Overregulation Killing Economic Recovery

There are a number of popular theories why the American economy is stuck in the doldrums and one in 10 Americans cannot find a job: consumers are not spending enough, the government is not spending enough, the government is spending too much, jobs have gone to China, etc, etc. Arguably, the single biggest drag on economic recovery — overregulation — is not discussed much.

A recent report from the Small Business Administration calculates the existing annual regulatory costs at $1.75 trillion. This is nearly twice as large as the sum of all individual income taxes collected last year. The Environmental Protection Agency is the worst offender, inflicting regulatory costs estimated at $23.2 billion dollars, according to a new Heritage Foundation study, "Red Tape Rising: Obama's Torrent of New Regulation."

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EPA is currently engaged in several significant rulemaking initiatives including regulating CO2 emissions, stricter ozone standards, and classifying coal fly ash as a hazardous waste. The additional cost of proposed EPA rules will significantly add to the cost of doing business and further diminish America's economic competiveness. Additional regulatory burdens especially harm small businesses that do not have the resources to hire lobbyist to protect their interests.

State officials cannot stop overregulation by the feds, but there are things that can be done at the state level to at least not make the situation worse. A good place to start would be to enact the following reforms:

  • Pass a law that does not allow state regulators to promulgate environmental regulations more stringent than federal requirements without the authorization of the Legislature.
  • Subject all state environmental regulations to periodic review and sunset unless the legislature reauthorizes them.

Government does not create jobs. Government can, however, reduce the regulatory burden and make it easier for the private sector to create jobs. Regulatory reform would allow the creation of more sustainable jobs than the spending of more federal stimulus dollars.