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Federal Regulations cost nearly $2 Trillion in 2019

Regulations are undoubtedly an essential part of doing business. They protect customers, businesses as well as property. However overly burdensome regulation do the opposite; they impose costs on individuals and businesses, as well as the country. Unlike other things that affect the economy, like taxes, regulation is hard to quantify. But through existing efforts, we have come to see just how much the economy loses when businesses and individuals are forced to jump through so many hoops when conducting economic transactions.

The cost of regulation is tremendous and it grows every year

Regulation imposes costs in a low of ways.  But regulation imposes cost mainly through (1) compliance costs (2) lost income (3) lost economic growth (4) lost GDP (5) higher prices (6) lost jobs. All of these costs add up and grow over time as the regulatory code expands. For instance, according to a study by the Mercatus Center, between 1980 and 2012, growth in the federal regulatory code cost the US $4 Trillion. But worse yet, this accumulation of regulation disproportionately affected disadvantaged groups like low-income individuals and unskilled workers.

Cost of Federal Regulation in 2019

Quite recently, The Competitive Enterprise Institute, estimated how much federal regulation cost for the year 2019. As expected, the costs are high. According to the highlights from the report :

1)The aggregate cost of federal regulation remains more than $1.9 TRILLION annually – and that is a conservative estimate based on publicly available data from government, academia, and industry and the inherent unknowability of such costs

2)The cost of federal regulation to each U.S. household exceeds $14,000 annually, on average. For perspective, that equals about one-fifth (18 percent) of the average pre-tax household budget and is the second-biggest budget item after housing.

3)The $1.9 trillion regulatory burden is almost equivalent to the $2.5 trillion COVID-19 Phase 3 stimulus bill Congress passed in April 2020. COVID stimulus cost taxpayers $2.5 trillion, but regulations impose a more hidden cost of $1.9 trillion – ouch!

4)The $1.9 trillion regulatory burden is equivalent to more than 40 percent of total federal spending, which was $4.447 trillion in 2019.

5)The $1.9 trillion “hidden tax” of regulation exceeds the corporate and personal income taxes combined.

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