Direct Costs of Regulation

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administrative costs of regulation:	The administrative costs of regulation include the salaries of government workers, inspectors, office supplies, etc.
compliance costs of regulation:	Compliance costs of regulation are costs incurred primarily by the private sector (and also by state and local governments) in the process of complying with regulations.

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The Costs of Regulation

The direct costs of regulation include the administrative costs of operating regulatory agencies and the compliance costs incurred by regulated entities.

Direct costs of regulation include (a) administrative costs to the government (employee salaries, office supplies, and other "overhead" expenses), and (b) compliance costs incurred by regulated entities (primarily the private sector, but also by other governmental units that must comply with regulations).

Studies estimating the direct costs of federal regulation have found that compliance costs are many times larger than administrative costs. Extrapolating some previous estimates to 2004, $650 – 800 billion is now absorbed annually to meet federal regulations – roughly one-third of U.S. private investment, or about $3,000 per U.S. citizen. Identifying ways to eliminate wasteful federal programs and inefficient red tape has been a centerpiece for federal priorities for almost 40 years, but little headway seems to be made.

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Author: Ralph Byrns

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