Hope this helps The American free enterprise system has been one of the greatest engines for prosperity and liberty in history, and has the potential to deliver a promising future for the United States and the world.1 Through protecting property rights and fostering healthy competition, democratic capitalism rewards work and ingenuity which improves our lives and has liberated more people from poverty than any other system.2
Yet, the United States faces growing challenges in an increasingly competitive global economy. Recent decades have seen a decline in economic growth and innovation, and one important cause is poorly-designed government policies. Large swaths of the American economy are distorted by government mandates and incentives, and the vast majority of binding “laws” are not enacted by our elected representatives in Congress, but are promulgated by agencies as regulations.
Sensible, evidence-based regulations that respect the fundamental role of free-market competition can provide vital public benefits – such as protecting the environment, public health and safety, civil rights, consumers, and investors. Yet, despite the best intentions, government regulation too often disrupts the marketplace or picks winners and losers among companies or technologies. When regulators behave this way, they invariably cause unintended harms. Poorly designed regulations may cause more harm than good; stifle innovation, growth, and job creation; waste limited resources; undermine sustainable development; inadvertently harm the people they are supposed to protect; and erode the public’s confidence in our government.3
This paper examines the important role regulations play in a vibrant economy, how they differ from other government programs, why they can produce unintended consequences, and how reforms could help us achieve the benefits regulations can provide with fewer negative outcomes. With a better regulatory system, we can enjoy a healthy environment, safe workplaces, more innovative products, and greater opportunities and prosperity for all Americans.
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.
