posted on 09.30.14

Federal regulations cost the U.S. economy more than $2 trillion annually, equivalent to more than 12 percent of GDP, according to a new study commissioned by the NAM.

The study, conducted by economists Nicole V. and W. Mark Crain, finds that manufacturers bear a disproportionate share of the burden. The average manufacturing firm spends $19,564 per employee per year to comply with federal regulations, more than double the per-employee rate of $9,991 for all firms. For manufacturers with fewer than 50 employees, the per-employee, per-year cost rises to $34,671, with nearly 59 percent of those costs coming from environmental rulemaking.

“With growing regulatory compliance burdens, policymakers should be alarmed that our nation’s smallest manufacturers are being put at a competitive disadvantage within the global economy,” said NAM President and CEO Jay Timmons in the NAM news release. “Now is the time to return clear-eyed economic analysis to the policy process and ease the burden on job creators across the country.”

Numerous news outlets reported on the study, including The Hill, Reuters, The Daily Caller and the Pittsburgh Post-Gazette.  Click here to watch Timmons’ interview on CNBC and here to read NAM Chief Economist Chad Moutray’s op-ed on FoxNews.com.

The study includes a survey of manufacturers on the costs they incur in complying with regulations and provides validation for the magnitude of both the overall cost estimate and the costs incurred by manufacturers of varying firm size. Manufacturers continue to cite regulatory uncertainty as a top concern.

When asked about how they might better use the resources devoted to regulatory compliance, 63 percent suggested that they would reallocate dollars back into their businesses with more investment, and 22 percent specifically indicated that funds would be used for worker initiatives, such as creating or preserving jobs and expanding employee training, wages and benefits.

The newly released NAM study builds on previous studies conducted by the Crains for the U.S. Small Business Administration’s Office of Advocacy. An updated estimate for the total cost of federal regulations helps policymakers understand the impact of federal rules on the economy and how the regulatory burden continues to expand. The study provides a clear rationale for why it is important for agencies to consider the cumulative effects of their rules and the impact on manufacturers.

“These costs don’t even include the more significant regulations heading our way, such as a new ozone standard from the Environmental Protection Agency that would be the most expensive regulation in U.S. history,” said Timmons. “These and other regulations mean an even larger burden on our country’s small manufacturers.”

For more information, including the full study and the executive summary, click here.

Government update provided in partnership with NAM.