The Regulatory State – A Bureaucratic Tyranny
From the recent annual snapshot of the federal regulatory state published by the Competitive Enterprise Institute ('The 10,000 Commandments', pdf):
- The most recent Small Business Administration (SBA) evaluation of the overall U.S. federal regulatory enterprise, prepared by economists Nicole V. Crain and W. Mark Crain, estimated annual regulatory compliance costs of $1.752 trillion in 2008.
- Earlier SBA reports pegged costs at $1.1 trillion in 2005 and at $843 billion in 2001. Meanwhile, a subset of 105 rules reviewed during 2000-2012 by the Office of Management and Budget (OMB) notes annual costs of between $44 billion and $62 billion.
- Given 2011’s actual government spending or outlays of $3.598 trillion, SBA’s estimated regulatory “hidden tax” stands at 48.7 percent of the level of federal spending itself.
- SBA-estimated regulatory costs exceed all 2009 corporate pretax profits of $1.317 trillion.
- Regulatory compliance costs dwarf corporate income taxes of $198 billion.
- Regulatory costs tower over the estimated 2011 individual income taxes of $956 billion by 83 percent.
- Regulatory costs of $1.752 trillion amount to 11.7 percent of the U.S. Gross domestic product (GDP), estimated at $14.954 trillion in 2011.
- Combining regulatory costs with federal FY 2011 outlays of $3.598 trillion reveals a federal government whose share of the entire economy now reaches 36 percent.
- The Weidenbaum Center at Washington University in St. Louis and the Mercatus Center at George Mason University in Arlington, Virginia, jointly estimate that agencies spent $55 billion (on budget) to administer and police the regulatory enterprise. Adding the $1.752 trillion in off-budget compliance costs brings the total regulatory enterprise to around $1.8 trillion.
- The 2011 Federal Register stands at 81,247 pages. That number is just shy of 2010’s all-time record-high 81,405 pages. These years are the only two in which the number of Federal Register pages topped 81,000.
- Federal Register pages devoted specifically to final rules rose by 5.4 percent—from 24,914 to a near-record-high 26,274 in 2011.
- In 2011, agencies issued 3,807 final rules, compared with 3,573 in 2010, a 6.5-percent increase.
- Proposed rules appearing in the Federal Register increased even more than the number of final rules, from 2,439 to 2,898, an 18.8-percent increase that signals a likely future rise in final rules.
- The annual outflow of over 3,500 final rules has meant that nearly 66,840 rules have been issued since 1995.
- Although regulatory agencies issued 3,807 final rules in 2011, Congress passed and the president signed into law a comparatively few 81 bills. Substantial lawmaking power is delegated to unelected bureaucrats at agencies.
- According to the fall 2011 “Regulatory Plan and the Unified Agenda of Federal Regulatory and Deregulatory Actions” in the Federal Register, which lists federal regulatory actions at various stages of implementation, 60 federal departments, agencies, and commissions have 4,128 regulations at various stages of implementation.
- The “Completed” component of these 4,128 rules rose by 39.9 percent, from 722 to 1,010.
- The “Active” component—prerule and proposed and final rules—has stood well above 2,600 annually for the current administration.
- Of the 4,128 regulations now in the pipeline, 212 are “economically significant” rules wielding at least $100 million in economic impact. That number represents a 32.5-percent jump over the 160 rules five years ago, in 2006, and a higher level than any year of the past decade except for the 224 rules in 2010.
- Total economically significant rules finalized annually are down slightly from 2010 (81 to 79), but are up by 92.7 percent over five years, and 108 percent over 10 years.
- If one assumes that those rulemakings are primarily regulatory (even if some are deregulatory) and cost only $100 million rather than multiples of that figure, that number implies roughly $21 billion yearly in future off-budget regulatory effects.
- Of the 4,128 regulations now in the works, 822 affect small businesses. Of those, 418 required a regulatory flexibility analysis and 404 were otherwise noted by agencies to affect small business.
Above we have highlighted the most egregious numbers, but we want to focus the attention of readers on one point specifically, namely this one:
„Although regulatory agencies issued 3,807 final rules in 2011, Congress passed and the president signed into law a comparatively few 81 bills. Substantial lawmaking power is delegated to unelected bureaucrats at agencies“.
Administrative law as it is called, is growing like a weed in all developed nations. It is probably not an exaggeration to say that these regulations, which are put in place by the ever-growing horde of unelected bureaucrats and are therefore wholly undemocratic, are slowly but surely leading to the downfall of Western civilization as we know it. The bureaucrats must constantly justify their own existence and many probably enjoy the fact that they are able to wield so much power. However, this has now progressed to a case of the parasites killing the host. To paraphrase Bob Hoye: “Unlimited government requires unlimited funding”.
Every small businessman knows that it is nigh impossible to conform to all these regulations to the letter and survive. It just cannot be done. For instance, the SAB estimates that businesses with more than 500 employees pay about $7,550 per employee to comply with federal regulations. Small businesses, i.e. those with less than 20 employees, pay about $10,600 for every person they employ.
And this is only counting compliance with federal regulations, state and municipal regulatory costs must be added to that amount. Is it any wonder that the formation of small businesses is in a nosedive? In fact, it is a miracle that there still is something like 'small business' at all. Remember though that small businesses create over 50% of all jobs, so this represents a significant problem with regards to the still MIA 'economic recovery'.
Big businesses have little problem with these overbearing regulations. They help to keep down the competition from upstarts, to the detriment of society at large, but to the advantage of established big businesses. Big business is not against more regulations – it is all for them. Wall Street's fight against 'Frank-Dodd' was nothing but show. Kabuki theater, to make people think that the big banks were actually against this tome of new regulations. The opposite is true.
