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NERA Conducts Analysis of the Macroeconomic Impact of US Federal Regulations; Study Commissioned by Manufacturers Alliance for Productivity and Innovation Estimates Costs to the Economy and the Manufacturing Sector

21 August 2012

New York -- NERA Economic Consulting, a leading global provider of economic advice and analysis in business, legal, and regulatory matters, has conducted a study commissioned by the Manufacturers Alliance for Productivity and Innovation (MAPI), examining the qualitative and quantitative impact of major federal regulations on the US economy in general and the manufacturing sector in particular.

"Macroeconomic Impacts of Federal Regulation of the Manufacturing Sector" is authored by a cross-discipline team of NERA economists. The NERA team, led by Dr. David Montgomery, a Senior Vice President in NERA's Environment Group, focused on five types of regulation that have the most significant impact on the manufacturing sector: financial, labor, energy, environmental, and transportation.

In order to estimate the cumulative cost of federal regulations affecting the manufacturing sector, Dr. Montgomery’s team analyzed over 30 years of all regulations, and developed several alternative calculations of the direct costs of major regulations. NERA experts used these as inputs into the firm's proprietary NewERA Model, a general equilibrium model of the US economy, to evaluate the macroeconomic consequences of major regulations.

Key Findings

  • The pace of US federal regulations is accelerating. An average of 72 major regulations per year have been promulgated since 2009, compared to an average of 45 per year between 2001 to 2008, and 36 between 1993 to 2000.
  • This increase in federal regulations has hurt manufacturing output, especially in energy-intensive sectors. In 2012 alone, regulation may reduce manufacturing output by between $200 billion and $500 billion, and manufacturing exports may be 6.5% to 17% lower than they would be without the regulatory burden.
  • In terms of the broader economy, regulations may reduce GDP by between $240 billion and $630 billion this year, and cut the average household’s purchasing power by between $1,800 and $5,000.

Although the study's estimates do not factor in the benefits of regulations, they can be used to help identify the cost of regulations, areas where regulatory review may be best focused, and the impacts of allowing regulations to expand at their current rate.

"Macroeconomic Impacts of Federal Regulation of the Manufacturing Sector" is authored by Dr. Montgomery; Dr. Paul Bernstein, Vice President; Dr. Elizabeth Becker, Senior Vice President; Lee Lane, Outside Consultant; Dr. Priscilla Medeiros, Consultant; Daniel O’Toole, Analyst; Dr. James Overdahl, Vice President; and Dr. Sugandha D. Tuladhar, Senior Consultant.

The report may be downloaded from:  http://www.mapi.net

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For more than six decades, we have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world’s leading law firms and corporations. We bring academic rigor, objectivity, and real-world industry experience to issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA’s clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world’s largest economic consultancies. Continuing our legacy as the first international economic consultancy, NERA serves clients from major cities across North America, Europe, and Asia Pacific.