On last night’s PBS NewsHour, Rep. Darrell Issa (R-CA), chair of the House Oversight and Government Reform Committee, took a shot at CPR’s Sidney Shapiro, who was the lone witness that Committee Democrats were allowed to invite to testify at yesterday’s hearing on the costs of regulation. Issa badly mischaracterized Shapiro’s testimony, saying:
The minority chose a witness. Mr. Shapiro spoke on behalf of his views, which were, in a nutshell -- and he reiterated them -- that he sees no reason to have a cost-vs.-benefit analysis. He thinks it's futile, meaning that no matter how much it costs, go ahead and do regulations. I would hope that, instead of the progressive witness that they had, that they would have sensible groups that see an advantage to environmental progress, while at the same time getting business progress, that win-win that we often look for but don't find in government, but we find it in the private sector whenever possible.
It’s true that Shapiro and a host of other scholars think that cost-benefit analysis is hopelessly slanted toward industry’s interests, and that it’s a fatally flawed method of regulatory impact analysis. But that doesn’t mean, as Issa fabricates, that he’s opposed to any analysis and that “no matter how much it costs, go ahead and do it.” Shapiro and others believe that cost ought to be one of several important considerations. Under today’s cost-benefit analysis methods, if it costs a chemical company one penny more to avoid pumping cancer-causing emissions into the air or water than it costs the victims of those emissions to treat the cancer that results, a regulation to prohibit or otherwise mitigate emissions would probably fail a cost-benefit analysis. Note, by the way, who pays for what in that example. It’s not the chemical company paying medical bills, even though it’s their pollution. Cost-benefit analysis treats it as a simple mathematical equation, without worrying about such questions of morality. It proceeds from the premise that polluters have a presumptive right to do harm in pursuit of profit, and that the rest of us must accept the risks associated with their profit, unless the numbers don’t happen to add up.
That’s one of a number of reasons why cost-benefit analysis is ill-considered. Others include that it relies on industry’s inflated cost projections, and ignores some of the most important benefits. As Shapiro wrote in a recent post on CPRBlog,
Neither does OMB’s methodology account well for items that defy monetization – the value of keeping people healthy rather than simply treating their pollution-caused illnesses, or the value of a great view from the top of a mountain that hasn’t been shorn clean by mountaintop mining. But even allowing for those shortcomings, all of which accrue to the anti-regulation side of the ledger, almost all regulations have greater economic benefit than cost.
Which brings us back to Issa, who in his NewsHour interview kneels at the altar of cost-benefit analysis even though he and his colleagues are doing the very best they can to ignore the benefits part. The $1.75 trillion estimate they’ve been citing for the economic impact of regulation is based on a study that’s flawed for several reasons, but one of the biggest is that it simply ignores the benefits, totting up only projected costs – and doing that in an indefensible way. Neither was Issa’s hearing structured to learn anything about the benefits of regulation. But for Shapiro, invited not by Issa but by Ranking Minority Member Elijah Cummings (D-MD), it was a series of industry spokespeople and right-wing think tank types telling us how costly it was for industry to comply with the nation’s laws protecting health, safety, the environment, workers, consumers and more.
It’s Issa who’s dissin’ cost-benefit analysis, by holding it up as the gold standard but then ignoring the part of the analysis he doesn’t want to talk about. Shapiro makes clear that he finds cost-benefit analysis to be flawed, but that even by its methods, slanted as they are toward industry, the costs of regulations exceed the monetized benefits. Issa should be a little less casual with the truth.
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On a related front, Shapiro recently joined 65 law professors from around the nation in a joint letter to Congress opposing the REINS Act, the GOP’s flagship measure to undercut the regulatory process. The letter’s not a CPR project, but we thought we’d make it available here.