Placing a Ceiling on Protection for Public Health

Governor Romney has endorsed an idea called regulatory budgeting, but it really means capping protection for public health.  Romney’s position paper explains the concept as follows:

To force agencies to limit the costs they are imposing on society, and to provide the certainty that businesses crave, a system of regulatory caps is required. As noted, the federal government has estimated that the existing regulatory burden approaches $1.75 trillion. We cannot afford those costs to go any higher. . . .

. . . .In the first term of a Romney administration, the rate at which agencies could impose new regulations would be capped at zero. What this means is that if an agency wishes or is required by law to issue a new regulation, it must go through a budget-like process and identify offsetting cost reductions from the existing regulatory burden.

Most of the EPA’s major regulations are based on public health, and Romney’s “cap” is very much like rationing health care – it says that EPA cannot protect the health of the public from one threat unless it’s willing in exchange to allow another threat to public health go untreated. Putting a compliance cap on public health protections is akin to saying that, because medical costs are too high, a doctor could not accept a new patient without cutting off care to an existing patient.

Consider two recent regulations.  Under Romney’s proposal, EPA might have to decide between reducing particulates from diesel trucks, which cause lung diseases, and reducing mercury from power plants, which harms the development of children’s brains. The two regulations deal with different kinds of harm and impose costs on different industries.  If each regulation considered independently makes sense, it seems bizarre to say that we have to choose between them.  Why should the trucking industry be allowed to cause lung disease as the price for stopping power plants from harming children?

Romney’s proposal is deeply flawed. The $1.75 trillion figure comes from a  discredited study by consultants to the Small Business Administration.  Romney’s position paper notes that this is “dramatically more” than all income taxes combined, and the figure also amounts to three times greater than total defense spending. The assertion that over ten percent of the economy is devoted to regulatory compliance simply isn’t credible.

The study and the Romney position paper also fail to consider the benefits of regulation. If we were actually spending that much money but getting even larger benefits for society, it would be hard to complain.  For instance, if the regulations produced $2 trillion in societal benefits, eliminating the regulations would make society as a whole $250 billion poorer.  What’s the argument for doing that?

On top of that, Romney’s first-year plan is legally untenable.  Congress, not the president, establishes the criteria for justifying the creation of a new rule and the repeal of old ones. Repealing a regulation has to be based on reasons relating to that regulation. The president can set regulatory priorities, within the limits set by Congress, but he can’t change the legal basis for agency action, whether that action be adopting or repealing a regulation.  If an agency says “the reason we repealed this regulation is that otherwise the president wouldn’t let us adopt another regulation that was mandated by law,” a court is not going to be favorably disposed.

In short, Romney’s proposal that may sound appealing to readers of the Wall Street Journal‘s editorial page, but doesn’t really qualify as a serious policy position. It is really just a gimmick that allows businesses to avoid regulation without actually having to do the hard work of showing that there’s anything wrong with any particular regulation.

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Reader Comments

12 Replies to “Placing a Ceiling on Protection for Public Health”

  1. Putting a compliance cap on public health protections is akin to saying that, because medical costs are too high, a doctor could not accept a new patient without cutting off care to an existing patient.

    Not at all. It’s like saying that Medicare or Medicaid or any other “public” program can’t spend more money, no matter how worthwhile the new expenditure, unless its paid for. When it comes to fiscal policy, we all understand that there may be more worthwhile investments than there is money to spend, and that this requires making choices and recognizing trade-offs. In the case of regulation, because the costs are off-budget, we can pretend as if there is no fiscal limit on our demands.

    Net benefits should not be considered in regulatory budgeting any more than benefits should be considered in regular budgeting. That spending money on program X will generate net benefits for society does not mean we should ignore budget limits, or pretend there is not a limited amount of money in the Treasury. We don’t get to pretend we have a budget surplus just because we spend money on net beneficial things.

    In the case of the new regulations you identify, is it really the case that you can think of no EPA regulations that might have outlived their usefulness? No regulations from any other agency? I find that as hard to believe as someone claiming that there’s no waste in the federal budget.

    The point of regulatory budgeting is to make sure that regulations, and the private expenditures they command, are focused on the most important things. Whether Romney’s proposal would actually achieve this — and whether it could be adopted without Congressional approval — is another matter.

