You might’ve heard the term “red tape” before. But what does it really mean? To understand the answer, you first need to ask: What are government regulations?
Government regulations are rules created by public agencies to carry out laws passed by elected officials. They can govern everything from workplace safety and environmental standards to home construction, business licensing, and energy development.
All levels of government — local, state, and federal — issue regulations. Local governments establish zoning, permitting, and licensing rules that can determine where homes may be built and what entrepreneurs must do before opening a business. At the federal level, everything from worker safety to air quality is regulated by the government.
Clearly, some regulations are necessary. They can protect public health, intellectual property, and more. But too much red tape can raise costs and limit opportunity.
The bottom line: Government regulations should protect people without creating hidden costs or unnecessary barriers.
Good regulations should strike that balance.
What are government regulations, and who writes them?
Have you ever wondered why something is regulated by government?
Why, for example, was it once illegal to tie a giraffe to a streetlight in Atlanta?
An important part of understanding government regulations is knowing who writes the rules.
Usually, it’s not the people you voted for on Election Day. In fact, at the state and federal levels, it’s often career agency employees.
These agencies take direction from governors, presidents, and lawmakers, but agency officials write and implement government rules.
Some lawmakers have tried to impose checks and balances on this process. For example, a bill called the REINS Act would require major regulations with large economic impacts to receive approval from elected lawmakers before taking effect.
The REINS Act wouldn’t just return power to members of Congress. Because you vote for these lawmakers, it would return power to you.
How red tape shows up in everyday costs
We are used to paying taxes — even if we don’t like them — and we understand how they affect our bank accounts.
But taxes aren’t the only way our government imposes costs. Regulations become harmful when they are outdated, duplicative, excessively costly, or disconnected from the problem they were designed to solve. Those rules can delay new homes, energy projects, businesses, and services. When government makes it harder to build and compete, supply remains limited, and prices rise.
When the government regulates something, it usually results in higher costs. This can be seen in:
- Housing: Restrictive zoning and lengthy permitting processes can prevent builders from adding homes where people want to live. When housing supply fails to keep up with demand, rents and purchase prices rise.
- Energy: Delayed permits for power generation and transmission can make it harder to add reliable energy capacity. Limited supply and aging infrastructure can contribute to higher utility costs.
- Small businesses: Licensing requirements, complicated reporting rules, and slow approvals can impose costs that large companies are better equipped to absorb than new entrepreneurs.
- Work: Rules that force independent workers into one employment model can reduce flexibility for people who prefer contract, freelance, or gig work.
Think about it this way: Food prices reflect costs across the supply chain. When the government regulates energy, transportation, and labor, businesses must add processes, people, and programs to comply with those rules.
Those requirements are costly, and those costs almost always get passed on to you, the consumer.
Government rules affect more than consumer prices, too. Labor rules can erode worker freedom. Worker-classification rules can also limit flexibility by preventing people from choosing independent or contract work that fits their circumstances. Thoughtful regulation should protect workers from abuse without eliminating legitimate, flexible ways to earn a living.
When government regulations become too broad, costly, outdated, or unaccountable, it’s time to do something about them.
Why regulatory reform matters
Regulatory costs are estimated at $2 trillion to $3 trillion, or at least 7% of America’s gross domestic product. Households pay about $16,000 annually to cover these regulatory costs, which account for 21% of household expenses.
Again, not all government rules are unnecessary. Some of them are really important.
But determining which regulations are needed, and which are not, requires reform. We need mechanisms that hold regulators accountable and ensure that government regulations are clear and affordable.
States can reduce burdens through accountability and transparency reforms.
Americans for Prosperity supports regulatory reform that restores accountability and prevents the government from imposing hidden costs on everyday life.
The next time someone asks, “What are government regulations?” you can say: They are hidden taxes in need of sunlight.
Families are already paying too much for housing, energy, groceries, and other everyday necessities.
Tell your lawmakers to look for every opportunity to remove unnecessary barriers and make life more affordable.
