In the News

Thirty years ago, President Reagan put cost-benefit analysis at the heart of how agencies like the EPA and OSHA do business and initiated one of the most important recent developments in how the federal government works. In a 1981 executive order, Reagan instructed the Office of Information and Regulatory Affairs (OIRA), which is part of the White House Office of Management and Budget, to oversee all major agency regulations to make sure they met a cost-benefit standard. This move was heavily fought by protection oriented groups, like environmentalists, because they saw it as a backdoor for favoring industry at the expense of the public.

Michael Livermore, executive director of the Institute for Policy Integrity at New York University, told BNA March 21 that the CURB Act offers nothing new and would only prolong the rulemaking process.
“Right now, there are very strong analytical requirements that agencies have to go through before they adopt regulations,” Livermore said. “There are rules set up by courts under the Administrative Procedure Act and cost-benefit analysis rules that the president has in place. These requirements are comprehensive. They are designed so that agencies look at all the costs, all the benefits, and so that they only adopt rules that maximize net benefits. So [the CURB Act’s requirements] are redundant requirements that will just create more red tape for agencies. Supposedly this is about reducing red tape.”

In a recent House Energy and Commerce Committee climate hearing, Rep. Ed Markey (D-Mass.) jokingly asked if some of his fellow colleagues were going to overturn the law of gravity, “sending us floating about the room.” It seems funny until you realize that it’s in response to a disturbing trend in Congress of misusing, manipulating, or ignoring scientific facts and academic research. As Lisa Jackson, the head of the EPA, put it, if they keep it up, “[p]oliticians overruling scientists on a scientific question would become part of this committee’s legacy.

Shortly, the EPA will release proposed rules that reduce toxic emissions, including mercury, from the utility sector. The new controls are likely to continue a long precedent of cost-benefit justified regulations under the Clean Air Act. In fact, a recent retrospective study of the effects of EPA programs implemented after 1990 show tremendous economic benefits (an estimated $2 trillion) versus costs that add up to a fraction of that.

Worst of all are the environmental costs. As the NYU Institute for Policy Integrity reports in “Flooding the Market,” “The financial costs of the NFIP are considerable, but they are likely dwarfed by the ecological damages that the program encourages. Floodplains are located near waterways and in coastal zones. These areas tend to be both ecologically significant and sensitive, and they contribute substantial ecosystem services.”

Michael Livermore, a law professor at New York University and a close observer of the regulatory process, said their involvement suggests the White House is keeping tabs on a proposal with broad impacts — both costs for utilities and health benefits for the public.

“These are not the kinds of folks who spend their time on run-of-the-mill permit applications,” said Livermore, who is executive director of NYU’s Institute for Policy Integrity.

PA released revised regulations for industrial and commercial boilers and incinerators this week. Implemented under the Clean Air Act, the move is a step in the right direction for reducing air pollution. But it misses out on opportunities to maximize net economic benefits for the American public.

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.”