According to the Manufacturers Alliance for Productivity and Innovation (MAPI), since 1981 federal agencies have promulgated approximately 2,300 manufacturing-related regulations. This equates to 1.5 regulations every week for 30 years. About one half of the 2,300 federal rules impacting manufacturing were issued by the U.S. Environmental Protection Agency (EPA). Over the last 15 years, the compliance costs associated with these EPA rules are $177 billion, which is more than all other federal agencies combined over that same period.
These federal rules have imposed a significant regulatory burden on U.S. manufacturing without any formal assessment of the cumulative cost to industry. EPA was not required to conduct a cost-benefit analysis for over 90 percent of its rules, because they were not designated as “significant” (a significant rule is defined as a rule that has an impact of $100 million or greater on the U.S. economy). Accordingly, the cumulative impacts of these EPA rules (that separately make a small incremental addition to the regulatory burdens on U.S. manufacturing) have been layered over 30 years to result in a significant impact.
In addition to this legacy of cumulative regulatory burdens, this trend has been accelerated in the past decade. Despite the gridlock in Congress, the Executive Branch has been very active and looks to remain active in the near future. The Federal Register is a public record of all the final and proposed regulations from federal agencies, as well as other regulatory activities of the federal bureaucracy. In 2013 the Federal Register included 79,311 pages, 3,659 final rules (representing new regulatory burdens), and 2,594 proposed rules (representing future regulatory burdens).
The 2013 Federal Register page count was the fourth highest total in history. The all-time record for Federal Register page total was 2010 with 81,405 pages. The Obama Administration has been particularly active with regulatory initiatives claiming four of the five highest Federal Register page totals in U.S. history. There is also no sign that this regulatory juggernaut will let up anytime soon.
The Competitive Enterprise Institute (CEI) estimates that the overall regulatory compliance cost and its economic impact is approximately $1.9 trillion annually. Not only does this regulatory tax hurt the competitiveness of U.S. companies, but it also increases the prices of goods and services. According to the CEI, U.S. households may pay nearly $15,000 annually in this hidden regulatory tax, which would be just less than 25 percent of the average U.S. household income of $65,596.
The good news is that the Obama Administration recognized the need for regulatory reform. President Obama issued Executive Order13610: Identifying & Reducing Regulatory Burdens and Executive Order 13563: Improving Regulation and Regulatory Review. These actions were designed to 1) modernize the regulatory system and reduce unjustifiable regulatory burdens and costs and 2) ensure that a regulation is inherently informed, that it delivers big economic and other benefits, and that it doesn’t compromise economic growth and job creation. As part of these efforts, federal agencies were asked to develop retrospective regulatory review plans and make regulatory programs more effective or less burdensome in achieving regulatory objectives
The Obama Administration claimed that retrospective regulatory review effort was expected to save U.S. businesses and consumers $12 billion over the next five years. Unfortunately, the results have not been as anticipated. Although more than 500 regulations were reviewed and reconsidered, the process has resulted in more than 1.5 billion hours of paperwork and $10.2 billion in new regulatory costs.
The 30-year legacy of regulatory burdens appears that it will continue, if not accelerate, for U.S. businesses. While the regulatory burdens are not the only reason for a sluggish U.S. economy, they are a significant contributor. U.S. companies must look for opportunities to innovate, reduce costs, and increase productivity to remain competitive globally.