Report: Rules reduce U.S. manufacturing by $500 billion

Regulations on U.S. manufacturing may reduce output by as much as $500 billion this year, according to an industry-sponsored study that cast doubts on President Barack Obama’s efforts to trim red tape in the federal government.

The Obama administration has established an average of 72 regulations on manufacturers annually, an increase from the 45 per year imposed under President George W. Bush, according to the study, commissioned by the Manufacturers Alliance for Productivity and Innovation, based in Arlington, Va.

“It is imperative that the pace of new regulations be controlled and the cumulative burden of existing regulations be reduced,” said the study, conducted by NERA Economic Consulting.

With job creation a central theme in the U.S. presidential race, the health of manufacturing companies is of importance to both Obama and his Republican challenger Mitt Romney. Industry groups including the U.S. Chamber of Commerce and National Association of Manufacturers have said federal regulations hinder economic growth.

During remarks in Windham, N.H., on Aug. 18, Obama said his administration has “created 4.5 million new jobs, half a million in manufacturing.” Romney is scheduled to visit LeClaire Manufacturing Co., a maker of aluminum casings, in Bettendorf, Iowa, tomorrow.

Major regulations – a category of rule where compliance costs are estimated at more than $100 million – reduce economic output by $200 billion to $500 billion in 2010 dollars, according to the study, which examined data from the White House Office of Management and Budget during the last three decades. Exports this year may be 6.5% to 17% lower, it said.

The U.S. government issued an average of 36 major regulations annually from 1993 to 2000, when Democrat Bill Clinton was president, according to the study.

Environmental regulations, such as those to reduce cross-state air pollution, sulfur dioxide and particulate matter, have the greatest impact on manufacturers, according to the study. It also examined regulations for the financial, labor, energy and transportation sectors.

The Obama administration has postponed decisions on some regulations, including a proposal to reduce ozone emissions, and in January 2011 the president issued an executive order for agencies to find ways to cut red tape.

Rule changes will save almost $6 billion during the next five years, Cass Sunstein, administrator of the White House Office of Information and Regulatory Affairs, said May 10.

Federal rules are subject to a cost-benefit analysis before being adopted. The manufacturers’s study did not address the value of the benefits of the rules it reviewed.

Rules during the first 32 months of the Obama administration cost $19.9 billion and delivered $91 billion in net benefits, according to the White House Office of Management and Budget.