Thursday, 27 June 2013 16:10

Federal Regulations Cut Standard of Living by 75 Percent Over 56 Years

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The 20th annual snapshot of the federal regulatory state published by the Competitive Enterprise Institute (CEI) last month announced the arrival of an unhappy milestone: Regulatory costs now equal more than half of all federal spending. Put another way, the real cost of government in the United States is half-again as much as the federal budget. It is approaching a third of the country’s economic output. Said CEI in its Ten Thousand Commandments 2013 report: “Federal environmental, safety and health, and economic regulations cost hundreds of billions — perhaps trillions — of dollars every year over and above the costs of the official federal outlays that dominate the [current] policy debate.”

Just how many billions and trillions the regulatory state costs, and has cost, the American economy has been put into perspective by two economists in their paper, “Federal Regulation and Aggregate Economic Growth,” published in the June issue of the Journal of Economic Growth. Rather than count the cost in dollars, the authors, John W. Dawson and John J. Seater, take a unique approach and attempt to measure how much lower Americans’ standard of living is today compared to what it would be if regulations had stayed at the level they were in 1949, the starting point of their study. Their conclusion? The average American household’s income would be $27,500 a month instead of the $4,400 a month that it is currently.

In their study they count the pages of federal regulations from 1949 through 2005 and discover that they have grown by 600 percent, slowing the economy by an estimated two percent every year. In simple terms, today’s economy, which produces about $17 trillion in goods and services every year, would instead be producing almost $55 trillion. And the authors apologize that their study doesn't reflect state and local regulations during that period as the effort that would have been required to collect and analyze them as well would have greatly exceeded their time and resources.

In a word, incomes and standard of living for the average American family would be even higher than they estimate, had that data been available. They also note that the avalanche of regulations under the Bush and Obama administrations were not included as part of their study.

There were only four years in that 56-year span when federal regulations declined: once under Reagan, and three under Clinton. In every other year, regulations increased, moving from 19,335 pages in 1949 to 134,261 in 2005.

Ronald Bailey, the science correspondent for Reason magazine and the author of "Global Warming and Other Eco-Myths," evaluated the loss in standard of living in a different way but came to same conclusion. By adding two percent to the real historical 3.2 percent annual rate of growth in America’s economy from 1949 through 2011 — and then doing the math — he found that America’s economic output would be $49 trillion, just slightly below the $53.9 trillion estimated by Dawson and Seater. Bailey notes coyly:

Whatever the benefits of regulation [may be], an average household income of $330,000 per year would buy a lot in the way of health care, art, housing, environmental protection, and other amenities.

Bailey then speculated as to why governments do this to their citizens. He came up with three theories: politicians attempting to improve social welfare by correcting “market failures”; companies capturing control of the agencies regulating them in order to exclude competitors and increase their profits; and politicians seeking to increase their power.

There is, of course, a fourth theory not mentioned by Bailey but supported by the political reality of the emerging totalitarianism extant in the country. David Horowitz, in his explosive pamphlet "From Shadow Party to Shadow Government," tracks the intents, purposes, and actions of a primary driver behind the current political scene, George Soros, and concludes that his agenda could essentially be distilled down to three overriding themes: the diminution of American power, the subjugation of American sovereignty in favor of one world government, and the implementation of a socialist redistribution of wealth.

This has been a common theme for decades, first exposed to light when a committee of Congress, the Reece Committee, investigated tax-exempt foundations in the early 1950s. Norman Dodd, the chief investigator for the committee, talked with Rowan Gaither, then-president of the Ford Foundation, who explained:

Mr. Dodd, all of us here at the policy-making level of the foundation have at one time or another served in the OSS (the Office of Strategic Services, the forerunner of the CIA) or [in] the European Economic Administration, operating under directives from the White House.

We operate under those same directives....

The substance of [those directives] is that we shall use our grant-making power to so alter life in the United States that we can be comfortably merged with the Soviet Union [in a one-world government].

All that the authors of the report published by the Journal of Economic Growth and the analysis by Bailey have done is to show just how successful those directives have been, and what they have cost Americans in unattained standards of living far beyond those being enjoyed today.

 

A graduate of Cornell University and a former investment advisor, Bob is a regular contributor to The New American magazine and blogs frequently at www.LightFromTheRight.com, primarily on economics and politics. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. .

5 comments

  • Comment Link Dieter Benz Sunday, 21 July 2013 07:00 posted by Dieter Benz

    This article points out the tsunami of destruction headed for Baby Boomers in particular who are counting on pensions and other retirement funds for their 'golden years'. Massive change is on the way and it won't be pretty.

  • Comment Link Frank M. Pelteson Friday, 28 June 2013 12:15 posted by Frank M. Pelteson

    The interview of Norman Dodd by G. Edward Griffin at http://www.youtube.com/watch?v=1PtguK73P6M is earth-shaking.

  • Comment Link voiceofthenameless Friday, 28 June 2013 10:42 posted by voiceofthenameless

    Democracy has become another form of slavery. You only have the illusion that you have a choice...

  • Comment Link Tionico Friday, 28 June 2013 01:12 posted by Tionico

    True enough, some HAVE been playing games with our money. Fractional Reserve banking, no more gold standard, "quantitative easing" (massive printing of money with nothing behind it but the paper its printed on), and creation of the Federal Reserve have inexhorably led to part of this. BUT... the home I purchased in 1990 for $57K now appraises by the county at four times that.... but my property taxes have gone up tenfold. We have half the number of sheriff's deputies patrolling the same northern section of the county, which has grown significantly in populatioin density. NOW.. get this... the homeowner's insurance I MUST carry is a "replacement value" policy, per state law, and the face value of that policy, to rebuild a home of present size and number of rooms on the same spot, is roughly twice the current cunty appraised value. Sure, new home would be worth more than this old dog.... BUT about forty percent of the increase in "value" is due to state mandated "energy codes" that address every aspect of construction, adding at least 35% to the actual cost of building to the 'green" standards compared to normal ICBO codes. New requirements and limitations for heat loss, hermetically sealed, coated, and double-pane windows (which I WILL leave open almost all year round), insanely expensive heat exchangers to compensate for the tightly sealed "envelope" (again, which I constantly compromise by keeping windows open year round....) and a host of other nonsense, add a third to the cost of new home construction. So, the money itself is not the only thing being messed with. Regulations DO indeed lower our standard of living. Septic systems can no longer be gravity.. MUST be designed... by pros with a good old boy protective system in place. And, guess what? Engineered systems can NOT be installed by homeowners... you've got to use the "professional" boys, another good ol boy protection racket and make work system. If I can follow the blueprints to plumb and wire my home, WHY can't I ALSO be smart enough to plumb and wire the poop system as well? Stupid.......

  • Comment Link REMant Thursday, 27 June 2013 20:56 posted by REMant

    Well, no doubt we would likely be more efficient without most of the regs, but the figures don't account for the fact that the equivalent of a $10,000 home in 1949 approaches $1.5 million in many places today, suggesting, not that they are wrong and we are wealthier, but that someone has been fooling around with the money.

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