Government policy mistakes raise the prices of the things that Americans buy. An average American household can expect to pay an extra $4,440 each year thanks to just 12 such policy mistakes that have large costs and few benefits.
Local, state, and federal governments are all guilty of enforcing costly laws and regulations. At the federal level, the biggest costs come from vehicle fuel-efficiency standards, which cost consumers $55 billion a year, and the requirement to use corn-based ethanol in gasoline, which costs $31 billion per year. Occupational licensure at the state level costs consumers $127 billion per year. Local land-use restrictions drive up the cost of housing by $209 billion per year.
Altogether, the 12 policy mistakes quantified in this paper cost Americans $546 billion per year or 4.6 percent of total consumption. That is comparable to the Department of Defense budget and 18 times the budget of the National Institutes of Health. It is more than half as much as Americans spend on groceries, and more than the rent paid by every renter in America. It is three times the budget of the State of California. It is more than what 14 million average Americans spend in a year. And we pay it again and again, year after year.
KEY POINTS
- Federal, state, and local policy mistakes unnecessarily increase the cost of living for the average American household by $4,440 per year.
- Citizens need not wait for Washington to act. They can lower the cost of living with state and local regulatory reforms.
- Policies and regulations that prevent competition and limit supply increase the cost of living.
- The most costly policy mistakes are extensive occupational licensure and restrictive zoning and permitting laws. Government should set rules that everyone has to follow rather than demanding that workers, builders, or businesses obtain permission before acting.
- Other, similar policy mistakes have costs as well, but those costs have not been quantified as fully.
- Policymakers can benefit consumers whenever they remove barriers to competition and simplify regulation.