NEWS: The Economist "The Rule of More; Rule-Making is Being Made to Look More Beneficial Under Barack Obama"

February 17, 2012

The Economist...ran a series of articles this week about the overregulation of America. The articles paint a grim picture of the red and green tape that is strangling our economic growth and imposing a massive collective burden on American business and consumers. The authors suggest America is in desperate need of a regulatory reform and argue federal agencies need be held more accountable for the costs of proposed regulations....

One example of overreaching regulation the authors used was EPA's recently released Utility MACT rule. The article suggests EPA is misrepresenting the rule by overstating the benefits and understating the costs--a concern Energy and Commerce Republicans have raised at recent hearings. EPA's Utility MACT rule is expected to be the most expensive rule ever to be imposed on our nation's power sector, yet we have no clear understanding of just how much this rule will cost, or just how devastating the impacts will be on employment, electricity prices, and electric reliability.

The Economist
The rule of more
Rule-making is being made to look more beneficial under Barack Obama

IN DECEMBER Barack Obama trumpeted a new standard for mercury emissions from power plants. The rule, he boasted, would prevent thousands of premature deaths, heart attacks and asthma cases. The Environmental Protection Agency (EPA) reckoned these benefits were worth up to $90 billion a year, far above their $10 billion-a-year cost. Mr. Obama took a swipe at past administrations for not implementing this "common-sense, cost-effective standard".
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A casual listener would have assumed that all these benefits came from reduced mercury. In fact, reduced mercury explained none of the purported future reduction in deaths, heart attacks and asthma, and less than 0.01% of the monetary benefits. Instead, almost all the benefits came from concomitant reductions in a pollutant that was not the principal target of the rule: namely, fine particles.
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The minutiae of how regulators calculate benefits may seem arcane, but matters a lot. When businesses complain that Mr. Obama has burdened them with costly new rules, his advisers respond that those costs are more than justified by even higher benefits. His Office of Information and Regulatory Affairs (OIRA), which vets the red tape spewing out of the federal apparatus, reckons the "net benefit" of the rules passed in 2009-10 is greater than in the first two years of the administrations of either George Bush junior or Bill Clinton.
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But those calculations have been criticised for resting on assumptions that yield higher benefits and lower costs. One of these assumptions is the generous use of ancillary benefits, or "co-benefits", such as reductions in fine particles as a result of a rule targeting mercury…
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The controversy arises from the overwhelming role that co-benefits play in assessing Mr. Obama's rule-making. Fully two-thirds of the benefits of economically significant final rules reviewed by OIRA in 2010 were thanks to reductions in fine particles brought about by regulations that were actually aimed at something else, according to Susan Dudley of George Washington University, who served in OIRA under George Bush (see chart). That is double the share of co-benefits reported in Mr. Bush's last year in office in 2008.
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If reducing fine particles is so beneficial, it would surely be more transparent and efficient to target them directly. As it happens, federal standards for fine-particle concentrations already exist. But the EPA routinely claims additional benefits from reducing those concentrations well below levels the current law considers safe. That is dubious: a lack of data makes it much harder to know the effects of such low concentrations…