Spending control and deficit restraint are indispensable to a nation’s stability and long term economic health. Before the economic lockdown, federal debt service was already projected to eclipse the entire defense budget. That was worrisome enough, but this year’s health and economic crisis has created a deficit that alone will be greater than all federal outlays as recently as 2015.
Meanwhile, magical thinking that government outlays create wealth is now fashionable among emboldened progressives who advocate Medicare for All, a Green New Deal, and a guaranteed national income, while supposed fiscal conservatives have lost the appetite for spending restraint.
The national debt already stood at $23 trillion in early 2020, up more than $2 trillion since 2018; it has accelerated amid coronavirus.
Yet the cost of government extends even beyond what Washington collects in taxes and the far greater amount that it spends. Federal economic, environmental, safety and health, and social engineering regulations and interventions comprise a hidden tax that affects the economy and the public by hundreds of billions — even trillions — of dollars annually.
As the least disciplined aspect of government activity, regulation can be appealing to lawmakers. Budgetary pressures can incentivize lawmakers to impose off-budget regulations on the private sector rather than add to deficit spending during those times it is umpopular (now is not one of those times). For example, a government job training or child care initiative could involve either increasing government spending or imposing new regulations that require businesses to provide those benefits.
Just as firms generally pass the costs of some taxes along to consumers, some regulatory compliance costs and mandates borne by businesses will percolate throughout the economy, affecting consumer prices and workers’ wages.
When the U.S. federal administrative state began its growth a century ago, few likely imagined the tangle of rules it would spawn and how those would envelop the economy and society. Over the past 3 1/2 years of President Donald Trump’s administration, there have been what I see as unprecedented reversals in this regard, such as a slowdown in the issuing of new rules and conscious rollbacks of existing ones, and a series of executive actions related to general regulatory process reform, reform of the executive branch itself, and to the streamlining of internal agency processes. The extensive executive actions undertaken aimed at liberalization and removal of undue burdens have been both broad-based and sector-specific (encompassing areas such as financial regulation, antiquities and national monuments, offshore resource access, education, health care, agricultural biotechnology, and more).
But some of Trump’s executive actions since taking office have added costs, such as emphasizing trade restrictions, anti-dumping, “buy American” agendas, and more.
Let’s look at some of all this here. Full details are in the 2020 edition of Ten Thousand Commandments the latest in an annual series that examines the scope of the federal regulatory state, and it contains seven major elements:
- A bulleted summary of highlights.
- An overview of ways the Trump administration has attempted to stem the flow of regulations and roll back old ones.
- A detailed discussion of Trump’s own regulatory impulses — implemented, pending, and potential — that undermine his own regulatory efforts.
- An overview of the scope of the regulatory state, including a taxonomy of categories and instances of unmeasured costs of regulation and intervention, and depictions of its appraised size compared with federal budgetary components and GDP.
- An analysis of trends in the numbers of rules and regulations issued by agencies, based on information provided in the Federal Register and in the Regulatory Plan and Unified Agenda of Federal Regulatory and Deregulatory Actions. This section also provides a brief survey of memoranda, notices, and other “regulatory dark matter,” and examines implementation of Trump’s “one-in, two-out” process for new regulations , along with its limitations (not Trump’s fault; he can’t reform the administrative state alone. Congress would need to step up).
- Recommendations for reform that emphasize disclosure and improving congressional accountability for rulemaking.
- An appendix containing historical tables of regulatory trends over past decades.
In broad strokes, apart from sector-specific executive orders and memoranda of which is an impressive number, there are six prominent ways the Trump administration has streamlined regulation so far:
- Right of the bat, delay or withdrawal of 1,570 of Obama administration rules in the pipeline;
- Early on, elimination of 15 rules and one guidance document via the Congressional Review Act;
- Multi-pronged streamlining of permitting for pipelines, bridges, 5G broadband, rural broadband, and other infrastructure;
- Agency restraint in initiating large, significant rulemakings;
- Continued progress on the presidential requirement that agencies eliminate at least two rules for every one issued;
- Steps toward addressing agency guidance documents and other sub-regulatory decrees. This has been one of the most important innovations of this administration.
Some bulleted highlights from the report follow.
- In fiscal year 2019, the administration’s ratio for significant rules out to significant rules in was 1.7 to 1. Employing all rules eliminated, the ratio was 4.3 to 1, still meeting goals of Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs.”
