Study: Cost of U.S. Regulations Larger Than Germany’s Economy

Regs have cost economy $4 trillion, $13,000 per person

BY: Elizabeth Harrington
April 26, 2016 12:50 pm

The cost of U.S. regulations is now larger than Germany’s economy, amounting to a $4 trillion loss to the American economy, according to a new study by the Mercatus Center at George Mason University.
The study, released Tuesday, found that regulations over the past several decades amount to a loss of $13,000 for each American worker.

“The impact of regulation on economic growth has been widely studied, but most research has focused on a narrow set of regulations, industries, or both,” according to the report. “These studies typically rely on regulatory indexes that measure subsets of all regulation, on country-to-country comparisons, on short time spans, or on surveys in which experts report how regulated they believe their country or industry is.

“In order to better understand the cumulative cost of regulation, a comprehensive look at all regulations across many industries over a long period of time is imperative.”

Researchers at Mercatus studied data from 22 industries from 1977 to 2012, finding regulations have distorted “investments choices that lead to innovation” and have “created a considerable drag on the economy.” The result: an average shrinking of the economy by 0.8 percent a year.

“If regulations had been held constant at levels observed in 1980, the American economy would have been 25 percent larger than it was in 2012,” the report said. “This amounts to a $4 trillion loss in 2012 for the American economy or $13,000 loss per person, a significant amount of money for most American workers.”

The cost of federal regulations amounts to the fourth-largest GDP in the world, surpassing the economies of Germany, France, the United Kingdom, Brazil, Italy, Russia, and India.

Mercatus researchers Bentley Coffey, Patrick A. McLaughlin, and Pietro Peretto said they hope that their in-depth analysis will persuade lawmakers and federal agencies to think twice before implementing costly regulations.

“While static analysis of individual regulations sometimes predicts beneficial effects for society, policymakers should consider the results of this study not only when creating new regulations, but also when considering reform of the regulatory process itself,” the study said.

“By altering investment decisions and disrupting the innovation that comes from investment in knowledge creation, regulations have a cumulative and detrimental effect on economic growth—and, over time, have a real impact on American families and workers.”

President Barack Obama is pushing thousands of new regulations through during his final year in office, many that will cost industries more than $100 million.