The Leaflet: States Impacted by Federal Regulations

Published May 12, 2016

Patrick A. McLaughlin, senior research fellow at the Mercatus Center, and Oliver Sherouse, research analyst at Mercatus, recently released the 2016 edition of the Federal Regulation and State Enterprise (FRASE) Index. The Index ranks the degree to which federal regulation affects the 50 states and Washington, DC. The researchers found the state harmed the most by regulations is Louisiana. The state affected the least is New Hampshire.

The FRASE Index examines thousands of administrative laws regulatory agencies pass each year. The authors explain that while regulations are not pieces of legislation that typically dominate news cycles, they are still laws that often have serious consequences for those who fail to comply, such as significant fines or jail time.

McLaughlin and Sherouse say in the Index that regulations are abundant: “The Code of Federal Regulations (CFR), which annually compiles all current federal regulations, numbers more than 175,000 pages in 236 volumes. Those pages contain over one million individual restrictions that mandate or prohibit some activity. And those numbers are growing: by restriction count, the CFR is nearly twice as large as it was in 1975.”

Mercatus recently created a website called RegData, which measures the FRASE Index score. A FRASE Index score of 1 means federal regulations affect a state to precisely the same degree that they do the nation as a whole. A score higher than 1 indicates federal regulations have a higher impact on the state than on the nation, and a score below 1 means they have a lower impact on a state. To calculate the FRASE Index score, RegData counts the number of individual restrictions in the CFR by identifying the words “shall,” “must,” “may not,” “required,” and “prohibited” and assigning the words to the appropriate industries.

McLaughlin and Sherouse argue in the FRASE Index, “When a state economy is highly concentrated in one or two industries, changes in regulation on those industries can dramatically affect the state’s score on the Index. Some trends in the production of regulations, such as the growth of environmental and transportation regulations, play a large role in determining the levels of regulation on specific states.”

Following the launch of the Mercatus FRASE Index, many states have been forced to consider the costs associated with federal regulations.

Alexandria Burris, a writer for Greater Baton Rouge Business Report, wrote in a recent article  federal regulations impact Louisiana more than any other state: “Louisiana’s score is 1.74, which indicates the impact of federal regulations on industries here are 74% higher than the impact on the nation overall. The state’s top ranking in the report is reflective of the large chemical, manufacturing and oil and gas industries—each of which is heavily regulated—in the state.”

Akash Chougule, director of policy for Americans for Prosperity, said in a recent press release, in which he cited the Mercatus results, New Jersey has seen a 14 percent increase in federal regulatory impact. “New Jersey ranked 38th on Mercatus’ list, as the state has not been as impacted in recent years by EPA regulations which have hit states like West Virginia, Kentucky and others hard,” said Chougule.

In a recent blog post, Vance Ginn, an economist at the Center for Fiscal Policy at the Texas Public Policy Foundation, advises states to be cautious of burdensome government regulations following the study’s conclusion that federal regulations have reduced average U.S. economic growth by about 0.8 percentage points per year since 1980. “While this doesn’t seem like a big deal, it’s important to note that economic growth compounds over time,” said Ginn. “Therefore, the negative gap between economic growth without regulations compared with actual growth grows larger as it builds on itself each period.”

What We’re Working On

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