Buy:movielib
02-06-06, 07:36 PM
http://www.hawaiireporter.com/story.aspx?aaed093d-9e16-43dd-99d7-5c9079619a33
Tragic Costs of Over-Regulation
By Michael R. Fox., 2/3/2006 12:11:44 PM
There is a mind-numbing, ill-defined uneasiness when to comes to discussions of regulations. Too often we accept them as if there was rationality behind them or some Biblical truths requiring our acceptance of them. It's only a small demand, it's said, on the businessperson's time and money, and not something to worry about. Nothing could be farther from the truth.
In addition to establishing the magnitude of the regulations, a second difficulty is determining the costs to our nation incurred in the effort to comply. Most of our elected officials are not concerned about such costs -- many of the state, local, and federal agencies do not keep such cost data, let alone be disposed to making it public.
Over the past number of years, Clyde Wayne Crews of the Competitive Enterprise Institute has performed yeoman's work in estimating the costs of compliance with federal regulations. Business costs of compliance to state regulations remain relatively unknown for the simple reason that state regulators are seldom asked by legislators or the public to do so.
Crews concedes that we may never have a precise cost for compliance with all of these regulations, but he has made major steps to do so at the federal levels. He entitles his reports "Ten Thousand Commandments" -- the last one covering the year 2005.
It is very important to appreciate that these costs are never seen in federal budgets, discretionary entitlements, or elsewhere. These regulatory costs are incurred by business and are passed along to the consumers, the taxpayers, or both. They are hidden costs which are added to the price of commodities we all consume.
He also estimates that the 2004 Federal Register contained 75,676 pages of new federal regulations for which U.S. businesses incur additional costs for compliance. For those who might not know, the Federal Register is the official document which contains the daily depository of all proposed and final federal rules and regulations.
Projections for this first decade of the 21st century reach a total of 732,798 additional pages. This is nearly double the pages added during the 40s, 50s, and 60s combined (390,126 pages).
Another category of regulations is called rule making (done by the agencies) and during 2004, 4101 final rules were issued by the agencies. These too, are enormously costly. The estimates of the costs for compliance with federal regulations for the year 2004 is a staggering $877 billion. This is equivalent to 38% of the federal outlays for 2004 ($2.292 trillion). And remember these compliance costs are all hidden from the American consumers, even though they unknowingly pay for them.
Other findings:
* a. These regulatory costs are more than twice the federal budget deficit ($412 billion)
* b. These costs also exceed all corporate pre-tax profits, which were $745 billion in 2002
* c. These costs exceed the total estimated 2004 individual federal income taxes of $765 billion
* d. They are far greater than the total corporate income taxes of $169 billion.
* e. These costs do not include $36.3 billion spent just to administer and police the regulatory state in 2004.
* f. The above costs bring the total regulatory burden to $913 billion for the year 2004.
The Heritage Foundation estimates that this is a hidden burden on each household greater than $8,000 per year. Other comparisons show this hidden burden to be larger than the entire Gross Domestic Product of Mexico of $637 billion and that of Canada, $725 billion.
We acknowledge that some regulations are necessary, a few human beings in every endeavor seem to prefer unlawful behavior and need to be restrained or removed. We also need regulations to protect the public from certifiable measurable health and safety threats based upon toxicology, dosimetry, and biochemistry of humans. But many of these regulations are not necessary or defensible from scientific, chemical, and toxicological analysis.
These are immensely costly and harmful and these need to be addressed through regulatory reform efforts and a return to common sense. These analyses have provided a great service for the American people in attempting to quantify the immense cost of over-regulation. We need to know more about how these enter our everyday lives and how we pay for them. Their impact is everywhere.
They include impacts on small businesses and workplace regulations, local governments, state governments, including the famous "unfunded mandates". Others include environmental compliances (compliance with environmental regulations now costs Americans an estimated $205 billion/yr.)
Many of these are not only costly but some, such as the EPA DDT ban in 1972, so effective in fighting malaria and yellow fever in the developing world, are lethal. An estimated 1 to 2 million people die of malaria annually as a result of withholding DDT from many parts of the world. Hundreds of millions suffer from the non-fatal effects of this disease.
Let's look a little more closely at two other areas of high regulation.
Pharmaceuticals
Dr. Henry Miller, a physician, now with the CEI, and a former head of the FDA Office of Biotechnology pointed out (www.tcsdaily.com Feb.1, 2006), our costly problems with vaccines and pharmaceuticals incurred by the Vaccine for Children Program established in 1994. It created a policy that made the US. Government the single largest buyer of childhood vaccines -- at a mandated discount of 50%. This disrupted market forces terrifically and is a major blow to vaccine producers. By doing so, we have crippled the US capacity for producing vaccines and increased the heavy legal and liability costs for producing them. We have decimated U.S. vaccine R&D, and their production.
