Federal regulations cost U.S. businesses more than $2 trillion annually, according to a new industry analysis.
The National Association of Manufacturers released a study Wednesday finding that federal rules on conducting business, protecting the environment, keeping workers safe, and complying with taxes impose an average cost of nearly $20,000 per worker for manufacturing and more than $233,000 for the average U.S. company.
“This new data, from my perspective, is very alarming, because it shows that more than one-third of businesses’ income is tied up in compliance costs,” NAM President and CEO Jay Timmons said during a call with reporters.
Calling regulations a “hidden tax,” Timmons said that there “needs to be a discussion on what level is the right level to tax the economy through the regulatory system.”
NAM, which represents companies with an interest in reducing the regulations they face, published the study to give a full accounting of the burdens regulations impose on commerce. The White House Office of Management and Budget reports costs of major new regulations to Congress, but doesn’t attempt to capture the total effects of cumulative rules. Adjusted for inflation, regulations cost between $74 billion and $110 billion annually, according to the OMB’s 2014 draft report. The OMB’s reported costs were significantly smaller than the estimated benefits.
NAM’s study, prepared by economists who performed a similar analysis for the Small Business Administration, examines data for the year 2012. It is based on surveys of NAM’s member firms, who cite regulations as a top problem facing their businesses.
The authors estimated the aggregate economic impact of regulations by comparing the cost of regulations across countries using the World Economic Forum Global Competitive Index to gauge the total regulatory burden. They also used government agency analyses to estimate the costs imposed by environmental and worker safety regulations, as well as tax compliance. The report does not attempt to quantify any benefits accruing from federal regulations.
Timmons declined to suggest any government action that NAM hoped to provoke with the study, telling the Washington Examiner that he hoped to have “this dialogue continue for the long term and for members of Congress to step up and take responsibility for the costs imposed on the economy” by regulations.
“Quite frankly, if it is part of the discussion leading into the congressional elections not only this year but also the presidential election in 2016, we’re very pleased to have that be part of the dialogue,” he said.
Last year, the House passed the Regulations from the Executive in Need of Scrutiny Act of 2013, or REINS Act, that would subject any administrative rule expected to cost more than $100 million to congressional approval. That measure, however, died in the Democrat-majority Senate.
President Obama has consistently called for better regulation. In 2011, he signed an executive order for a government-wide review to eliminate overlapping or unnecessary rules, although critics say the measure has since failed to curb excessive regulations.
