We’ve all heard the argument that regulations increase the costs of doing business and thereby lower economic output and job creation. But just by how much? In Regulatory Expenditures, Economic Growth and Jobs, the Phoenix Center estimates the relationship between government spending on regulatory activity and economic growth and job recovery. The results are astounding and suggest that Congress could make a big positive impact on the economy by cutting funding to the myriad of federal regulatory agencies forcing the economy under their stranglehold.
According to the report:
… even a small 5% reduction in the regulatory budget (about $2.8 billion) will result in about $75 billion in expanded private-sector GDP each year, with an increase in employment by 1.2 million jobs annually. On average, eliminating the job of a single regulator grows the American economy by $6.2 million and nearly 100 private sector jobs annually. Conversely, each million dollar increase in the regulatory budget costs the economy 420 private sector jobs.
Earlier this year, President Obama asked for “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.” Well, let’s get on it! Cutting wasteful, unnecessary regulations that provide negative net benefits for Americans should be a no-brainer one would think. Unfortunately, the process isn’t as easy as it sounds. It’s highly political in nature and it is certainly not in the interest of regulators and their agencies to paint a picture in which their work is rendered non-essential, if not outright harmful. So what can be done?
The Phoenix Center suggests that reducing the overall size of the regulatory bureaucracy by curbing federal spending on such efforts, might be a more effective approach to motivating regulators to prioritize essential and beneficial interventions, once they are forced to “do more with less.”