Confirmation that regulatory reform provides relief for struggling businesses

Richard Fullenbaum and Tyler Richards

Economic activity in the United States was down nearly 33 percent in the second quarter of 2020. With the magnitude of a third quarter recovery still uncertain, languishing revenues are driving businesses to cut costs wherever they can, leaving millions of Americans unemployed. Congressional negotiators struggle with new stimulus deals. Without intervention, as many as 2.1 million U.S. businesses may have to shut their doors for good, adding further economic uncertainty to the stress of living in a pandemic.

One silver lining is that even modest regulatory reform, the likes of which bipartisan leaders in Canada and some U.S. states have successfully implemented, could lift a significant weight off the shoulders of businesses and help protect the livelihoods of their employees and owners.

In a new Mercatus Center study, we find that regulatory growth over the last 20 years has increased businesses’ operating costs per unit of output by about 3.3 percent each year. As is the case with compound interest, this seemingly modest annual change grew into a hefty burden over time.

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