Picture the slow motion shots of Rocky Balboa getting pummeled by Apollo Creed in the first of that eponymous series of boxing movies and you get the sense of what the economy – manufacturing and otherwise – is up against with regard to federal regulations.
In the course of one day last week I interacted with people from three completely disparate industries, and the first item on the table of each casual discussion was what the new cost and time commitments would be to meet new federal government regulations.
First up was a customer meeting with a company that supports the oil and gas industry to discuss new traceability requirements put into place since the Gulf oil spill. While we can all agree the BP spill was a horrendous accident, the pendulum appears to have swung way too far the other way as the paperwork requirements for simple machined parts mean we now have to generate a half inch stack of documents that will add 20-25 percent to the cost of the part, which of course the customer does not want to pay, but is required by the government to have.
The second item of the day was a lunch meeting with a health care executive for a charitable event. We quickly became engrossed in the unseen paperwork costs associated with the Affordable Care Act. Their belief is that the added time, money, processes and people added to the system in order to comply with the regulations of the ACA will cause health care rates to jump significantly over the next 3-5 years as it is implemented, based purely on paperwork and systems – not healthcare – needs.
The last event of the day was attending an aerospace and defense supply management conference and dinner. In addition to the obvious talk of defense budgets and sequestration, the supply chain issue of the day was figuring out what to do about the new SEC rule requiring disclosure on the use of conflict minerals. As part of Dodd-Frank, this rule lays out a whole series of regulations on what to do and what must be filed if you used, did not use, knew, did not know, bought, contracted, processed, thought of, or looked at pictures of conflict minerals. Depending on your answer, independent audits may be required. So we’re now faced with not only the prospect of defense budgets being cut, potentially significantly, but now aerospace and defense companies are being asked to add another layer of non-value added work to the process.
Taken individually, each and every one of these mandates or regulations is certainly well meaning and in some cases needed. But when viewed from a cruising altitude, the totality of the regulations to the economy as a whole is stifling, which is especially troubling since we seem to always be a couple of tenths of a percentage point from teetering back into a recession.
As the new House and Senate is seated in DC, they must take stock of not only what effect each rule and regulation has on their particular hot point or constituency, but what it does to the economy as a whole and then truly question if yet another regulation is needed. Hopefully the ending to this movie is more like Rocky II. (Spoiler…Rocky wins.)
Steve Macias is the president of Pivot Manufacturing and the chairman of the Arizona Manufacturers Council