  2. Putting a compliance cap on public health protections is akin to saying that, because medical costs are too high, a doctor could not accept a new patient without cutting off care to an existing patient.

    Not at all. It’s like saying that Medicare or Medicaid or any other “public” program can’t spend more money, no matter how worthwhile the new expenditure, unless its paid for. When it comes to fiscal policy, we all understand that there may be more worthwhile investments than there is money to spend, and that this requires making choices and recognizing trade-offs. In the case of regulation, because the costs are off-budget, we can pretend as if there is no fiscal limit on our demands.

    Net benefits should not be considered in regulatory budgeting any more than benefits should be considered in regular budgeting. That spending money on program X will generate net benefits for society does not mean we should ignore budget limits, or pretend there is not a limited amount of money in the Treasury. We don’t get to pretend we have a budget surplus just because we spend money on net beneficial things.

    In the case of the new regulations you identify, is it really the case that you can think of no EPA regulations that might have outlived their usefulness? No regulations from any other agency? I find that as hard to believe as someone claiming that there’s no waste in the federal budget.

    The point of regulatory budgeting is to make sure that regulations, and the private expenditures they command, are focused on the most important things. Whether Romney’s proposal would actually achieve this — and whether it could be adopted without Congressional approval — is another matter.

  3. I think there are several flaws in this argument. One is that agencies like EPA are already subject to budget constraints that limit their ability to issue new regulations, forcing them to prioritize. So we don’t need another constraint to make them prioritize.

    The second is that a regulation, which prohibits businesses from invading their rights of their neighbors to be free from unconsented physical harms, is not equivalent to a government expenditure for a public benefit. As a libertarian, I assume you agree with that.

    The third is that businesses don’t share a common budget from which they all draw. There are limits on how much a single industry can afford to spend on pollution control at any given time, but how does that limit relate to how much an entirely different industry is spending on an entirely different regulation? That seems like saying that the government shouldn’t forbid me to burn trash in my back yard because they’ve told you not to dump toxic chemicals in the river — instead, they should decide which one is more harmful. I don’t see why either of us should be allowed to engage in antisocial behavior or why the government should have to pick between which misbehavior to ban.

  4. I think there are several flaws in this argument. One is that agencies like EPA are already subject to budget constraints that limit their ability to issue new regulations, forcing them to prioritize. So we don’t need another constraint to make them prioritize.

    The second is that a regulation, which prohibits businesses from invading their rights of their neighbors to be free from unconsented physical harms, is not equivalent to a government expenditure for a public benefit. As a libertarian, I assume you agree with that.

    The third is that businesses don’t share a common budget from which they all draw. There are limits on how much a single industry can afford to spend on pollution control at any given time, but how does that limit relate to how much an entirely different industry is spending on an entirely different regulation? That seems like saying that the government shouldn’t forbid me to burn trash in my back yard because they’ve told you not to dump toxic chemicals in the river — instead, they should decide which one is more harmful. I don’t see why either of us should be allowed to engage in antisocial behavior or why the government should have to pick between which misbehavior to ban.

  5. Dan said;

    “…Most of the EPA’s major regulations are based on public health…”

    Dear Dan,
    The general public no longer trusts the EPA to tell the truth about public health. Too many times the EPA has fabricated fake public health scares like pre-mature deaths and carbon dioxide pollution to justify unnecessary regulations, government expansion and spending. We all know by now that when the EPA claims that it is acting to protect public health, it is not telling the truth. The EPA cannot be trusted.

  6. Dan said;

    “…Most of the EPA’s major regulations are based on public health…”

    Dear Dan,
    The general public no longer trusts the EPA to tell the truth about public health. Too many times the EPA has fabricated fake public health scares like pre-mature deaths and carbon dioxide pollution to justify unnecessary regulations, government expansion and spending. We all know by now that when the EPA claims that it is acting to protect public health, it is not telling the truth. The EPA cannot be trusted.

  7. The first argument is not particularly responsive and hard to take seriously. Because the EPA has a budget constraint on its personnel and spending this imposes a meaningful constraint on the cost of its rules? That’s like saying you could my spending at the supermarket could be meaningfully controlled by limiting the amount of time I can spend shopping. In practice, it can actually encourage the opposite — devoting greater time and effort to more costly endeavors to maximize the value of time and resources.

