The Importance of Regulatory Easing to U.S. Manufacturing

A recent article written by Stephen Gold for Industry Week takes a broad look at the strict regulatory environment within the U.S. manufacturing industry that existed for the past three decades and lauds the respite from rulemaking that has occurred since President Trump took office.

From 1998-2014, the federal government issued more than 2,300 manufacturing-related regulations—that’s nearly 1.5 per week. In an effort to jump-start economic growth through streamlining, the Trump administration has released many fewer new regulations, and an executive order to federal agencies requires the elimination of two existing regulations for every new regulation introduced.

Gold’s support of a less burdensome regulatory system does not mean he believes that regulations don’t serve an important purpose. On the contrary, he agrees that certain regulations are quite important. However, the regulatory problem facing U.S. manufacturers is not an issue of individual regulations but rather the sum total of regulations in aggregate. He illustrates it as a “pebbles in the stream” effect: while a single pebble will not hinder the flow of a stream, add in enough pebbles and the stream will be damned—the same is true of regulations within the U.S. manufacturing industry.

To make matters worse, even the federal government itself seems not to have a good idea of the scope of impact that its many regulation have on the manufacturing industry, explains the author. This is due to a variety of factors, such as Executive Order 12866 which only requires executive branch agencies to report costs for “major” regulations—a threshold which nearly 90% of regulations that affect manufacturers does not meet. A report released by NERA Economic Consulting estimates that unaccounted regulations could have a comparable economic impact to that of all reported major regulations.

Gold concludes with an emphasis on the need within the manufacturing industry of a reprieve, particularly in in order to recover pre-recession levels of output. He is hopeful that the current respite will make this possible.

For more information, read the article in full at Industry Week.