Growing Number of Federal Regulations Continue to Challenge Manufacturers
An update of key elements of a 2012 report on the impact of federal regulations on the manufacturing sector finds that the problems continue to persist and have increased in 2013.
NERA Economic Consulting’s update of a report commissioned by Manufacturers Alliance for Productivity and Innovation (MAPI) shows that manufacturing regulatory costs increased an average of 7.6 percent per year since 1998 compared with average growth of 0.4 percent for manufacturing output.
Further, the analysis found that since 1981, the federal government has promulgated 2,302 manufacturing-related regulations—up from 2,187 in 2012 and an average of just under 1.5 regulations per week for 30 years. With 270 of these considered “major” regulations (those determined to have an annual effect on the economy of $100 million or more), this means about 90 percent of the regulations targeting manufacturers do not undergo a cost-benefit analysis.
“Each year federal agencies layer regulations onto manufacturers, one on top of another, without any transparency or any clue as to the true cost to our factory sector,” said Stephen Gold, president and CEO of MAPI. “Such an inefficient system is clearly a drag on manufacturing growth, and therefore overall economic growth.”
Total major regulations, both manufacturing and non-manufacturing, have increased markedly from the Clinton administration through the Bush administration and now through the Obama administration. During President Clinton’s term, there was an average of 36 per year. During President George W. Bush’s term, this average increased to 45 per year. The Obama administration is promulgating an average of 75 major regulations per year.
This increased pace is affecting business operations in America. NERA’s analysis concluded that, assuming federal agencies maintain their current pace of regulatory activity, the load will reduce manufacturing output by up to 6 percent over the next decade and by as much as $500 billion this year alone.
“Since 1998 we’ve had a 41 percent increase in the number of regulations affecting manufacturing, but manufacturing output has increased only 12 percent over that time,” Gold emphasized. “More alarmingly, the manufacturing workforce has declined by 32 percent since 1998. While there have been a number of factors driving this loss of jobs, the growing regulatory burden has to be considered one of them.”