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Jun
12

Can We Employ Evidence in the Battle over Regulations?

Editor’s Note:  The answer to the question posed by OMB Watch is: Yes, we can and we do employ evidence in disputes over regulatory policy.  The federal criteria for accepting or rejecting assertions of evidence are found here.

From: OMB Watch

The Office of Information and Regulatory Affairs (OIRA) recently asked for comments on whether and how to consider if regulations under development in federal agencies could have “adverse effects” on employment. Once again, the rhetoric coming from OIRA is reinforcing the distortions of industry groups, even while evidence shows that regulations are good for the American people and the economy.

Every regulatory agency has the same core mission: to protect the American public from unreasonable risks, including those caused by corporate neglect and ineptitude.  One such risk is the pollution caused by the burning of fossil fuels to generate power.  To protect public health, the U.S. Environmental Protection Agency (EPA) has been charged with ensuring that power plants limit their emissions.  Research shows that these regulations have been tremendously successful.  The Clean Air Act Amendments of 1990 alone prevent 130,000 heart attacks and 54,000 cases of bronchitis, avert 86,000 hospitalizations, and save more than 160,000 lives every year. American businesses also reap the benefits of these public protections: Americans work 13 million more days each year than they would if the Clean Air Act Amendments had not been passed.

Research has also found that  regulations typically have a positive (though small) effect on employment.

After closely analyzing a single rule now under consideration – the proposed national emissions standards for mercury, arsenic, and other toxic air pollution from power plants – the Economic Policy Institute estimated that the rule would create a net increase of more than 90,000 jobs in sectors as diverse as mining, construction, utilities, agriculture, forestry, fishing, hunting, finance, insurance, educational services, health care, social assistance, arts, entertainment, and recreation.

Public protections can increase productivity, spur technical innovation, and encourage creation of new markets.  Sometimes, new rules encourage firms to hire workers (for example, to build or maintain a new facility).  Other times, they create an incentive for corporations to develop new technologies or business processes.  In fact, a Harvard Business School economist has noted that the productivity gains generated by new regulations may entirely offset the cost of complying with the new standards.

This is particularly likely to be true when corporations are holding significant capital reserves and unemployment is high – the situation we currently face.  Like average Americans, businesses have been battered by the recession.  Unlike most of us, corporations are sitting on record levels of reserve funds, which they could be using to build new facilities, expand production, grow the economy, and put people back to work.  Without an increase in consumer demand, corporations are not hiring or expanding production.  But new standards could encourage corporations to move forward with new investments, simultaneously making Americans safer, healthier, and creating new jobs.

In other words, regulations are good for the economy.  In fact, studies show that the benefits of recent regulations were more than two times their costs – even before non-quantifiable benefits were considered.  This is why business economists overwhelmingly feel that the American regulatory climate is “good” for business and, in fact, small business owners say that regulations are an important part of the modern economy.

Recent history clearly shows that when the regulatory system serves corporate interests rather than the public interest, people get hurt.  Consider the 2008 economic crisis.  According to the Financial Crisis Inquiry Commission, “Widespread failures in financial regulation and supervision proved devastating to the stability of the nation’s financial markets.”  In other words, millions of jobs, trillions of dollars of investments and savings, and billions of dollars of economic growth were lost to under-regulation and under-enforcement.  Similarly, the BP Deepwater Horizon blowout is projected to cost the Gulf Coast’s economy more than $8.5 billion and result in the loss of more than 22,000 jobs (to say nothing of the more than $14 billion BP itself has already had to devote to clean-up costs).

Despite the constant rhetoric to the contrary, evidence shows that public protections can be good for the American economy.  Our regulatory agencies exist to keep the American public safe.  Fortunately, there’s no need to choose between economic growth and a strong system of public protections: effective standards keep our economy strong – both by spurring corporations to spend and invest and by safeguarding us against the disasters that can occur when corporate interests overtake the public interest.

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