Job-killing regulations? Opponents fail to support claims with evidence

Original Reporting | ByJames Lardner | Regulation

January 25, 2011 — House Republicans and the President jockeyed last week to demonstrate their opposition to “bad” regulations. House majority leader Eric Cantor was confrontational, rallying fellow-Republicans for an assault on “the job-killing regulations that have been pursued by this Administration.” President Obama struck a more nuanced note; while insisting that some regulations play an important and constructive role, he voiced irritation over a subset of rules that he described as wasteful, redundant, or “just plain dumb.” He added that he had directed the Office of Management and Budget to undertake a systematic review of those that “stifle job creation and make our economy less competitive.”

It turns out, however, that it is easier to generate provocative rhetoric on this topic than to provide historical evidence for the proposition that regulations do, in fact, kill jobs.

These exchanges left plenty of room, of course, for struggle over the particulars of regulating the Internet, food safety, drugs, coal mining, oil drilling, and financial derivatives, among other zones of disagreement. Yet the President seemed almost as eager as his opponents to slam the door on a broader question: Do regulations actually “kill jobs”? Is there an inevitable tension, as the President suggested in a Wall Street Journal op-ed, between the health, safety, social, and environmental goals of regulation, on the one hand, and job creation, on the other?

The idea is widely taken for granted. “Job-killing regulation” has become not only a mantra of today’s Republicans, but also the marketing pitch for a host of plans to have Congress exercise preemptive powers over federal rule-making and enforcement efforts.

It turns out, however, that it is easier to generate provocative rhetoric on this topic than to provide historical evidence for the proposition that regulations do, in fact, kill jobs. Through repeated inquiry, Remapping Debate established that, at least in Washington, vociferous opponents of regulation are often unable or unwilling to offer any such evidence, even in the area of regulation — environmental protection — that is the ground zero of current Republican fury.

 

Crying wolf

In 1990, congressional Democrats, along with moderate Republicans and the administration of President George H.W. Bush, came together to amend the Clean Air Act for the purpose of creating a cap and trade program to reduce the sulfur dioxide emissions responsible for the problem of acid rain. The National Association of Manufacturers warned at the time that the 1990 law would achieve "the dubious distinction of moving the United States towards the status of a second-class industrial power by the end of the century." That same year, the Business Roundtable commissioned a study that foresaw job losses of at least 200,000 and possibly as many as 2 million.

Studies of the 1990 amendments to the Clean Air Act, by observers within government and without, have generally agreed that it produced surprisingly quick results at surprisingly low cost.

Such apprehensions led the law’s framers to include a $50 million retraining fund for displaced workers. Yet four years later, only 2,363 displaced workers, all of them coal miners, had applied for aid in the belief that their unemployment had been caused by the act.

Even the EPA, environmental groups say, has consistently over-estimated the economic costs of its rulemaking. Looking back on the first ten years of the nation’s experience with the 1990 program, the agency found a total loss of 4,000 coal miner jobs, as opposed to the 15,000 it had forecast. The great majority of the losses, the EPA concluded, were the result of mechanization and productivity increases, not regulation.

Studies of the 1990 Act, by observers within government and without, have generally agreed that it produced surprisingly quick results at surprisingly low cost.

The dollar costs of environmental regulation, according to Eban Goodstein, an economist who has written extensively on the subject, have typically been too small — no more than about 2 percent of overall production costs — to cause a company to consider relocating to a foreign country. When companies do make that decision, Goodstein says, they are motivated by the pursuit of lower labor and health-coverage costs, not by the prospect of escaping the expense of regulatory compliance.

Goodstein points out that the 1990 amendments to the Clean Air Act did not, beyond modest losses in coal industry employment, have any significant net negative job impact, and certainly nothing remotely of the scale predicted by the Business Roundtable.

He asserts that scary job-loss predictions have been consistently overstated for several reasons, including the time that companies are typically given to adjust; during the transition period, he says, they develop methods of compliance that are often not only less costly but more effective than the ones that existed when the rule was first promulgated. A key abatement technology in the sulfur dioxide case, for example, were the “scrubbers” that came to be used by the nation’s electrical-power plants. They turned out to be significantly more effective than experts had projected, removing upwards of 95 percent of the sulfur dioxide, according to the World Resources Institute, a Washington-based environmental think tank.

But the biggest weakness of most of the alarming studies, according to Goodstein and others, has been their failure to fully examine the job-producing results of compliance. The anti-regulation camp wants “people to believe that the money spent complying with regulations is poured down a sewer and is never seen again,” says Sidney Shapiro, a regulatory scholar and law professor at Wake Forest University.

Laurie Johnson, chief economist at the Natural Resources Defense Council, says that selling pollution control equipment, and transporting, installing, and maintaining it, translates into “a lot of income, GDP, and jobs…Environmental protection and cleanup is labor-intensive work,” Johnson says.

The Business Roundtable’s 1990 study explicitly ignored the upside, offering an estimate of gross job losses, not net losses. But the main effect of the 1990 Clean Air amendments, says Goodstein, was to shift employment from one area to another — in the first place, from high-sulfur Eastern coal to low-sulfur Western coal. That meant job losses in eastern coal mines accompanied by modest job gains in western mines and more substantial gains in the railroad industry.

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