How much do federal regulations cost Hawaii?

by Keli'i Akina, Ph.D., President/CEO, Grassroot Institute of Hawaii

There is good news and bad news when it comes to the impact of federal regulation on our state. The good news is that Hawaii suffers less compared to other states--according to the Mercatus Center's FRASE Index (that's "Federal Regulation and State Enterprise"), the Aloha state ranks 39th nationwide in the impact of federal regulation on our major industries. Hawaii's FRASE Index rating of 0.86 for 2013 means that the impact of federal regulation on Hawaii is 14% lower than its impact on the nation as a whole.

The bad news is that this figure is relative to other states--not relative to the amount of regulation out there. If you look at how the amount of regulation has changed over time, you'll see a 41% growth in what is termed the "constant basis FRASE Index" between 1997 and 2013. In other words, a proliferation of regulations have continued to burden state industries over the past two decades.

And remember that this is just federal regulation. The effect of state regulation remains unmeasured. What's more, measuring loss of opportunity (one of the burdens of complex regulatory schemes) means that you are considering something that continues to compound over time. One economist estimates that federal regulations have reduced economic growth by 0.8% every year since 1980--an amount he values at about $4 trillion.

Above all, this makes it clear that in order to make policy in Hawaii, we must have a better appraisal of the economic impact of regulation and state action. Acknowledging the burden that regulation and legislation have on the economy would be a significant step towards boosting the state's economic growth.

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LINK: RegDataHawaii  

IBD: Regulations Are A Really Big Drag On U.S. Growth