March 19, 2009, 4:00 a.m.|
No Stimulus to Smarter Regulation
Instead, we'll spend more on the ongoing catastrophe of phantom risk.
By Henry I. Miller
Federal regulation imposes staggering costs on the economy — costs that dwarf even the massive “economic stimulus” package signed by the president: about $1.1 trillion annually (as of 2005). These costs include the immediate expense of compliance and the disruption of the affected industries, and also the impacts on workers and savers from the lower returns and higher prices forced on them by our shared regulatory burdens.
One might think that the drag on the economy exerted by regulation would make legislators and policymakers question whether savings could be achieved by imposing only the amount of regulation that is necessary and sufficient to protect human health and the environment. Instead, both Congress and President Obama are demonstrating that they care more about perception than performance, more about public relations than the public’s well-being. Not only is the “economic stimulus” package loaded with pork and welfare, but through additional, imprudent regulation it will inflict further damage on American businesses large and small.
Federal agencies are required by presidential executive order to prepare a regulatory-impact assessment in support of any economically significant regulatory action, an important component of which is a cost-benefit analysis. Nevertheless, because politics and special interests (which include regulators themselves) often prevail, all regulations are not created equal. Some serve society — and taxpayers — well, while others are so wrong-headed and costly that they are actually harmful.
Office of Management and Budget (OMB) analyses of major regulations often show wide disparities between benefits and costs. For example, nutrition labeling of meat and poultry yields benefits of $1.75 billion against costs of $245 million, while wind standards for manufactured housing have benefits of $79 million but cost $511 million, and standards for double-hull boats yield benefits of $15 million but cost $641 million.
Congress could legislate such disparities out of existence, or the president could direct the federal agencies and departments involved to initiate rule-making to rectify them. Instead, they are doing the opposite.
The gargantuan “economic stimulus” bill provides $1.1 billion for “comparative effectiveness” research — specifically, “to conduct or support research to evaluate and compare the clinical outcomes, effectiveness, risk, and benefits of two or more medical treatments and services that address a particular medical condition.” Sounds benign — but it isn’t. A staff report describing the House version of the package said treatments found to be less effective and in some cases more expensive “will no longer be prescribed.” This is consistent with the recent comments of House Appropriations Committee chairman David Obey, who admitted that the point of “comparative effectiveness” is to keep patients from getting more expensive medications and procedures — in other words, the rationing of medical treatment.
Comparative-effectiveness research is part of a plan to reallocate healthcare resources in a way similar to the UK’s National Institute for Health and Clinical Excellence, which uses “experts” to judge the cost-effectiveness of therapies, in order to decide which ones the government will pay for. It will constitute another blow to American drug and medical-device companies already reeling from the effects of excessive and unwise regulation.
In addition — supposedly to achieve greater transparency and accountability in government — President Obama earlier this month revoked George W. Bush’s Executive Order 13422. While most aspects of this order had little impact and won’t be missed, two provisions were particularly worthwhile because they increased transparency and accountability. The first subjected regulatory “guidance documents” — which government agencies use increasingly as back-door regulations to impose their will on regulated entities — to interagency review by OMB’s Office of Information and Regulatory Affairs (OIRA). This requirement was all about transparency and accountability, because it ensured that the public would be aware of and would have an opportunity to comment on guidance documents that affect them.
The second worthy provision of the now-revoked executive order made so-called Regulatory Policy Officers (RPOs) at regulatory agencies more accountable to Congress as well as to the president, and also more transparent (because OMB posted the list of RPOs on its website.)
Society’s resources are not infinite. Former OMB official John Graham, who is now dean of the Indiana University School of Public and Environmental Affairs, spoke bluntly about the need for more considered, more rational regulation: “Sound science means saving the most lives and achieving the most ecological protection with our scarce budgets. Without sound science, we are engaging in a form of ‘statistical murder,’ where we squander our resources on phantom risks when our families continue to be endangered by real risks.”
Thus, by taking actions that will make government regulation of consumer products and activities more burdensome and less efficient and effective, Congress and the president are putting the welfare of all Americans in jeopardy. There is plenty of blame to go around. Regulators’ self-interest is served by arrogating more responsibilities, building larger empires, and being given bigger budgets. NGOs promote the unrealizable goal of zero-risk in everything we do, and they demand the creation of a nanny state that will pursue it. The media have fed these tendencies.
Tad Friend has written in The New Yorker that “it often seems that there is only one show on television, ‘Dateline NBC: 48 Hours of 20/20, PrimeTime Thursday,’ and that this show endlessly repeats one basic story: The Thing That Went Terribly Wrong.” The media’s medical and consumer reporting is undiscriminating and overly alarmist, and regularly demonstrates their ignorance of the difference between association and causation. All of this provides both cover and encouragement for Congress to mandate ever more stultifying regulation.
One gets the feeling this is going to be a long four years.
— Henry I. Miller, a physician and molecular biologist, is a fellow at Stanford University’s Hoover Institution. He was an official at the NIH and FDA from 1977–1994.