The Costly Regulatory State

Two trillion dollars a year, and rising.

If it appears to you that the federal government is doing everything it can to destroy the economy, that’s because the truth is very close to that.

In addition to crushing tax rates, wasteful spending on foreign wars and vote-buying schemes through social-program and economic “stimulus” spending, refusal to begin entitlement reform, and record peacetime federal government borrowing, the government is regulating private commerce light-years beyond any possible economic and social benefits from those actions.

Federal regulations now impose an annual cost of $1.939 trillion per year on American businesses and families, according to the latest annual report from the Competitive Enterprise Institute (CEI), titled Ten Thousand Commandments: A Snapshot of the Federal Regulatory State.

That cost is in addition to an estimated $9.3 trillion in federal, state, and local taxes for fiscal year 2024, plus a federal deficit that is likely to be $1.5 trillion or more and costs businesses and the public by pushing up interest rates.

The regulatory cost alone amounts to more than $14,500 per household and about 7.4 percent of GDP, CEI notes. Given that federal agencies habitually “low-ball costs and exaggerate benefits,” as CEI’s Ryan Young puts it, the actual numbers are surely much higher than this.

That number is more than 40 percent higher than the average credit card balance per U.S. household, which is currently $10,479. Consumers owe far more for upcoming regulatory costs than for their own credit card borrowing. The federal government is borrowing more on your behalf than you are.

After a brief but significant decrease in regulation during the first three years of the Trump administration, President Joe Biden injected into the federal regulatory state a massive shot of adrenaline laced with methamphetamine, especially through the “‘whole of government’ mandate that directs federal agencies to prioritize progressive political goals, like ‘equity’ and climate change, unrelated to and on top of the agency mission set by Congress,” study author Clyde Wayne Crews Jr. states in a news release about the report.

Potential remedies include requiring real cost-benefit analyses for all regulations and ending the use of the “precautionary principle” in which the ability to imagine any dire scenario is used to justify any proposed regulation. Unfortunately, Congress is highly unlikely to implement such reforms, and Biden would never sign them.

Congress benefits when the Executive Branch fills in the details of the laws the legislature passes, Crews notes in the report:

One of the main enablers of regulatory growth is Congress’s delegation of its law-making power to executive branch regulatory agencies. Agencies have much less visibility than members of Congress and do not have to worry about upsetting voters or finding compromises with the other party. Additionally, many members of Congress are happy to have someone else to blame when regulations backfire or prove controversial.

If this sounds unconstitutional, that’s because it is, Crews writes:

Administrative agencies, not Congress, do most U.S. lawmaking, despite Article I of the Constitution stipulating otherwise. Congress is to blame here, as it routinely enacts weighty legislation that should be closely attended, then delegates substantial lawmaking power to agencies.

From an agency’s perspective, the primary measure of its productivity is the body of regulation it produces. That gives agencies ample incentive to expand turf by regulating even without an actual need for it.

Crews documents this trend in a data stream he aptly dubs the “Unconstitutionality Index”:

During calendar year 2022, while agencies issued 3,168 rules, Congress enacted 247 laws. Thus, agencies issued 13 rules for every law enacted by Congress. This “Unconstitutionality Index”—the ratio of regulations issued by agencies to laws passed by Congress and signed by the president—highlights the entrenched delegation of lawmaking power to unelected agency officials. The average ratio over the past 10 years is 22 rules for every law.

Crews is right to describe the current system as unconstitutional. All three branches of government have been complicit in this rise of unconstitutional regulation, as the Supreme Court has given agencies full benefit of the doubt in questions about the interpretation of statutes passed by Congress, in a principle known as Chevron deference.

The agencies have run wild with that permission, and Congress has generally gone along with the scam, for the reasons noted above. The Supreme Court finally took down Chevron after taking up four cases on the administrative state in the last term, including two that address the fact that many agency proceedings against businesses and individuals seem to conflict with the Seventh Amendment right to trial by jury.

Congress and a long line of presidents have failed to do anything about this problem. The nation’s regulatory scheme has been both unconstitutional and enormously destructive. The Supreme Court must do its job and hold the other two branches in check.

If it does not do so, the states should step in, as I noted in yesterday’s post about state nullification of federal laws and regulations.

To prevent that conflict, the Court should do all it can to rein in the administrative state further in the coming session—and then more.