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Sunday, March 22, 2009

COSTS OF GOVERNMENT REGULATION

I have previously shown how direct government spending is now more than 50% of the economy. Also how the cost of regulations to those being regulated is 20 times that of to cost to government of hiring said regulators. [p58]

So how much does this additional regulatory cost of government burden us all?

Here is a list of some factors. Note that costs of products increased by taxation (petrol, beer, & pretty much everything) aren't such factors because their effect is already included in the +50% we are already accepted as losing:

We know that our electricity could be sold at 1/4 the present price with nuclear because that is what the French pay for theirs. This, in turn, feeds into the costs of all industry & services.

We know that houses could cost 1/4 of the present amount in a free market. This, in turn, means all rents could change, over time, proportionately. Granted that this particular cost would not end imediately but only over time as new housing stock is built.

We know that building of public projects costs 13 times what it could & I think we can reasonably suspect that private projects must incur at least half that. How much would Trump's golf course cost if he had been able to start building 3 years ago?

Assorted EU regulations said, by an EU commissioner to cost us £67 billion annually - 5% of GNP.

Accountancy charges & paperwork. Most small businesses employing 10 or more people have at least 1 full time employee doing government paperwork. It may be proportionately less for big businesses but even so I think we may assume accountancy (7.5%) adds 7.5% to general costs.

Childcare costs - est 4 times above natural rate.

Unfair dismissal regulations - no exact estimate but I am told it is a significant factor - lets say 2.5%.

Cap & trade. Meetings with government bureaucrats. Maternity leave. Food as increased by EU tariffs £60 per family of 4 ie £1 bn ie under 0.1% GNP., not being allowed to park, pubs closing & thus less competition because of smoking ban, paying fot the BBC whether you want it or not, etc etc. All minor but endless.

This is how Americans divide up their personal spending, so assuming they are like us except that they do 5% on health care which I have eliminated & corrected the other figures:

Annual Expenditures 100% Food 15% (Food at home 10% Food away from home 5%) Housing 34% Apparel and services 5% Transportation 20% Health care 0% Entertainment 5% Other expenditures 11% Personal insurance and pensions 9% Note: Details do not sum to total due to rounding.
So lets do the arithmetic:

75% of housing cost is regulatory - 34% X 75% = 25.5%
(I assume this includes heating it)

The EU regulations come to another 5%
(assuming the cost is equally borne by the people as by the government sector which is an optimistic assumption)

Remaining portion of income that goes to the value of what we actually choose
100% - 25.5% - 5% =69.5%

That 69.5% is, in turn reduced proportionately by all the other factors. Take off commercial building costs (est 2.5%), electricity charges through the rest of the economy (est 2%),accountancy (7.5%), child care (est 2.5%), assorted other (est 10%)
Total 24.5%

Therefore percentage of income we nominally get to spend which we actually get in our pockets & spent on the product not the surrounding regulation
69.5% X (100% - 24.5% = 52.5%


Government spending is already above 50% of the economy & growing fast so (52.5% of 48%) we might actually be getting to spend 25%

This is obviously a fairly rough estimate but it is based on genuine figures, or at least ones given by those in charge & if anything I think I have erred on the conservative side (small c) particularly in assuming all the minor regulators only cost 10%. Remember that 20 to 1 ratio of the cost of regulators to the amount of working time they cost us. I don't think anybody arguing the figures could reasonably come out with us getting to spend more than 30% or less than 20% of GNP on actual value or less than 70% or more than 80% on government taxes + regulations.

The good side is that is it is obvious how amazingly well we could be doing if we would just fire all these parasites & busybodies. Get government spending down to the 15% which is where, according to the only poll I know on the subject, most people want it, and prune all regulations that don't unambiguously cost more than their value.

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