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Research shows red tape reduction fuels economic growth

Some 60 administrative regulations repealed this week alone

FRANKFORT, Ky. (Oct. 17, 2016) – If Kentucky can reduce unnecessary regulation on business, the result will likely be a faster growing economy and steady increase in per capita income, according to William Beach, vice president for policy research at the Mercatus Center at George Mason University, who has reviewed Kentucky’s administrative regulations and their effect on economic growth.

As an example of the effects of regulation, Beach cited a national study of the Code of Federal Regulations which compared the number and reach of regulations in calendar years 1980 versus 2012. Had regulations in 2012 stayed at the same level as they were in 1980, the U.S. economy would have been 25 percent larger, accounting for an additional $4 trillion. Additionally, more than 34 million jobs could have been available.

On the state level, Beach estimates fewer regulations can result in a faster rate of growth in the economy. For example, at a two percent annual growth, Kentuckians’ per capita income could rise to $72,000 in 35 years. However, a consistent five percent annual growth would cause per capita income to more than double — to $157,000 — seven years faster.

In addition, while the state has no control over federal regulations, the effects of those regulations affect Kentucky businesses over 30 percent more than the average state. That’s because Kentucky has a strong presence in the three most regulated industries – coal and petroleum products manufacturing; electric power generation, transmission and distribution; and motor vehicle manufacturing.

Beach is encouraged, however, at the progress being made through Gov. Matt Bevin’s Red Tape Reduction Initiative. Just this week, a legislative committee repealed some 60 regulations and amended several others. So far, approximately 150 regulations have been repealed or amended, and nearly 550 are targeted for amendments or outright repeal. More than 1000 state administrative regulations have been reviewed so far, and during this process, every one of the 4700+ regulations will be reviewed to determine its need, effectiveness or adverse impact on business.

“Over the past 40 years, the number of books making up the Kentucky Administrative Regulations has more than tripled,” wrote Beach. “Regulations reduce growth rates, and small changes in the growth rate result in large changes in per capita income over time. Regulatory reform at the federal and state levels has the potential to unleash economic growth for Kentucky.”

Beach’s full report is available here: https://www.mercatus.org/publications/deregulation-can-fuel-economic-growth-kentucky.