- Agencies’ stated priorities and “inventories” of rules signal some warning signs for Trump’s deregulatory agenda. While the Trump administration can be said to have met the goal of implementing a “one-in, two-out” process for federal regulations over the past three years taken as a whole, the longer-term horizon shows agencies poised to reverse this and to issue substantially more regulatory actions than deregulatory ones as soon as the pressure is off.
- Some warning signs are of Trump’s own creation, though. President Trump’s regulatory streamlining is being offset by his own favorable comments and explicit actions toward regulatory intervention in the following areas (detailed in the report in the “Swamp Things” section beginning on page 15):
- Antitrust intervention
- Financial regulation
- Hospital and pharmaceutical price transparency mandates and price controls
- Speech and social media regulation
- Tech regulation
- Digital taxes
- Bipartisan large-scale infrastructure spending with regulatory effects
- Trade restrictions
- Farming and agriculture
- Subsidies with regulatory effect
- Telecommunications regulation, including for 5G infrastructure
- Personal liberties: health-tracking, vaping, supplements, and firearms
- Industrial policy or market socialist funding mechanisms (in scientific research, artificial intelligence, and a Space Force)
- Welfare and labor regulations (job training, the new family leave)
• Given the limited available federal government data and reports, as well as contemporary studies — and the federal government’s failure to provide a regularly updated estimate of the aggregate costs of regulation — the Ten Thousand Commandments survey employs a placeholder for regulatory compliance and economic effects of federal intervention of $1.9 trillion annually. This is for purposes of context and rudimentary comparison with federal spending and other economic metrics. This report also presents an outline of the vast sweep of intervention and policies for which costs are disregarded.
• The burden of regulatory intervention is equivalent to over 40 percent of the level of federal spending, projected to be $4.6 trillion in 2020.
• Regulatory costs of $1.9 trillion amount to 9 percent of U.S. GDP, which was estimated at $21.54 trillion in 2019 by the Commerce Department’s Bureau of Economic Analysis.
• When regulatory costs are combined with estimated federal FY 2019 outlays of $4.447 trillion, the federal government’s share of the entire economy reaches 30 percent (state and local spending and regulation add to that).
• If it were a country, U.S. regulation would be the world’s eighth-largest economy (not counting the U.S. itself), ranking behind Italy and ahead of Brazil.
• The regulatory hidden “tax” is equivalent to federal individual and corporate income tax receipts combined, which totaled $1.914 trillion in 2019 ($1.698 trillion in individual income tax revenues and $216 billion in corporate income tax revenues).
• Regulatory costs rival corporate pretax profits of $2.063 trillion.
• If one assumed that all costs of federal regulation and intervention flowed all the way down to households, U.S. households would “pay” $14,455 annually on average in a regulatory hidden tax. That amounts to 18 percent of the average pretax income of $78,635 and 24 percent of the average expenditure budget of $61,224. The regulatory “tax” exceeds every item in the household budget except housing. That means that an average American household “spends” more on embedded regulation than on health care, food, transportation, entertainment, apparel, services, or savings.
• Calendar year 2019 ended with 2,964 final rules in the Federal Register, which was the lowest count since records began being kept in the 1970s and is the only sub-3,000 tally ever (in the 1990s and early 2000s, rule counts regularly exceeded 4,000 annually).
• During calendar year 2019, while agencies issued those 2,964 rules, Congress enacted “only” 105 laws. Thus, agencies issued 28 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. As it happens, the average ratio for the past decade has also been 28.
• In 2017, Trump’s first year, the Federal Register finished at 61,308 pages, the lowest count since 1993 and a 36 percent drop from President Barack Obama’s 95,894 pages, which had been the highest level in history. The 2019 Federal Register tally rose to 70,938 pages. However, Trump’s rollbacks of rules—and as noted there are far fewer rules overall—also necessarily add to rather than subtract from the Register.
• The Weidenbaum Center at Washington University in St. Louis and the George Washington University Regulatory Studies Center in Washington, DC, jointly estimate that agencies spent $72 billion in fiscal year 2019 to administer and police the federal regulatory state. This on-budget sum is in addition to compliance and economic burdens.
• At the end of calendar year 2019, 2,131 proposed rules were contained in the Federal Register pipeline.
