A Pretense of Regulatory Reform

A Pretense of Regulatory Reform
Thursday, July 07, 2011
by Gary Galles

After taking office, President Obama massively expanded regulation, from Obamacare to the proliferation of regulatory czars, and proposed still more. That contributed substantially to the Democrats' midterm shellacking.

In response, the newly Republican House of Representatives planned an extensive re-examination of federal regulations. So to reposition himself away from his attacks on market arrangements for every problem and proposals for more government as every solution, President Obama signed an executive order requiring that regulations be justified and not unduly burdensome. Unfortunately, it was only a pretense of regulatory reform.

Four months later, Cass Sunstein, Obama's regulatory czar, with plenty of self-congratulation and references to "21st-century regulation," proudly announced hundreds of millions of dollars in savings. (This is the same Cass Sunstein, by the way, who coauthored Nudge, the manifesto of "libertarian paternalism.")

The intent was to defuse attacks on Obama's regulatory abuses by claiming the reform mantle. But an "intense review" of burdensome regulations that only turned up hundreds of millions of dollars in savings, from an annual regulatory burden of over 1 trillion dollars, could not really be intense, especially when the waste and abuse discovered were obvious and longstanding.

Consider the milk reform. Sunstein wrote, "Since the 1970s, milk has been defined as an 'oil' and subject to costly rules designed to prevent oil spills." But the EPA has now concluded the burdens were unjustifiable, and given dairies an exemption saving them $140 million a year. Unfortunately, rather than demonstrating that Americans no longer need worry about abusive regulations, it illustrates the opposite.

The fact that a clearly nonsensical and costly policy persisted for decades, despite multiple "reforms," reveals that almost no attention is actually given to outdated and overly burdensome regulations. But when public outrage becomes severe, a few idiocies must be recognized and sacrificed to pretend regulatory responsibility. Once such a minimal reform diminishes outrage, Americans will again stop paying much attention to the regulatory bureaucracy, and the constraints on abusive regulations will once again shrivel. And thanks to Obama's regulatory expansions, abuses then will apply to more of our lives than ever.

Also revealing is that during this unjustified regulation hunt, the EPA issued extraordinarily costly new rules requiring US coal-fired power plants to further reduce their emissions of mercury and other air pollutants, finding the costs justified in lives saved and medical benefits. But the benefit claims were bogus.

Power plants contribute less than 0.5 percent of the mercury in America's air, and their emissions have long been falling. Eliminating such a minuscule source of mercury will not save many thousand lives, as the EPA asserts. But it will dramatically raise the cost of coal-powered electricity, which is about half of all domestic electricity production (and far more in some states).

Perhaps most troubling is the EPA's selective science. It ignored the CDC's findings that show blood mercury levels for American women and children as falling and already below the levels found safe by the EPA and FDA, and well below the standard set by the World Health Organization. Instead, it based its criteria on a study of the people of the Faroe Islands, whose diet includes a great deal of pilot-whale meat and blubber, which gives them far higher mercury and PCB "doses," but little selenium (which limits conversion to methylmercury), fruits, or vegetables. Given that in epidemiology "the dose makes the poison," their circumstances are virtually irrelevant to Americans.

The Obama administration's regulatory reform is political window dressing. Finding a few long-established, obvious examples of waste to eliminate actually revealed how inattentive regulators are to the burdens imposed, with little likelihood of continuing vigilance after public outrage wanes. And in the midst of supposed reform, the EPA imposed very costly new regulations based on misrepresentation and ignoring powerful contradictory evidence.

Reining in a few regulatory stupidities, while introducing far more costly ones, may advance Obama's agenda, but it will not benefit Americans buried in an avalanche of burdens that have rapidly expanded on his watch.


Gary M. Galles is a professor of economics at Pepperdine University.

http://mises.org/daily/5436/A-Pretense-of-Regulatory-Reform