I mentioned the other day a claim from CEI that regulatory burdens cost the economy nearly $2 trillion in 2008. The Phoenix Center also recently produced a policy bulletin examining the costs of the regulatory state (Hat-tip: Big Government). In quantifying the relationship between government spending and economic growth based upon 50 years of data, it reported that, on average, eliminating the job of a single bureaucrat grows the economy by $6.2 million and 98 private sector jobs annually.
The exact figures can be taken with a grain of salt, as the paper freely admits that every variable cannot be accounted for. Moreover, not all regulations are created equal. Some explicitly seek to limit economic growth, such as in the pursuit of ends like environmental protection, while a few might actually promote growth. Which regulation or regulator is eliminated would thus determine the impact on economic growth.
But the relationship is clear. Excessive government regulation slows economic growth. In addition, the paper finds that the affect has been amplified in recent decades as government has grown bigger. This comports with the Rahn Curve, which describes the relationship between the size of government and economic growth,and demonstrates that once government passes a certain threshold, additional growth harms the economy.
For more on the Rahn Curve and why we don’t need so many bureaucrats, watch these two CF&P Economic Lessons:
