December 15, 2011

Obama Administration vs. Obama Administration: Are Regulations a Problem in this Economy?

The Obama Administration is sending mixed messages.

On the one hand, several top economic officials have noted the extensive evidence that a lack of demand, rather than regulation, is the cause of a slow economic recovery and low job creation. Yet the President himself has contradicted his economic advisers on the issue in a misguided effort to pander to industry concerns, leaving the Administration’s message confused.

Treasury Secretary Timothy Geithner, hardly the most progressive force in the Administration, said in October: “I don’t think there's good evidence in support of the proposition that it's regulatory burden or uncertainty that's causing the economy to grow more slowly than any of us would like.” Jan Eberly, Treasury’s Assistant Secretary for Economic Policy, laid out a significant batch of evidence in support of Geithner’s argument in a subsequent blog post.

Austan Goolsbee, Chair of the President’s Council of Economic Advisors until August, appeared to hold a similar position. Asked in his final days whether regulations were hindering the economy, he said that there were certainly “individual things that could be done different and streamlined, where, you know, they have to submit paper forms, they can’t do it on the web, you know, things of this nature.” But: “as a general matter, no.” (He indeed gave a spirited defense of regulations).

So it’s frustrating to see that in other instances, the Administration sends a message that is in direct contradiction with the assessments of Geithner, Eberly, and Goolsbee. In an appearance with Canadian Prime Minister Stephen Harper last week, President Obama declared:

… we’re ramping up our effort to get rid of outdated, unjustified regulations that stifle trade and job creation.

And in September, President Obama explained his decision to reject EPA’s update to smog standards by saying:

… I have continued to underscore the importance of reducing regulatory burdens and regulatory uncertainty, particularly as our economy continues to recover.

So, how should we square that with the Treasury Secretary and other top economic advisors’ assessments that regulations are not in fact restraining the economic recovery? Does the President have some new and different evidence he’d like to share?

Geithner, Eberly, and Goolsbee have and will again be criticized by industry and conservatives for the assessments they’ve given. That’s to be expected. Running away from their assessments, however, flouts the truth, and is unlikely to win over industry. But that’s the strategy the President sometimes chooses.

The White House, for example, has tried touting to industry that it is regulating less than the Bush Administration. Regulatory costs during the first two years of the Obama presidency were lower than under the last two years of Bush, the White House argued. But picking the last two years of Bush, rather than the first two, was misleading, and a Bloomberg analysis of the first years of both administrations found that Obama had finalized somewhat fewer rules in sheer number, but somewhat greater in total cost (estimates that are, to be sure, highly imperfect). The entire exercise has been a disaster for the public interest: the White House is running away from defending regulations themselves, and facilitating a debate that’s been mostly about regulatory costs.

It need not be that way. The President rightly speaks about the importance of “rules of the road,” and touts some rules, like the new fuel economy standards. As imperfect as the Administration’s regulatory record is, there’s a lot that could be showcased. Did you know that OSHA finalized a rule on crane safety that is expected to prevent dozens of construction workers deaths each year? Or that the FDA finalized a rule that will likely prevent tens of thousands of salmonella poisonings?

If nothing else, the Administration could point out that EPA’s rules have monetized benefits that dwarf the costs (even though benefits estimates often fail to reflect gains that are hard to monetize, and even though cost estimates used for environmental rules are usually exaggerated). The Republicans have framed the conversation solely in terms of costs, and the President and his people haven’t pushed back nearly hard enough. That’s not just bad policymaking, it’s political malpractice. 

The White House’s position, in many cases, is that it is seeking ways to reduce regulatory costs while not diminishing health and safety protections. In the Administration’s regulatory “look-back” (initiated in January), agencies have identified some outmoded requirements to eliminate, as Goolsbee noted. But this commitment to cleaning the closet simply ignores how the preoccupation with look-backs takes away agency resources from work on current health and safety protections.  It is also telling that most of the rules identified for cutting in this process had simply become outdated by the passage of time and the advancement of technology; if anything, the results confirmed that there is nothing systematically wrong with our regulatory system, something the Administration could have emphasized.

Some rule changes in the look-back have been outright losses for public protection. The White House, for example, trumpeted that OSHA was stepping back from a proposal that would have required manufacturers to replace some extremely loud, ear-damaging machines with quieter technology (thousands of workers suffer significant hearing loss every year). We can debate whether that regulation would be “worth it,” but the research is quite clear that more workers will be hurt by not updating the standard.

The smog standard, of course, was exhibit A of how reducing regulatory costs will have direct effects: literally thousands of Americans will die as a result, and tens of thousands will suffer.

Ultimately the President seems aware that weakening regulations is generally unpopular. On Friday he told 60 Minutes:

And the question next year is going to be -- and this is how democracy's supposed to work -- do they see a more compelling vision coming out from the other side? Do they think that cutting taxes further, including on the wealthy, cutting taxes on corporations, gutting regulations. Do we think that that is going to be somehow more successful? Rolling back Wall Street reform? You know, rolling back clean air and clean water laws?

The President is right. But if he’s going to embrace public protections between now and the election, he should drop the bit about regulations that “stifle” job creation. His own economic advisors say it isn’t true, and repeating it simply does the bidding of those industries trying to block the very clean air and clean water laws the President sometimes embraces.

Rena Steinzor, Professor of Law, University of Maryland Carey School of Law. Bio.

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