Grandfather Government Regulation Cost Report

Government is costing us more than the taxes we see,
because it's difficult to see the extra cost of complying with government regulations.

Complying with government regulations consumes $1.4 Trillion
($1,028 billion federal mandates, $343 billion state & local government mandates)
- 14.9% of the economy - $4,680 per man, woman and child -

- adding this regulation cost to $13,568 government spending per person
equates to $18,248 per person of government impact -

AND - this does not count compliance cost impacts of the Patriot Act and Sarbanes-Oxley regulations

- federal expenditures on regulatory activity increased 2.7 times faster than economic growth since 1960 -
- at 14% per year compounded -

Government mandated regulatory compliance costs are huge amounts: as much as all spending by state & local governments (education, police, welfare, etc.), or twice as much as social security & Medicare spending, or 3 times more than national defense. And, government does not budget or account for these huge costs - although $100 hammers are accounted. Despite congressional mandates, government has been dragging its feet for years to account, measure & control - thereby placing the economics of our young generation at incalculable risk.
(Nobel Laureate Dr. Milton Friedman, in various letters to this author, continually stressed the importance of studying this critical area of regulatory compliance costs. How right he was!)

Of $1.371 trillion total regulatory costs, federal regulatory compliance costs are 1.028 trillion (incl. about $200 billion for paperwork just complying with tax codes, which is rapidly increasing); state & local government compliance costs are estimated at $343 billion.

[This Regulation Cost report includes picture-charts that you have not seen, and is part of the series of Grandfather Economic Reports - of economic threats facing young families and their children, compared to prior generations]

If a nation has a goal of continually increasing real income & economic living standards for its citizens, plus a strong currency and positive international trade balance, it must make sure its free-market private sector is by far the largest and growing share of the national economy.

The larger the section of the economy that is consumed by government spending, and the higher the regulatory costs mandated, the smaller the effective share of the economic pie remaining to the 'free-market private' sector. (It is the intent of this report to review the costs and trend of regulations, not the possible benefits vs. liabilities of various regulations).

You are now viewing the 'start-up' page of the Regulation Cost Report (a link at the bottom of this page takes you to the full report and charts) - - To help summarize the full Regulation Cost Report of the next page, included below is one of the data color pictures.

Govt outlays + regulatory costs 1947-today This chart looks at the economy as a pie (as measured by national income), in 1947 compared to today. Its easy to understand - - let me help.

The shrinking (blue) slice of the total economy is the free-market Private Sector's share of the economy - -reduced from a 74% share of the economic pie in 1947 to a 42% share today.

That's a HUGE reduction - - a transfer of 32% of the economy from the private sector to government spending and its mandated regulatory compliance costs.

This was caused by two factors:
1. The red slice of the pie on the chart: the share of the economy dependent on government (federal plus state & local) spending increased faster than growth of the economy - - the government-spending share of the economic pie expanded from 22% to 43% of the economy. Although the total economy grew in size during this period, the proportion owned by government spending grew even faster. This is also shown in the Grandfather Government Growth Report.
2. The yellow slice of the pie on the chart: the share of the economy's national income consumed by regulatory compliance costs mandated by these government entities also increased faster - - regulatory compliance costs growing from 4% of the economic pie to a 14.9% share (11.2% federal mandates and 3.7% state & local govt. mandates), the subject of this regulation cost report.

So - during this period government at all levels increased their control of the economy by 32 points - - made up of an additional 21 points in spending and an extra 11 points in mandated regulatory compliance costs.

The more of the economic pie consumed/controlled by government spending, the smaller the portion left for the free-market private sector.

Most agree the private sector (not the government sector) is the prime generator of long-term real median family incomes, living standards, real private savings and freedom. This chart indicates the private sector has lost a big hunk of its share of the total economic pie, by increases in government spending and by the cost of complying with government-mandated regulations - - all increasing faster than total economic growth.

Additionally, compliance costs small business more per employee than big business. In 2004, according to a report released by the U.S. Small Business Administration's Office of Advocacy, small businesses spent $2,365 more per employee last year to comply with federal regulations than their larger counterparts. Companies employing fewer than 20 employees spent an average of $7,647 in 2004 on items ranging from tax and environmental compliance to international trade and workplace requirements. That's 45 percent more per employee than at companies with more than 500 workers.

with color pictures you have never seen
(a picture is worth a thousand words - and, knowledge is power if you have it)

Copyright © 1997-2008 Michael W. Hodges. The Grandfather Economic Report series is the intellectual property of its author; all rights reserved under Copyright Conventions. Permission to redistribute all or part of this series for non commercial purposes is granted by the author, provided the associated web page address is included and full credit given to the Grandfather Economic Report and the author, Michael Hodges. Notice appreciated via email.