managing in a regulatory fog

What's the first thing a warehouse manager or industrial executive thinks of in the morning? Customers? Stockholders? The work force? Chances are, it's none of the above. It's more likely to be some variation on this question: Will I be in compliance today?

That's not as easy to answer as it sounds. Federal agencies are cranking out new regulations at a rate of around 4,000 a year. All told, more than 50 federal departments, agencies, and commissions have the authority to propose, modify, and issue detailed rules and regulations. And if the size of the Code of Federal Regulations is any indication, they're not hesitating to use it.

But what is the cost of managing in this regulatory fog? It appears that compliance doesn't come cheap: The U.S. Chamber of Commerce estimates the annual cost of complying with federal regulations at $1.1 trillion. "Regulatory costs take their toll on our economy," says Don Brunell, president of the Association of Washington Business. "Just imagine the equipment, economic expansion, employee benefits, and jobs that could be created with 1.1 trillion dollars." To put it into perspective, Brunell notes that $1.1 trillion is the equivalent of 22.5 million jobs that pay $50,000 a year.

And that $1.1 trillion is just the cost of complying with federal regulations. Businesses today must also bear the expense of complying with a raft of state and local regulations—a cost estimated at over $400 billion per year. At a combined $1.5 trillion, federal and state compliance costs now account for about 15 percent of the nation's spending.

Now, few of us want a completely laissez faire economy. Modern society needs some regulation, especially when it comes to safety. No one wants to see airplanes falling from the sky, trucks careering down highways without functioning brakes, or pallets and racks collapsing on workers. Common sense tells us that when it comes to easing the regulatory burden, the answer lies not in abolishing all regulation, but rather, in re-evaluating the system.

To that end, the U.S. Chamber of Commerce, along with other business groups and academic and labor leaders, is calling for regulatory reform in Washington. In particular, the chamber is pushing for more stringent oversight over the cost-benefit analyses federal agencies must conduct on their regulatory proposals. Arguing that agency compliance with current cost-benefit guidelines from the Office of Management and Budget (OMB) has been sporadic to date, the chamber has urged OMB to tighten up enforcement, rejecting any analyses that fail to meet its guidelines. It also urges OMB to require agencies to validate the findings of their cost-benefit analyses once regulations are actually implemented. And it has called for legislation that would pilot-test dynamic economic models to assess the total annual costs and benefits of regulations.

Can these efforts help ease the regulatory burden on business and clear out some of the fog? The cynics will argue that they're not worth the time, that Washington will never kick its regulatory habit. But there will likely be plenty of others who feel differently, who will take up the cause and urge businesses to support these efforts and organize others.

In the meantime, business groups like the U.S. Chamber of Commerce are pressing ahead with their reform efforts. Seems to me it's something companies and their employees, from the chairman to the hourly workers, should naturally support. Without such support and ongoing efforts to educate the public about these issues, it will be business as usual, and the bureaucrats will just keep thickening the fog.

Right now, too many managers are waking up to worries about staying legal. Wouldn't it be great to wake up to thoughts about helping the business grow instead?