Excessive Red Tape Hurts the Least Fortunate

Excessive Red Tape Hurts the Least Fortunate

Montana has the opportunity to take the lead reducing harmful red tape and lifting up the least fortunate, while preserving regulations needed to protect consumers.

This article was originally published in March of 2021

When someone fell on hard times in the rural Bitterroot Valley community I grew up in, neighbors went above and beyond to help. Too often the biggest barrier to helping those in need isn’t the willingness of good Montana neighbors, it’s the heavy hand of government.

New research from the Mercatus Center at George Mason University details the regressive effects of federal regulations on Montana’s economy, where the regulatory burden disproportionately impacts our least fortunate.

For example, increases in regulatory burdens are associated with higher rates of poverty in the states. Over the last few decades, Montana’s burden of federal regulations grew by upwards of 60% and is linked to an additional 1.71% increase in the poverty rate. This effectively means nearly 18,000 more Montanans living in poverty due to the damaging effects of regulations on the economy.

States with more federal regulations also have higher levels of income inequality. Montana’s regulatory burden is connected to an extra 3.1% increase in income inequality, which exacerbates regional economic divisions where affordability is becoming a crisis.

For those exposed to the common trope that deregulation will only help the bottom line of big corporations, it may be surprising to learn regulations can harm the poor more than the rich. However, it’s unsurprising given what we know about the detrimental economic effects of red tape.

Some regulations may be needed to protect health, safety and the environment, but abundant research shows the accumulation of thousands of regulations together damages economic growth and substantially increases the cost of doing business.

While big businesses with vast resources can easily absorb the costs of regulatory compliance, small businesses with thinner margins have a harder time staying afloat as the list of red tape gets longer. According to Mercatus research, that translates to an estimated annual loss of 51 small Montana businesses and 508 jobs on average due to growth in federal regulations.

Small family businesses passed down through generations bring economic stability and opportunities for advancement to communities on the rural frontier. When regulations smother these vital businesses, people get poorer and communities suffer.

Reducing red tape may be one of the best things leaders can do to level the economic playing field and stick up for the “little guy.”

Unfortunately, President Biden has effectively opened the floodgates for federal regulations, recently rescinding successful Trump era reforms that reined in the growth of costly regulations and saved the public billions.

In contrast, Governor Gianforte used his very first executive order to create a Red Tape Relief Task Force to implement comprehensive regulatory reform, taking the first step toward reducing Montana’s state-level regulatory burden.

In this dynamic, Montana has the opportunity to take the lead reducing harmful red tape and lifting up the least fortunate, while preserving regulations needed to protect consumers. With the second-worst burden of regulations in our region, this will be transformational for Montana’s economy.

Montanans who care about reducing poverty, promoting economic growth and reducing income inequality should support efforts to reduce harmful regulations and red tape.

This article originally appeared in Lee Newspapers

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