NERA Report Finds Increasing Number and Cost of Federal Regulations Harming U.S. Manufacturing Growth
A new report from NERA Economic Consulting on behalf of the Manufacturers Alliance for Productivity and Innovation (MAPI) finds that U.S. manufacturers are significantly impacted by the escalation in the volume and cost of compliance with federal regulations.
In Macroeconomic Impacts of Federal Regulation of the Manufacturing Sector, NERA examined the qualitative and quantitative impact of federal regulations on the U.S. economy as a whole and the manufacturing sector in particular.
The study produced a number of key findings:
• Since 1998, growth in the cost of major regulations has far exceeded manufacturing sector growth and overall economic growth. In that span, the cumulative inflation-adjusted cost of compliance for major manufacturing-related regulations grew by an annualized rate of 7.6 percent. Over this same period, annual growth in the physical volume of manufacturing sector output averaged a mere 0.4 percent while U.S. inflation-adjusted GDP growth averaged 2.2 percent per year.
• U.S. manufacturers are subjected to an estimated 2,183 unique regulations promulgated between 1981 and April 2012.
• Major regulations could reduce manufacturing output by up to 6 percent over the next decade. Energy-intensive sectors are affected most, and chemicals and petroleum products sectoral output could be on average 10 percent lower because of major regulations over this time.
• In 2012, major regulations could reduce the total value of shipments from the manufacturing sector by up to $500 billion in constant 2010 dollars; in addition, manufacturing exports in 2012 could be up to 17 percent lower than they would be without the estimated cost burden from major regulations.
• By count, the Environmental Protection Agency imposes the largest regulatory burden on manufacturers (972 regulations in total, 122 major regulations), followed by the Departments of Transportation (880/69), Labor (214/27), and Energy (106/17).
• By cost, EPA also imposes the largest regulatory burden on the manufacturing sector ($117 billion in constant 2010 dollars), followed by the Departments of Transportation ($25 billion), Health and Human Services ($10 billion), and Homeland Security ($7 billion).
“A vibrant manufacturing sector is essential to growing the economy,” said Stephen Gold, MAPI President and CEO. “We understand the important role regulation can play in promoting health and safety, but there also needs to be a more rational approach to our regulatory system. If policymakers want American manufacturers to be more competitive and to invest more in this country, they need to ensure that federal regulations are better coordinated and streamlined to minimize costs.”
The NERA report concluded, “If helping the manufacturing sector to escape its flat growth trap is an important priority of national economic policy, it is imperative that the pace of new regulations be controlled and the cumulative burden of existing regulations be reduced.”