Even though today is tax day, let us not forget that taxation is just one of several ways that government dimishes propserity. Government spending financed by borrowing also is destructive, as is most regulation since red tape imposes substantial inefficiences and generally fails a cost-benefit test.
The folks at the Competitive Enterprise Institute have just released their annual estimate of the regulatory burden. The publication, entitled Ten Thousand Commandments, includes the following depressing factoids:
• A very rough extrapolation from an evaluation of the federal regulatory enterprise by economist Mark Crain estimates that annual regulatory compliance costs hit $1.187 trillion in 2009.
• Given 2009’s actual government spending of $3.518 trillion, the regulatory “hidden tax” stood at 34 percent of the level of federal spending itself. (Because of the recent federal spending surge, this proportion is lower than the near–40 percent level of recent years.)
• The dramatic reality that regulations and deficits now each exceed $1 trillion a year is an unsettling new development for America. In 2008, regulatory costs were more than double that year’s $459 billion budget deficit. Now, the 2009 deficit spending surge has catapulted the deficit well above the costs of regulation ($1.414 trillion compared to $1.187 trillion, respectively).
• The game has changed, with respect to government spending versus government regulation. Although the spending and deficit levels eclipse federal regulatory costs now, unchecked government spending can translate, in later years, into greater regulation as well…
• Regulatory costs dwarf corporate income taxes of $147 billion.
• Regulatory costs exceed estimated 2009 individual income taxes of $953 billion by 25 percent.
• Regulatory costs of $1.187 trillion absorb 8.3 percent of the U.S. gross domestic product (GDP), estimated at $14.253 trillion in 2009.
• Combining regulatory costs with federal FY 2009 outlays of $3.518 trillion implies
that the federal government’s share of the economy now reaches 33 percent.
Should a majority pay for the sins of an elite few? The costs of regulation
News headlines: The Securities and Exchange Commission accused Goldman Sachs of “defrauding” investors.
Certainly betting against a financial product that you sell to your clients may be considered morally wrong. The financial sector needs more corporate responsibility but is regulation the answer? Allow me to point out that these “defrauded” investors are not “You and I”, not middle to lower class Americans. Most of them are highly educated upper-middle, rich, sophisticated investors who were well aware of the risks they were taking. Sure, companies that acted irresponsibly, bad apples, should be held liable but does it justify regulating an entire industry, and hurting even those who played by the rules? Regulation will encourage one of two things, or both: either business will waste resources on expensive lawyers to find loopholes in the law (which they already do) or they will move overseas, rendering America less competitive, costing jobs and slowing down our economic recovery.
Read the full article at http://wp.me/pPdcm-2e