Study Reveals Federal Regulations Cost U.S. Economy $2 Trillion Annually

Complying with federal regulations costs Americans $2.028 trillion in lost economic growth annually, or roughly 12 percent of the total gross domestic product that could be invested back into U.S. businesses, according to a new study commissioned by the National Association of Manufacturers (NAM).

The study, which was conducted by economists Nicole and W. Mark Crain, concluded that manufacturing businesses face a disproportionate share of the burden, or $19,564 per employee per year, which is nearly double what the average U.S. business pays to comply with federal rules. Small manufacturers pay more than three times as much as the average U.S. firm. That is $34,671 per employee per year that small manufacturers could use to grow their businesses and create jobs.

"Manufacturers have long cited more and more complex regulations as a barrier to their growth, and today we have new data demonstrating the true burdens shouldered by manufacturers throughout the supply chain, particularly the smallest firms, in complying with growing federal mandates," said NAM president and CEO Jay Timmons. "Manufacturers rely on a stable, balanced and commonsense regulatory environment to create jobs and fuel economic growth. With growing regulatory compliance burdens, policymakers should be alarmed that our nation’s smallest manufacturers are being put at a competitive disadvantage within the global economy."

The newly released NAM study builds on previous studies conducted for the U.S. Small Business Administration’s Office of Advocacy. This study updates previous estimates of the cost to comply with federal regulations using new data sources and incorporates the findings of an extensive survey of NAM members that validate conclusions reached in the economic analysis. For instance, the survey shows that manufacturers would invest more in their businesses and in their people if compliance costs were lessened.

"Our data continue to show that small businesses and manufacturers bear a disproportionate share of compliance costs," said Nicole Crain.

"Overall, we hope that this analysis helps policymakers as they contemplate additional regulatory proposals," added W. Mark Crain. "Small businesses and manufacturers most frequently identified regulatory issues as the top business challenge."

"These costs don't even include the more significant regulations heading our way, such as a new ozone standard from the Environmental Protection Agency that would be the most expensive regulation in U.S. history," said Timmons. "These and other regulations mean an even larger burden on our country’s small manufacturers. Now is the time to return clear-eyed economic analysis to the policy process and ease the burden on job creators across the country."

For more information, including the full study and executive summary, visit www.nam.org/CostofRegulation.