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Regulation – The Hidden Cost of Our “Bureaucrats Gone Wild”

Few people stop to consider just how expensive regulations actually are. They seem to believe that regulation is somehow “free” – i.e. there is no cost to it. But the reality is that every mandate (which is what any regulation is) results in an increase in the cost of the product or activity being regulated. Even something as seemingly trivial as those little warning stickers required on various products has a cost associated with it. And while they may seem inconsequential when viewed individually, they all add up.

So why do so many people go along with, and even advocate, more and more regulations? The reason is that  we have all been sold the idea that regulating something is somehow automatically “good” –  and therefore it must be worth doing. We have also been convinced that “the government” (and ONLY the government) has the ability to oversee every conceivable human activity, and the benign benevolence to make us all “safer.”

Now, we can all agree that some regulation is necessary, even desirable. We “regulate” traffic with stop signs, traffic lights, and laws regarding how fast you can drive. Without such rules, there would simply be chaos on the roads, which would likely result in a lot of death and injury. But such actions are a far cry from having government dictate what kinds of light bulbs you are “allowed” to have in your own home, or demanding that an automobile manufacturer produces cars that get a specific number of miles per gallon.

Yet that is precisely where we are today, thanks to the unconstrained growth of government regulations enacted by both Federal and State legislatures. But the free market is also increasingly under attack by unelected bureaucrats in Federal agencies like OSHA and the EPA, and in state agencies like insurance commissions. The inevitable result of such interference is ever increasing costs.

Take the Ethanol debacle, for example. The Federal government, in its infinite wisdom, decided that corn-based ethanol was “good for the environment” and would also “save petroleum,” so it provided government subsidies to “encourage” production. Local states then mandated that gasoline sold in their state must contain some arbitrary percentage of ethanol (10% in most cases).

No surprise, with such a government induced increase in the demand for corn, prices soon began to rise. Farmers, seeing a gold-mine, diverted more of their farmland to growing “fuel” corn instead of food and feed corn. Many also converted their soybean fields to ethanol corn exclusively, rather than rotating crops. Which of course also raised the price for soybeans. The result? A world-wide rise in the cost of food, since corn is used as feed for hogs and cattle, and is also a component of so many food products. Ditto soybeans.

But we have learned that ethanol is actually quite bad for the environment, because its production uses immense quantities of precious water, and produces millions of tons of waste.  We also know that ethanol doesn’t save a drop of gas – since it reduces a car’s fuel mileage, more fuel is used than with petroleum-base gasoline.

Perhaps the most outrageous part of the ethanol scam is that ethanol plants are subsidized by the taxpayers, because it requires more energy to produce a gallon of ethanol than a gallon of ethanol contains! Even worse, in states that offer E-85 (meaning 85% ethanol – for use only in “flex-fuel” cars) even though it costs far more than regular gasoline, it is sold for less, because it is (once again) subsidized by the taxpayers!

Or look at healthcare. Not that long ago, medical professionals were paid like any other provider of a service, no different from a mechanic or an accountant – the customer paid the doctor directly for the services they received. As a result, normal competitive factors kept prices in line. Later on, people purchased medical insurance that covered major, catastrophic costs (major surgical operations, long-term care, etc.) but still paid their day-to-day medical bills out of their own pockets.

It is interesting to note that even today, while most health care costs have been rising, the price for LAZIK surgery has gone down dramatically. This has occurred precisely because it is generally not covered by insurance, and when the customer is the one paying the bill, he will invariable seek the best value. When someone else (whether an insurance company or “the government”) is paying the bills, there is no “price discipline” in the market.

Thus today, we have the inflationary pressure on costs due to taxpayer funded programs like Medicare and Medicaid. We also have ever-increasing regulatory interference, with government mandating what an insurer must cover, whom they must cover, and often how much in premiums that insurers may charge.

