The Trump administration is pushing even harder to cut government regulations than they did in the president’s first term.
New research shows this is a smart move. Cutting regulations helps the economy grow, increases investments, and lowers inflation—without raising taxes. If Congress wants to keep this progress going, they need to make these changes permanent before government officials try to reverse them.
Stopping New Regulations Reduces Inflation
Our research finds that stopping new regulations for 10 years would boost the economy by 1.8%, similar to the benefits of a big tax cut. Inflation would also drop, making prices more stable. In fact, annual inflation could go down by 0.6 percentage points, which would help the Federal Reserve keep household costs under control.
This makes sense. Government regulations act like hidden taxes, forcing businesses to spend money on paperwork instead of growing, hiring workers, or creating new products.
The number of regulations has been growing fast. In the last 10 years, regulations increased by 15%, and since 1980, they have nearly doubled. As more rules pile up, businesses must spend more time and money following them instead of focusing on customers.
This leads to two big problems: higher prices and slower economic growth. Businesses pass compliance costs to customers, making products more expensive. At the same time, companies invest less in new ideas and workers, which hurts wages and productivity.
But when businesses spend less time on government rules, they can focus on expanding, hiring, and investing. Our research suggests that cutting regulations has the same positive impact on the economy as the Tax Cuts and Jobs Act (TCJA), which encouraged businesses to invest.
Reducing Government Regulations Boosts the Economy
Our research confirms this. We found that freezing new regulations for 10 years would have major benefits:
- Business investment would jump by 7.8% because companies wouldn’t have to spend as much on compliance.
- People would work 1.4% more hours since there would be more job opportunities.
- Consumer spending would increase by 1.7% because lower prices and better job markets help families.
These results show that reducing government regulations boosts the economy, just like tax cuts do. Washington should take notice. If lawmakers want to grow the economy, they should extend the TCJA and cut unnecessary regulations.
As lawmakers debate whether to extend the TCJA, they should do two things: make tax cuts permanent and reduce government red tape. By supporting Trump’s efforts to cut regulations, Congress can decide which rules to remove. A mix of tax cuts and deregulation would supercharge the economy and keep inflation low.
Washington has a chance to boost growth without adding to the national debt. If leaders want a stronger economy and lower inflation, the solution is simple: cut the red tape.
