Archived Story

Sutter: The rising tide of regulation

Published 7:18pm Wednesday, August 28, 2013

Federal regulations reach into almost every sphere of our economic lives and cost the economy trillions of dollars each year, as I discussed last week. Republicans as well as Democrats bear responsibility for the growth of the regulatory state. For example, Republican Richard Nixon created the Environmental Protection Agency (EPA) and Occupational Safety and Health Administration, for example, while elimination of costly regulation of the trucking, railroad and airlines industries occurred under Democrat Jimmy Carter.

An aggressive expansion in regulation is occurring under President Obama. Although more final regulations were issued in George W. Bush’s first term in office, the number of economically significant regulations and pages of new regulations increased sharply under Obama. New regulations on power plants, cars and trucks, and household appliances indicate the impact on our lives. And the Consumer Financial Protection Bureau is just getting into the game. Additionally the EPA has been wresting control over environmental regulation from the states.

New emissions and fuel economy requirements for cars illustrate the impact of recent regulations. Mileage requirements imposed in the 1970s reduced the weight of cars, with fatal consequences since lighter cars offer less protection in crashes. The fuel economy standards resulted in around 3,000 deaths annually, or nearly 10% of annual highway deaths. The new greenhouse gas emissions requirements for cars would require a doubling of average fuel economy, to around 55 miles per gallon, likely costing more lives.

The Obama administration claims to be generating significantly more benefits from new regulations than under George W. Bush. One comparison of regulations enacted in each administration’s first three years estimates that President Obama has delivered nearly thirty times the benefits to the nation. While this suggests that the Obama administration has been regulating more diligently and effectively, in reality creative accounting and controversial assumptions produce the difference.

The EPA in particular has resorted to tricks to make their regulations appear worthwhile. New EPA rules addressing mercury, lead, and other air pollutants actually yield benefits almost exclusively from reducing fine particulate matter. The EPA insists that fine particulate matter is responsible for 10% of all deaths in the U.S., despite extremely flimsy scientific evidence on this matter.

The EPA now routinely estimates benefits from greenhouse gas reductions without acknowledging (except in technical documents) that almost all of these benefits, if they do materialize, would be to residents of other nations. Including international benefits is not unreasonable, but the EPA should more forthrightly acknowledge its venture into foreign aid.

Perhaps most controversial is the emergence of “private benefits,” which sound innocent enough but reflect a very un-American view of the role of government. Regulations have traditionally been tied to some problem with our market economy, like say air pollution. Private benefits, by contrast, arise from reversing consumer choices. Suppose you choose not to purchase an expensive, energy efficient appliance. Basic economics implies that forcing you to buy a product that you aren’t willing to pay for makes you worse off. But not according to the Obama administration. They believe they make consumers better off when forcing them to buy more fuel efficient cars or dish washers than desired.

The Obama administration plans to advance through regulation a political agenda with no chance of passing the Republican-controlled House of Representatives. Yet many regulations being finalized today were authorized by earlier legislation, so Congress bears some responsibility as well. What can be done to combat the tide of regulation? Attempting to delay regulations required by law is not necessarily a winning strategy. A recent and unsettling trend has been “sue-and-settle” rulemaking, where say an environmental group sues the EPA for failure to act by the required date and negotiates regulations as a court settlement, exempt from the normal rulemaking process. Republicans in Congress have proposed the Regulations from the Executive in Need of Scrutiny (REINS) Act to require Congressional approval for all new economically significant rules, and this is a step in the right direction.

 

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University. Respond to him at dsutter@troy.edu and like the Johnson Center on Facebook.

 

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