Riding the Tsunami

Report: ‘Regulatory tsunami’ coming from Obama administration in new term

Flickr user Denis Dore
February 7, 2013

President Barack Obama’s administration is unleashing a host of new regulations that are expected to add billions in compliance costs for American small businesses, according to a new report.

Regulations issued in January and February following Obama’s reelection could add more than $25 billion to the costs of regulatory compliance for American businesses, according to the yet-to-be-released report by Sam Batkins, the director of regulatory policy at the American Action Forum.

"If the current trend continues, the federal government will add more than $138 billion in regulations in 2013," Batkins concludes. "It is no surprise then, that businesses view new rules as a major obstacle to economic growth and job creation."

Batkins told the Free Beacon the flood of new regulations lends credence to concerns the administration waited until after the 2012 election to issue them to avoid a political backlash.

Batkins cited the time it took last year for rules to be approved by the White House.

The White House waited more than 90 days to sign off on 84 percent of new rules in 2012—a rate Batkins says is 50 percent higher than in 2011.

A group of House Republicans, including Oversight Committee chairman Darrell Issa (Calif.), then-Judiciary Committee chairman Lamar Smith (Texas), and the chairs of both committees’ regulatory panels noted in October that the administration had not submitted its 2013 regulatory agendas, as required by law.

"Due to the impending election, it does raise concerns that the administration is holding back this information for fear it will be met with dissatisfaction by the public, or even worse, perceived as breaking the administration’s promise of regulatory reform," the lawmakers wrote in an Oct. 26 letter to the White House Office of Management and Budget.

The flood of new regulations primarily deals with implementation of Obamacare, the Dodd-Frank financial regulation package, and new Environmental Protection Agency measures.

According to Batkins’ study, the compliance costs of all regulations issued in January will be $12 billion annually. February could be even more expensive: The study estimates total compliance costs for regulations that could be issued this month at $15.8 billion.

Those numbers may even understate the costs of compliance since the study assumed federal agencies’ cost projections are accurate. "We are taking everything that the government says at face value in terms of costs," Batkins explained.

However, some of those estimates are unrealistically low. The Consumer Financial Protection Bureau estimates that banks and credit unions will have to spend 1.1 million hours complying with new mortgage servicing rules. But the Bureau estimates compliance costs to be only $7 million. That would mean that those financial institutions are spending less than $7 per hour on compliance activities.

Batkins said that projection is highly unlikely, noting some recent financial regulations have imposed hourly compliance costs in excess of $400.

The study notes polling data showing businesses have increasing concerns about the rising costs of federal red tape. According to a Jan. 31 Gallup survey linked in the report, "the fact that so many owners say worries about such things as potential healthcare costs and potential new government regulations are holding back hiring is troublesome for the job market outlook."

Business groups have also sounded the alarm on increasing compliance costs and noted the administration’s opacity in carrying out its regulatory agenda.

"Federal regulators are churning out about 4,000 regulations a year—including a rising number of massive, costly rules," Tom Donohue, president of the United States Chamber of Commerce, recently warned. "Systemic overregulation breeds uncertainty, drives up costs, stifles hiring and investment, and threatens our competitive edge in a global economy."