The views expressed by contributors are their own and not the view of The Hill

The poor suffer most from runaway regulation

Few Americans give much thought to the scope, magnitude, and impacts of regulation on their lives. They should. As economist John Taylor pointed out in a March working paper, the U.S. productivity growth rate had been negative for three consecutive quarters in a row and was -0.4 percent over the previous year.  Such trends, he believes, may portend a period of declining income growth and lower standards of living. Flawed economic policies, including excessively burdensome regulation that blunts both productivity and innovation, are to blame.

Regulatory costs, which inevitably are passed along to consumers, are enormous. Using many of the government’s own cost estimates, which are notoriously low, as bureaucrats tend to lowball the costs and overstate the benefits of their rules, an analysis by the Competitive Enterprise Institute found that federal regulation alone costs consumers and businesses at least $1.9 trillion — more than 11 percent of current GDP — every year in compliance costs and lost economic productivity. According to the author, federal regulation is, in effect, “a hidden tax that amounts to nearly $15,000 per U.S. household each year.”

{mosads}A subtle aspect of regulation that is wrong-headed or that merely fails to be cost-effective is that it actually costs lives, so the number of deaths prevented or other benefits derived from government regulation should always be large enough to offset the costs. In his excellent book “Breaking the Vicious Circle,” written shortly before he became a U.S. Supreme Court justice, Stephen Breyer cites an example of expensive, non-cost-effective regulation by the EPA: a ban on asbestos pipe, shingles, coating, and paper, which the most optimistic estimates suggested would prevent seven or eight premature deaths over 13 years–at a cost of approximately a quarter of a billion dollars. Breyer observes that such a vast expenditure can be expected to cause more deaths than it would prevent from the asbestos exposure, simply by reducing the resources available for other public amenities. 

The diversion of resources to comply with regulation—good, bad, or indifferent—exerts an “income effect” that reflects the correlation between wealth and health. It is no coincidence that richer societies or segments of the population have lower mortality rates than poorer ones. This is evident at the local level as well: California’s Marin County, just north of San Francisco, ranks No. 1 in both health and per capita income, while the poorer parts of the state, such as the Central Valley, score poorly on measures of health.

Depriving communities of wealth via regulations that lead to inflated consumer prices or lower wages, therefore, increases their health risks, because wealthier individuals are able to purchase better health care, enjoy more nutritious diets and lead generally less stressful lives. Conversely, the deprivation of income itself has adverse health effects—for example, an increased incidence of stress-related problems, including ulcers, hypertension, heart attacks, depression, and suicides. That phenomenon led risk-analysis scholar John D. Graham to coin the term “statistical murder” to describe the impacts of excessive, non-cost-effective regulation. 

The poorest and most vulnerable in society disproportionately bear the costs and impacts of excess regulation while they enjoy relatively few benefits.  In her study, “Regressive Effects of Regulation,” University of Utah economist Diana Thomas describes the harm that attends regulation that fails to consider the real-world impacts on consumers of increasing costs of goods and services or lowering wages: 

People make private decisions determining their diets, how safe of a car to buy, whether to install smoke detectors, the type of neighborhood in which to live, and counseling for drug and alcohol problems. As regulatory agencies address smaller and smaller risks — thereby driving up the prices of many consumer goods and lowering wages of workers in regulated industries — they crowd out expenditures people would make in their private lives that address larger risks and perhaps cost less than government risk regulation. This crowding-out phenomenon will affect the less well off before it affects the wealthy because lower-income consumers may face higher risks in some areas of their lives and might wish to spend less on risk reduction overall.

Thomas concludes that not only do current trends in regulation make the less wealthy less safe, but “by focusing on the mitigation of low-probability risks with higher cost, regulation reflects the preferences of high-income households and effectively redistributes wealth from the poor to the middle class and the rich.” 

Compared to other administrations since the Reagan years, the Obama administration has been an outlier—to the high side—in the number of “economically significant” regulations (those that are expected to cost Americans $100 million or more annually) it has added. According to a recent estimate, “some 60 federal departments, agencies, and commissions have 3,297 regulations in development at various stages of the pipeline,” and of those, 202 in the Obama administration’s spring 2016 unified regulatory agenda are “economically significant.” Thus, federal anti-innovation regulatory policies and actions are actually increasing income inequality.

There is always tension between regulation and economic growth, but currently it is imbalanced — and that imbalance is disproportionately killing poor Americans. Maybe we need a grassroots nationwide regulatory-reform movement called Poor Lives Matter.

Economist John Cochrane has characterized the U.S. economy as “overrun by an out-of-control and increasingly politicized regulatory state.” A few enlightened legislators agree, and one has a solution. “No major regulation should become law unless Congress takes a vote,” House Speaker Paul Ryan said during a June news conference in Washington.

If we are going to maintain our standard of living, we must have vigorous economic growth. And to get that, we will need regulatory reform to loosen the shackles on America’s scientific and technological entrepreneurism.

Henry I. Miller, a physician and molecular biologist, is the Robert Wesson Fellow in Scientific Philosophy & Public Policy at Stanford University’s Hoover Institution and an adjunct fellow at the Competitive Enterprise Institute. He was the founding director of the FDA’s Office of Biotechnology.

The views expressed by authors are their own and not the views of The Hill.

Tags Paul Ryan

More Economy & Budget News

See All
See all Hill.TV See all Video

Most Popular

Load more


See all Video