October 21, 1999

According to a recent report by Melinda Warren and Murray Weidenbaum for the Center for the Study of American Business (CSAB), federal spending on regulatory activity and the number of federal regulators have been on the rise throughout most of the 1990s.

CSAB estimated that total spending on federal regulatory activity will have grown by 30% in real terms between 1990 and 2000. At the same time, total staffing for federal regulatory activity will have risen by 15% over the same period.

Indeed, federal regulation has been marching relentlessly forward throughout the 1990s. Of course, the costs of regulation extend far beyond federal spending on bureaucrats and the programs they run. The total economic impact of regulations rivals that of direct methods of taxation. Regulatory costs are a very real burden on businesses, consumers, taxpayers and the economy in general-with small businesses hit much harder than big businesses.

As regulatory economist Thomas Hopkins has noted, the average per employee cost of federal regulation is roughly 80% higher for businesses with fewer than 500 employees than for businesses with more than 500 employees. Obviously, unlike smaller firms, large businesses possess the resources and expertise to better absorb the costs of federal regulations.

The bottom line: heavy regulatory burdens hurt small businesses most, and therefore take a significant toll on innovation, economic growth and job creation.