Miller also describes additional costs incurred by the Food and Drug Administration. The FDA is famous for its long, tedious, and costly steps for drug approval. These can now exceed more than $897,000,000 for approval of a single drug, according to estimates by Tufts University. The FDA routinely rejects human evidence of drug safety and efficacy gathered from European and Canadian approvals. Miller says "It (the FDA) has prematurely withdrawn life-saving products from the market because of the mere perception of risk, and set the bar for the testing of new vaccines almost impossibly high". Not only have the FDA regulations been terrifically costly, making drugs more expensive, they are driving many companies out of the business. Further, the FDA delays in approving new drugs have cost thousands of lives.
Gary Becker, Nobel Prize winner in economics, summarizes the FDA situation: "...experience indicates that the FDA frequently has delayed approval to avoid embarrassing political and medical mistakes... Eliminating all requirements except a reasonable safety standard would vastly reduce drug prices in the U.S., as companies would be encouraged to develop additional compounds to compete for customers."
Nuclear Energy Regulation
The United States experience with nuclear energy is almost unique among the 33 nations which currently have nuclear power plants. The US power plants are uniquely costly and uniquely lengthy in construction durations. According to the World List of Nuclear Power Plants (March 2005 issue of Nuclear News, p.35ff), there are now 440 operating nuclear power plants sited in 33 countries. There are 30 reactors now under construction in 12 nations around the world, but none in the US. Many more are planned, many of which will be in Asia.
The political and regulatory climate in the US has historically been unduly hostile to nuclear reactors, relative to those in many other nations. This has been at the federal, state and local levels in many regions. This collective hostility has been reflected in federal state, and local regulations making this energy option uniquely costly in the world of nuclear reactors. It needn't be so, but it's been made that way in the US.
By contrast foreign nations have very different experiences and as a result the nuclear option is extremely competitive with other energy choices. For example, Japan completed two General Electric designed reactors in 1996 and 1997. They are designated Kashiwazaki 6 and 7, located at Kashiwazaki, Niigata, Japan. These reactors cost $1.3 billion dollars each (to be compared with US costs of 4-5 billion dollars). They were completed in 53 months (compared with 120 to 150 months in the US.) In other words, both the cost and construction duration in the US are about triple those overseas. It's important to note that these are American designed reactors (GE) but built in Japan. GE could not build these reactors of their own design in the US at these low costs and short construction times. A major difference is that the regulatory climate in Japan is not nearly as hostile to the nuclear industry as it is in the US.
In addition to these cost disparities there are dramatic differences in the operating costs as well. A large 1200 Mw(e) in the United Kingdom known as the Sizewell B reactor is very comparable with similar reactor designs in the US. Sizewell B operates with 375 people.
By contrast the same size US power plant (1170 MW(e)) such as Wolf Creek in Kansas, operating in the US regulatory climate requires about 1100 people to operate. This means millions more dollars in annual operating costs for energy in the US than in England.
Similar experiences are found in the large nuclear programs in France and elsewhere. France has about 60,600,000 people living in a land area of slightly larger than Oregon and Washington combined. Yet they have currently 59 operating reactors, most of them very large (up to 1500 MW(e). (By comparison on Oahu, Hawaii the entire installed electrical capacity is 1669 MW(e)).
It shouldn't need saying but that 1669 MW(e) electric capacity on Oahu, 77% from oil and 18.5% coal, emits more air pollution, more CO2, more NOx, more SO2, and more particulates, than all of the 59 nuclear reactors in France (capacity 63,300 MW(e)) combined. This is 38 times more electricity with far less air pollution. Such excessive nuclear regulation keep us from enjoying the environmental benefits of the nuclear option.
These are only some of the costs of compliance to federal regulations. These estimates do not include cost of compliance to state and local regulations which would add to the costs of doing business. Some states have even more hostile anti-business regulations which makes doing business more difficult. They make it more costly, more difficult to provide employment, and difficult to pay more tax revenues for state and local governments. Clearly regulatory reform is needed at all levels to stop the horrendous waste, lost lives, and bloated self-serving government agencies.
I don't know for a fact if these figures are accurate but if they are anywhere near reality, it seems to me the U.S. regulatory state is totally out of control. If there is anything like $900 billion or more removed from the U.S. economy each year, that seems to me an enormous anchor we have attached to ourselves, slowing economic and technological growth, decreasing the wealth of our society far under what it could be and making us less healthy to boot (as wealthier is healthier).
