Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
President Obama and his minions seem to think that freedom is a four-letter word. His administration has imposed an array of intrusive, nanny-state, financial, environmental and consumer-product regulations that will cost Americans hundreds of billions of dollars.
Public policy has consequences, and excessive, unwise regulation has contributed to a potentially catastrophic slowing of the nation’s economic growth. The Philadelphia Federal Reserve Bank’s survey of 39 economic forecasters released in November predicted that over the first three quarters of 2013, GDP growth will average 2.1% and will rise only to 2.9% in 2015. They predicted that unemployment will average 7.8% this year and drop to a still unacceptable 6.9% by 2015.
In other words, economic growth and unemployment numbers are expected to remain weak at least through most of Obama’s second term. A report from the World Economic Forum offers some insight into the reasons: the erosion of transparency in government, wasteful spending, burdensome regulation, and waning trust in the integrity of the public sector.
A senior presidential appointee who epitomizes all of those flaws is EPA Administrator Lisa Jackson, who has a cynical, hyper-regulatory, damn-the-science philosophy that resembles the Europeans’ innovation-busting “precautionary principle,” the view that until a product or activity has been definitively proven safe, it should be banned or at least smothered with regulation. Jackson – who has just announced her resignation — seems unaware that regulation has costs, direct and indirect; that regulators should strive to limit the intrusiveness of oversight to the level that is necessary and sufficient; and that her agency has myriad deficiencies in both policies and personnel.
Policy by policy and decision by decision, Jackson and her colleagues (along with their counterparts at other regulatory agencies) have decimated the nation’s competitiveness, ability to innovate, and capacity to create wealth. A recent analysis from the Competitive Enterprise Institute estimated that the annual cost of compliance with EPA regulations alone is more than a third of a trillion dollars.
It should hardly come as a surprise, then, that the Wall Street Journal/Heritage Foundation’s 2013 Index of Economic Freedom shows that the United States has slipped to tenth place, behind Chile and Mauritius.
Jackson’s EPA has been a job-killer. Unscientific and obstructionist policies toward once-promising R&D areas such as the use of genetically engineered bacteria to clean up oil spills and toxic wastes and kill insect pests have caused academics and companies to abandon entire R&D sectors that could have created jobs and wealth, possibly even America’s Next Big Thing.
The EPA’s policies and individual product decisions concerning genetic engineering offer textbook cases of how not to regulate. The agency treats genetically engineered products as though they pose some inherent, systematic, unique risks, when both theoretical considerations, risk-assessment experiments and practical experience make it clear that they do not: A quarter-century-old scientific consensus holds that the molecular techniques of generic engineering are an extension, or refinement, of less precise and predictable techniques for genetically improved products with which consumers and government regulators have long familiarity and comfort.
Some of the most onerous policies introduced on Jackson’s watch include stricter gas-mileage standards, an increase in the amount of ethanol in gasoline from 10 percent to 15 percent and more stringent ambient air standards under the Clean Air Act. Particularly damaging was an EPA rule finalized in February 2012 that created new emissions standards for coal- and oil-fired electric utilities. According to an analysis by Diane Katz and James Gattuso of the Heritage Foundation, “The benefits are highly questionable, with the vast majority being unrelated to the emissions targeted by the regulation. The costs, however, are certain: an estimated $9.6 billion annually. The regulations will produce a significant loss of electricity generating capacity, which [will] undermine energy reliability and raise energy costs across the entire economy.”
Because many EPA policies and actions torture both statutes and common sense to a degree that approaches malfeasance, it’s no surprise that the agency is regularly reined in by the federal judiciary. In a case decided earlier this month, the state of Virginia had sued the EPA over its attempt to regulate the amount of water flowing through Fairfax County’s Accotink Creek watershed in order to control sediment buildup. In other words, instead of regulating the sediment directly, EPA decided that water was a pollutant. This regulatory action would have cost the county at least $300 million and the state’s Department of Transportation an additional $70 million. However, on January 3, a federal court ruled that that the EPA could not treat storm water as a pollutant under the Clean Water Act.
