Does Industry Cry Wolf on Regs?
Politico | By Robin Bravender
Industries have a long track record of warning about the dire consequences of regulations and projecting that the economy will wither and countless jobs will vanish because of efforts to protect public health and safety.
Such was the case in past decades, when the federal government acted to limit lead in paint, curb acid rain and ban ozone-depleting chlorofluorocarbons.
And each time, environmental advocates say, the opponents of regulation were crying “wolf.”
Now, they say, it’s happening again as the Obama administration faces an onslaught of criticism from business leaders and lawmakers trying to thwart rules on global warming, industrial air hazards and water pollution.
The anti-regulatory rhetoric from businesses and Capitol Hill is as scathing as ever.
House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) accused the Obama administration in an October op-ed of imposing a “restrictive regulatory stranglehold on industry.” The Environmental Protection Agency’s revised ozone standard alone, he warned, could cost 7 million jobs and about $1 trillion annually. Senate Republicans have warned that nursing homes, schools and even doughnut chains could suffer under EPA climate regulations.
But backers of health and environmental rules say they’ve heard it all before.
“Today’s forecasts of economic doom are nearly identical — almost word for word — to the doomsday predictions of the last 40 years,” EPA chief Lisa Jackson said in a September speech. “This ‘broken record’ continues despite the fact that history has proven the doomsayers wrong again and again.”
Frank O’Donnell, president of the advocacy group Clean Air Watch, said there has been a “long history of exaggeration and outright distortion” from industry when it comes to estimating the impact of federal rules.
In fact, supporters of the regulations said that the economic benefits often end up far exceeding the costs. For example, the EPA predicts that the George H.W. Bush administration’s 1990 Clean Air Act amendments will have reaped $2 trillion in benefits and prevented more than 230,000 early deaths by 2020, at a cost of just $65 billion in compliance costs. Not coincidentally, the agency has trotted out those estimates as it seeks to rebut GOP attacks on its greenhouse gas regulations.
Industry groups aren’t backing down, though. They contend that the Obama administration’s regulations will be more far-reaching than any that have come before. “Certainly, the aggressiveness of EPA over the last two years is unprecedented,” said Jeff Holmstead, an industry attorney who served as EPA air chief in George W. Bush’s administration. “Everybody has to concede that at some point, you can put in restrictions that can force plants to shut down.”
But to Rep. Henry Waxman (D-Calif.), the Republican message is the same it’s been for the 36 years he’s been in Congress.
“That was their message when I first came here on the Clean Air Act in 1975, as we approached the ’77 reauthorization,” Waxman said. “It was their position for more than a decade before we got to the 1990 amendments. Every statement made by industry about how it was going to cost jobs and ruin the economy has turned out to be false.”
In 1972, as the federal government planned to ban lead paint from homes, the paint industry argued that the regulation would force prices up and push retailers and manufacturers out of business. Robert Roland, executive vice president of the National Paint and Coatings Association, was quoted in The New York Times as calling the regulation a “hastily conceived regulation done for political reasons alone to satisfy Congress.”
But few would argue now that banning lead paint was a bad idea. High lead levels are known to cause learning disabilities, mental retardation and other health problems. A peer-reviewed 2009 cost-benefit analysis found that each dollar invested in lead paint control produces between $17 and $221 in benefits.
In the same vein, industry lobbyists warned in 1990 that the latest round of Clean Air Act amendments would mean a “quiet death for businesses across the country.” Businesses claimed the acid rain emissions trading program would cost ratepayers $5.5 billion annually between 1990 and 2000 and increase to $7.1 billion per year after that. But as it turned out, the costs were between $1.1 billion and $1.8 billion per year, according to a 2005 White House report to Congress.
Similarly, a representative from DuPont told Congress in 1990 that the phase-out of ozone-depleting CFCs would cause “severe economic and social disruption.” The Air-Conditioning and Refrigeration Institute warned that “we will see shutdowns of refrigeration equipment in supermarkets. … We will see shutdowns of chiller machines, which cool our large office buildings, our hotels and our hospitals.” But according to the EPA, the phase-out happened five years faster than predicted and cost 30 percent less than expected.
Safety regulations also become subject to inflated predictions of doom. In 1971, Lee Iacocca, then president of Ford Motor Co., warned President Richard Nixon against imposing new car safety requirements. “The shoulder harnesses, the headrests are complete wastes of money,” Iacocca said in remarks secretly recorded by Nixon’s Oval Office taping system. “I have a feeling that the auto industry, … we are in a downhill slide, the likes of which we have never seen in our business.”
One explanation for the pattern: Businesses often warn of worst-case scenarios in an effort to weaken or delay federal regulations, said Bill Becker, executive director of the National Association of Clean Air Agencies. But once the rules are in place, he said, industry has proved its ability to cut costs.
“Once the rule is adopted, it’s in their interest to find the cheapest way possible to implement the rule,” he said. “Almost without exception, they have come up with compliance strategies that are far less than the exaggerated estimates they initially developed during the proposed stage.”
Businesses might not be the only ones that exaggerate. A 2010 report from economists at the nonprofit research group Resources for the Future found that EPA and other regulatory agencies tend to overestimate the costs of their regulations. Of a series of rules they examined, 14 overestimated the costs, while the costs wound up exceeding projections for only three rules.
On the other hand, federal agencies also tend to overestimate the benefits of regulations, according to the 2005 White House report.
The gap between predictions and reality doesn’t always mean the businesses were wrong, saide Holmstead, the former EPA air chief. He said one reason that costs are ultimately lower than predicted is that regulators often alter their proposed rules after hearing industry concerns.
In the past, when industries have complained that proposed rules could shut down companies, EPA has moderated its approach, he said. “Usually the agency doesn’t just say, ‘Well, we’re going to do whatever we want to do.’”
In a recent example, EPA last month significantly altered its final air toxics rule for industrial boilers after coming under fire from industry and lawmakers predicting widespread job losses. The agency’s final rule is projected to cost about $1.8 billion — about half the draft rule’s $3.6 billion price tag.
Industry groups insist that while their track record hasn’t been perfect on estimating regulatory costs, some rules have imposed severe hardships on industries, and they warn that the Obama administration’s policies will be exceptionally burdensome.
“There are cases where the costs are less [than the estimates] without question, and there are plenty of cases too where the costs are more,” said Howard Feldman, director of regulatory and scientific affairs at the American Petroleum Institute. He cited the 1997 ozone standard, saying it has taken longer than anticipated for regions to attain it and that more controls were needed than anticipated.
Industry advocates are particularly concerned about the administration’s greenhouse gas regulations. They warn that the rules will deal a tremendous blow to the economy and that EPA has neglected to assess their overall impact on jobs.
Margo Thorning, senior vice president and chief economist at the American Council for Capital Formation, warned Congress last month that the EPA’s climate rules could cause losses of between 476,000 and 1.4 million jobs.
Administration officials, meanwhile, insist they’ll prove their critics wrong by issuing “common-sense” regulations that help create jobs.
“If I look back on the 40-year landscape, there’s no evidence that the kinds of claims that … we hear about occur or have occurred,” EPA Deputy Administrator Robert Perciasepe said at a conference in February. “And in fact, they’ve actually created economic opportunity in the United States.”
In terms of climate change, he asked, “Why will it be different this time?”