May 28, 2002

Public Interest Comment on the Office of Management and Budget's 2002 Draft Report to Congress on the Costs and Benefits of Federal Regulation

  • Susan Dudley

    Director, George Washington University Regulatory Studies Center
  • Jennifer Zambone

    Chief Operating Officer
Key materials
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Report to Congress on the Costs and Benefits of Federal Regulations

Stated Purpose:

"[An] estimate of the total annual costs and benefits (including quantifiable and nonquantifiable effects) of Federal rules and paperwork"

Summary of RSP Comment:

The annual report to Congress on the costs and benefits of federal regulation is important. The federal government has two principal mechanisms by which it diverts resources away from private sector uses towards government-mandated goals: taxation (and subsequent spending) and regulation. While tax revenues are measured, tracked through the federal budget, and subjected to Congressional oversight and public scrutiny, there is no corresponding mechanism for keeping track of the costs of regulation. Yet this burden can be considerable and continues to grow. Since the costs of regulation are not paid directly, as taxes are, Americans don't know what this hidden tax actually amounts to each year. And all of the burden ultimately falls on individuals-consumers, workers, entrepreneurs, investors, taxpayers, and citizens-and affects the quality of their lives. Businesses (and governments too, for that matter) are merely intermediaries and cannot "absorb" the real costs of regulation. People bear this burden. Estimating the size of this hidden tax is not straightforward; policy analysts have resorted to such crude metrics as the number of pages printed in the Federal Register, or the size of the budgets of regulatory agencies. (See Figures 1 and 2.) While these statistics are informative-they confirm that the number and scope of regulations have grown dramatically over the last three decades-they are only proxies rather than estimates of the extent to which regulations increase the cost of goods and services and limit consumer choices. OMB's annual report to Congress has the potential to shed some light not only on the magnitude and impact of the hidden regulatory tax, but also on the benefits Americans are expected to derive from it.