Unscientific policies and regulatory grandiosity and excess are not EPA’s only failings; neglecting to weigh costs and benefits is shockingly common. In one analysis by the Office of Management and Budget, of the 30 least cost-effective regulations throughout the government, the EPA had imposed no fewer than 17. For example, the agency’s restrictions on the disposal of land that contains certain wastes prevent 0.59 cancer cases per year – about three cases every five years – and avoid $20 million in property damage, at an annual cost of $194 to $219 million. Moreover, EPA systematically exaggerates benefits and underestimates costs.
EPA is a serial offender when it comes to egregious government waste, fraud, abuse, and just plain sleaziness. The agency buys influence by doling out hundreds of millions of dollars each year to certain favored non-profit organizations – money that, according to the inspector general and Government Accountability Office, is dispersed with no public notice, competition or accountability. The investigators documented systematic malfeasance by regulators, including: (1) making grants to grantees who were unable to carry out the terms of the grants; (2) favoring an exclusive clique of grantees without opening the grants to competition; (3) funding “environmental” grants for activities that lack any apparent environmental benefit; and (4) failing to ensure that grantees performed the objectives identified in the grants.
Over the years, EPA has, in effect, bought the loyalty of a small cadre of scientists and radical advocacy organizations that will dependably defend the agency’s precautionary approach and expansionist tendencies.
Just last week, Sen. David Vitter (R-La.) called attention to a questionable practice of the EPA and U.S. Fish and Wildlife Service called “sue and settle,” sometimes referred to as “friendly lawsuits.” According to Sen. Vitter, “sue and settle” is a subterfuge under which “radical environmental groups file lawsuits against a federal agency in a friendly court demanding the agency take action. Rather than allowing the entire process to play out, the Department of Justice and the agency being sued settles [sic] the lawsuit by agreeing to move forward with the requested action. While the environmental group is given a seat at the negotiating table, private property owners and other affected residents are not given the opportunity to object to these settlements.” Vitter concludes that “regulatory policy is being fashioned behind closed doors with groups that are clearly antagonistic to the economic health of the United States.”
Especially troubling are the “sue and settle” cases in which there is what Competitive Enterprise Institute scholar Gregory Conko called a “tacit, wink wink, nudge nudge” agreement between an agency’s professional staff and the plaintiffs. In other words, the professional staff may prefer a rule that is far harsher than the political appointees would permit, so they find an accommodating activist group to sue, and then agree to a settlement that compels the agency to write the harsher rule. A former senior Office of Management and Budget official said that such “sue and settle” lawsuits are used skillfully by EPA staffers “to truncate substantive and procedural reviews” and that the judicial deadlines that are part of settlements often result in the regulatory reviewers at OMB getting only a day or two to review significant, voluminous, complex rules. In this way, agency professional staff are able to subvert procedures that are supposed to be part of governmental checks and balances.
EPA Administrator Jackson recently announced that she would resign in February — but only after yet another agency scandal, one that involved her personally. Under various aliases, she has maintained several secret government email accounts that she uses to conduct agency business, apparently to obscure her involvement in various agency actions. After the Justice Department (reluctantly) agreed to release thousands of those emails as required by the Freedom of Information Act, Jackson decided to quit. These irregularities have attracted the scrutiny of members of Congress and are being audited by the EPA’s inspector general. Such abuses have apparently been committed not only by Jackson but by James B. Martin, administrator of EPA’s Region 8 (based in Denver) [http://www.vitter.senate.gov/public/index.cfm?FuseAction=PressRoom.PressReleases&Type=Press%20Release&ContentRecord_id=87322e88-c2cc-3f6b-e7b1-4faee5be4216].
In so many ways, EPA pollutes the cause of transparent, effective government. It’s hard to imagine a successor to Lisa Jackson who would be a worse steward of the environment, but I’m sure President Obama will do his best to find one.