Dow Could Be Above 25,000 Without Government Regulation

By Michael Carr – Re-Blogged From

A recent study concluded that the growth of regulation between 1977 and 2012 reduced economic growth by about 0.8 percent a year. Without all of those new regulations, GDP would be about $4 trillion higher.

This may seem like an abstraction but individuals suffer when economic growth fails to meet its potential. With $4 trillion in economic growth, there would be more jobs and jobs would pay better. As study by the Mercatus Center at George Mason University found, regulations could be shaving as much as $13,000 from each worker, on average.

Skeptics need to realize many manufacturers wouldn’t relocate if regulations didn’t increase the cost of doing business. There would be more jobs and better paying jobs without onerous regulation.

Higher GDP also results in a higher stock market. The easiest way to recognize this is by thinking of Warren Buffett’s favorite indicator, market cap to GDP. This ratio compares the size of the stock market to the size of the economy. The ratio is overvalued but it might be undervalued if economic growth matched its potential.

Decreasing regulation could add 40 percent to the size of average portfolio. It is unlikely government can be downsized quickly but each regulation that is repealed would produce real wealth for individuals.

The study finding bureaucrats cost America $4 trillion used data through 2012 and recent regulations may have doubled the cost of compliance. Before the end of the year, even more regulations are expected. These regulations don’t just impact an individual business.

Regulations reduce the standard of living of everyone in the country. Often overlooked is the fact that regulation also reduces wealth which makes saving for college or retirement more difficult.

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