The National Association of Manufacturers promotes many facts about our manufacturing sector. Among them: U.S. manufacturers contribute $2.4 trillion to our economy; employees are compensated an average of $84,832 annually; the U.S. manufacturing sector is the eighth-largest economy in the world; and direct foreign investment in U.S. manufacturers is $1.6 trillion.
These facts are astoundingly impressive, and readers of this journal are to be congratulated as participants in this glory. It can and should be better, but it is inhibited in many ways by non-law regulation. This has been achieved in spite of many federal (plus state and local) regulations, which are rules created by agencies, commissions and departments of Executive branches of government based on authority granted by legislative (Congress) branches. Herein is an enormous problem, especially at the federal level. Financial impacts get insufficient attention because regulation costs are unbudgeted and hard to quantify.
A Competitive Enterprise Institute survey found that the U.S. has $1.9 trillion in hidden taxes via federal regulations, greater than corporate and personal income taxes combined. This is equivalent to 40% of federal spending in 2019. Do not be fooled by hype and political talk – Congress passed just 214 laws in 2016, but federal agencies issued 3,853 regulations. These regulatory rules have force of law, but accountability of issuing agencies is difficult, complicated and expensive to challenge, requiring efforts that ordinary citizens cannot perform.
Another political distraction is that there is a big difference in the burdens between types of regulations. The Office of Information and Regulatory Affairs (OIRA) compared the differences between the recent presidencies and the issuance of regulations this way (over the first two years of presidency).
|President||Major Rules||Minor Rules|
Major rules have national economic impact of $100 million or more annually. And politicians will tell the public that compliance costs are highest only when regulations are new; that it is hard to change existing regs; and that there are few major regs in the review for change process. Cumbersome as it may be, it would be a self-help effort to consider a few actions (available online). Nobody else is going to do it for you.
These programs are often overlooked, but they are quite important. They assist getting long-lasting reforms from imposed burdens and are divided into six parts.
- Define the regulatory burden and what needs to be reduced or eliminated.
- Establish a baseline and calculate the overall regulatory level. This is assisted by use of Mercatus’ RegData project, which has assembled datasets for different states (27 to date).
- Set a target reduction goal and deadline. States can understand the benefits of cooperation on these definitions and analyses because many will recognize their own peril without an active role in reform and/or repeal processes.
- Create an oversight mechanism. Any reform effort will fail without defined accountability.
- Establish a process to review and reduce regulatory burdens that has buy-in from state and local regulators. This step should contain economic analyses to target the most inefficient state regulations and the benefits of reduction.
- Institutionalize a regulatory budget. To be successful, the desired changes must reflect the costs and benefits of proposed changes.
In recent years this column has urged readers to do something about the problem described. This time the urging is a warning. Failure to do something about out-of-control regulations can be devastating. With changing tariffs and trade wars in the background, our economy can be killed by the unnecessarily high costs of bureaucratic regulations imposed on manufacturing.