povery amongst the elderly. People have reason to be fearful about those programs going. SS has been paying out without fail for 70 years, how many private pension funds have gone out in that time? What chance does an elderly person with pre-existing conditions have of getting insurance on the private market? And how the hell can any average joe possibly save enough money to pay for a cancer treatment or even a short hospital stay? It’s not possible in reality. Only counting income tax as “taxes” is one of the most dishonest, dispicable talking points Republicans use. It’s pure unadaulterated class warfare. Income tax is the one progressive tax there is. The percentage of TOTAL taxes amongst the poor and middle class is still about the same as for the wealthy because FICA tax stops at around 100 k. Most working-class folks would LOVE to pay the 14% tax rate Mitt pays. Furthermore most of the reasons why the 47% doesn’t pay taxes is because of provisions in the tax codes put in place by Republicans. The earned income tax credit was signed and championed by Gerald Ford. Ronald Reagan was also a big fan of it and he increased it. He was also a big fan of the child tax credit and the housing deduction. All of these tax credits contribute to people being among the 47% and all of them were championed by Republicans, back when they were sane. Hell, even George W. Bush increased the earned income credit. They were pushed to make tax cuts for the… Read more »

NHSparky

Horrible poverty amongst the elderly? And pray tell, why? Could it be that because they failed to save for their retirement, when their income stream went to zero they were forced to live with their adult children?

Newsflash, sippy–still happens today. Your vaunted program didn’t achieve its intended effect. Sure, some folks got over for a while, but consider that most folks NEVER considered SS a sole source of income in their retirement years, and those who did, frankly, were fools for doing so, because it was then, is now, and will continue to be even more so in the future a pathetically shitty level of income considering the contribution people 55 and under are making to support those who have taken far more from the system than they gave for over 70 years.

And if you look at the data, the EIC credit for a family with two or more children in 1991 was $11,249 in income gave you a $1235 credit. In 2011, a family filing married/joint with an AGI (NOT gross income) of under $46,044 and two children qualified for a $5112 credit (those limits increased to an AGI limit of $49,078 and credit of $5751.)

Guess where the two biggest expansions came, sippy? 1993, 1997, and 2009. The “expansion” you cite under Reagan was basically that it was indexed for inflation. Whoopsie!

http://www.gpo.gov/fdsys/pkg/GPO-CPRT-108WPRT108-6/pdf/GPO-CPRT-108WPRT108-6-2-13.pdf

Start reading at page 35.

NHSparky

His tax isn’t income tax-he hasn’t worked in over 10 years. He pays capital gains tax.

So basically you’re admitting there’s double-taxation.