Twelve Costly Regulatory Policies

Twelve Costly Regulatory Policies
By Allen Tharp

By Allen Tharp

 

In many of my previous articles, I have covered the costly impact that government overregulation has on Americans. This week I read an article from Heritage that did a very good job bringing this point home.  They pointed out twelve costly regulatory policies that hit Americans right in the pocketbooks. So I want to summarize those policies for you, in case you missed the article.

 

 

  1. CAFE Standards.

Vehicles sold in this country fall under the Corporate Average Fuel Economy (CAFE) standards. These are regulations controlling auto gas mileage. Due to a 2009 regulatory change spearheaded by Obama, automakers were forced to increase the fuel efficiency of their fleets by 9 miles per gallon over five years.

Heritage says that these fuel standards have added about 10 percent to the cost of vehicles, costing the average household $448 per year and have added from $3800 to $4500 to the cost of the average vehicle. That equates to an overall cost to consumers of over $62 billion per year. Of course, these costs are passed on to consumers.

  1. Renewable Fuel Standard.

The Renewable Fuel Standard (RFS) is a federal mandate to include corn-based ethanol in gasoline. The added cost to consumers is $255 per year for each average household.

  1. Tax Complexity and Compliance Costs.

Time spent saving receipts, filling out forms, and reading 100-page IRS instruction booklets is time wasted.  Imagine the benefit if this time could be devoted to work rather than feeding the beast.

Just the added cost for corporate taxes alone is 113 billion per year. We need tax reform that eliminates deductions, replaces depreciation with expensing, and lowers the marginal tax rate so that compliance costs are reduced.

Heritage says that if only half of those savings were passed on to consumers, it would save the average household $230 per year, with the rest of the benefit going to investors and workers.

  1. Crude Oil Export Restriction.

The Federal Government mostly prohibits oil producers from exporting crude oil.

The U.S. produces and refines a different mix of oil products than it consumes. Therefore, economists at the Brookings Institution and economic consulting firm IHS say that the crude oil export restriction actually raises gas prices.

From Heritage: “Refineries in the Gulf Coast were built to handle heavier crude oil, which is largely imported. The U.S. is now producing higher-quality crude oil, but The old refineries cannot handle all of the new U.S. oil in a cost-effective way. If the export ban were lifted, U.S. producers could sell their high-quality Crude for a better price on world markets, U.S. crude oil would be refined more efficiently, and gasoline prices would fall globally—including in the United States.”

Eliminating this export ban would increase production and save American consumers 12 cents per gallon of gas—which adds up to $227 per year for the average household, including savings passed on by businesses.

  1. Federal Sugar Program.

The federal sugar program interferes with the free market by setting minimum prices and production controls for U.S. sugar producers while imposing quotas on sugar imported from abroad. This is just more redistribution of wealth by government. American agribusiness benefits, and consumers pick up the bill.

The sugar program costs consumers $3.6 billion per year. For the average household, that comes to $29 a year.

  1. Federal Milk Marketing Orders.

FMMOs are dairy policies intended to maintain the status quo in dairy markets at the expense of consumers. The government divides the country into regions, setting different prices for wholesale milk in each region.

Some dairy farmers benefit, others lose.

Like the Sugar Program, FMMOs cost $29 per year for the average household. The impact is largest on families with small children.

  1. Cement Production Regulation.

Even minor-sounding regulations on smaller industries can raise prices. For example, Stephen Ryan estimated that the 1990 amendments to the Clean Air Act docked consumers $1.7 billion by raising costs and encouraging monopoly power in the cement industry. The average household may not buy cement directly, but the increased costs of buildings and infrastructure are passed through to them, totaling $14 per year for an average household.

  1. Costly State Policies.

Occupational Licensure. Thirty percent of Americans now need a license to work legally in their professions. While the medical profession has clear arguments for preventing newcomers from practicing without going through a rigorous pre-examination, many others do not. From barbers to sign language interpreters to schoolteachers—that argument does not apply.

Occupational licensure costs the average American household $1,033 per year.

  1. Auto Dealership Monopolies.

You can buy bicycles or order merchandise from bike manufacturers. However, if you want to buy a new car, you must go through a dealer.

States have rules and regulations designed to protect the existing auto dealerships from additional competition, regardless of the negative impact it has on consumers. Because of the lack of competition, middlemen jack up the prices of cars by 6 percent or more. This policy adds $1,950 to the price of the average new car.

Most Americans don’t buy a new car every year, but over a decade these monopolies will cost the average household an extra $2,880.

  1. Renewable Energy Mandates.

Many states mandate that a percentage of the state’s electricity be generated from renewable sources. Since most renewable energy sources are not cost-effective, this means higher prices for consumers.

Heritage says, “These Renewable Portfolio Standards (RPS) mandates will soon cost the average Household $108 per year.”

  1. Medical Tort Reform.

Medical malpractice liability has caused physicians to sometimes perform unnecessary procedures designed to protect themselves against suits rather than prescribing based on the needs of the patient.

The CBO estimated that tort reform would save 0.5 percent of all medical spending—$82 a year for the average household.

  1. Costly Local Policies.

Local land-use regulations can cost families even more than bad federal or state policies.

Your city council has as much influence on your cost of living as the federal government does. Local governments regulate housing, which is the largest expense for most families.

Americans pay about $209 billion a year extra for housing due to overregulation of land use. For the average household, the cost is $1,700 a year, but the cost in metro areas can be over $5,000 per year.

Zoning boards, planning boards, town councils, environmental review boards, neighborhood commissions, historic preservation societies, and even concerned neighbors routinely delay or block much potential construction.

The bottom line is that these twelve policy mistakes alone cost the average American household $4,440 per year.   Imagine the staggering total cost of overregulation if you include the thousands of other regulations we are subjected to.

 

This content is published under the Attribution-Noncommercial-Share Alike 3.0 Unported license. Please honor attribution.

Leave a Reply

Your email address will not be published.