The crash in small business formation – and this chart does not yet include the 2011-2012 data. It is a god bet the downtrend has continued apace.
Not only does this mean that it becomes ever more difficult for people to actually help themselves by starting a small business when they e.g. become unemployed and cannot find work, it also means that existing small business owners are forced to 'cut corners' if they want to survive. Surely those making the rules must be aware of this as well. By making as many people as possible potential criminals by subjecting them to rules and regulations they cannot possibly comply with, one creates a population that can be very easily controlled. People who are forced to bend the rules are constantly living in fear of being discovered. They will do everything not to draw unwanted attention to themselves, as they can be ruined anytime at the whim of a bureaucrat. They will acquiesce to the system and stop criticizing it. Freedom is thus destroyed and replaced by a tyranny of bureaucracy.
It is even worse in the EU, where the regulatory state and the production of administrative law have always been excessive, with the number of regulations exceeding the comparable US data by a noticeable margin. A friend of ours is a lawyer who has many small business owners as clients. His verdict, after two decades of experience: Anyone who starts a small business in today's EU is suicidal. He also reports that existing small business owners are throwing the towel in droves. They have simply had enough.
The Government's Wars
Every government activity that is described as a 'war', such as the 'war on poverty' or the 'war on drugs' has long been shown to be enormously costly and completely ineffectual. The goals that these 'wars' were supposed to achieve are as far out of reach today as they ever were. In fact, the unintended consequences of these wars have made things worse instead of better. They have also created a large mass of bureaucrats and other vested interests in whose interest it is to continue these activities regardless of their obvious senselessness. These vested interests are a mighty political force.
The 'wars' become ever more ridiculous. The latest example is the war against vegetable gardens, which bureaucrats in both Canada and the US are currently waging.
“In Drummondville, Quebec, one couple decided to turn their useless front lawn into a productive vegetable garden. While this seems like wonderful news, city officials feel differently — and they’re ordering Josée Landry and Michel Beauchamp to cut down or move nearly three-quarters of their plants by July 24. After that date, the couple will be fined up to 0 a day until they have gotten rid of most of their garden.
In the fall, the bylaw will apply to all front lawns in the city. This attempt to unify residential properties will limit food gardens to occupy, at most, 30 percent of any front lawn. For residents like Landry and Beauchamp, whose front yard is the only location with enough sun exposure to grow vegetables, this effectively means they will be back to supermarket shopping.
“If this garden is deemed illegal, we’re in deep you-know-what,” said Roger Doiron, founder of Kitchen Gardeners International, a nonprofit that educates and empowers people to grow their own food. He believes many changes are necessary to the current food systems, including changes to government priorities and finding ways to incorporate gardens into our living spaces. For more information, read this interview with Doiron written by Revmodo co-founder Shea Gunther.
Actions similar to what’s happening in Drummondville have taken place elsewhere, such as in Tulsa, where Denise Morrison is suing the city for cutting down an edible garden of more than 100 plants in June. And in Clarkston, Ga., where gardener Steve Miller was fined for planting too many vegetables. Similar reports have come from Oak Park, Mich., and Chatham, N.J. That’s right, public employees all over North America are spending their time policing the lawns of citizens looking to grow their own food.”
This also tells us something of how the State and its minions actually view property rights: no longer is it the State's function to defend property rights, it is to grant or revoke them. We're sure the bureaucrats who have begun this war against front lawn vegetable gardens can point to regulations that back their actions up. However, this is precisely the problem: who made those regulations and why? What are they actually good for? You probably get the idea when considering one sentence in the report above: “For residents like Landry and Beauchamp, whose front yard is the only location with enough sun exposure to grow vegetables, this effectively means they will be back to supermarket shopping.”
If there is one good thing about the economic downturn, it is that both the production and enforcement of such senseless rules will become more and more difficult, for the simple reason that it is becoming too expensive.
As an example, powerful public employee unions were able to get courts to side with their demands in several disputes with insolvent city councils. However, it was to no avail: once the municipalities concerned declared bankruptcy the court decrees essentially became meaningless. In several cases the public union demands actually hastened the bankruptcies. Political cartoonists have correctly identified the problem as Mish reported a while back. A cartoon depicting the situation in bankrupt Scranton struck us as especially pertinent:
Sign of the times: the social mood darkens, and with it the willingness to support overly generous financial compensation of public employees. In some cases, bankruptcy intervenes. No blood can be squeezed from turnips.
It has been asserted by many that the financial and economic crisis were a result of 'too much deregulation', the inevitable outcome of what was allegedly to great a commitment to 'laissez faire'.
Nothing could be further from the truth. As noted above, the regulatory burden increases every year without fail. There has not been a single year in which the 'Federal Register' has become smaller. Moreover, at the center of the crisis was one of the most heavily regulated and subsidized businesses of all, namely mortgage finance. Those who think we will be saved by adding to the existing pile of regulations are in for a wake-up call. No meaningful economic recovery will be possible anywhere in the developed world unless regulations are actually rolled back. The idea that financial crises can be held at bay by adding to regulations and increasing the power of regulators is extremely dubious. As Dylan Grice has recently pointed out (scroll down to 'Dylan Grice and Spontaneous Order'), the exact opposite is probably true.
Meanwhile, the backbone of the free market economy, small business, is slowly but surely smothered to death by the costs of the regulatory burden. It has been a long time since something resembling free market capitalism has last been tried. It was time of unprecedented economic progress for the masses (we are referring to the 'Gilded Age'). We should go back to what has demonstrably worked in the past and finally get rid of Leviathan.
Source: Acting Man