Rising regulatory costs prompt calls for reform

Jon Mauch
Jon Mauch
Tony Gagliardi
Tony Gagliardi

Phil Castle, The Business Times

Jon Mauch makes the connection between federal regulations and sales for his company.

When regulations make it difficult for ski resorts operating on public lands to expand their operations, those resorts are less likely to purchase new chair lifts and gondolas manufactured at Leitner-Poma in Grand Junction. “It’s direct cause and effect. It’s pretty easy to see,” said Mauch, sales manager at Leitner-Poma.

That’s not to mention the additional costs regulations impose on a firsthand basis, Mauch said.

It’s part of what’s seen as an increasingly heavy regulatory burden that’s estimated to cost Americans more than $2 trillion annually in lost economic growth, said Tony Gagliardi, state director of the National Federation of Independent Business.

And with another 3,300 proposed federal rules in the regulatory pipeline, calls for reform have become more urgent, Gagliardi said.

Leitner-Poma was scheduled to host a meeting to discuss the implications of federal regulations, particularly for small businesses and small manufacturing operations. Gagliardi and members of Club 20 based in Grand Junction planned to attend, as did U.S. Rep. Scott Tipton, whose 3rd Congressional District covers most of Western Colorado.

Mauch said he considers himself an environmentalist and deems workplace safety a priority. But more restrictive regulations in and of themselves don’t necessarily better protect the environment or workers, he said. They can, however, impose higher compliance costs. And that’s true not only for Leitner-Poma but other businesses in other industries, he added.

Mauch said the overall outlook for Leitner-Poma remains upbeat, but in part because increased demand for public transportation systems and other specialty projects have helped to offset a decrease in demand for the chair lifts and gondolas the company manufactures for ski resorts.

Gagliardi cited a recent analysis commissioned for the National Association of Manufacturers that estimated that federal regulations cost Americans $2.028 trillion annually in lost economic growth.

The NAM study builds on previous studies conducted by the U.S. Small Business Administration Office of Advocacy that pegged federal regulatory costs at $1.75 trillion.

Regulations tend to impose a disproportionally heavier burden on small businesses, Gagliardi said at about $13,000 per employee. Large businesses pay an estimated $7,000 to $8,000 per employee in compliance costs.

The NAM study found that manufacturing businesses in particular pay higher compliance costs at nearly $20,000 per employee — double that of the average business in the United States. Small manufacturing firms pay more than three times as much as the average business.

Small business owners that belong to the NFIB who respond to monthly surveys conducted by the advocacy group consistently cite  regulations as their most pressing business problem.

The combination of uncertainty over regulations, the economy and government has hampered small business growth and job creation in the aftermath of the recession, Gagliardi said.

What he described as a “runaway” regulatory environment isn’t likely to change soon with more than 3,300 more proposed federal rules, Gagliardi said.

But he hopes meetings like the one in Grand Junction  will serve to draw attention to regulatory compliance costs as well as reform efforts.

A number of efforts could help, he said, including a six- to 12-month moratorium on new regulations, a mandatory cost-benefit analysis of regulations and outreach efforts promoting greater involvement by small businesses in the regulatory processes.

The result of regulatory reform, Gagliardi said, would be more economic and job growth. “We need to unleash the potential.”