The High Costs of Regulatory Enforcement

The High Costs of Regulatory Enforcement
February 8, 2013

U.S. regulatory cost estimates of around $1.8 trillion per year encompass compliance costs paid by the public plus economic drag. But those estimates do not include the costs of administering the regulatory state—on-budget amounts spent by federal agencies to produce rules and to police regulatory compliance are not accounted for there.

For that part of the “regulatory budget,” the Weidenbaum Center at Washington University in St. Louis and the Regulatory Studies Center at George Washington University in Washington, DC regularly examine the federal budget to excerpt and compile the administrative costs of developing and enforcing regulations. Because those funds are amounts that taxpayers pay to support agencies’ administrative budgets, rather than compliance costs paid by the regulated parties, the amounts are disclosed in the federal budget.

Up 8.6% in One Year

The newest report, “Growth in Regulators’ Budget Slowed by Fiscal Stalemate: An Analysis of the U.S. Budget for Fiscal Years 2012 and 2013,” finds fiscal year 2012 enforcement costs incurred by federal departments and agencies stood at an estimated $61 billion (in constant 2012 dollars; here I’ve adjusted the figures from the original 2005 dollars). That represents an 8.6 percent increase over the previous year’s $59 billion.

Of this $61 billion, $10.8 billion was spent administering economic regulations. The much larger amount spent on writing and enforcing social and environmental regulations was $49.9 billion. The Environmental Protection Agency alone spent $5.6 billion in this latter category, accounting for 9.2 percent of the total expected to be spent by all federal regulatory agencies. EPA used to dominate, but now the far newer Department of Homeland Security at $26.8 billion, accounts for more than half.

$1.86 Trillion Total

Those $61 billion in agency costs help complete the picture of the federal regulatory apparatus. Adding the $61 billion in administrative costs tabulated by the Weidenbaum Center and Mercatus Center to the $1.806 trillion from the Tip of the Costberg (a Competitive Enterprise Institute working paper on regulatory costs) placeholder estimate for compliance and economic costs brings the total estimated 2012 regulatory burden to around $1.867 trillion.

Incidentally, estimated full-time-equivalent employment staffing for federal agencies  reached 283,615 in FY 2012, according to the Weidenbaum and George Washington University report—nearly 100,000 more than a decade ago (185,205 in 2002). Much of the post-2002 surge apparent in their data may be largely attributable to the newly created Transportation Security Administration’s hiring of thousands of airport personnel, which fits with the huge homeland security costs just noted.

Wayne Crews (wcrews@cei.org) is vice president for policy and director of technology at the Competitive Enterprise Institute. Reprinted with permission of OpenMarket.org, the Competitive Enterprise Institute blog.

Internet Info

“Growth in Regulator’s Budget by Fiscal Stalemate: An Analysis of the U.S. Budget for Fiscal Years 2012 and 2013,” The George Washington University and Washington University in St. Louis: http://wc.wustl.edu/files/wc/Regreport2012-2013.pdf

“Tip of the Costberg,” Competitive Enterprise Institute: http://www.scribd.com/doc/103172296/Tip-of-the-Costberg-On-the-Invalidity-of-All-Cost-of-Regulation-Estimates-and-the-Need-to-Compile-Them-Anyway-August-17-2012-Uncopyedited-Draft