The goal of regulation is to better society, not undermine it. From the Fair Labor Standards Act which banned oppressive child labor to the Federal Water Pollution Control Act, regulation has helped shape and protect our society. Left unchecked, however, regulation comes at an incredibly expensive cost (literal and figurative). While regulation is important, to ensure it fulfills its intended purpose we must limit usage (as well as revisit past regulation) and when utilized, keep it as simple as possible.
- Use regulation sparingly: As of 2019, there are over 185,000 total pages in the Code of Federal Regulations. This number has grown from just 138,000 in 2000 and 102,000 in 1980. Accompanying this growth are very real costs which are paid by the public via our taxes to enforce regulations. In the FY21 budget, almost $80,000,000,000 in funding was set aside for 77 different Federal regulatory agencies and related activities alone. As regulation continues to expand, enforcement cost will increase alongside. Additionally, regulation also carries very real costs which are passed to consumers and businesses. While difficult to size, multiple studies have shown price increases and impacts to economic growth directly related to increased regulation. In one specific study from the National Association of Manufacturers, the estimated indirect cost of regulation was ~$2,000,000,000,000 in 2012, with a disproportionate impact felt by smaller businesses.
- Keep regulation simple: The US tax code is so complex there isn’t even clarity over how large it truly is. The smallest estimate one can find is around 2,600 pages (the largest is 70,000+). 2,600+ PAGES!!! This is not theoretical - The Affordable Care Act (Obamacare) was 974 pages by itself. How could anyone expect to understand, let alone effectively regulate something which is that complex. While all regulation is of course not this complex, over time, the average statue length has increased from ~2.5 pages in 1950 to 17.8 pages in 2018. With the increase in complexity has come a corresponding decrease in congressional activity. As complexity breeds complexity, the problem is magnified over time. This is the exact reason that our tax code now 2,600+ pages or our healthcare ecosystem is so confusing and inefficient. As one final point, complex regulations also disproportionately impacts small businesses with fewer resources. The more complex the regulation, the more likely one needs an expensive professional to help navigate the regulation and maximize value.
One could argue complex issues require complex regulation, but smart people will always find ways to circumvent the system. We are likely better off spending time simplifying the situation we are trying to regulate. More often than not, complexity just increases administration and decreases efficacy. In short, if we want regulation to be effective, efficient, and equitable, the KISS principle is real: keep it simple stupid. Let’s demand less from our politicians: regulation must be used sparingly and kept simple when enacted.
Want to read more? Check out the Regulatory Transparency Project.
