In the News

Regulation has become a hot topic in recent weeks. There have been executive orders to reform them, hearings to scrutinize them and budgets to defund them. But in all these forums, one side of the balance sheet is often absent — the fact that regulations create significant economic benefits.

As expected, deficit reduction plays a large part in President Obama’s budget proposal, released earlier in the week. In line with predictions, this includes slashing the Low-Income Home Energy Assistance Program’s (LIHEAP) funding nearly in half, from $5.1 billion to $2.57 billion.

This is a real negative for many people who are struggling to make ends meet, and who will have one less source of support. But another downside is that this move passes up on an opportunity to implement a long-term strategy for more sustainable energy use that will also benefit the low-income recipients of LIHEAP aid.

“Cost parity is the holy grail of renewable energy,” says Michael Livermore, executive director of New York University’s Institute for Policy Integrity. “But there is cost parity with subsidies, and there is cost parity without subsidies. If this is happening without subsidies, then that means that wind power is going to explode, regardless of what the government does. I doubt that’s what really is going on.”

Because the political arena is often fraught with hyperbole, misinformation, and special interest pandering, facts and reason don’t count for as much as they should. Despite that, green advocates have smartly and effectively engaged in the political arena to help protect the environment and public health.

But to augment that advocacy, it is equally important for greens to engage in the regulatory process, which offers a refuge from the dysfunction of political discourse. Because of the legal structure that undergirds it, it is one of the few bastions in American government where truth can trump rhetoric.

A new report out today from NYU’s Institute for Policy Integrity – it says that the benefits of regulations governing the fuel efficiency of heavy-duty trucks outweigh the costs. But the authors state that the scope and stringency of the regulations should be increased to achieve the maximum net benefits for society.

The Obama order, as has been noted, is one in a long line of executive orders requiring review of agency action using cost-benefit analysis. Initiated under Reagan, the process initially looked only at economic efficiency, remaining insensitive to how benefits and burdens were distributed. So if a regulation generated a large economic benefit for very wealthy people, but caused lower income earners to suffer disproportionately, it could be approved. At the same time, a rule that would help lift people out of poverty, but placed a larger burden on corporate profits, could be turned down.

Some progressive voices have weighed in on the executive order President Obama signed on Tuesday with harsh criticism. The president’s move, which lays out new ground rules for regulations issued by government agencies, was lambasted as a betrayal of progressive values and a gift to industry. But a closer look reveals that much of the focus has been on the rhetoric surrounding the order’s release, and not on the actual substance. There, you won’t find much for progressives to complain about. In practice, the new order makes several significant changes to the current regulatory process that will favor stronger protections for public health, safety, and the environment.

EPA is stuck between a rock and a hard place, said Michael Livermore, executive director of the Institute for Policy Integrity at New York University School of Law. Even if the agency has qualms about the proposed rules, it can’t make any changes that weren’t subjected to public comment last year. Whether the agency’s final rule is similar to the proposed rule or makes substantial changes, it’s bound to face lawsuits, Livermore said.

Tuesday’s news of a new executive order on regulatory review was not welcomed by some progressives. President Obama announced his move in a Wall Street Journal op-ed, and it was widely perceived as an olive branch to regulated businesses. But in its substance, the order mostly boosts the case for a strong government hand in protecting the public from the negative consequences of the free market.

The Clinton order lasted six years into George W. Bush’s presidency. But a lot depends on how the White House uses its power. In the Bush years, says Michael Livermore of New York University Law School’s Institute for Policy Integrity, “the actual practice changed significantly” and “informal reviews” essentially derailed rules secretly. In 2007, Mr. Bush replaced the Clinton order with his own, among other things, strengthening the role of political appointees.