Tragic Costs of Over-Regulation
By Michael R. Fox., 2/3/2006 12:11:44 PM
There is a mind-numbing, ill-defined uneasiness when to comes to discussions of regulations. Too often we accept them as if there was rationality behind them or some Biblical truths requiring our acceptance of them. It's only a small demand, it's said, on the businessperson's time and money, and not something to worry about. Nothing could be farther from the truth.
In addition to establishing the magnitude of the regulations, a second difficulty is determining the costs to our nation incurred in the effort to comply. Most of our elected officials are not concerned about such costs -- many of the state, local, and federal agencies do not keep such cost data, let alone be disposed to making it public.
Over the past number of years, Clyde Wayne Crews of the Competitive Enterprise Institute has performed yeoman's work in estimating the costs of compliance with federal regulations. Business costs of compliance to state regulations remain relatively unknown for the simple reason that state regulators are seldom asked by legislators or the public to do so.
Crews concedes that we may never have a precise cost for compliance with all of these regulations, but he has made major steps to do so at the federal levels. He entitles his reports "Ten Thousand Commandments" -- the last one covering the year 2005.
It is very important to appreciate that these costs are never seen in federal budgets, discretionary entitlements, or elsewhere. These regulatory costs are incurred by business and are passed along to the consumers, the taxpayers, or both. They are hidden costs which are added to the price of commodities we all consume.
He also estimates that the 2004 Federal Register contained 75,676 pages of new federal regulations for which U.S. businesses incur additional costs for compliance. For those who might not know, the Federal Register is the official document which contains the daily depository of all proposed and final federal rules and regulations.
Projections for this first decade of the 21st century reach a total of 732,798 additional pages. This is nearly double the pages added during the 40s, 50s, and 60s combined (390,126 pages).
Another category of regulations is called rule making (done by the agencies) and during 2004, 4101 final rules were issued by the agencies. These too, are enormously costly. The estimates of the costs for compliance with federal regulations for the year 2004 is a staggering $877 billion. This is equivalent to 38% of the federal outlays for 2004 ($2.292 trillion). And remember these compliance costs are all hidden from the American consumers, even though they unknowingly pay for them.
Other findings:
* a. These regulatory costs are more than twice the federal budget deficit ($412 billion)
* b. These costs also exceed all corporate pre-tax profits, which were $745 billion in 2002
* c. These costs exceed the total estimated 2004 individual federal income taxes of $765 billion
* d. They are far greater than the total corporate income taxes of $169 billion.
* e. These costs do not include $36.3 billion spent just to administer and police the regulatory state in 2004.
* f. The above costs bring the total regulatory burden to $913 billion for the year 2004.
The Heritage Foundation estimates that this is a hidden burden on each household greater than $8,000 per year. Other comparisons show this hidden burden to be larger than the entire Gross Domestic Product of Mexico of $637 billion and that of Canada, $725 billion.
We acknowledge that some regulations are necessary, a few human beings in every endeavor seem to prefer unlawful behavior and need to be restrained or removed. We also need regulations to protect the public from certifiable measurable health and safety threats based upon toxicology, dosimetry, and biochemistry of humans. But many of these regulations are not necessary or defensible from scientific, chemical, and toxicological analysis.
These are immensely costly and harmful and these need to be addressed through regulatory reform efforts and a return to common sense. These analyses have provided a great service for the American people in attempting to quantify the immense cost of over-regulation. We need to know more about how these enter our everyday lives and how we pay for them. Their impact is everywhere.
They include impacts on small businesses and workplace regulations, local governments, state governments, including the famous "unfunded mandates". Others include environmental compliances (compliance with environmental regulations now costs Americans an estimated $205 billion/yr.)
Many of these are not only costly but some, such as the EPA DDT ban in 1972, so effective in fighting malaria and yellow fever in the developing world, are lethal. An estimated 1 to 2 million people die of malaria annually as a result of withholding DDT from many parts of the world. Hundreds of millions suffer from the non-fatal effects of this disease.
Let's look a little more closely at two other areas of high regulation.
Pharmaceuticals
Dr. Henry Miller, a physician, now with the CEI, and a former head of the FDA Office of Biotechnology pointed out (www.tcsdaily.com Feb.1, 2006), our costly problems with vaccines and pharmaceuticals incurred by the Vaccine for Children Program established in 1994. It created a policy that made the US. Government the single largest buyer of childhood vaccines -- at a mandated discount of 50%. This disrupted market forces terrifically and is a major blow to vaccine producers. By doing so, we have crippled the US capacity for producing vaccines and increased the heavy legal and liability costs for producing them. We have decimated U.S. vaccine R&D, and their production.
