Millennials are inheriting a bleak fiscal future. Not only is America $18 trillion in debt, but when future spending obligations on entitlements are compared with future tax obligations, the so-called fiscal gap is $205 trillion. This is 12 times GDP and 16 times official debt held by the public.
Paying off the federal fiscal gap would require an immediate increase of 57 percent in all federal taxes, or cuts of 37 percent in all federal spending except interest payments on the debt. Of course, no one is proposing this. Instead, the debt grows from year to year, gradually stifling productive investment.
How can we change Washington’s direction in order to paint a brighter future for America’s next generation?
Perhaps the easiest way to begin digging out of this debt is regulatory reform, which would spur substantial economic growth. America’s regulatory state has expanded steadily since the 1970s. In 1975, the Code of Federal Regulations was 71,224 pages. By 2013, the number of pages had grown to more than 175,000. The sheer quantity of government red tape makes it impossible for ordinary Americans to know whether they are breaking the law while working to start or maintain a business.
Americans are moving from obeying laws passed by elected bodies to regulations promulgated by unelected bureaucrats. These pages of regulations contain over one million commands—a 30 percent increase in federal regulatory restrictions from 1997—most of which were promulgated outside Congress. In 2013, the number of regulations issued by agencies was 56 times the number of laws passed by Congress and signed by the president. Apparently gridlock does not slow down regulators.
Commands from Washington bureaucrats have real-world effects. It is impossible to calculate their full costs. Wayne Crews of the Competitive Enterprise estimates the annual cost of regulatory compliance and lost economic growth at over $1.9 trillion, nearly $6,000 for every person living in the United States, but this is probably an underestimate.
As Michael Mandel and Diana Carew of the Progressive Policy Institute argue, steadily-increasing regulations impose “an unintended but significant cost to businesses and to economic growth.” A multitude of overlapping and outdated regulations create confusion for small business owners who lack armies of lawyers and cannot be sure that they are complying with the law.
Additionally, entrepreneurs are focused on bringing their ideas and skills to market, and want to use all their available, and often limited, resources to do so. Forcing potential or current small-business owners to spend time and money on regulatory compliance that they could use for expanding their businesses inflicts substantial costs on the overall economy.