Smarter Regulation for the American Manufacturing Economy

Oct 25, 2016
Noe_Paul-WebBy Paul Noe
Vice President, Public Policy

Given the importance of manufacturing to the U.S. economy, it is encouraging to see a top-ranked public policy school bring academic focus to supporting coherent and sustainable government policies for manufacturing in America. 

Last year, Indiana University’s School of Public and Environmental Affairs (IU SPEA) launched a multifaceted Manufacturing Policy Initiative to study challenges confronting the U.S. manufacturing sector, to assess public policies affecting it and to identify policy options to enhance this vital economic sector. This is the first program of its kind in the United States, and it is very timely.

As part of this initiative, on Sept. 14, 2016, IU SPEA recently convened a conference in Washington, “What the Next President Should Do About U.S. Manufacturing: An Agenda for the First 100 Days.” Industry executives, political leaders, small business and trade union leaders, researchers and policymakers gathered to offer a blueprint for maintaining and enhancing the competitiveness of the U.S. manufacturing sector on a wide range of policy issues, including my favorite, regulatory reform. It was my privilege to participate in that discussion.   

Too often, the potential for manufacturing to deliver a promising future for our country is overlooked. The American version of democratic capitalism — with manufacturing as a driving force — has been one of the greatest engines for prosperity and liberty in history, not just in the U.S. but around the world. Manufacturing contributes 12% of U.S. GDP and supports about one in six private sector jobs — that’s 18.5 million high-paying jobs. 

But the United States also faces growing challenges in a fiercely competitive global economy. Large swaths of our economy are distorted by mandates and incentives, and the vast majority of “laws” governing our country are not enacted by elected representatives in Congress, but are promulgated by agencies as regulations. The cost, complexity and sheer number of regulations is greater than ever, with about 3,500 new rules annually imposing costs on the order of $3.8 trillion dollars, and this burden disproportionately affects manufacturers. Manufacturers spent almost $20,000 per employee to comply with regulations in 2012 — nearly double that for all U.S. businesses, and small manufacturers spent almost $35,000 per employee annually — about triple the cost for the average U.S. business. On top of that, our cumbersome permitting processes have gridlocked attempts to rebuild our crumbling infrastructure and to modernize manufacturing plants.  

Leaders in Washington should embrace regulatory reform not simply on a rule-by-rule basis, but as systemic change, such as ensuring that regulations do more good than harm and streamlining our permitting processes. For further information, you can access the regulatory reform policy recommendations discussed at the IU SPEA manufacturing conference here: https://spea.indiana.edu/doc/mpp/noe-reg.pdf