Debunked SBA Regulatory Costs Study Front and Center at House Energy & Commerce Committee Hearing

Ben Somberg

July 15, 2011

The House Energy & Commerce sub-committee on Environment and the Economy held a hearing yesterday on “regulatory chaos” (yikes!). One figure seemed popular: $1.75 trillion. That’s how much regulations cost the U.S. economy each year, sub-committee vice-chair Tim Murphy said in his opening statement. Two of the four witnesses made the same claim in their testimony (William Kovacs of the Chamber of Commerce and Karen Harned of the National Federation of Independent Business). The committee’s briefing memo on the hearing featured, you guessed it, the same number.

The number, of course, comes from a September 2010 study sponsored by the Small Business Administration’s Office of Advocacy. In February, a CPR white paper showed that the SBA study was severely flawed. Most notably, more than 70 percent of the total cost estimated had been based on public opinion polling about the perceived regulatory climate in different countries, numbers that the original researchers had never meant to be used for a guess about the total effect on the U.S. economy. In April, the nonpartisan Congressional Research Service published a report on the SBA study, including similar and additional critiques.

Even more impressive is that neither the study nor those who cite it make any effort to account for the benefits of regulation – saved lives, cleaner air and water, safer workplaces, safer automobiles, and so on. If they were to do that, they’d have to report that the benefits – even by the means of the badly-slanted-against-regulation methods of cost-benefit analysis imposed by the Office of Management and Budget – greatly outweigh the costs. But the Small Business Administration’s study simply ignores the benefits, the better to focus attention on its jaw-dropping, if wildly inaccurate, estimate of the costs.

Why is it regulatory opponents can’t seem to cite many studies on regulations other than this one?

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