Sledgehammer Politics

Washington – It is a seemingly immutable law of modern Republican rhetoric that the word”regulation” can never appear unadorned by the essential adjective:”job-killing.”

As in nominee-in-waitingMitt Romney, after winning the Illinois primary: “Day by day, job-killingregulation by job-killing regulation, bureaucrat by bureaucrat, this presidentis crushing the dream.”

Or House SpeakerJohn Boehner denouncing “the president’s job-killing regulatory agenda”last month after the Environmental Protection Agency proposed new limitson coal-fired power plants.

Or Minnesota RepublicanRep. Michele Bachmann who, during her presidential campaign, said EPA shouldbe renamed the “Job-Killing Organization of America.”

Hating regulationis an old argument, but the phrase is a relatively new trope. A Nexis searchof U.S. newspapers and wires shows that the words “job-killing regulations”appeared just a handful of times in 2007 — but several hundred times in2011.

This inflated rhetoricis often accompanied by bad science — or, perhaps more precisely, inherentlyinexact science badly used. Opponents of a particular regulation tout inflatedprojections of the regulatory body count, more often than not financedby the affected industry. Ditto, by the way, for those on the other side.

For example, whenthe EPA last year issued rules to limit mercury and other power-plant emissions,the industry-backed American Coalition for Clean Coal Electricity estimatedthe regulations would trigger the loss of 1.44 million jobs.

At the same time,the Political Economy Research Institute at the University of MassachusettsAmherst concluded that the rules would instead create 1.46 million jobs through retrofitting old plants and switching to newsources of renewable energy.

The EPA itselfcame up with much more modest predictions — that the rules would createabout 50,000 one-time jobs and another 9,000 additional jobs annually.All in the broader context of a rule that the agency estimated would deliverannual net benefits of between $166 billion and $407 billion from cleanerair, including avoiding as many as 51,000 premature deaths annually.

Lesson One: Ifyou plug your cherry-picked assumptions into your preferred model, it’seasy to obtain the desired result. Lesson Two: Jobs are only part of thelarger picture.

A new report fromthe Institute for Policy Integrity at the New York University School ofLaw attempts to bring some economic rationality to the regulatory discourse— however quixotic that might be in the current political environment,not to mention in a presidential election year.

The report is titled”The Regulatory Red Herring: The Role of Job Impact Analyses in EnvironmentalPolicy Debates.” Yet somewhat surprisingly, Michael Livermore, theinstitute’s executive director, does not oppose factoring job impact intothe cost-benefit analysis. Rather, he argues for adopting a more sophisticatedapproach than the prevalent knuckleheaded assumption — my words, not his— that increased regulation inevitably results in fewer jobs.

If an employer’scosts increase as the result of a regulation, Livermore notes, that isanother way of saying that the employer has to hire workers to, say, installnew technology while other employers hire workers to produce the new equipment.

In a healthy economy,the cost of layoffs should be transitory, as workers quickly find new jobs.In an economy like the current one, the impact of such layoffs may be morepersistent — but any new jobs created may be more significant since, ina soft labor market, otherwise unemployed workers may be hired.

Can these cross-cuttingimpacts be accurately measured in a dynamic economy? Perhaps more importantfor the current discourse, is it possible to have the jobs and regulationdiscussion without ignoring the inherent limitations of economic modeling?

“The jobsimpact analysis is important and we should do it, but the way it’s discussednow is completely wrong,” Livermore told me.

First, he said,”we talk about the jobs impact on the one hand and the other impacts(such as health and safety improvements) on the other hand, and they’retreated as apples and oranges.” Instead, he said, “we need tointegrate the jobs impact into the broader cost-benefit analysis.”

Second, Livermoresaid, is a failure among those doing the analyzing to disclose the assumptionsand limitations of their models — and the willingness of politicians (andthe media, for that matter) to treat the resulting figures as gospel ratherthan guesstimate.

“The realproblem is the way they’re used in the political back and forth,”Livermore said. “They’re used as sledgehammers to beat up the otherside.”

No surprise there.But a useful reminder at a time when the phrase job-killing has becomemind-numbing.