New gun laws could mean economic woes for booming gun industry

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As lawmakers consider a range of new restrictions on guns, the gun industry is growing nervous that its exceptional success during the “Great Recession” could be coming to an end.

In the past four years, the gun industry has experienced an unprecedented level of growth, providing a rare boost to the ailing economy.

But now, with states like New York and Colorado passing some of the strictest gun laws in decades — and Senate Majority Leader Harry Reid poised to bring a sweeping new gun control measure to the Senate floor — worries are growing about the widespread impact such gun laws could have on business.

The gun industry employs approximately 220,000 highly skilled workers, according to a recent report released by the National Shooting Sports Foundation. Over the past two years, while the rest of the country faced unemployment rates above 8 percent, the gun industry added more than 37,000 new jobs, with average salary of $47,000.

The report states that in 2012 alone, the industry paid $5.1 billion in federal taxes and was responsible for $33.6 billion in economic activity.

Demand for new guns is high. FBI background checks for new guns through America’s 130,000 licensed firearm dealers have doubled since 2006, but with politicians pushing for various bans on firearms and magazines, the era of growth in the gun industry may be coming to an end.

“It’s unfortunate. We don’t want to lay anyone off, but there is always the potential of layoffs,” said Joseph H. Bartozzi, CEO of shotgun and rifle manufacturer Mossberg & Sons.

Most concerning to gun companies is the potential reinstatement a version of the 1994 assault weapons ban, which could be passed as an amendment to the bill that Reid will likely present in April.

“If there were a federal ban on modern sporting rifles, which are mislabeled ‘assault weapons,’ it would mean a ban on the most popular semi-automatic rifle in the US,” Mike Bazinet, public affairs director at the National Shooting Sports Foundation, told The Daily Caller.

For Bartozzi, it is the passage of legislation at the state level — not just the federal level — that has him worried.

“We just invested $4 million dollars in new equipment and hired dozens of people to develop a product line that would be completely wiped out by the proposed Connecticut laws,” he said.

In Connecticut — where Colt, Strum & Ruger Company and Mossberg & Sons are headquartered — legislators are considering a variety of measures to curb gun violence, including a manufacturing exemption, which would allow guns to be manufactured but not sold in-state.

“What kind of public policy is that? To say to manufacturers, ‘We feel your product is not safe within our borders, but you can go and sell it outside our borders,'” said Bazinet.

While some states are cracking down on the gun industry, others are capitalizing on the economic opportunity and inviting disillusioned companies to relocate. Last month, Texas Gov. Rick Perry sent a letter to 26 gun companies inviting them to relocate their manufacturing operations to Texas.

For companies like Mossberg & Sons, which has been located in Connecticut since 1919, making a move to greener pastures is something to consider.

“The proposed legislation in Connecticut would touch about 50 percent of our product line,” explained Bartozzi. “Being in Connecticut is a source or pride for us, but the fact that the state is about to make a decision that could hurt the company — we have to prepare for that and look at all options.”

If companies were to start leaving states like New York, New Hampshire or Connecticut, the economic impact would go far beyond just gun companies. Most gun companies develop an in-state supply chain that can include everything from parts to food for employees.

“In manufacturing, there is a ripple effect on economic activity. Legislators should stop and look at it that way,” said Bazinet.

None of Connecticut’s five members of Congress responded to TheDC’s request for comment.

For publicly traded companies like Smith & Wesson and Sturm & Ruger, the constant discussion of gun control has meant strong sales, but weak stock prices. When the gun debate flared up in the wake of the tragic Sandy Hook Elementary School shooting, Smith & Wesson’s stock decreased by 5.2 percent — a loss of almost $30 million.

In a document released to the SEC, Smith & Wesson wrote, “There can be no assurance that the regulation of firearms will not become more restrictive in the future and that any such restriction would not have a material adverse effect on the business of the company.”

For investors who make judgments based on potential returns, the cloud surrounding the gun industry means valuations are low.

And for pro-gun control organizations, such as the Coalition to Stop Gun Violence, the economic issue is secondary.

“When an industry is creating a public hazard, I think some kind of regulation is appropriate,” said Ladd Everitt, communications director at the Coalition to Stop Gun Violence.

“[The gun industry is] the most laxly regulated industry in America, and I think that they’ve probably profited in ways that most American’s would not approve of,” Everitt told TheDC. “I think all too often their products make their way pretty quickly into criminal hands, and there is more we should be doing to prevent these sales.”

Bartozzi believes there are other means to prevent gun violence, without risking the jobs of hard-working Americans or taking a hit on American manufacturing.

“The issue is not just about guns. If you just focus on guns, you’re creating a situation where the people are not getting the best legislation that is going to protect their safety,” he said. “We all support keeping guns out of the hands of criminals. We all want public safety, but there are things that could be done to enhance it that don’t include banning guns or magazines.”

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