What’s the biggest cause of poverty? Federal regulations

When people look at the issue of “poverty”, many fingers are pointed. Often what you hear is blaming “the system”, but it couldn’t get more vague. What system, where? Are we all a part of it, or just impoverished communities?

Instead of blaming some obscure “system”, John Dawson of Appalachian State University and John Seater of North Carolina State made a startling find:

the average American household receives about $277,000 less annually than it would have gotten in the absence of six decades of accumulated regulations—a median household income of $330,000 instead of the $53,000 we get now.

Federal regulations take away 2 percentage points of growth each year—a staggering amount. Instead of our current $15.1 trillion economy, our economy could be at $53.9 trillion had regulations remained unchanged since 1949.

Regulations cause resources to be misallocated and wasted, businesses to fold, and great ideas to not be produced.

Compliance with regulations alone “costs consumers and businesses approximately $1.8 trillion—about 11 percent of current GDP—to comply with current federal regulations.”

The researchers even calculated in the positive effects from regulations, like cleaner water and air, and showed how those were overwhelmingly outweighed by negative effects.

So what does this mean?

It means that regulations as a whole have caused the economy to be just a shadow of what it could have been—perpetuating poverty, social inequality, and a lower standard of living for everyone. The next time you hear a politician say “there should be a law…”, there just shouldn’t.

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