ON-Lion Letter

"[O]ur regulatory process, contrary to what many expect, contributes to poverty," Patrick McLaughlin testified to a subcommittee of the U.S. House Committee on the Judiciary in February.

McLaughlin is a senior research fellow at the Mercatus Center at George Mason University in Arlington, Va.  The Lynde and Harry Bradley Foundation in Milwaukee supports the Mercatus Center.

"Some people maintain the notion that the costs of regulation are limited to compliance costs, and that these costs are paid primarily by businesses," McLaughlin continues.  "This belief is incorrect.  I will highlight two specific ways that the costs of regulation can actually be regressive, meaning that the costs are disproportionately borne by low-income households ...."

First, he said, "Regulations have regressive effects by increasing the prices of basic necessities, such as electricity, housing, and telephone services, which typically consume a larger share of the budget of lower-income households than of wealthier households."

Second, "Some types of regulations are associated with higher levels of income inequality, most likely because entrepreneurs at the lowest segments of the income distribution have relatively greater difficulty surmounting costly barriers to entry created by regulations.

"With those points in mind," McLaughlin said, "I hope to present this problem as an opportunity for policymakers to take positive steps toward regulatory reform -- steps that will reduce the harm of federal regulations that are acting to impoverish, rather than help, low-income households."

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