The Tip of the Regulatory Iceberg

In 2014, the government issued 2,400 new regulations, including 27 major rules that may cost $80 billion or more annually. They range from forcing restaurants to list the number of calories in food — even though past experiments have revealed that such measures fail to change consumers’ behavior — to reducing consumer choices and increasing energy prices by imposing tighter energy efficiency mandates on the plugs that we use to charge cellphones, laptops and even electric toothbrushes.

Veronique De Rugy1

These figures can be found in a new paper by Heritage Foundation scholars Diane Katz and James L. Gattuso, in which they tally the number and cost of government regulations over the past six years of President Barack Obama’s administration — and show that Washington’s control over the economy and Americans’ lives is intensifying. According to their count, during the first six years of the Obama administration, the number of new major rules reached 184, but another 126 are in the pipeline. That’s more than twice the number imposed by President George W. Bush, who wasn’t shy about regulating the economy.

Katz and Gattuso explain, “The cost of just these 184 rules is estimated by regulators to be nearly $80 billion annually.” But this is only the tip of the iceberg. Official regulatory costs are vastly underestimated, among other things, because of the large number of rules for which costs have not been fully quantified.

More importantly, it doesn’t appropriately account for the businesses, innovations and economic growth that will never exist because of the incessant accumulation of regulations. Take the bureaucrats at the Federal Aviation Administration, who have effectively banned the use of commercial unmanned aerial vehicles, commonly referred to as drones. This and the myriad other questionable drone regulations proposed by the FAA have been widely criticized as arbitrary and nontransparent. Another example was the FAA’s proposal to require drone pilots to obtain the same license as old-school airplane pilots. Thank goodness it appears that the FAA is walking away from this bad idea. But the bottom line is that the FAA has demonstrated its penchant for imposing destructive constraints on this new technology.

Meanwhile, a more hands-off approach to regulating drones in other countries has led to new, exciting commercial uses for drones all over the world. For instance, a startup called Matternet uses drones to deliver critical supplies in places where roads can keep people isolated for months at a time. The potential is huge, considering that over 1 billion people live in such places. Germany’s DHL already uses drones to deliver medicine to the small city of Juist on a small island in the North Sea. And a few weeks ago, we saw how the charity GlobalMedic was using drones to help aid relief operations in Nepal after the country was ravaged by earthquakes.

Yet the FAA continues its destructive approach with new proposed rules to further constrain drones that are less than 55 pounds. The rules would, among other things, prohibit them from conducting deliveries and prohibit operation outside the hours of official sunrise and sunset.

In other words, forget about sending medication or food to people in areas where ground travel is not possible, and forget about the 30-minute delivery service Amazon Prime Air — in the United States, that is.

But that’s a drop in the bucket compared with dozens of other costly rules, including 13 regulations of the financial system that saw the light of day in 2014. According to Katz and Gattuso, eight of those were the product of Dodd-Frank, an act that was supposed to reduce the risk of a major bank failure but is actually a regulatory burden that cripples small banks while further protecting even larger institutions. In other words, Katz and Gattuso conclude, the need for reform of the regulatory system has never been greater.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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