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New study reveals the massive costs of federal regulations

Common sense suggests that regulations hurt the economy, but until now no definitive study had been done to prove this fact.

Last week George Mason University's Mercatus Center released the results of a comprehensive study that determined the cumulative cost of federal regulations over the last 35 years. Here are a few highlights: 

The buildup of regulations over time leads to duplicative, obsolete, conflicting, and even contradictory rules, and the multiplicity of regulatory constraints complicates and distorts the decision-making processes of firms operating in the economy. Firms respond to both individual regulations and regulatory accumulation by altering their plans for research and development, for expansion, and for updating equipment and processes. Because of the important role innovation and productivity growth play in an economy, these distortions have consequences for the growth of the economy in the long run.

KEY FINDINGS

Economic growth in the United States has, on average, been slowed by 0.8 percent per year since 1980 owing to the cumulative effects of regulation:

    • If regulation had been held constant at levels observed in 1980, the US economy would have been about 25 percent larger than it actually was as of 2012.
    • This means that in 2012, the economy was $4 trillion smaller than it would have been in the absence of regulatory growth since 1980.
    • This amounts to a loss of approximately $13,000 per capita, a significant amount of money for most American workers.

Regulations have their place, but duplicative and unnecessary regulations serve only to hurt the American worker.

Only one solution is comprehensive enough to address such over-regulation and the agencies that perpetrate it: an Article V Convention of States.

A Convention of States can propose constitutional amendments that limit the ability of regulatory agencies to create new rules without congressional approval. These amendments can cap the number of regulations and ensure they do not unduly burden the American economy.

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