    The first part of the third argument is also not very responsive. The question is not how much an industry can spend, but how much we as a country are willing to spend achieving certain goals. So long as our environmental regulatory system embodies a collective enterprise, imposing one-size-fits-all approaches across the nation, it’s appropriate to ask how much we, as a nation, are willing to spend achieving these goals, just as we ask how much we as a nation are willing to spend on national defense, health care, etc. That the incidence of such costs is non-uniform (as it is with taxes, just as it is with regulation) is a separate issue.

    The second argument — that budget constraints are inappropriate where protection of rights are involved — is a more serious argument (and one for which I have particular sympathy), but it’s not the argument that was made in your post. I am also not sure it responds to my comment above, as much of the current environmental regulatory framework has little to do with protecting rights against unconsented-to harms and instrusions. Many regulations control conduct that does not violate anyone’s rights, and some behavior with the potential to violate rights is subject to minimal control.

    Were our regulatory system oriented in a more rights-protective manner, I would find little use for regulatory budgeting (just as I would find little use for CBA). As things stand, however, I have such sympathies for this sort of effort. Properly implemented, a regulatory budget might well encourage the EPA to focus its efforts on those areas where its intervention are most necessary (though it’s also possible that a regulatory budget could give some interests even greater leverage in the regulatory process). While there are serious objections to be made about a regulatory budget, the original post did not make them.

    JHA

  8. The first argument is not particularly responsive and hard to take seriously. Because the EPA has a budget constraint on its personnel and spending this imposes a meaningful constraint on the cost of its rules? That’s like saying you could my spending at the supermarket could be meaningfully controlled by limiting the amount of time I can spend shopping. In practice, it can actually encourage the opposite — devoting greater time and effort to more costly endeavors to maximize the value of time and resources.

    The first part of the third argument is also not very responsive. The question is not how much an industry can spend, but how much we as a country are willing to spend achieving certain goals. So long as our environmental regulatory system embodies a collective enterprise, imposing one-size-fits-all approaches across the nation, it’s appropriate to ask how much we, as a nation, are willing to spend achieving these goals, just as we ask how much we as a nation are willing to spend on national defense, health care, etc. That the incidence of such costs is non-uniform (as it is with taxes, just as it is with regulation) is a separate issue.

    The second argument — that budget constraints are inappropriate where protection of rights are involved — is a more serious argument (and one for which I have particular sympathy), but it’s not the argument that was made in your post. I am also not sure it responds to my comment above, as much of the current environmental regulatory framework has little to do with protecting rights against unconsented-to harms and instrusions. Many regulations control conduct that does not violate anyone’s rights, and some behavior with the potential to violate rights is subject to minimal control.

    Were our regulatory system oriented in a more rights-protective manner, I would find little use for regulatory budgeting (just as I would find little use for CBA). As things stand, however, I have such sympathies for this sort of effort. Properly implemented, a regulatory budget might well encourage the EPA to focus its efforts on those areas where its intervention are most necessary (though it’s also possible that a regulatory budget could give some interests even greater leverage in the regulatory process). While there are serious objections to be made about a regulatory budget, the original post did not make them.

    JHA

  9. JHA,
    I am confused by your opposition to a calculation of regulatory impact that takes into account benefits as well as costs.

    You are likening the proposal to budgeting, but it seems to me budgets and cost-benefit studies are different. A budget sums up internal costs. It also sums up internal benefits: for example if the EPA makes money each year selling EPA t-shirts or collecting fines, that (I presume) appears in its budget. A cost-benefit calculation casts its net more broadly, taking into account the external effects of (in this case) a policy. I can’t understand why it would be useful to look only at one half of those effects (the external costs) and not the other half (the external benefits). If a change to the mortgage regulations costs investment banks $200 million/yr in revenue but increases commercial banks’ revenue by $300 million, are you saying the cost of the regulation is $200 million? I see a $100 million net benefit. What if it costs investment banks $200 million but saves homeowners $300 million? Same thing.

    If you’re a libertarian, maybe you think all this hubristic Benthamism is simply profoundly wrongheaded — but doing half of a Benthamite calculation is much worse than doing the whole thing. You can always look at the cost line only if you are interested in the absolute amount of money a regulation costs a certain sector, but commissioning a study that doesn’t also report a benefit line seems misleading and irresponsible.

