How Trump Officials Abuse Cost-Benefit Analysis to Attack Regulations

by Daniel Farber

January 09, 2019

This op-ed was orignally published in the Washington Monthly.

In December of 2017, Donald Trump gathered the press for a variation on a familiar activity from his real estate mogul days. Stretched between a tower of paper taller than himself, representing all current federal regulations, and a small stack labeled "1960," was a thick piece of red ribbon – red tape, if you will. The president promised that "we're going to get back below that 1960s level." With his daughter Ivanka and other advisors by his side, Trump used comically large scissors to cut the ribbon.

Cutting regulations has been a priority for nearly every Republican politician since at least the 1980s. But the Trump-era GOP, unsatisfied with the existing deregulatory toolkit, has found a bigger pair of scissors. Call it cost-cost analysis: to justify getting rid of regulations they dislike, Republicans have decided to systematically ignore their benefits.

Since the Reagan era, there has been a consensus among conservatives that cost-benefit analysis is the gold standard for evaluating regulations. It requires quantifying the benefits and costs of a proposed regulation, expressed in monetary terms. If its benefits exceed the costs, a regulation is justified, but not otherwise. For conservatives, this approach provides a veneer of objective, mathematical rigor that can be aimed against regulations whose benefits are hard to measure in dollar amounts. What's the precise value of a new clean air standard that slows down the rate of global warming? Cost-benefit analysis also ignores the secondary benefits of regulations that are hard to preemptively measure, like when new standards spawn new, vibrant industries. (Think fuel efficiency standards and electric cars).

Nevertheless, the cost-benefit analysis has given conservatives common ground with some moderates, like Obama regulatory czar Cass Sunstein; many economists; and at least a few environmentally inclined scholars. The critics of cost-benefit analysis have mainly come from the left. They argue that it is wrong to put a dollar figure on the lives saved by a regulation or on an endangered species. ("Should we really not mandate clean drinking water if it doesn't turn out to save money?")

But now conservatives are showing increasing disenchantment with cost-benefit analysis. Specifically, they like the consideration of costs but are unenthusiastic about the benefits side of the equation. In the Trump era, as Public Citizen's Amit Narang has written, costs play an expanding role in regulatory policy, both in Congress and the executive branch, whereas benefits are increasingly sidelined or underestimated.

Read the full op-ed on the Washington Monthly's website.

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Daniel A. Farber is the Sho Sato Professor of Law and Director of the California Center for Law, Energy and the Environment at the University of California, Berkeley.

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