Economic Perspective: The Cost of Regulations

MARY WALDEN:

“Today’s program looks at the cost of regulations. Mike, one of the stated goals of the new Trump administration is to reduce the cost of regulations, arguing that one result will be faster economic growth. Do we have any information indicating this would work?”

MIKE WALDEN:

“Well we actually have a new study out from George Mason University that tried to quantify the cost of regulation. Of course, there are really two costs. One is the cost of complying with regulation, and the second cost is the cost associated with, maybe, a business deciding not to make an investment due to regulations.”

“So George Mason University, which used a team of economists, tried to put some numbers on this. They went back and looked at all the new federal regulations that have been implemented since 1980. I won’t get into the background of how they came up with this number, but they calculated that if those regulations since 1980 had not been put in force, had not been put on the books, annual economic growth in the country would be .8 percent higher than it is now.”

“Now that doesn’t sound like a lot, but that would mean, for example, going from a growth rate where we are now at about two percent up to 2.8 percent or close to three percent. That’s a big jump.”

“They also calculated that gross-domestic product, the most widely used measure of our total economy, would be 25 percent higher today if we had not had those new regulations since 1980 implemented. Now, very important, all this study did is look at the cost size.”

“Obviously, regulations, in part, are put into place because there are benefits. Safety, for example, environmental quality, et cetera. So we certainly want to point out that there are benefits to regulations, but what this study did is put some quantification on what the costs are so that that then helps us to evaluate regulations, which I think is going to be a big part of the new Trump administration.”