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March 19, 2012

The Double Tax of Regulation

While there are countless regulations created and enforced by the federal government, they seem to exist under one consistent theme. The federal government creates regulations to "protect" citizens from essentially themselves. Practically any consumer protect has some layer of federal regulations in order to ensure that it is used "safely" by the consumer.

But, has anyone actually thought about the cost of such measures?

In order for the government to enforce these regulations, they must hire thousands of employees and create an infrastructure to support such massive governance. This costs hundreds of billions of dollars per year. This is financed through each individual's tax contributions.

In addition to this, the rules and regulations created by the government have to be carefully followed by businesses. Manufacturers must spend money in order to produce products that meet federal regulations. Service providers spend time and money (outside consultants) filling out a variety of forms required by the government for all types of information.

These private costs of regulation were estimated at $1.1 trillion in 2004. This was far before Dodd-Frank, Obamacaid, and a consumer protection bureau. The study also found that the cost for small businesses equated to around $7,600 per employee. These costs must be passed on to the consumer in order for the company to make a profit. Therefore, the private cost of regulation is baked into what the consumer pays for the product.

People are so consumed with the government protecting them that they do not realize the economic costs of such protection. The government is extremely inefficient in its application of most of what it does. As long as people don't be informed and hold the government accountable, these costs will continue to rise.

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