Like all presidents since Ronald Reagan, Donald Trump came into office promising to reduce unnecessary regulation, ordering rollbacks of environmental and financial regulation and directing all executive agencies to throw out two rules for every one new one they propose.
Back in Reagan’s time, the big debate was over his executive order requiring the government to perform cost-benefit analyses for every federal regulation. The business community had long complained that government officials focused only on the benefits of regulation, while ignoring the costs to businesses and the economy as a whole. Liberal interest groups — unions, consumer advocates and environmentalists — went bananas. How can anyone put a monetary value on the human life that is saved because of environmental regulation, they asked, or the limb that is not cut off because of workplace safety rules, or the peace of mind that comes from knowing that your life savings are safe from the predations of Wall Street sharks? Any estimates of the benefits of regulation, they argued, were too squishy and too subjective — and downright immoral.
What the interest groups were arguing, in effect, was that there was no limit to what society should spend to save a life or a species from extinction, which is why they lost that argument. And ever since, presidents have required executive branch agencies to do cost-benefit analyses on proposed regulations.
Ironically, today it is the business lobby and its cheerleaders in the Republican Party who are the skeptics. They are only too happy to tote up every conceivable cost for those “crushing,” “job-killing” regulations, but resist toting up the benefits because — like the liberals of old — they view such estimates as too squishy and subjective.
As part of its assault on climate change regulation, for example, the energy industry has conjured up frightening estimates of lost jobs and higher energy prices. But nowhere will you find any estimate of the economic benefit that would be realized by preventing rising tides from inundating New Orleans, Miami, Manhattan, Charleston, S.C., Jacksonville, Fla., and Galveston, Tex., or the lost crop production from increased drought and flooding, or the increased cost of air conditioning to deal with year after year of record heat. The industry line, parroted by Republican politicians, is that the science on it is unsettled and comes from biased or unreliable sources. For that reason, the only credible estimate of the benefit of climate change regulation is zero.
To quantify the benefits of its climate change regulations, the Obama administration came up with a concept it called the “social cost of carbon” — the cost to society of putting a ton of carbon into the atmosphere or the benefit from preventing it — which it estimated at $36 per ton. By their nature, however, such long-range calculations are sensitive to assumptions that are made about things such as the cost of money over time or the speed at which the planet is warming. But rather than offer a different estimate of benefits based on different assumptions, the business lobby has focused on discrediting the government and backing Republican proposals to prohibit regulators from ever calculating the social cost of carbon again.
Wall Street has adopted a version of the “all cost-no benefit” approach in lobbying for relief from the Dodd-Frank financial legislation. Despite mounds of evidence that capital is plentiful and cheap, the industry argues it could be even cheaper and more plentiful without most of the new rules and restrictions. But of course, that was precisely the point of the law — to ensure that we didn’t return to the days when capital was so cheap and easy that loans were made to individuals and businesses who shouldn’t have gotten them.
It was always understood by those who wrote Dodd-Frank that the result would be slightly higher interest rates and slightly reduced availability of capital. The judgment was that these costs would be more than offset by the benefit of reducing the risk in the financial system and avoiding another financial crisis like the ones that have regularly beset the economy over the past 30 years. Each one wiped out trillions of dollars in household and corporate wealth and triggered painful, job-killing and income-reducing recessions.
Wall Street, not surprisingly, is not too keen to calculate the cost of financial crises it has inflicted on the economy, and thus the economic benefit of avoiding the next one. Instead, the strategy has been to challenge each of the dozens of Dodd-Frank regulations individually, arguing that no rule could substantially reduce the probability or severity of the next financial crisis.
Wall Street’s view seems to be that while it is not opposed to the idea of Dodd-Frank, it wants to repeal or roll back virtually all of its major provisions.
The pharmaceutical industry also has an interesting history with cost-benefit analysis. As part of its health-care initiative, the Obama administration wanted to invest big money into what is known as “outcomes research” — using millions of computerized medical records to determine what are the most effective treatments for various conditions and illnesses. A study by the respected Institute of Medicine had found that half the treatments received by patients was done without clear, scientific evidence that it worked. But the drug industry, fearing what the research might show about its most expensive and profitable drugs, used its considerable muscle to ensure that the research would be limited to medical effectiveness only, with no consideration of cost. In other words, no cost-benefit analysis allowed.
Here’s the dirty little secret about cost-benefit analysis: It really is squishy and it often relies on subjective assumptions, whether it is done by regulators who want to find huge benefits from regulations or industry executives who want to find none. That said, it is still exercise is worth doing — not because of the precise answers it generates but because of the fact-based discipline it imposes on thinking about whether and how to regulate.
Now, however, the business lobby and its Republican allies have decided even that discipline is more than the public deserves. It reminds me of the age-old advice given to trial lawyers on how to win a case in court:
“If you have the law, hammer the law. If you have the facts, hammer the facts. If you have neither the law nor the facts, hammer the table.”
When it comes to rolling back regulation, the business lobby has decided it can only win by hammering the table. And the tragedy of it is that, for the moment at least, it seems to be working.