The federal government has two main vehicles for diverting private resources to achieve policy goals. The first is through spending programs. The IRS collects compulsory taxes, and the revenues are spent on desired public functions such as parks, roads and other infrastructure, schools, law enforcement, homeland security, and scientific research, as well as welfare and social insurance programs such as Social Security, Medicare, Medicaid, food stamps, and unemployment assistance.
The second is through regulation. Federal agencies issue and enforce standards ranging from environmental quality, to consumer protection, business and banking practices, nondiscrimination in employment, Internet privacy, labels and “disclosure,” safe food, drugs, products, and workplaces.
The goals of spending programs and regulations are widely accepted. For example, a clean and healthy environment, safe food and drugs, and fair business and employment practices are among the most important things citizens expect of their government. The goals are largely nonpartisan—most conservatives, moderates, and liberals agree on them. However, the implementation of spending and regulatory programs often is controversial. Disagreement over government policy is inevitable in a society where people’s values, opinions, incomes, and interests vary widely, and when the breadth of government has grown substantially
While the goals of most regulatory programs enjoy broad public support, in practice regulation usually comes down to detailed rules and lots of paperwork that can be highly costly and burdensome to those who must comply with them. This includes not only large corporations but small businesses, nonprofit organizations, schools, state and local governments, farms, and consumers and citizens. Some sectors of the economy bear the heaviest burdens, such as manufacturing, automobiles and transportation, energy and power, banking and finance, and health care and pharmaceuticals. But all of us pay for federal regulations through higher prices, fewer available products, services, and opportunities, and stifled wages or job opportunities. The costs of regulation are never “absorbed” by businesses; they always fall on real people.
In our democracy, citizens express their views at election time by voting for candidates and parties that stand for broad menus of policy positions. Between elections, choices on controversial subjects are made through presidential leadership, voting in Congress, court rulings on specific disputes, and “checks and balances” among the three constitutional branches. For citizens to intelligently hold elected officials accountable, however, policies’ benefits and costs must be visible.
While policies effected through both spending and regulatory programs provide benefits to Americans, the costs associated with regulatory programs are much less transparent than their on-budget counterparts. To implement spending policies, presidents send proposed budgets each year to Congress, and Congress must both authorize activities and appropriate necessary funds to implement them. Spending agencies are generally enthusiastic about their programs and want more resources to pursue them, but the available funds are necessarily limited and must be allocated to the highest priorities by Congress and the President in a much-debated, highly-publicized, annual budget process. These checks and balances make elected officials accountable to citizens. Regulatory policies cannot be measured in the same way, however; and there is nothing equivalent to the fiscal budget to track regulatory costs. These costs are like stealth taxation, and because they are assumed to fall on businesses (even though individual consumers and workers ultimately bear them), regulatory tools may seem preferable to direct spending programs for accomplishing an agency’s policy objectives.
Further, regulations have the force of law, but Congress usually just sets broad regulatory goals by statute, and delegates the power to write and enforce detailed rules to specialized regulatory agencies. This means that Congress gets credit for popular regulatory goals while the often-unpopular rules are blamed on “unelected bureaucrats.” This criticism often comes not only from citizens and businesses but also from the legislators who voted for the regulatory statutes in the first place.
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