Three recently published studies discuss the relationship between regulations and economic development. One study focuses on the job-creation potential of an individual environmental rule, and another touts the economic benefits of clean energy investments. The third study debunks a widely quoted but inaccurate report on the economic costs of regulations. All three reinforce an argument that public interest advocates have made for decades: government standards and public investments in clean energy protect health and safety and encourage job creation.
A study published July 14, “Why EPA’s Mercury and Air Toxics Rule is Good for the Economy and America’s Workforce”, describe the economic benefits of the US Environmental Protection Agency’s (EPA) proposed air toxics rule. Author Charles J. Cicchetti of Navigant Consulting finds that the air toxics rule would create more than 115,000 jobs by 2015 – eclipsing EPA’s conservative estimate by nearly 80,000.
Cicchetti argues that the EPA’s own cost-benefit analysis was scientifically sound but failed to account for possible inaccuracies in industry-supplied data and left out some secondary benefits of the rule, such as reduced health care and insurance costs. Sponsored by the Clean Air Council, the Environmental Law & Policy Center, the Conservation Law Foundation, and others, the study echoes one published by the Economic Policy Institute (EPI) in June. The EPI study estimated the rule could prompt the creation of up to 158,000 new jobs in the next four years.
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A second report, this one peer-reviewed and published by the Union of Concerned Scientists, takes a close look at the economic impacts of clean energy investments in the Midwest. Entitled “A Bright Future for the Heartland: Powering the Midwest Economy with Clean Energy”, the July 19 report finds that if Midwest states invest in a clean energy strategy produced in 2009 by the Midwestern Governors Association (MGA), it could save the average household $78 per year on electricity and natural gas bills, create 85,700 new jobs in the region, and bring $1 billion in new income to farmers and clean energy companies. The Midwest was hit hard by the recent recession, and the study’s authors indicate that the region has a “great renewable energy potential, a strong manufacturing base and the skilled workforce needed to realize that potential.”
Also on July 19, EPI released a critique of a controversial study by Nicole and Mark Crain, which was commissioned by the Small Business Administration’s (SBA) Office of Advocacy in 2010. Corporate interests and their allies in Congress have been incessantly repeating the Crains’ faulty conclusion that regulations cost the US economy $1.75 trillion per year.
In its critique, EPI noted that “[a] substantial majority of these costs—$1.2 trillion or 70 percent—are based on the author’s use of an econometric regression analysis to determine the costs of ‘economic’ regulations, such as those rules affecting the financial industry.” This means that, by EPI’s assessment, the costs of health, safety, and environmental regulations would be a much smaller portion of overall regulatory costs than critics claim. These important social regulations are smart investments because the burden they place on the economy is minor while their far-reaching economic and quality-of-life benefits are great.
Because of its limited focus, Crain and Crain did not calculate the benefits of regulations – just their costs – making it difficult for the authors to accurately determine the true value of regulations. Furthermore, EPI found that the study relied on flawed methodology and incomplete data to reach its conclusions. Setting the record straight on Crain and Crain is important because congressional Republicans and business organizations like the US Chamber of Commerce have been using the controversial estimate to support their attacks on critical air, water, food safety, and workplace safety standards that protect Americans from harm.
Independent studies that look at the costs and benefits of regulations are important because they double-check agency numbers and often consider additional factors that are outside of the agency’s purview. When agencies perform their own cost-benefit analyses, they usually rely on industry-supplied cost numbers, and industries tend to overstate the potential costs of a new regulation. There is substantial evidence that once implemented, regulations do not cost nearly as much as anticipated. Therefore, independent studies help to inform agencies of the true expected costs of regulations. They also document the often overlooked benefits of public protections, offering yet more evidence that the American people do not have to – and should not be asked to – choose between job creation and safeguarding the health and safety of their families and communities.