Regulations Costly, Study Finds

by G. E. Morton

Federal regulations imposed costs of $667 billion annually on the U. S. economy in 1996, according to a new study by the Competitive Enterprise Institute (CEI). The figure translates into a financial burden averaging $6831per family, or 19% of the average household income—-more than most families pay in personal income taxes. New rules that will cost American consumers an additional $11.6 billion are in the pipeline.

The study, by CEI fellow Wayne Crews Jr., relies primarily on data gathered from federal sources, including the OMB and the Small Business Administration.

The latest figure continues an upward trend beginning in 1988. During the preceding decade, due to deregulation of the trucking, airline, and natural gas industries, regulatory costs had actually shown year-to-year declines. But passage of the Clean Air Act and the Americans with Disabilities Act early in the Bush Administration launched the current upward spiral. Costs of compliance with environmental regulations have increased from 7% of the total regulatory cost burden in 1977 to 27% last year.

''When the federal government decides it wants to get something done,'' says Crews, ''it has three choices. It can raise taxes to pay for its adventures, it can borrow money (which must be paid back with interest by future taxpayers) or it can issue regulations to require the private sector and lower-level governments to shoulder the burden.'' Crews expects more reliance in the future on the third method, given the pressure to balance the federal budget and the fact that regulatory costs are ''hidden''—-passed along to consumers in the form of higher prices.