It's their favorite figure: $1.75 Trillion. Repeated ad nauseam in congressional hearings by members of congress and expert witnesses alike, it is the supposed annual cost of regulations, this according to a study from last year commissioned by the Small Business Administration's Office of Advocacy. Sponsors of anti-regulatory legislation like the number: Olympia Snowe and Tom Coburn included it in the 'findings' of their bill, while Geoff Davis, chief sponsor of the REINS Act, cites it regularly. It's been used by John Boehner and Eric Cantor, and House committee chairs Fred Upton, Darrell Issa, Lamar Smith, and Sam Graves. Conservative think tanks like the Competitive Enterprise Institute and the Heritage Foundation are fond of it. A few Democrats have gotten in on the act, too: Mark Warner, proponent of his own anti-regulatory plan, has cited it, as has Nydia Velazquez, Ranking Member of the House Small Business Committee.
Is it correct? In February, a CPR white paper found a series of flawed methods in the SBA's study, and showed that most of the SBA's number was derived from a regression analysis that used opinion polling data on perceived regulatory climate.
Now the nonpartisan Congressional Research Service (CRS) has published its own report examining the SBA study. CRS looked at a number of aspects of the SBA-commissioned study, and found an awful lot of questionable assumptions. I encourage you to check it out.
I'm not going to try to summarize the whole CRS report here, but I think this excerpt gets to the heart of some of the problems in the SBA study, which was conducted by economists Nicole Crain and Mark Crain:
More than 70% of the overall estimate ($1.236 trillion) is based on the WGI index of regulatory quality for the United States, with the authors determining the extent to which economic regulations reflected in that index reduces per capita real GDP in the United States. However, one of the authors of the regulatory quality index has said that Crain and Crain misinterpreted the index, and that higher values on the index cannot be interpreted as “less stringent regulations.” Even if it could, he said that the index for the United States should be compared to a country with a preferable index, not to an idealized “best possible” score on the index. Comparing the United States’ regulatory quality index in 2008 to the country with the highest index that year (Ireland) would have reduced Crain and Crain’s estimate of the cost of economic regulations by nearly two-thirds. Other commenters (including one of the peer reviewers of the Crain and Crain study) raised similar concerns about whether the regulatory quality index could be used to measure the cost of economic regulations, and about the regression analysis used to produce the cost estimate.
Folks who have cited the SBA study triumphantly ought to take a step back and really look at the study and CRS's new report. Is the SBA's methodology something they'd want to defend?
Showing 2,825 results
Ben Somberg | April 22, 2011
It's their favorite figure: $1.75 Trillion. Repeated ad nauseam in congressional hearings by members of congress and expert witnesses alike, it is the supposed annual cost of regulations, this according to a study from last year commissioned by the Small Business Administration's Office of Advocacy. Sponsors of anti-regulatory legislation like the number: Olympia Snowe and […]
Matthew Freeman | April 21, 2011
Right about this time a year ago, Americans were learning about a massive explosion aboard an oil rig in the middle of the Gulf of Mexico called the Deepwater Horizon that had occurred the day before. Video footage of the flame-engulfed rig began splashing across television screens, and we were told that 11 workers on […]
Alice Kaswan | April 21, 2011
The Supreme Court arguments in American Electric Power Company v. Connecticut on Tuesday raised profound issues about the respective role of the courts and administrative agencies in controlling greenhouse gas emissions from stationary sources, emissions that remain uncontrolled notwithstanding their significant climate impacts. As my CPR colleague Doug Kysar has noted, at times the Court […]
Douglas Kysar | April 20, 2011
Cross-posted from ACSblog. In one of the most, er, hotly anticipated cases of its term, the Supreme Court yesterday heard arguments in the climate change nuisance suit of Connecticut v. American Electric Power. From the beginning of this litigation, pundits have questioned the plaintiffs’ decision to seek injunctive relief gradually abating the defendants’ greenhouse gas […]
Ben Somberg | April 20, 2011
So far as regulatory safeguards are concerned, we’ve come a long way in 27 months. The Obama Administration started with federal agencies that had been devastated by eight years of an explicitly anti-regulatory president. Turning that around is not easy, and no President could do it in a day. So, as much as you see […]
Ben Somberg | April 19, 2011
Claudia Rodgers, Deputy Chief Council for the Office of Advocacy at the U.S. Small Business Administration, testified earlier this month at a hearing conducted by a House Oversight and Government Reform sub-committee. The session ("Assessing The Impact of Greenhouse Gas Regulations on Small Business") was a sparsely attended affair on all sides of the room. […]
Amy Sinden | April 18, 2011
In politics, repeating something over and over again can sometimes make it stick, whether it’s true or not. From Reagan’s welfare queens, to the specter of “socialized” medicine leading to imminent communist takeover, these sorts of myths often start on the far right but then move surprisingly far to the center. And as the EPA […]
Sidney A. Shapiro | April 15, 2011
Congress charged the Office of Advocacy of the U.S. Small Business Administration (SBA) with the job of representing the interests of small business before regulatory agencies, such as the Occupational Safety and Health Administration (OSHA). As an agency of the federal government, it has an obligation to taxpayers to get its facts straight before it speaks. Lately, […]
Celeste Monforton | April 13, 2011
Cross-posted from The Pump Handle. President Obama received an award last week for his efforts to improve openness in federal agencies. Jon Stewart poked fun at it (see clip) and I actually thought it might have been an April Fool’s joke because of what I’d learned earlier in the week. The President’s own Office of […]