Miller also describes additional costs incurred by the Food and Drug Administration. The FDA is famous for its long, tedious, and costly steps for drug approval. These can now exceed more than $897,000,000 for approval of a single drug, according to estimates by Tufts University. The FDA routinely rejects human evidence of drug safety and efficacy gathered from European and Canadian approvals. Miller says "It (the FDA) has prematurely withdrawn life-saving products from the market because of the mere perception of risk, and set the bar for the testing of new vaccines almost impossibly high". Not only have the FDA regulations been terrifically costly, making drugs more expensive, they are driving many companies out of the business. Further, the FDA delays in approving new drugs have cost thousands of lives.
Gary Becker, Nobel Prize winner in economics, summarizes the FDA situation: "...experience indicates that the FDA frequently has delayed approval to avoid embarrassing political and medical mistakes... Eliminating all requirements except a reasonable safety standard would vastly reduce drug prices in the U.S., as companies would be encouraged to develop additional compounds to compete for customers."
Nuclear Energy Regulation
The United States experience with nuclear energy is almost unique among the 33 nations which currently have nuclear power plants. The US power plants are uniquely costly and uniquely lengthy in construction durations. According to the World List of Nuclear Power Plants (March 2005 issue of Nuclear News, p.35ff), there are now 440 operating nuclear power plants sited in 33 countries. There are 30 reactors now under construction in 12 nations around the world, but none in the US. Many more are planned, many of which will be in Asia.
The political and regulatory climate in the US has historically been unduly hostile to nuclear reactors, relative to those in many other nations. This has been at the federal, state and local levels in many regions. This collective hostility has been reflected in federal state, and local regulations making this energy option uniquely costly in the world of nuclear reactors. It needn't be so, but it's been made that way in the US.
By contrast foreign nations have very different experiences and as a result the nuclear option is extremely competitive with other energy choices. For example, Japan completed two General Electric designed reactors in 1996 and 1997. They are designated Kashiwazaki 6 and 7, located at Kashiwazaki, Niigata, Japan. These reactors cost $1.3 billion dollars each (to be compared with US costs of 4-5 billion dollars). They were completed in 53 months (compared with 120 to 150 months in the US.) In other words, both the cost and construction duration in the US are about triple those overseas. It's important to note that these are American designed reactors (GE) but built in Japan. GE could not build these reactors of their own design in the US at these low costs and short construction times. A major difference is that the regulatory climate in Japan is not nearly as hostile to the nuclear industry as it is in the US.
In addition to these cost disparities there are dramatic differences in the operating costs as well. A large 1200 Mw(e) in the United Kingdom known as the Sizewell B reactor is very comparable with similar reactor designs in the US. Sizewell B operates with 375 people.
By contrast the same size US power plant (1170 MW(e)) such as Wolf Creek in Kansas, operating in the US regulatory climate requires about 1100 people to operate. This means millions more dollars in annual operating costs for energy in the US than in England.
Similar experiences are found in the large nuclear programs in France and elsewhere. France has about 60,600,000 people living in a land area of slightly larger than Oregon and Washington combined. Yet they have currently 59 operating reactors, most of them very large (up to 1500 MW(e). (By comparison on Oahu, Hawaii the entire installed electrical capacity is 1669 MW(e)).
It shouldn't need saying but that 1669 MW(e) electric capacity on Oahu, 77% from oil and 18.5% coal, emits more air pollution, more CO2, more NOx, more SO2, and more particulates, than all of the 59 nuclear reactors in France (capacity 63,300 MW(e)) combined. This is 38 times more electricity with far less air pollution. Such excessive nuclear regulation keep us from enjoying the environmental benefits of the nuclear option.
These are only some of the costs of compliance to federal regulations. These estimates do not include cost of compliance to state and local regulations which would add to the costs of doing business. Some states have even more hostile anti-business regulations which makes doing business more difficult. They make it more costly, more difficult to provide employment, and difficult to pay more tax revenues for state and local governments. Clearly regulatory reform is needed at all levels to stop the horrendous waste, lost lives, and bloated self-serving government agencies.
I don't know for a fact if these figures are accurate but if they are anywhere near reality, it seems to me the U.S. regulatory state is totally out of control. If there is anything like $900 billion or more removed from the U.S. economy each year, that seems to me an enormous anchor we have attached to ourselves, slowing economic and technological growth, decreasing the wealth of our society far under what it could be and making us less healthy to boot (as wealthier is healthier).