Regulated to death: The burdensome assault on manufacturers

With federal regulations now becoming an unbearable burden for America’s manufacturers, a recent report by the National Association of Manufacturers breaks down over $2 trillion in costs imposed by a dizzying array of laws, rules, and interpretations imposed by the federal bureaucratic leviathan.

The survey asked manufacturers to identify main business concerns in the past year and immediate future, and nearly 90 percent said that federal regulations were a substantial hardship.

{mosads}Much of the problem lies in the cost of compliance. In 2012, manufacturers on average paid nearly $20,000 per employee–and that number jumps much higher, to almost $35,000, for manufacturers employing less than 50 people.

Polymer Technologies Inc., a Delaware based company spent over a year trying to obtain a permit for a new spray booth–much of it spent getting bounced around to different agencies and being fed conflicting information.

PTI President and CEO, Robert Prybutok, notes that “ the regulations were complex [and] the people who were involved in the regulations were even confused by the regulation.”

Often, unreasonable blanket style edicts and layers of bureaucracy hurt manufacturers. In fact, a recent analysis from the Phoenix Center for Advanced Legal & Economic Public Policy Studies, estimates that each federal regulator destroys an average of 98 private sector jobs and $6.2 million worth of gross domestic product per year.

And environmental rules brought about by reliance on questionable climate change science hurt manufacturing as well.  Almost 55 percent of federal environmental regulations in 2013 directly impact manufacturers, but unfortunately, it’s about get worse. New complicated energy and water efficiency formulas will soon come into effect–forcing manufacturers to comply with strict guidelines on items such as television sets, light bulbs, air conditioners, and even urinals.

The Competitive Enterprise Institute calls these regulatory cost a “hidden tax” that get passed along to consumers while workers could see lower wages.  The National Association of Manufacturers agrees, saying that in many cases regulation costs “harm less educated and younger workers.”

Federal assaults on energy production will also undercut a several year long energy boom. An explosion in oil and natural gas production has helped to keep energy prices relatively low, partially offsetting the cost of vastly expanded regulatory costs.

Dan Steffens with Houston’s Energy Prospectus Group estimates that shale gas production from Texas, West Virginia, and Pennsylvania has, along with North Dakota oil, helped keep U.S. gasoline prices from breaking $6 per gallon.  More domestic production of energy has prevented the wild fluctuations in U.S. prices previously caused by Middle Eastern instability.

Low energy prices, however, are threatened by the EPA’s “War on Coal.”  Regulations, unless checked, will start knocking many of America’s coal fired power plants offline. Natural gas fired plants, and pipeline infrastructure have not yet expanded to fill the potential void, especially in places like New England, making it likely for prices to rise dramatically.

The entire federal regulatory regime, according to NAM president Jay Timmons creates “unnecessarily costly rules, duplicative mandates, impediments to innovation and barriers to our international competitiveness.”  Meanwhile businesses, like JC Newman, which create good jobs, have endured multiple recessions and even the Great Depression, cannot survive their relentless burden.

Telford is a seniror vice president of the Franklin Center for Government & Public Integrity.