The U.S. Economy Would Be 3.5 Times Larger If....

Discussion in 'Politics' started by pspr, Jun 29, 2013.

  1. pspr


    ....The Federal Government hadn't added a single new regulation since 1949.

    Frustrated by the lack of jobs and middle-class progress? Dispirited by the fading American Dream? Don't blame capitalism. Blame regulation and politicians who push it.

    Some people, it seems, live to rail against free markets and free enterprise, holding them responsible for flat wages, lack of opportunity, income gaps, middle-class stagnation, poverty and economic listlessness. They're convinced private greed holds back the government's ability to improve conditions.

    But it's the government that's done the most damage to economic growth, new research shows.

    America is now more of a regulatory state than a haven of free enterprise — a development that has not come without measurable cost.

    A study published this month, for example, observes that if just federal regulation (state regulation wasn't considered) had remained at the level it was in 1949, the economy would be more than 3.5 times bigger than it is.

    "Regulation's overall effect on output's growth rate is negative and substantial," economists John Dawson and John Seater write in "Federal Regulation and Aggregate Economic Growth" Published in the June issue of the "The Journal of Economic Growth."

    "Federal regulations added over the past 50 years," they say, "have reduced real output growth by about two percentage points on average (annually) over the period 1949-2005. That reduction in the growth rate has led to an accumulated reduction in GDP of about $38.8 trillion as of the end of 2011.

    "That is, GDP at the end of 2011 would have been $53.9 trillion instead of $15.1 trillion, if regulation had remained at its 1949 level."

    Numbers that big aren't easy to put into perspective. But at a more micro level, they mean losses of "$277,100 per household and $129,300 per person" per year, the the authors reckon.

    To get a handle on the economy's regulatory burden, Dawson and Seater counted the number of pages in the Code of Federal Regulations and came up with a sixfold increase — from 19,335 in 1949 to 134,261 in 2005.

    Their work does not consider four other government activities that affect economic activity — spending, taxation, deficits, monetary policy. So it's likely that if Washington had been more responsible in those activities since the middle of the last century, the $53.9 trillion the Dawson and Seater estimated would be even bigger.

    Federal spending alone does tremendous damage. David Ranson, a senior fellow at the National Center for Policy Analysis, has just published a study showing that increases in federal spending since 1929 has been accompanied by even-larger decreases in private-sector spending.

    Conversely, in the years when federal spending fell, private spending grew by a greater degree.

    "Increased government spending induces the private sector to contract, a phenomenon that has been called 'crowding out,'" says Ranson. "Surprisingly simple evidence shows that government growth tends to cut the business sector back."

    There are those who will say that government regulation has protected Americans and saved lives. That's arguable. But this isn't: A wealthier society is a safer and healthier society. More than six decades of regulation can't be erased in a moment. But the dismantling needs to start.