In a speech Thursday before the Economic Club of Washington, Speaker Boehner made an impassioned case about how federal regulations were harming businesses and imperiling jobs. This is indeed an important issue — one that the Obama administration claims it is also trying to tackle.
As part of his evidence, Boehner pointed to “219 new rules” that were in the works, which he said “will cost our economy at least $100 million.” He suggested the impact could be immediate. As he put it, “our economy is poised to take a hit from the government of at least $100 million — 219 times.”
Boehner, in recent weeks, has pressed the White House for answers about these 219 new rules. In a letter to President Obama dated Aug. 26, Boehner wrote: “This year the Administration’s regulatory agenda identifies 219 planned new regulations that have estimated annual costs in excess of $100 million each.”
So we wondered — where did this “219” number come from? And does it really mean what Boehner suggests?
The federal government is required to identify regulations that could have an economic impact of more than $100 million, but people frequently misunderstand what that means. It does not necessarily mean $100 million in costs; in fact, it can also mean more than a $100 million in benefits.
The Congressional Research Service earlier this year made this clear when it examined the 100 major regulatory rules issued in 2010. The report — which is actually posted on the speaker’s Web site — found that more than a third of the 100 rules were deemed “major” because they involved the transfer of federal funds to recipients (such as grants, food stamps, or crop payments). In most cases, this meant more money in people’s pockets, not costs to businesses.
Other rules were labeled major because they triggered economic activity by consumers; these all had to do with hunting seasons and bag limits for certain types of migratory birds. And there were rules that established new fees (such as increased costs for passports) to fund government operations.
Finally, 39 of the 100 rules were expected to have either $100 million in annual compliance costs, $100 million in annual benefits, or both. In some cases, the ranges were so large that it was difficult to conclude whether the result was a positive or negative benefit. But in 14 cases, the lowest estimate of the benefits exceeded the highest estimate of the costs.
In other words, it’s a real stretch to assume, as Boehner does, that each one of these proposed regulations automatically means at least $100 million in costs to the economy.
So where did the number of “219” come from? It appears to have started with an opinion column in Politico by Susan E. Dudley, the director of the George Washington University Regulatory Studies Center and a top regulatory official in the George W. Bush administration. Dudley derived the list from the White House budget office’s agenda of upcoming regulation, and she graciously walked us through OMB’s Web site to find all 219 rules.
Dudley acknowledged that the number has been misunderstood. “It is wrong to say that 219 will be issued this year,” she said, citing a television news report she heard on Boehner’s speech. “I realized that these numbers are getting a life of their own.”
When we read through all of the potential regulations, it quickly became apparent that at least a third were not relevant to Boehner’s argument in the speech.
Forty-two were either “long-term actions” or in the “pre-rule stage,” which meant they had no date for completion. Some of these had been in the works for years, such as an Agriculture Department conservation program on which no action had been taken since 2006. “I’m not sure why that is still on the agenda,” Dudley admitted.
Another 33 rules had already been completed and issued, some of them as long ago as last year. That left 144 in the “proposed rule stage” or “final rule stage,” which mostly meant that they could be issued this year. But not in all cases, such as an Energy Department regulation on lamps that is not due to be completed until 2014.
In this list of 144, we also spotted the new passport fees, which had already been imposed last year when an interim regulation was announced, and the hunting regulations for migratory birds, which as mentioned are considered a benefit for consumers. So even this pared-down list does not consist only of regulations that would impose immediate, $100 million costs.
Brendan Buck, a spokesman for Boehner, conceded that the speaker should have tweaked his language.
“Indeed he should have said ‘may be poised’ rather than ‘is poised,’ ” Buck said. “The irony is because the White House hasn’t responded to our request to make public the impact of all the pending major regulations, we simply don’t know all of their costs.”
The Pinocchio Test
Boehner left the distinct impression that 219 new regulations were hanging like a Sword of Damocles over the U.S. economy. But it turns out the number of potential regulations is inflated, as well as the potential impact. Many of the regulations may turn out to have substantial costs, but others could have benefits, as a report on the speaker’s Web site makes clear. Boehner wins points for admitting he may have overstated his case, but overall his statement contained significant factual errors.