THE BLOG

The Overlooked Harm of Overregulation on the U.S. Economy and Each Person in It

02/18/2015 04:34 pm ET | Updated Apr 19, 2015

Yesterday, I published a piece at Rare.us that discussed some of America's most serious overcriminalization issues. I addressed federal laws against marijuana, high state and federal taxes, and sentencing disparities, among other concerns.

With President Obama's attack on Staples last week, however, it may be time to take a moment to analyze overcriminalization's bureaucratic twin: overregulation.

Often, overregulation is looked upon as an issue of academic concern when compared to overcriminalization. After all, it is the latter that often has police breaking down doors and arresting people, sometimes unjustly or incorrectly, or even leading to physical harm or death.

Furthermore, many liberals and Democrats think concerns about overregulation are either falsified or exaggerated.

Yet the subtle and damaging effects of overregulation can be found in the price of gas, milk, iPhones, and the unemployment rate -- even if they tend to be less obvious, and less sexy, to the media than police breaking down doors.

According to The Heritage Foundation's John Malcolm, who heads the think tank's Meese Center for Legal and Judicial Studies, overcriminalization isn't just about laws that regulate individual behavior. Malcolm said that overregulation "encourages people to go to regulators, politicians, and others to prohibit or criminalize the practices of their competitors, rather than engaging in direct competition, even though those practices don't harm the public at large."

My brother, a general contractor and small businessman in northern New Hampshire, agreed with Malcom's assessment.

"As someone who works in a potentially dangerous industry, I can appreciate regulations that enhance public health and safety," Charlie said. "However, many times these regulations create government-centered industries that encourage people to turn in their competitors in order to get a leg up -- instead of using ingenuity and entrepreneurial ability to increase their size of the available market."

Charlie also attested to the effect of overregulation on his business, and, as a result, the effects on his employees and the customers he serves.

"The increased costs inherent in these regulations are absorbed by me, my competitors, my customers, and my employees. It adds to our costs without creating any competitive advantage," he explained.

My father, a serial entrepreneur and small businessman for more than three decades, was likewise critical. "When the cost of compliance exceeds the potential for profit, businesses will close, move out of the state or nation, sell out to a larger business, or circumnavigate the situation," he says.

"For those who choose to stay in business, most regulations increase the cost of the product or service while simultaneously reducing employee pay and/or benefits, and -- perhaps most importantly -- eliminate opportunity for those who could have otherwise been employed in that company or industry."

"These costs are often times unseen by the general public, yet it is the general public that suffers the most from them," says Dennis.

Like Dad pointed out, the effects of overregulation may not be visible to the average American, but they are felt in every transaction in which we engage. Whether it's buying milk -- the Food & Drug Administration has its claws in there -- filling up on gas -- EPA, anyone? -- or getting insurance -- the ACA and a gazillion other regulations -- overregulation greatly diminishes both our freedom of choice and our ability to save and spend money as we wish.

Unfortunately, Heritage regulatory research fellow Diane Katz says that not only are the regulations getting both worse and more numerous, but also that "an increasing number of those regulations are being finalized without the public comment process."

"Agencies are doing less of the cost-benefit analysis by which we can judge whether these rules are beneficial on the whole, or whether they do more harm than good," Katz told me. "Both of those trends are very troubling."

More than two years ago, the Small Business Administration estimated that regulations cost the U.S. economy $1.7 trillion. The Competitive Enterprise Institute's Wayne Crews found a similar number. Katz says that there is no way to know the exact impact, especially given the thousands of smaller regulations, but she estimates that so-called "major regulations," which cost the economy at least $100 million in potential growth, are preventing $70 billion in economic growth each year.

Like my brother, Katz emphasized that regulations can be beneficial. She does, however, believe that "these regulations are not protecting us from harm -- health and safety. They are intended to provide personal or private benefits, and thus are regulating lifestyle."