The US Regulatory Black Hole, Quantified

By: Nick Zaiac - @NickZaiac - May 6, 2014, 3:06 pm

EspañolThis week the Competitive Enterprise Institute released its annual report on the failures of the regulatory state. Written by Clyde Wayne Crews, the report is aptly titled Ten Thousand Commandments and recaps the last year in regulatory excess. Needless to say, the details are not pretty.

The headline figure was US$1.863 trillion. That is the total that Crews estimates was the annual cost of regulation in the United States in 2012. To contrast, below is a chart comparing the cost of US regulation to the GDPs of the world’s largest economies.

Regulatory costs compared to 2012 GDP of the world's largest economies
Source: Competitive Enterprise Institute

As you can see, the cost of US regulation is larger than the GDP of India, the world’s largest country by population, as well as the major economies of Canada, Australia, and Mexico. On the surface this claim seems absurd. How could US regulations cost that much? The breakdown of the US$1.863 trillion figure by category lends some insight as to where these costs come from.

Annual cost of federal regulation 2012

As you can see, the biggest components are economic regulation, environment, and tax compliance, with more than US$300 billion in costs each. This is not particularly shocking. Environmental rules are costly to comply with and often immensely complex. Such regulations span from auto emissions and fuel standards, to coal ash from power plants, to lead-based paint. With so many categories and so much technology needed to remedy environmental harms, it is no wonder that environmental regulations alone cost more than the GDP of Denmark.

Tax compliance is another major category, and is often the first thing people think of when discussing regulatory costs. Last year Mercatus Center scholars Jason Fichtner and Jacob Feldman found that tax compliance costs could be even higher than Crews’ estimates, adding up to nearly US$1 trillion. Moreover, they find that tax compliance could cost the government more than US$450 billion in unreported taxes. Anyone who has filed taxes knows that it is far from simple, and personal income taxes can be among the easier taxes to handle. Taxes such as Pennsylvania’s Capital Stock and Foreign Franchise Tax are nightmarish to file, and complex even for tax policy experts.

Crews’ study also notes some of the most important and costly regulations that went on the books in 2012. Some highlights:

  • Regulation to reduce the number of right whales struck by ships
  • Various regulations related to Obamacare
  • Applying the Fair Labor Standards Act to domestic service
  • Creation of an incentive program for advanced technology vehicles
  • Energy efficiency standards for a long list of things, from furnace fans to battery chargers to vending machines.
  • Mandatory motor coach seat belts
  • Performance standards for residential wood-burning heaters
  • Mandatory catfish and catfish products inspection (which cost US$14 million per year)

The Crews report does a great job at attempting to quantify the number and cost of new regulations. While it is by no means a perfect measure of these costs, in a field with as little transparency as regulatory policy, it is helpful to understand the sheer scale of the problem. Needless to say, the regulatory state is huge, and that isn’t a good thing.

Nick Zaiac Nick Zaiac

Nick Zaiac is a public-policy researcher in Washington, DC. He also serves as a policy analyst at the Maryland Public Policy Institute. His column, The DC Leviathan focuses on the often-ignored bureaucratic agencies, from the Department of the Interior to the General Services Administration. He has been published in the Baltimore Sun, City AM, CapX, and other outlets. Follow @NickZaiac.

The First Floating City “Seastead” with Substantial Autonomy by 2020?

By: Tony Escobar - @EscoTony - May 6, 2014, 3:01 pm

Español A market for residential seasteads exists, so says the Seasteading Institute in their newly published "Floating City Project" report (PDF). The 134-page publication — prepared between March 2013 and March 2014 and released on April 25 — is an initiative that seeks to establish the world's first seastead within territorial waters of a host nation. The authors, led by Randolph Hencken, set out to establish “the feasibility of developing a floating city before the end of the decade.” In addition to the presence of considerable market demand, they conclude that (1) a practical design can be built to match the market’s price point and (2) it is likely that the Seasteading Institute can reach a deal with a host nation. [embed width="710"][/embed] A Market for Residential Seasteads As part of the research, the Seasteading Institute released an ongoing survey in May 2013 to gauge customer demand and identify potential initiative pioneers. Utilizing the data collected from over 1,200 survey participants, the survey results are shaping the future of the Floating City Project’s first seastead. The quantitative survey results show a market base with a young demographic: 58 percent between the ages of 18-29, and nearly 30 percent between ages of 18-23. "While it's unlikely that students will be early investors in the development of a floating city, it is heartening to know that the vision of the Floating City Project resonates with college-aged people," the authors state. Approximately 55 percent of survey respondents were from the United States and the remainder from over 67 countries. Most preferred a seastead location in the Caribbean or Mediterranean seas, followed by Australia or New Zealand — "possibly owing to these countries' increasing rankings on major indexes of economic freedom." Practical Design Built for the Market An Indiegogo crowdfunding campaign raised a total of US$27,000 to fund a partnership between the Seasteading Institute and DeltaSync, a Dutch aquatic urban design firm hired to engineer the project's architectural seastead design. DeltaSync completed their preliminary concept in December of 2013, and after a thorough review (in comparison to a semi-submersible alternative) DeltaSync's researchers determined that the design was best adapted for early seasteads within protected waters. The six most important design objectives analyzed in DeltaSync’s Final Concept Report are portability, dynamic geography, growth, seakeeping, safety, and water experience. The concept design is based on 11 modules, with locations for apartments, terraced housing, office space, and even hotels. Between 225 and 300 full-time residents would live and work on board with an additional 50 hotel beds for a total projected cost of about $167 million. Given that the plan is to set up shop within a host nation’s territorial waters, DeltaSync’s floating platform dimensions are smaller than a concept designed for the high seas. “The ideal situation would be that platforms can exist without a breakwater,” states their findings. "When moved to the high seas, the platforms should be able to survive, but be less attractive to live on from a comfort point of view." One of the main goals was to develop a more feasible alternative to large-scale platforms, because they are likely to be the most expensive part of the project, costing roughly $15 million each. The report suggests the ideal size platform is 50-by-50 meters, which also ensures portability with tugboats. “It is not structurally feasible to try and deal with … extremely large platforms,” they write. However, the report acknowledges that a more detailed study should be conducted regarding how interconnected platforms behave under different wave conditions, since the ideal 50-by-50 meter size is not yet conclusive. Finding a Host Nation That Provides Political Autonomy The United Nations recognizes 193 countries in the world, and approximately 150 of them have territorial waters. To narrow down the list of candidate host nations, each must meet two broad qualities: (1) located in a desirable and strategic location from the perspective of intended residents; (2) the ability of the government and relevant authorities to grant substantial autonomy for the residents and businesses in exchange for the economic, environmental, and societal benefits to the host nation. “The ideal country would be stable, non-corrupt, small, and relatively poor by first world standards,” states the report. While no country was found as ideal, the report yielded a consistent pattern that allowed for the selection of several Latin American countries such as Colombia, Costa Rica, El Salvador, Guatemala, Guyana, Honduras, Nicaragua, Panama, and Suriname, among a few other countries in other parts of the world. At the time of the publishing of this report we are pursuing diplomacy, and have made contact with influential people in government and business in several of the nations listed above. However, due to ongoing diplomatic efforts, we are not at liberty to publicly comment on our engagements. The seasteading movement has come a long way from the Principality of Sealand and similar isolated attempts. This report and the many names associated with it suggest an outlook is as positive as ever. [embed height="500"][/embed]

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