Increasing the Regulatory Burden

The other day I was reading a study commissioned by the SBA and completed by Nichole and Mark Crain of Lafayette College in 2010.  The executive summary begins with stating that the annual cost of complying with federal regulations in the United States totaled $1.75 trillion in 2008.  If this were to be divided up evenly among households, it would total $15,586.  Compare that to the average household cost for health care in that year of $10,500.  It is interesting how there has been an uprising about the high costs of healthcare, yet you do not hear the same clamor over regulatory costs!

To give you the idea of the enormous size of this, in 2014, according to the International Monetary Fund, the entire GDP of Canada, the 11th largest on the planet, was only $1.788 trillion.  So, if we could take the regulatory costs in 2008 and make it a national economy to itself, it would be the 12th largest in the world.

To depress you even further, the cost of regulatory compliance has definitely not slowed down since 2008.  We still have not even scratched the surface with items such as Obamacare or government agencies like the EPA.  So where do most of these rules come from?  They come from a new 4th branch of government called the bureaucracy.  In 2011, federal agencies issued 3,807 final rules, yet Congress passed and the president signed only 81 laws.  In 2012, federal bureaucrats issued 212 federal rules which each were projected to cost more than $100 million. 

Another problem here is these rules are not passed as a laws are as outlined by our Constitution.  These rules, which often impose monetary or criminal penalties, are created as explanations of laws or enforcement actions of various agencies.  Consider one of the favorite laws in the financial realm, the Dodd-Frank Act.  This was supposed to protect the consumer from risky decisions of financial institutions.  The law is an offense to the Constitution.  An example here is the establishment of the Consumer Financial Protection Bureau (CFPB).  This agency has far reaching power from preventing financial transactions that are considered “unfair,” “deceptive,” or “abusive” in regarding a consumer financial product or service.  The statute has no definition of what these acts are, so the CFPB has exclusive authority to create rules with little recourse by those impacted by its decisions.

No doubt, if you are in a financial institution, you are feeling the impact of these dictates today.  What makes matters direr is that the CFPB was set up by Congress for Congress to have no appropriating authority over the CFPB, as the law allows the CFPB to claim funding directly from the Federal Reserve.  So this would appear to violate the Constitution’s establishment of how funding for the federal government agencies is handled. 

The head of the CFPB is given a five year term and can only be removed “for inefficiency, neglect of duty, or malfeasance in office” by the president.  Congress gave up even more of its authority by establishing a 15 member oversight council and granted it broad executive powers.  The council has open-ended discretion to designate nonbank financial institutions as systemically important, which should have a wide range of regulatory authority over these businesses.  I recently ran into this from some of my real estate friends in Colorado who were putting on classes for other realtors dealing with the new impact of the CFPB to their firms.  But these items cannot be challenged as the law prohibits aggrieved parties from challenging the legal status of the council’s actions in court.

So we are left with a Congress that has surrendered its own power to the executive branch entities, and the president to grant his power to an administrative state.  Statists have, for the past century, contended that these agencies are necessary to provide a progressive government required by a modern society.  Yet, delegating power to an administrative state is a violation of the separation of powers doctrine of the Constitution where the authority is granted to the three branches of the government.  The ceding of such power would seem an illogical act that is completed over and over again by each branch of government, yet it make perfect sense when elected officials and appointed judges share the view of an ever-expansive administrative state that runs the lives of the people of our country.

There is a saying that power corrupts and absolute power corrupts absolutely.  The consolidating and granting of such power to a group of people places us on a fast track to totalitarianism.  It is important that brakes be placed on our journey as I doubt the American people are intending to sign up for this trip in the first place.  We need elected officials and appointed judges who operate from the standpoint of limited government.  We may even need safeguards in our Constitution that would force significant federal agency rules that would impact the economy by $100 million or more to be forced to a congressional vote or some provision that would create sunsets for all federal agencies that are not outlined in the Constitution. 

There is an old story about the producers in a society being the ones that are pulling the cart while there are some who cannot produce, for no fault on their own, and thus sit inside the cart.  Today we find many more in the cart who choose to be there.  We also find another group in the cart, telling the pullers of the cart how to do their job.  One wonders when the pullers will just give up.