Regulating The Regulators, The ‘Headless Fourth Branch’
In the current debate over leadership succession of the Consumer Finance Protection Bureau (CFPB), few people are discussing crucial questions that will remain even after the leadership crisis is resolved, such as: Does this federal agency efficiently achieve its goals? Is it relevant or is it redundant?
Unfortunately, public discourse concerning regulations often is dominated by attention to the laudable goals of regulation, which leaves far too many Americans in the dark about whether we are achieving these goals and what the costs are that we must bear as a consequence.
For example, experts have reported that one of the major costs of regulation is found in the increased prices for goods and services. Although regulatory impacts are diffuse and hard to measure, and with no estimates of the actual costs of regulation completely reliable, some researchers calculate this total annual cost at more than $2 trillion.
Other research suggests the drag on economic growth could be twice that much, about $4 trillion per year, or $13,000 for every man, woman and child in the United States.
Regulatory compliance has therefore been described as a stealth tax — a very lucrative one through which the federal government collects more annually than it does in corporate, income, payroll, excise, and estate taxes combined.
In May 2016, the Federalist Society launched the Regulatory Transparency Project (RTP), an initiative that seeks to identify and raise awareness about rules, regulations and processes that appear to be doing more harm than good.
The aim of the RTP is to draw the public’s attention to government regulations that might be improved, reformed, or eliminated altogether.
To help the public fully understand the impact of over-regulation, however, it is important to do more than just recite dollar amounts. Monetary figures do not tell the full story of how regulatory costs are passed on to all Americans — who are generally unaware of that fact because they are hidden in lower wages, higher prices for consumer goods and services, and fewer products and job opportunities made available.
In this scheme, those with the least means shoulder the greatest burdens. A full picture of the price of over-regulation must also consider stifled innovation and restrained entrepreneurship — the truly unseen costs.
One illustrative story is that of Flytenow, a flight-sharing phone app dubbed “the Uber of the Sky.” Like the Uber model, the Flytenow app connected licensed, private pilots with individuals who desired to share flight expenses with that pilot in exchange for being transported to whatever destination the pilot already intended to travel.
The revolutionary nature of such an innovation is obvious. Again, think of Uber, which now boasts nearly half a million drivers who have provided greater than five billion rides, making the company valued in the tens of billions of dollars.