How Much Do Regulations Cost?

I walked into the kitchen and MSNBC was on with Al Sharpton lambasting Republicans for talking about light bulb and ceiling fan regulations. Apparently the EPA is chasing after ceiling fans and some Republican Congress people are enacting legislation to stop the EPA, something that champion of the African American “Community,” the community that has problems finding jobs, has issues with that, or any other restrictions of government.

Knowing what I know about that POS Sharpton, with his long history of burnings, riots, people destroying and general rabble rousing, I doubt he has had any personal experience with complying with regulations. After all he doesn’t even comply with the tax regulations and pay his taxes.

As an engineer, having worked in several regulated  industries, I do know something about regulatory compliance.   In fact I’ve spent a significant amount of time dealing with regulatory compliance first hand.  It’s a huge pain in the butt.  Time I would rather spend designing and developing is spent chasing down certifications for this or making sure that I or t is dotted.  Then there’s what happens if you need to change even a drawing material note.  Then you have to create a massive  Engineering Change Notice and ship the whole thing off to a regulatory agency and wait. It’s a drag.

What people will tell you is that without regulations the sky will fall, rivers will burn and we will all be choking on bad air, drinking bad water and poisoning ourselves. I was alive before most of the regulatory letter soup agencies really got going in the Seventies and life didn’t seem to be as bad as people said.  Yes, there were problems like Cuyahoga River and Love Canal, but these were local problems and actually fairly easily resolved.  Love Canal should never have happened as Hooker Chemical told the school board that they donated the filled landfill not to build anything on the land.  The school board sold the land anyway. With things ending as we all know.

The problem is that regulations might seem reasonable at first, but the typical bureaucrat doesn’t know when to stop.  Take the CAFE standards for instance.  At the time they were imposed, there was real concern that oil might actually run out.  So maybe they made sense to the bureaucrats.  But why the steadily increase of the standard now when we now know that we will probably NEVER run out of oil.  Yet there we are, with the added cost to car buyers for ever more expensive cars that will inevitably become both even more expensive and dangerous as the automakers try to conform to regulations that break the boundaries of physics and common sense.

It’s become like this all across just about every facet of life.  Everything we use or consume is surrounded by a web of red tape.  Just look at the labels.  Count the number of alphabet soup agencies on  stuff and think of what must be behind all of them.

It’s estimated that the direct cost of regulation is 1.88 trillion a year.  That’s only part of the picture. There’s also the time and money spent in indirect costs.  Every minute, for instance that I spend chasing a ROHS cert is time I’m not spending looking for ways to improve the product.

Of course the regulatory elephant sits heaviest on the smaller businesses.  Most of which are struggling to just get by.

The fact is that it’s gotten so bad that it’s almost a given that a business, no matter how small is out of compliance with something.  This showed up on my Facebook Timeline:

I’m a lawbreaker. So’s my dad. In my dad’s case, it’s because he didn’t register a rain barrel, in mine it’s because the sugar we use in our cotton candy concession business is not stored in a separate facility from my home, but in my own pantry. As my wife and I have embarked on this small business venture we’ve discovered that it is impossible, not hard, but IMPOSSIBLE to obey all the laws and regulations pertaining to a small business. We would have had to have spent tens of thousands of dollars, we don’t have and can’t get, just to be nominally compliant and I want to stress “nominally.” See the laws are not only stupid, they are ridiculously complicated and convoluted with many competing agencies with overlapping authority over you. So much so, you have no idea when you are breaking them or not. We were panicked about it until our fellow vendors and the organizers at the farmer’s market where we make cotton candy got us to relax about it. EVERYONE was in some violation or the other, and the inspectors only cared about the most basic stuff and that your paperwork was in order. So everyone knew it was a sham. I must comment that this is in Utah, which has a reputation for being one of the most friendly states to start a new business in. But it made me mad, because it became clear that at any time, for any reason, an inspector could shut us down, and it would be impossible to protest. The laws were not written to make food handling safer or better, it seems instead they were written to give maximum leeway to the regulator class. I live at their pleasure, and I am very much aware of it, and it galls me.

The fact is that the more government you have, the bigger the nongovernment institutions get.  Simply put, the cost of government regulation and economies of scale create the big corporations and enable their existence.

“It is fashionable for the left to say we need big government to deal with big business. The opposite is true. Only big business can survive big government.”
— Carly Fiorina

Even a crisis will not stop regulators.

Add to that, the stuff that’s so screwed up, it no longer works.

The EPA and the CPSC  have been declaring war on gas cans for as long as I can remember. When I was working in the hardware store, the dissatisfaction with the abominations that we were selling was palpable.  Those cans are actually dangerous because they have the nasty habit of leaking gas where you don’t want it.

The problem with zero tolerance in things like lead is that you can destroy and burn things that we should treasure.  Those old children’s books like those I grew up with, for instance.  Will we lose an important part of our culture to regulatory intolerance and pettiness?

Like all bullies the Feds go after the little guys who don’t have any recourse.  The problem with that is that we all pay for the added cost in more expensive products or no products. Either the price of compliance is passed on if possible or the product simply stops being made, which can be trivial or might be a big loss in people’s quality of life.

People see the stalwart guardians in their white uniforms(FDA, really) and think that they are being protected.   The reality is that just slapping people with pieces of paper doesn’t change anything.  Has the FDA actually STOPPED an Ecoli outbreak before it happened? Yes, it’s bad that people die, but somehow having men with guns enforce everything doesn’t seem to do anything but a false sense of security.

The problem with regulation is that in many ways it’s one big broken windows fallacy.  We see the regulation we do have, but we don’t the see the prosperity and economic growth that we don’t have. And even a 1% or 2% growth lost adds up to a lot of lost prosperity.

Charles Murray has said that maybe it’s time to disobey.  At this point what can people do otherwise?

The fact is that we’ve almost reached the point where the regulatory state is strangling any possible future growth.  Growth has been essentially stifled in existing industries and new industries  can’t emerge because financial regulation makes money too expensive.  We have gotten to the point where we are eating the seed corn of our future and that never ends well.

For more on the dysfunctional economy click Here or on the tag below.

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