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Increasing Number of Regulations Challenge Manufacturers

Oct. 24, 2013
If federal agencies maintain their current pace of regulatory activity, the load will reduce manufacturing output by up to 6% over the next decade and by as much as $500 billion this year alone.

Since 1998, manufacturing regulatory costs increased an average of 7.6% per year according to an earlier report from NERA Economic Consulting, as commissioned by the Manufacturers Alliance for Productivity and Innovation (MAPI) , that was updated today.

During that same time manufacturing output grew only 0.4%.  

“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, CEO of MAPI. “Such an inefficient system is clearly a drag on manufacturing growth, and therefore overall economic growth.”

To get a feel for the volume of regulation, 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.

What is even more surprising, MAPI points out is that with 270 of these considered “major” regulations (those determined to have an annual effect on the economy of $100 million or more), about 90% of the regulations targeting manufacturers do not undergo a cost-benefit analysis.

And what a cost-benefit analysis would reveal, according to NERA’s analysis, is that if federal agencies maintain their current pace of regulatory activity, the load will reduce manufacturing output by up to 6% over the next decade and by as much as $500 billion this year alone.

Looking at specific industries and the impact regulations will have during the time period 2012-2021, petroleum output will be reduced by 10.3%, while transportation equipment will see a drop of 9%. Other industries hard hit include chemicals (-8.8%), aluminum (-8%) and iron/steel (7%).

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