Regulatory Alphabet Soup and the Visible Foot of Government

I am usually able to steer clear of federal entanglements. I pay my annual protection money through the IRS, and hire an accountant as insurance. Every few years, my passport fills up, so I get it renewed. I ship important things through FedEx or UPS, and rely on the mercy of the US Postal Service for magazines and the occasional handwritten thank-you note. 

Economist Milton Friedman quipped that one could “pick at random any three letters from the alphabet, put them in any order, and you will have an acronym designating a federal agency we can do without.” And the Competitive Enterprise Institute reports some contradictory figures on the actual number of federal agencies: 115 according to the Administrative Conference of the US; 257 according to the Federal Register online index; and 430 listed in various paper issues of the Federal Register. From the AbilityOne Commission to the Woodrow Wilson International Center for Scholars, and from the Joint Fire Science Program to the Rural Utilities Commission, the federal government has it all. With so many agencies, it’s no wonder that regulatory compliance costs the American economy about 10 percent of GDP.

What is a wonder is that the financial and administrative costs are so invisible in daily life. The juggernaut of federal involvement in the economy is typically hidden behind a corporate veil. I am reminded of the great French economist Frédéric Bastiat, who wrote of what is seen and what is not seen. Perhaps Americans are so tolerant of the federal drag on the economy, simply because most of it is never seen by citizens and consumers.

6.2 percent of my income is visibly taken from me, to finance a bankrupt Social Security program. But another 6.2 percent is invisibly taken, as the employer share (not out of my salary directly, but out of my putative salary –in terms of economic incidence, still out of my pocket). My employer collects state and federal income taxes for me, so I don’t need to fill out monthly forms or write a monthly check. Environmental and safety regulations are baked into the prices I pay at the till, and I don’t need to worry about compliance. Banking regulations increase the cost of a checking account, but the bank’s army of compliance officers handles them – and I am fortunate not to be among the million or so Americans who became unbanked, as a result of extra fees caused by the Durbin Amendment to the Dodd-Frank act.

I rage against the machine, because I am a professional economist. Indeed, the Constitution, in Article 1, Section 8, enumerates about 20 powers for Congress; under Article 2, the executive has the power to execute the laws, along with some military, foreign policy and nomination powers. That’s it. This is nowhere near the 25 percent of US GDP spent by the federal government in 2022, coupled with 10 percent of GDP in regulatory compliance.

But, again, I am usually shielded from federal entanglements; I may pay the indirect cost, but the direct cost is almost always borne by others. So, in the few instances where I come nose-to-nose with the federal bureaucracy, I get particularly aggravated – especially when those agencies are not authorized by the Constitution, and inimical to the spirit or letter of the document.

Today, I focus on two agencies that have been thorns in my side. They are minor, but they are representative of runaway and unconstitutional government. First, the Foreign Trade Department of the United States Census Bureau. Second, the US Department of Veterans Affairs, Office of Housing Assistance.

As I make my way to the next chapter of my life in Paris, France, I received an odd request from the moving company. For export purposes, I needed to file for an Employer Identification Number from the Foreign Trade Division of the US Census Bureau. I was surprised to find that my Social Security number (itself not authorized by the Constitution)- was insufficient. I was also surprised that the US Census Bureau has a Foreign Trade Division – and one with the power to regulate the moving of my personal effects overseas. Indeed, Article 1, Section 2 of the Constitution provides that the federal government will count the population every ten years, for purposes of apportioning congressional representation. But that’s it; talk about mission creep! As best I can tell from the Division’s website, its purpose is the collection of import and export data, and the regulation of reporting export shipments. But, as any undergraduate student of macroeconomics will know, used goods and services (even when imported or exported) do not count towards calculating GDP. I remain puzzled.

Once my North Carolina house was emptied, I had to sell it. The buyer and I smoothly agreed on a sales prices and repairs. We then signed a contract. Unfortunately, financing is provided by the US Department of Veterans Affairs; and, naturally, the agency has its own set of conditions. First, the sale is subject to federal approval of the sales price; unfortunately, the appraisal came in under the mutually agreed sales price, so full financing won’t be possible. Second, the federal government is requiring repairs beyond the contractual obligation already reached between buyer and seller. I have learned that it is customary in such cases for the seller to reduce the price and make the required repairs. In other words, the federal government is sticking its nose into an already established contract. This is not entirely surprising. Indeed, in Home Building & Loan Association v. Blaisdell, 290 U.S. 398 (1934), the Supreme Court held that states could rewrite certain private contracts without violating the Constitution’s Contract Clause (Article 1, Section 10). While the federal government is not prohibited from rewriting contracts, it also does not have this enumerated power. But that doesn’t seem to matter anymore.

In the grand scheme of things, these two inconveniences pale in comparison to the federal government’s long train of abuses and usurpations. But these are seen. So they’re even more infuriating.