• In contrast to the 2,964 rules finalized in calendar year 2019, 68 federal departments, agencies, and commissions have in the pipeline 3,752 regulatory actions at various stages of implementation (recently completed, active, and long-term stages), according to the fall 2019 Unified Agenda of Federal Regulatory and Deregulatory Actions. Of the 3,752 rules, 689 are “Deregulatory” for Executive Order 13771 purposes, broken down as follows:
– Of 2,602 rules in the active phase, 522 are deemed deregulatory.
– Of 546 completed rules, 106 are deemed deregulatory.
– Of 604 long-term rules, 613 are deemed deregulatory.
• Of the 3,752 regulations in the Agenda’s pipeline (completed, active, and longterm stages), 192 are “economically significant” rules, which the federal government describes as having annual economic effects of $100 million or more. Of those 192 rules, 33 are deemed deregulatory for purposes of Trump Executive Order 13771 (11 at the completed stage, 20 at the active stage). Only two are at the planned long-term rule phase.
• Since 1993, when the first edition of Ten Thousand Commandments was published, agencies have issued 107,712 rules. Since the Federal Register first began itemizing them in 1976, 204,802 final rules have been issued.
• The Trump administration’s spring and fall 2019 editions of the Unified Agenda of Regulatory and Deregulatory Actions contained a combined 70 completed “economically significant” rules (the counts were 35 and 88 in 2018 and 2017, respectively). The yearly average for Barack Obama’s eight years was 69; George W. Bush’s average over his term was 49. Trump’s average so far is 64, but his Agendas are the first to contain expressly deregulatory economically significant rules for purposes of Executive Order 13771.
• During calendar year 2019 the Government Accountability Office (GAO) issued 74 reports on “major” rules — a category similar to but slightly broader than economically significant — as the Congressional Review Act requires it to do. In the first year of the Trump administration, the count was 49, the lowest ever. President George W. Bush’s administration averaged 63 major rules annually during his eight years in office. President Obama averaged 86. Obama issued 685 major rules during his term, compared with Bush’s 505. Approaching the end of Trump’s first term, the president’s average is 59 yearly, but a significant portion are deemed deregulatory.
• Of the 3,752 regulations in the pipeline, 644 affect small businesses. Of those, 347 required a Regulatory Flexibility Analysis (official assessment of small business impacts), down from 412 in 2016. An additional 297 were otherwise noted by agencies to affect small businesses in some fashion. Overall, 102 rules affecting small business were deemed “deregulatory.”
• The seven most active rule-producing entities—the Departments of Commerce, Defense, Health and Human Services, the Interior, Transportation, the Treasury, and the Environmental Protection Agency (EPA) — accounted for 2,002 rules, or 53 percent of all rules in the Unified Agenda pipeline.
• President Trump issued 47 executive orders in 2019 (after 63 in 2017 and 35 in 2018). From the nation’s founding through the Obama administration, more than 15,285 executive orders have been issued. President Obama issued a total of 276, similar to President George W. Bush’s 291. Prior to the 20th century, most presidents had no more than a few dozen. In contrast, Woodrow Wilson issued 1,803, Coolidge issued 1,204, and Franklin D. Roosevelt issued 3,467.
• President Trump issued 26 presidential memoranda in 2019, after issuing 38 in 2017, and 30 in 2018. President George W. Bush published 131 memoranda in the Federal Register over his entire presidency, whereas President Obama published 257.
• Public notices in the Federal Register normally exceed 24,000 annually, with uncounted guidance documents and other proclamations with potential regulatory effect among them (and other guidance documents that do not appear in the Register at all). There were 21,804 notices issued in 2019. There have been 616,455 public notices since 1994 and well over a million since the 1970s.
Regulatory excesses are largely driven by the longstanding delegation by Congress of its rightful lawmaking power to executive branch regulatory agencies. But of course, Congress’s own legislation is highly regulatory as well, which too often gets left out of the big picture. The limited cost–benefit analysis of rules and intervention undertaken by the very agencies imposing the requirements covers only a fraction of rules. Addressing that situation effectively will require the restoration of Congress’ duties under Article I of the Constitution rather than “mere” administrative law reforms. In the meantime lawmakers should require thorough tracking and disclosure of regulatory costs and effects, and perform periodic housecleaning.
(This article is a summary of the 2020 edition of my Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State, also available on SSRN).