The Hidden Costs of Regulation

The cost of regulatory compliance in the US is killing jobs and investment. George Will reports:

According to the U.S. Small Business Administration, by 2008 the cost of federal regulations had reached $1.75 trillion. That was 14 percent of national income unavailable for job-creating investments. And that was more than 11,000 regulations ago.

The government can do whatever it wants regarding fiscal and monetary policy. All these do is pump up that accounting contrivance we call GDP. While that may provide temporary favorable headlines, it cannot create jobs if the incentives at the microeconomic level are not there. By itself, macroeconomics is no match for disincentives at the level of decision makers.

The US suffers from stifling regulation, much of it providing no socially useful purpose other than catering to the ideological mindset of various appointed government officials. Stupid and unnecessary regulation is not costless, however. It has negative effects:

• It drives investment out of the country and with it jobs.
• It causes marginal businesses to close.
• It causes profitable businesses to become less so, leading to less investment and hiring.