Policy & Government

Charting the Impact of Trump’s Deregulation on Manufacturing

Photo: RealClear Markets

Source: Real Clear Markets

President Trump has made advancing American manufacturing the cornerstone of his economic agenda.  And the first six months of the Trump Administration has occurred in concert with positive growth for the U.S. manufacturing sector.  The Institute for Supply Management (ISM) reported that U.S. manufacturing activity expanded in June at the fastest pace in nearly three years and recorded the second highest reading in more than six years. According to the ISM, manufacturing growth in June accelerated and was broad-based, with 15 of 18 manufacturing industries showing growth.  Moreover, the ISM reported that the overall US economy grew in June for the 97th consecutive month.

But how much of this manufacturing expansion should be attributed to the Trump Administration’s efforts at federal regulatory reform?  One positive indication can be found in a one-year series of quarterly Manufacturers’ Outlook surveys undertaken by the National Association of Manufacturers (NAM) (see Figure 1 below).  For example, in the 2016 third quarter survey, under the topic “Primary Current Business Challenges”, NAM members surveyed ranked “Unfavorable business climate, e.g., taxes, regulation” (73.6%) closely behind the top ranked “Rising health care/insurance costs” (74.8%).  However, by the 2017 first quarter survey, “Unfavorable business climate, e.g., taxes, regulation” (58.2%) dropped dramatically to the number three ranking, with “Rising health care/insurance costs” (65.1%) remaining number one, and “Attracting and retaining a quality workforce” (63.5%) rising to the number two ranking.  Most recently, in the 2017 second quarter survey, “Unfavorable business climate, e.g., taxes, regulation (55.7%) remained in the number three ranking, but dropped another 3.5%, with “Rising health care/insurance costs” (74.7%) remaining steady at the number one ranking, and “Attracting and retaining a quality workforce” (64.4%) retaining the number two ranking.

 Source: National Association of Manufacturers

The 2017 first quarter and second quarter decline, according to NAM, “is likely because manufacturers are optimistic that the new administration will continue to provide regulatory relief and make progress on regulatory and tax reform.”  Moreover, the first quarter 2017 survey results show manufacturers’ optimism rose to a new all-time high (average of 93.3%) in the survey’s 20-year history, with the second quarter 2017 survey results registering the second highest all-time high (89.5%).

So what regulatory reform policy efforts has the Trump administration undertaken to improve the U.S. manufacturing sector’s operating environment and justify this optimism?  Immediately after entering office, President Trump placed an executive hold on approval of administrative rules (with exceptions made to those pertaining to emergency circumstances relating to health, safety, financial, or national security matters).

Second, the President issued Executive Order 13771 (“Reducing Regulation and Controlling Regulatory Costs”), with the Office of Management and Budget, in a follow-up Memorandum, further explaining its requirements:  “In general, executive departments and agencies may comply with those requirements by issuing two “deregulatory” actions for each new significant regulatory action that imposes costs.  The savings of the two deregulatory actions are to fully offset the costs of the new significant regulatory action (emphasis added).”

Third, with the assistance of Republican majorities in Congress, President Trump was able to successfully employ the 20 year-old Congressional Review Act, which provides that an administrative rule once repealed cannot be promulgated again without a new act of Congress, to prevent 14 rules adopted in the final months of the Obama administration from taking effect.  One of those rules, “Clarification of Employer’s Continuing Obligation to Make and Maintain an Accurate Record of Each Recordable Injury and Illness”, was submitted by the U.S. Department of Labor and had an industry-estimated regulatory cost of $1.9 billion.

Read the full story here

Leave a Comment