Regulations devastate economic growth

Wednesday, October 13, 2010 - 8:00pm

October 14, 2010

WASHINGTON -- Today, a regulatory hurricane threatens our economy and its ability to create the 20 million American jobs that we need by the end of this decade. It's been building strength for some time. Over the last several decades, more than 100,000 regulations have been issued, many of which impose heavy burdens on our job creators.

In the last two years, conditions have grown even worse. We've seen a dramatic acceleration of major regulations and mandates, from the health care and financial reform laws to some of the most activist agendas ever undertaken by federal agencies.

Businesses are hunkering down in response, hoping to wait out the storm. The $1.8 trillion they hold in cash reserves will likely remain on the sidelines until the economy becomes more certain. Without certainty, businesses find it difficult to make the plans and investments needed to grow and create jobs.

The business community, of course, has long recognized the need for sensible regulations to ensure workplace safety, guarantee worker rights and protect public health.

But government has gone too far. America is sinking under the crushing weight of the ever-expanding regulatory state. This burden threatens to disrupt our recovery, hamper long-term growth, undermine our global competitiveness, and suffocate the entrepreneurial spirit so vital to America's success.

If you want to see how far-reaching the regulatory state has become, look at The Code of Federal Regulations. Put simply, it includes every regulation now in force in this country. The document is nearly 150,000 pages long, spread over 50 different volumes.

Federal regulations are only the tip of the iceberg - there are hundreds of thousands, if not millions, of regulations at the state and local levels. In fact, those are often the ones small businesses complain about the most.

California offers a perfect example. A recent study pegged the cost of state regulations at $177 billion in 2007. It also resulted in the loss of more than 1 million jobs.

While many regulations have a positive impact, many others are outdated, ineffective, overly complicated, and counterproductive.

The Small Business Administration's Office of Advocacy put the total price tag of complying with federal regulations at $1.75 trillion in 2008. That amounts to $15,500 for each U.S. household. In the same year, the average cost to businesses was nearly $8,100 per employee. Costs are 36 percent higher for small businesses, which create 60 to 80 percent of new jobs.

It's only going to get worse. The Environmental Protection Agency is advancing 29 proposed major rules and 173 others - an unprecedented level of regulatory action. The massive health care law creates 183 new agencies, commissions, panels and other bodies. And the nearly 2,400-page financial regulatory reform bill creates nearly 500 regulatory rulemakings, 60 studies, and 93 reports.

So what's to be done to stem this rising tide? First, Congress needs to stop approving bills that pass the buck to the regulators. For example, the health care law hands significant new powers to the Department of Health and Human Services and vests its secretary with broad, unchecked discretion.

Second, Congress must begin to exercise vigorous oversight of the sweeping bills that it passes. At the moment, regulators are left to do as they see fit, and even regulations with a major economic impact are infrequently reviewed.

Third, the federal agencies must do a much better job of complying with laws designed to ensure the use of quality data, cost-benefit analyses, and the scrupulous review of regulations.
Finally, the American people must speak out against the regulatory hurricane that is overwhelming our economy and squelching job creation.

At stake is the health of our economy, our standard of living, our global competitiveness, and the free enterprise system that is at the heart of the American Dream.


Thomas J. Donohue is the president and CEO of the U.S. Chamber of Commerce. Readers may write him at U.S. Chamber of Commerce, 1615 H Street NW, Washington, D.C. 20062; website: