We already have the tools we need to ease the regulatory burden.
L awmakers are returning from their summer recess and have just weeks before the fiscal year ends to head off a government shutdown and face deadlines on topics ranging from Medicare telehealth to defense contracts. That to-do list should not cause President Trump and congressional allies to put an in-progress goal — untangling the staggering amount of outdated and counterproductive federal regulation — on the back burner.
Millions of Americans voted for an America that’s freer to build homes, roads, and other infrastructure, for lower prices, and for better jobs. They know regulations are slowing growth, increasing costs, and sapping productivity and wages. Soon, the political calendar flips to next year’s midterm elections. Will they view the administration’s early work as proof that red tape will be held in check and that an economy of more abundance is on the way? These things take time.
There is a way to provide much of the proof necessary: Begin treating regulations like dollars in a fixed budget. A joint presidential-congressional effort would send the clearest signal yet that there is a limit to how much we can be regulated.
As I recently told the Joint Economic Committee, each year, the unchecked accumulation of rules and regulations robs each average American of an estimated $18,000 and the U.S. of roughly (and conservatively) 0.8 percent in GDP growth. Businesses pay rising compliance costs — estimates range into the trillions annually — and one recent study suggests about 1.3 percent of all labor costs go toward complying with regulations rather than production. The dynamic toll this takes matters more: untold amounts of compounding growth lost to delays and uncertainty.
That’s not an indictment of one or even 1,000 individual regulations. It’s the result of an economy gummed up by a Code of Federal Regulations that, according to my research, contains well over 1 million commands such as “shall,” “must,” and “required.” Then there’s the larger mass of informal guidance — regulatory dark matter — which rarely invites public comment or shows up in the cost ledgers that shape policy.
You don’t overcome this macroeconomic headwind without measuring it. The government budgets federal dollars; it barely counts federal mandates. Only a thin slice of rules carries a proper impact analysis, and even these are inconsistent across agencies.
Understanding the totality of the regulatory burden has so far been left to academics and perhaps a handful of recent White House staffers. The administration is doing its best to overcome the decades in which this cost was too often overlooked or ignored by, for example, eliminating two regulations for each new one in its first term and 10-for-1 in its second term. But unshackling growth over the long haul requires Congress and could involve the Congressional Budget Office (CBO) and the Fed.
Tools like one that I developed, RegData, count restrictive terms and map them to affected industries, creating a consistent time series across jurisdictions. Emerging AI text metrics can flag these rules’ complexity and contradictions in a fraction of the time it takes an entire agency’s staff. Private-sector company filings and market reactions reveal where perceived regulatory risk is highest.
Together, these data can craft economic growth projections for Congress to determine a formal regulatory budget capping the net burden on the U.S. economy. Agencies should be allowed to trade reductions and additions related to their rules within that cap, the way they already do with dollars. With a hard budget constraint, government rulemakers are forced to prioritize, coordinate, and innovate.
And given regulations’ outsized effect on the economy, similar metrics should play a role in the important projections made by CBO and Fed and in state or local policy.
If CBO were to include the effect of regulatory accumulation in federal budgetary projections, we could see estimates of how significant reforms — ranging from the aforementioned “10-for-1” executive order to the REINS Act, which subjects agencies’ rules to more congressional scrutiny — would affect future years’ growth and the tax collections that provide government revenue.
The Fed’s highly relied-upon economic projections could factor for incoming and outgoing regulation rather than flying blind in this key regard.
The same scrutiny could be applied to states’ and localities’ regulations, helping us to better understand, for example, local regulations’ role in limiting the housing supply in economically vibrant communities and how that is affecting the economy. It would encourage states and cities to compete on better rulemaking rather than adding layers and layers of their own rules.
Modernizing the regulatory process will take a comprehensive guidance registry, standardized metadata for every significant rule, and perhaps a shared library of impact metrics and data pipelines to CBO, OMB, and the Fed. Other regulatory reforms — such as sunsetting provisions that require agencies to assess whether rules are actually working, and “shot clocks” to keep permitting decisions from dragging on — would ensure that this more disciplined approach is not disregarded.
We budget what we value. If we want growth and abundance — more housing, cleaner power, safer finance, faster projects — we must start budgeting the regulatory state with the same seriousness we bring to fiscal policy. The tools exist. The incentives can be fixed. We haven’t run out of ideas; we’ve run out of excuses.