Who Pays the New Half Trillion in Regulatory Costs?

The Obama administration issued an unprecedented number of new regulations last year.  According to a new study by the American Action Forum, the administration added $236 billion dollars worth of new regulations and regulatory proposal in 2012 alone, putting the grand total of first term regulatory costs at $518 billion. According to their estimate, the new regulations added in 2012 also added 87 million hours of paperwork, adding more bureaucratic red tape onto an already ailing economy. 

There’s no doubt that adding more regulations to industry hampers economic growth.  The money that must be spent on accounting, compliance and attorneys does not include other regulatory costs —whether it be capital costs for new machinery or added labor costs.  According to an article in The Fiscal Times, regulatory costs on businesses add up to $1.75 trillion dollars every year, a staggering number that nicely illustrates the cost and time lost to the maze of red tape business owners have to endure at the hands of an overzealous government.  Who pays?  Consumers do, in the form of higher prices

The new regulations being imposed are hitting across the board, but two areas stand out —the healthcare and energy.  In addition to the Affordable Care Act, which many studies say will add $1.8 trillion a year to the cost of healthcare, the Obama administration has been busy in adding even more regulatory burdens.  Late last year, the administration attempted to impose a 3.5% user fee on an insurance policy—a fee collected on insurance companies listing their policies in the health exchanges set up by the law.  According to The Weekly Standard, this is not only a regulatory affront that could add untold billions in regulations, it’s almost certainly illegal.  And there’s talk of adding more rules to the ACA’s individual mandate provision.  Called the Mandate Plus, it could include even more penalties and taxes for those who don’t sign up, including late enrollment penalties.

The blocking and delay of the Keystone XL pipeline is yet another example of the administrations onerous regulations that have caused harm to consumers and the economy.  The pipeline would have provided a vital energy resource to consumers, carrying 700,000 barrels of oil per day to the gulf coast, not to mention the thousands of jobs the construction of the pipeline would have provided.  The pipeline has been approved by the necessary governors, and is currently awaiting movement by President Obama. The longer the administration waits, the more economic activity is lost and the more consumers lose.

The Obama administration has been regulation happy in its first four years, and all signs point to an even more regulation happy second term.  With his re-election, there isn’t much incentive for President Obama to hold back.  One bright sign is the recent ruling by the DC Court of Appeals which found the President’s recess appointments to the National Labor Relations board unconstitutional, which could invalidate many of the burdensome regulations imposed over the last year, though the Obama administration doesn’t seem to be taking the ruling well.  It remains to be seen if anything can be done about the regulatory environment, but if the President is serious about improving the economy, reducing the red tape seems like a great place to start imposing pro-growth and pro-consumer policies.

Zack Christenson is a digital tech writer for the American Consumer Institute Center for Citizen Research

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