(BigGovernment.news) While most people aren’t experts on Germany, many are aware that it is one of the most industrious and successful countries in Europe, and certainly one of the richest. A founding member of the European Union, Germany boasts the fifth-largest economy in the world. As a bonus, in 2014 Berlin managed to generate the highest trade surplus in the world ($285 billion) as the globe’s third-largest exporter.
Okay, so Germany’s pretty wealthy, right? So what?
Well, despite an annual gross domestic product of about $3.47 trillion, Germany still could not finance the cost of regulations every year in the United States, which are estimated at a whopping $4 trillion a year, according to a just-released study by the Mercatus Center at George Mason University.
And of course, this is all money that comes out of the U.S. economy each year. So instead of generating $18.1 trillion a year, we’d be generating something like $22 trillion a year, and our economic growth rate wouldn’t be at zero.
“The impact of regulation on economic growth has been widely studied, but most research has focused on a narrow set of regulations, industries, or both. These studies typically rely on regulatory indexes that measure subsets of all regulation, on country-to-country comparisons, on short time spans, or on surveys in which experts report how regulated they believe their country or industry is,” the center said on its web site. “In order to better understand the cumulative cost of regulation, a comprehensive look at all regulations across many industries over a long period of time is imperative.”
Using a 22-industry dataset, researchers examined economic output regulations between 1977 and 2012. They found that over-regulation has distorted “the investment choices that lead to innovation” which “has created a considerable drag on the economy, amounting to an average reduction in the annual growth rate…of 0.8 percent.”
If you want to know why there is wage stagnation and lack of good-job creation, there’s your answer.
The accumulation of regulations has happened over time, of course, but as the center noted in its study, the accumulation of regulations is the problem.
“The buildup of regulations over time leads to duplicative, obsolete, conflicting, and even contradictory rules, and the multiplicity of regulatory constraints complicates and distorts the decision-making processes of firms operating in the economy,” the center noted. “Firms respond to both individual regulations and regulatory accumulation by altering their plans for research and development, for expansion, and for updating equipment and processes.
“Because of the important role innovation and productivity growth play in an economy, these distortions have consequences for the growth of the economy in the long run,” it said.
Key findings of the study include:
- If regulation had been held constant at levels observed in 1980, the US economy would have been about 25 percent larger than it actually was as of 2012.
- This means that in 2012, the economy was $4 trillion smaller than it would have been in the absence of regulatory growth since 1980.
- This amounts to a loss of approximately $13,000 per capita, a significant amount of money for most American workers.
“While static analysis of individual regulations sometimes predicts beneficial effects for society, policymakers should consider the results of this study not only when creating new regulations, but also when considering reform of the regulatory process itself,” researchers concluded.
Congress can start by reasserting its legislative authority over the various federal agencies, using the power of the purse if need be to defund key regulatory processes. Any lawmaker who doesn’t want to reign in the size, scope and power of the federal bureaucracy isn’t serious about creating better opportunities for his or her constituents, as this study shows.
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