    Another remarkable aspect of the proposal is that it could function as a transfer of power from democratically-accountable policymakers to logic-accountable technocrats. If the cost of regulation is capped at $1.75 trillion, a lot of the arguments about whether a proposed regulatory change is, in the broad sense, “good” or “bad,” “effective,” or “ineffective” will be replaced by arguments about how to properly estimate the regulations economic costs and benefits. Congress couldn’t pass what it thought was a “good” regulation if the technocrats estimate that the net effect of the regulation is too costly.

    This could be a good thing or a bad thing depending on your view of such estimates. Personally, I am skeptical of the accuracy and value of quantitative estimates about a phenomenon with as many complex, interlinked moving parts as the economy/society. For example, I don’t find the current mania for expressing the impact of every policy in terms of “number of jobs created” very helpful — though in part, this is due to the fact that I’m never sure whether the reported estimates take into account the number of jobs destroyed, which goes to the other point above.

    -Tyler

  10. JHA,
    I am confused by your opposition to a calculation of regulatory impact that takes into account benefits as well as costs.

    You are likening the proposal to budgeting, but it seems to me budgets and cost-benefit studies are different. A budget sums up internal costs. It also sums up internal benefits: for example if the EPA makes money each year selling EPA t-shirts or collecting fines, that (I presume) appears in its budget. A cost-benefit calculation casts its net more broadly, taking into account the external effects of (in this case) a policy. I can’t understand why it would be useful to look only at one half of those effects (the external costs) and not the other half (the external benefits). If a change to the mortgage regulations costs investment banks $200 million/yr in revenue but increases commercial banks’ revenue by $300 million, are you saying the cost of the regulation is $200 million? I see a $100 million net benefit. What if it costs investment banks $200 million but saves homeowners $300 million? Same thing.

    If you’re a libertarian, maybe you think all this hubristic Benthamism is simply profoundly wrongheaded — but doing half of a Benthamite calculation is much worse than doing the whole thing. You can always look at the cost line only if you are interested in the absolute amount of money a regulation costs a certain sector, but commissioning a study that doesn’t also report a benefit line seems misleading and irresponsible.

    Another remarkable aspect of the proposal is that it could function as a transfer of power from democratically-accountable policymakers to logic-accountable technocrats. If the cost of regulation is capped at $1.75 trillion, a lot of the arguments about whether a proposed regulatory change is, in the broad sense, “good” or “bad,” “effective,” or “ineffective” will be replaced by arguments about how to properly estimate the regulations economic costs and benefits. Congress couldn’t pass what it thought was a “good” regulation if the technocrats estimate that the net effect of the regulation is too costly.

    This could be a good thing or a bad thing depending on your view of such estimates. Personally, I am skeptical of the accuracy and value of quantitative estimates about a phenomenon with as many complex, interlinked moving parts as the economy/society. For example, I don’t find the current mania for expressing the impact of every policy in terms of “number of jobs created” very helpful — though in part, this is due to the fact that I’m never sure whether the reported estimates take into account the number of jobs destroyed, which goes to the other point above.

    -Tyler

  11. Tyler —

    I don’t object to the consideration of both costs and benefits when considering regulatory impact, any more than I object to the consideration of costs and benefits of government programs. This can be useful in setting priorities. But when it comes to budgeting, we don’t get to ignore fiscal constraints because spending money may generate offsetting benefits elsewhere (particularly, as is the case with environmental policy, many of the resulting benefits are non-pecuniary). In other words, there are lots of things that are cost-beneficial but still unaffordable. So insofar as we are using regulation to provide collective goods, I think it reasonable to set a default cap to what we are willing to spend on such things (while reserving the option to revise the cap in the future).

    JHA

  12. Tyler —

    I don’t object to the consideration of both costs and benefits when considering regulatory impact, any more than I object to the consideration of costs and benefits of government programs. This can be useful in setting priorities. But when it comes to budgeting, we don’t get to ignore fiscal constraints because spending money may generate offsetting benefits elsewhere (particularly, as is the case with environmental policy, many of the resulting benefits are non-pecuniary). In other words, there are lots of things that are cost-beneficial but still unaffordable. So insofar as we are using regulation to provide collective goods, I think it reasonable to set a default cap to what we are willing to spend on such things (while reserving the option to revise the cap in the future).

    JHA

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Dan Farber

Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…

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