A Fork in the Road: What OMB’s 2025 Regulatory Reform Report Really Means for the American Economy

The release of the 2025 regulatory reform report by the Office of Management and Budget marks a turning point in federal regulatory policy. For years, regulatory growth was treated as inevitable—an accretion of rules layered one atop another, rarely revisited, rarely rolled back, and seldom assessed for real-world economic impact. OMB’s latest report rejects that fatalism. It affirms something long argued by reformers: regulatory costs are not destiny. They are the product of policy choices—and those choices matter.

The significance of the report is not merely rhetorical. It documents a renewed commitment to regulatory restraint, retrospective review, and cost discipline across the executive branch in 2025. More importantly, it sets the stage for what could follow if that approach is sustained. The difference between continuing down this path and reverting to the regulatory acceleration of the prior administration is not marginal. It is measured in trillions of dollars.

The Baseline We Inherited

As of January 2025, direct federal regulatory costs stood at approximately $3.97 trillion annually. That figure reflects the cumulative result of policy decisions stretching back more than a decade, including a sharp acceleration in regulatory activity after 2021. From January 2021 to January 2025 alone, direct regulatory costs increased by roughly $1.8 trillion, an annual growth rate of more than 16 percent.

That trajectory matters because regulatory costs compound just like interest. Each year’s increase becomes the base on which the next year’s growth is calculated. Left unchecked, this dynamic produces exponential expansion in regulatory burden—higher compliance costs, reduced investment, slower productivity growth, and diminished economic dynamism.

OMB’s 2025 report represents a conscious break from that model.

What Continued Reform Means in Direct Cost Terms

In 2025, regulatory reform efforts resulted in an estimated $211 billion reduction in direct regulatory costs—about a 5.31 percent annual decrease from the January 2025 baseline. On its own, that is a meaningful accomplishment. But the true importance lies in what happens if that rate of reduction is sustained.

If direct regulatory costs continue to decline at roughly 5.31 percent per year from January 2025 through January 2029, total direct regulatory costs would fall to approximately $3.2 trillion by the end of the period. That is not a symbolic trimming at the margins. It represents a cumulative reduction of roughly $780 billion in annual regulatory costs relative to the 2025 baseline.

Equally important is the pattern of those reductions. In the first year, the savings are largest—roughly the $211 billion already realized. In subsequent years, the annual reductions remain substantial, though slightly smaller as the base shrinks. Over four years, the policy produces a durable downward shift in the regulatory cost structure of the economy.

That is what OMB’s report makes possible: not a one-time deregulatory gesture, but a sustained change in trajectory.

The Road Not Taken

To understand the stakes, it is necessary to consider the alternative. Had Kamala Harris been elected president in 2024 and continued the regulatory approach of her predecessor, the trend line would have pointed sharply upward.

Under a continuation of the post-2021 regulatory growth rate—approximately 16.2 percent annually—direct regulatory costs would not have stabilized. They would have exploded. Starting from the same $3.97 trillion baseline in January 2025, direct regulatory costs would have reached roughly $7.2 trillion

by January 2029.

That is nearly double the regulatory burden in just four years.

Critically, this is not speculation. It is a straight-line projection based on the actual growth rate observed during the prior administration. No new assumptions are required. The difference between a $3.2 trillion regulatory state and a $7.2 trillion regulatory state is not philosophical. It is structural.

Opportunity Gained Versus Opportunity Lost

Direct regulatory costs, however, tell only part of the story. Regulations do not merely impose compliance expenses; they shape investment decisions, labor markets, innovation, and long-run economic growth. Economists have long recognized that the opportunity costs of regulation—what the economy forgoes as a result of regulatory constraints—can far exceed the direct costs recorded on balance sheets.

There is debate over how large those opportunity costs are. Some analysts suggest they are roughly twice the direct regulatory costs. Others, including the well-known work by Dawson and Seater, estimate that long-run opportunity costs can be as high as 19 times direct costs. Rather than cherry-pick a single figure, a responsible analysis examines the full range.

When we apply those opportunity-cost multipliers to the annual regulatory changes implied by OMB’s reform path versus continued regulatory growth, the contrast becomes stark.

Under continued deregulation, each year’s direct cost reduction translates into hundreds of billions to trillions of dollars in economic opportunity regained, depending on the multiplier used. Over the 2025–2029 period, the cumulative opportunity gains from sustained regulatory reductions range from approximately $1.6 trillion on the low end to nearly $15 trillion using the Dawson–Seater estimate.

This can also help explain why the economic shocks that some believed would come from an aggressive Trump administration tariff policy did not come to pass.

Under continued regulatory growth, the story reverses. Each year’s added regulatory burden compounds, producing higher incremental costs year after year. By 2029, the cumulative lost economic opportunity from regulatory acceleration would range from roughly $6.5 trillion at the low end to more than $60 trillion at the high end.

Even the most conservative assumptions lead to the same conclusion: regulatory trajectory matters enormously.

Why OMB’s Role Is Central

OMB’s 2025 report is important precisely because it institutionalizes a different approach. By emphasizing cost awareness, retrospective review, and disciplined implementation, OMB is reasserting its role as a guardian against regulatory drift. This is not about eliminating necessary protections or ignoring statutory mandates. It is about ensuring that regulation is purposeful, proportional, and accountable.

That distinction is often lost in political debate. Regulatory reform is frequently caricatured as anti-regulation. In reality, it is pro-governance—an insistence that rules achieve their objectives without imposing unnecessary economic harm.

The Stakes Going Forward

The choice facing policymakers is now clear. One path continues the reforms documented in OMB’s 2025 report, gradually reducing regulatory costs and restoring economic opportunity. The other returns to an era of rapid regulatory expansion, in which costs compound silently until the damage is impossible to ignore.

By January 2029, the difference between those paths is not incremental. It is measured in trillions of dollars, in foregone investment, in lost innovation, and in diminished economic resilience.

OMB’s 2025 report shows that another future is possible. The task now is to ensure that this moment of reform is not treated as an exception, but as a new baseline for how the federal government approaches regulation—carefully, transparently, and with a clear understanding that every rule carries real economic consequences.

That is a story worth celebrating—and sustaining.