The growth of government regulation poses hidden costs to the economy, driving up prices and impeding business expansion. As debates continue over tariffs, SNAP program restrictions, and federal micromanagement, experts stress the need to confront regulatory excess with greater transparency, restraint, and respect for local decision-making.
Doug Holtz-Eakin, founder and president of the American Action Forum, has views about the cost of regulations. Before launching his policy think tank in 2009, the former professor and department chair at Syracuse University served as chief economist at the President's Council of Economic Advisers, directed the nonpartisan Congressional Budget Office, and advised Senator John McCain's 2008 presidential campaign.
He describes the American Action Forum as "a permanent campaign policy shop, where the candidate is market-oriented policy ideas." The goal is to communicate in "shorter, digestible" formats for both congressional staff and the general public.
A major part of his work focuses on the hidden costs of government regulations. "The government does a lot of regulation,” he says, and points out that “it didn't seem to get the same attention" as spending and taxes. Holtz-Eakin and his team set out "to quantify to the best of our ability the regulatory burden," tracking rulemaking. The effort revealed that "eight years of the Obama administration imposed $890 billion of regulatory costs," averaging "$100 billion a year in stealth taxes."
Holtz-Eakin found the Trump administration's approach to regulation a "night and day" difference. He says there were $10 billion of regulatory costs added in Trump’s first year compared to the previous $100 billion. But, he says,"the second year was negative,” and the “third year was negative." The "small businesses I talked to were so happy,” he says.
He stresses that policymakers must understand opportunity cost. "It has to be good enough that you're going to take somebody's money away from them," he says. Regulations impose unseen sacrifices, like "giving up the raise that someone might have gotten" or "the expansion they might have done on a plant." He warns that regulatory burdens "get passed along" to consumers as higher prices, making it effectively "the same as taxing them."
Discussing centrally planned economies, Holtz-Eakin points to historical mistakes, like the Congressional Budget Office’s assumption during the dotcom bubble that revenue growth would continue indefinitely. "They just jumped it up and forecast $7 trillion of surpluses. Ouch." He emphasizes the importance of admitting errors: "If you don't know, don't make it up."
Now that tariffs are the main topic of discussion, Holtz-Eakin is blunt: "I'm concerned about what's going on in tariff land." He argues that trade across international borders is still trade, and "the rules aren't different and the measurements shouldn't be different." The imposition of high tariffs, he says, is "using the coercive power of the state to change people's decisions,” that were otherwise the right decisions.
Holtz-Eakin rejects the idea that blanket tariffs solve problems. "An across-the-board tariff of 10% on every country solves no problem." He prefers targeted measures: "We have… countervailing duty dumping–we should use them." Broad tariffs, he warns, are "very regressive" and "hard to administer."
He also criticizes the "nanny state" approach for programs, such as to dictate how welfare program benefits are spent. And he expresses strong concerns about overreach. "I don't like that mindset," he says. "Are we going to get healthier outcomes?"
He points out that banning purchases like soda with SNAP benefits ignores that "money is fungible" and "you never know where it's going to stop." And he cites a bizarre tax rule in California where "trail mix is healthy as long as it has 12 or fewer M&Ms," a great example of what he calls excessive micromanagement.
Holtz-Eakin believes in individual self-regulation. "Individuals have the capacity to regulate their behavior–I'm not going to tell you how to live your life." He argues for humility: "Let's acknowledge we're not that smart."
