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Following tax day, many Americans breathe a sign of relief, assured that they won’t have to cut Uncle Sam a check for at least the next year.
What they don’t realize is that the government doesn’t need a slip of paper from your checkbook to dip into your bank account. In fact, without any of the high profile and highly publicized Congressional battles that surround changes to tax rates, the federal government quietly siphoned $1.75 trillion out of the economy last year. That’s nearly 12 percent relative to the Gross Domestic Product. How?
All through bureaucratic rules and regulations on business. And, rather than sacrificing growth or profitability, regulated industries account for compliance costs by raising prices. This transfers the burden of government regulation directly to the consumer of goods and services, i.e. you and me. While even the most expensive of rules passed down by regulatory agencies may only amount to pennies on the dollar in any given transaction, when you consider that the Code of Federal Regulation is 169,301 pages long (117 times longer than War and Peace), the strain on the economy becomes easier to appreciate.
The situation is growing worse at a frightening rate. The raw size of the regulatory code has grown by almost 20 percent in just the past decade.
This year is already shaping up to be a troubling year for the economy when it comes to the burden of bureaucracy. Billions have already been spent in compliance with federal regulation. New frivolous, yet expensive, rules are hamstringing an economy still reeling 6 years out of the financial crisis.
A particularly egregious example of this years regulatory forecast is a 393 page rule promulgated by the Department of Energy set to take effect in the coming weeks. It’s called the Energy Conservation Standards for Distribution Transformers and it slated to be the most expensive regulation promulgated thus far this year.
The text of the rule states: “Pursuant to EPCA (Energy Policy and Conservation Act of 1975), any new or amended energy conservation standard that DOE (Department of Energy) prescribes for certain equipment, such as distribution transformers, shall be designed to achieve the maximum improvement in energy efficiency that DOE determines is technologically feasible and economically justified.”
In English, this means that the companies which produce those cylindrical electrical devices at the top of the telephone pole will have to produce them in a way that ensures they meet efficiency standards set by an office in Washington. This may not sound particularly troubling, but conservative estimates put the cost of this single regulatory standard at over $5 billion. Large-scale manufacturers are projected to spend the equivalent of 20 percent of their research and development budgets on compliance, while smaller manufacturing firms could see that figure jump as high as 220 percent.
While many would struggle to empathize with a major corporation’s plight to deal with this aggressive new regulation, they can rest assured they won’t have to. Companies will disguise compliance costs with higher prices for the transformers themselves. Higher transformer prices necessarily mean higher electricity prices and higher utility prices will increase the cost of nearly all goods and services across the economy.
This is just one part of an additional $19 billion worth of regulatory costs that have filtered their way into the economy so far this year, on top of the $1.75 trillion in existing regulations. So long as the federal government still insists on controlling all aspects of the economy, down to the efficiency standards of a specialized product for electrical utilities, prices will continue to rise as businesses pass the burden of a government breathing down their neck on to their customers; that is of course if the business chooses to remain open.