U.S. manufacturing growth may be limited by government red tape

August 22, 2012

Though the U.S. manufacturing sector has stayed relevant for decades through an adjustment of business strategy and increased automation, there has been one underlying factor that has inhibited growth in the industry, according to a report.

Bloomberg News reported that the administration in power has an impact on the level of restrictions that are put in place, as President Obama has established an average of 72 regulations per year on manufacturers, while his predecessor only had an average of 45 rules.

The study, commissioned by the Manufacturers Alliance for Productivity and Innovation, noted that despite these regulations, growth has still occurred, albeit slightly slower than if these rules were not in place.

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

According to the news outlet, the study was released right as the election rhetoric is being bolstered on both sides of the aisle, and companies may begin to push both Romney and Obama to speak about lowering the number of regulations in order to support further economic growth instead of inhibiting it.

Leaders from both parties have come out with their own plans regarding U.S. manufacturing, as Obama's is centered on the allocation of federal funding to the sector while Romney favors a lifting of regulations that are limiting growth in the sector.

Obama said his administration has "created 4.5 million new jobs, half a million in manufacturing," in a recent speech in New Hampshire. Romney is scheduled to visit LeClaire Manufacturing Co., a maker of aluminum casings, in Bettendorf, Iowa, and is expected to promote his idea of lifting regulations in order to give companies more money to operate.

The Wall Street Journal reported that regardless of the stances of the two parties, there are regulations that are standing in the way of future progress in the sector.

"The increasing number of regulations has harmed the manufacturing sector’s production," noted the report. All aspects of manufacturing "are impacted negatively by the myriad regulations."

Shipments were especially vulnerable, as the report identified an estimated $500 billion that regulations may cut in the value of manufacturing commerce this year.