We also have a situation where individual state governments have, by law, prevented their citizens from obtaining health insurance from any company outside of their home state. Without the ability to buy insurance across state lines, the in-state insurance carriers enjoy a government created monopoly, and they have made a bundle.

And the rest of us pay the tab in the form of higher premiums.

And it doesn’t stop with health insurers – the actual providers of health care (doctors, nurses, pharmacists, etc.) are so buried under a mountain of regulations that it is estimated that 40% of the cost of medical care is the result of government mandates and reporting requirements. There are people in the healthcare industry today whose only job is to track “compliance” with all the regulations. It should be noted that these regulations are most often written by people with no education, no training, and no experience in actual medicine.

Naturally, when anyone talks about getting us out of a recession by cutting regulations to free up businesses to expand and start hiring people, the wailing and gnashing of teeth can be heard for miles. Out come the horror stories of water unfit to drink, air too dirty to breathe, and predictions of pandemics due to infected food – in other words, the end of the world as we know it.

But those who want less government and more freedom are just as concerned about clean air and water as anyone, and everyone wants to be confident that the food we eat is reasonably safe. But how much salt or “trans-fats” are in the food we buy is none of the government’s business – we are all perfectly capable of deciding, for ourselves, what we eat, and in what quantities.

Unfortunately, a good many people fall for the false promise of “safety” that is the fundamental justification for each new encroachment on our personal freedoms. Yet no one can guarantee that anything is perfectly safe – even today, outbreaks from contaminated food occur on a regular basis, and accidents of all kinds still happen.

And even when an injury or death is a one-in-million fluke occurrence, or the result of abject stupidity by the user of the product, the response from government types is always to pass yet another law, accompanied by the inevitable assurance that passing it will “make sure that a tragedy like this never happens again.”

But the reality is that market discipline is far more effective than any law when it comes to making you safe. What?! How can that be?! Without government regulation will not those “evil, greedy capitalists” throw caution to the wind, eager to place us all at risk, just to make a few extra pennies of profit?

Not really. The fact is that protecting customers is good business.  A major food store chain has a vested interest in making sure that the food they sell is as safe as possible. If they don’t, they will certainly lose customers, and they are likely to be sued in civil court. You could probably abolish the FDA and see no real change in the incidence of tainted food.

An airline doesn’t need Federal regulations to get them to keep their fleet of aircraft in tip-top condition. A crash costs them millions, not just the cost of replacing a $200 Million airplane that is destroyed , but the lost revenue due to passengers who went elsewhere, and once again, the millions in civil liability damages they will have to pay. The big government types would be apoplectic at the suggestion, but the reality is that if all FAA regulations were repealed, it would likely have no measurable affect on airline safety.

Over at the Environmental Protection Agency things have truly gotten out of hand. Far beyond their original stated purpose, the EPA now functions as little more than a propaganda arm for the radical “climate change” movement. The most egregious example of “bureaucrats gone wild” is the EPA’s deciding to classify as a pollutant CO2 – you know, that gas you and I exhale, and the same gas that all plants use to convert sunlight to energy…and oxygen.

The truth is that only a tiny fraction of all the regulations that exist today are remotely effective, or even necessary. Their real purpose is to give those in favor of governmental control over your life a means to do so. Unfortunately, every regulation has a cost, which ultimately affects not just the costs of their products, but also how many people a business can afford to hire or keep.

Here in Minnesota, we have a text-book example of the harm that results from over-zealous regulators. Using the phony “threat” of “second-hand smoke” our legislators passed a law banning smoking in all bars and restaurants. The result? To date more than 65 of the city’s pubs and restaurants have gone bankrupt, costing many business owners their life savings, and putting hundreds of employees out of work. All because elitist bureaucrats arrogantly believe that they know better than you how you should live your life.

So unless we begin to roll back the mountain of regulations that now hamstring American business, we can look forward to high unemployment, high prices, and ultimately a lower standard of living for our children and grandchildren.

 

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