Not Measuring Up

Feb 21, 2012

I'm back to the latest issue of The Economist, which looks into an "Over-regulated America." One story delves into how the administration measures the benefits of new, proposed rules.

The Office of Information and Regulatory Affairs (OIRA), which evaluates new regulations written by agencies like EPA and OSHA,  argues that the rules put out by this administration from 2009-2010 have had a greater net benefit than those from "the first two years of the administrations of either George Bush junior or Bill Clinton."

However, The Economist points out that OIRA can arrive at that conclusion because several of the administration’s major rules weigh "co-benefits"—related benefits from a rule—more heavily than previous administrations.  For example, the Utility MACT rule (A.K.A. the "Blackout Rule") primarily targets mercury emissions, but EPA derives most of the rule’s benefits from an ancillary reduction in fine particles. If the administration intends to reduce particulate matter emissions, "it would surely be more transparent and efficient to target them directly," writes The Economist.

(That’s what the Chamber has been saying all along, and is a big reason why we’re supporting Sen. Inhofe’s Congressional Review Act resolution of disapproval of the Blackout Rule.)

Another example of the administration’s "innovative" benefits measuring is the inclusion of private benefits in its calculations. The Economist's concern stems from the economic truism of self-interest:

The values placed on such private benefits are highly suspect. If consumers were really better off with more efficient cars or appliances, they would buy them without a prod from government. The fact that they don’t means they put little value on money saved in the future, or simply prefer other features more.

 "[L]ike co-benefits, their importance has grown dramatically under" this administration according to The Economist.

We don't need to wade too deeply into the administration's creative approaches to cost-benefit analysis. We know this administration's regulations have cost business $25 billion so far, and the Small Business Administration reports the "total cost of federal regulations has increased to $1.75 trillion" [via Bruce McQuain]. That's money not going to job growth and a growing economy.

It is a reminder that sound science, transparency, and public debate are needed or the Regulatory State will run amok.

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