The Costs and Benefits of the Clean Air Act Amendments of 1990 on the U.S. Economy

Executive Summary

EPA’s estimate of $2 trillion in CAAA benefits is flawed: The “economic value” calculation is based on (1) surveys that ask individuals what they would be “willing to pay” (“stated” WTP) for a small increase in life expectancy and (2) the wage differential between occupations of different riskiness, such as a commercial fisherman compared to an office worker (“revealed” WTP). The academic surveys of WTP used by EPA have no link to overall economic activity and do not address how (or if) WTP affects the components of GDP (consumption, investment, government spending and net exports).

EPA’s Macroeconomic Model Results Show that CAAA Slows GDP Growth: In sharp contrast to EPA’s $2 trillion estimate of the “economic value” of the CAAA described above, EPA’s own simulations with its macroeconomic model show that the CAAA has significant negative impacts on U.S. GDP growth over the 2010- 2020 period (see Figure 1). GDP declines by $79 billion in 2010 and by $110 billion in 2020 relative to the baseline forecast. In other words, the already implemented CAAA regulations have real, quantifiable costs to the economy.

The Link between Economic Growth and Mortality Rate Decline in the U.S.: Many scholars have documented the role between economic growth and declines in the U.S. mortality rate. Professor M. Harvey Brenner of Johns Hopkins University concludes that “Economic growth, cumulatively over at least a decade, has been the central factor in mortality rate decline in the US over the 20th century.”

Restoring Strong U.S. Job and GDP Growth: Dramatic reductions in gross private domestic investment since the last quarter of 2007 are by far the largest contributor to the nation’s slow GDP growth. In recent years the relationship between investment spending and employment has been that each $1 billion dollar decrease in investment is associated with a loss of 15,500 jobs in the U.S. Conversely, each billion dollar increase in investment is associated with 15,500 additional jobs.

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