|Number 512||August 22, 2012|
This Week: Regulations and Jobs. And Life.
This week's issue of the Notes is all about something we call "regulations." Specifically it's about the claim that regulations have a negative effect on employment. What I'm not doing this week is discussing the fundamental problem with regulations. It's simple, really. 1. The point of regulations is to limit or eliminate some things we don't want. 2. The nature of the systems we are regulating have powerful incentives built into them that encourage the very things we are trying to eliminate. I guess I do address this major contradiction, if briefly, in the final paragraph of this week's issue.
The regulations we have are hardly effective, as illustrated by a couple of news items recently. In the first one, presidential hopeful Mitt Romney was speaking to a crowd in southeastern Ohio—a coal-mining region— earlier this week when he said "We've got 250 years left of coal. Why in the world wouldn't we use it?" The answer to that could take up a whole 'nother issue of the Notes, but consider that it was just a month earlier that the same Toledo, Ohio newspaper that reported Romney's question sort-of reported the answer: "An Ohio firm has pleaded guilty to criminal violations of the federal Clean Water Act involving coal-wastewater spills into a southeast Ohio stream." That hints at why we need regulations, and since the "more than $7 million" the corporation will pay in fines comes to only about one percent of its annual revenues of $600 million, it also tells you how much of an effect the penalty is bound to have.
By the way, it was back in April of this year that I wrote a short piece called "The Ryan Budget," in which I summarized some of the main points of the federal budget proposed by the new Republican vice-presidential nominee. It's brief and to-the-point. Go online and look at Nygaard Notes #505 for that.
OK, that's all for now. I have to finish up so I can take a day off and go to the Minnesota State Fair!
"Quote" of the Week: Two Quotes this week
"Quote" #1: "Little Mention of Dwindling Revenue."
The choice of Paul Ryan as a vice-presidential candidate is almost guaranteed to have everyone talking for the next few months about deficits and what to do about them. In that regard, here are the opening sentences of a short and succinct report called "The Untold Story of Deficits in Washington" that was released just about a month ago by the National Priorities Project.
"In 2000, the federal government had a balanced budget and projected surpluses for years to come. Fast forward a decade, and Washington runs steep budget deficits while news media report that federal spending is out of control. Americans now list federal debt and deficits as one of their top concerns for the nation. But deficits depend on two things: spending and revenue. In 2000, when the budget was balanced, federal tax revenue amounted to around 20 percent of the U.S. economy.
"Federal revenue as a share of the economy has dropped sharply since then, to its lowest point in more than half a century. Federal spending has increased in recent years, and this rise in spending has received ample coverage in the news media. Some lawmakers say the only solution to deficits is to make deep cuts in federal programs.
"Yet there has been little mention of dwindling revenue."
The report goes on to tell us about how much our revenue has dwindled. At seven short pages it takes about 4 minutes to read. Read it, then talk to your fellow voters about it. It's found HERE.
"Quote" #2 (For Minnesota Dwellers, especially): "Finding the Blueprint"
In this fall's elections residents of Minnesota will be voting on two constitutional amendments. One would forbid same-sex couples from marrying, and one would change the rules about who gets to vote. The so-called 'Marriage Amendment" has gotten far more attention in the state so far. In a piece called "The Marriage Amendment as Decoy and How to Fight the Real Danger," published this month on the website of the Twin Cities Daily Planet, strategic thinker Ricardo Levins Morales explains the difference between the two amendments and why it matters:
"The 'Voter ID' amendment—as a power play—is . . . the lynchpin of the Right Wing's current strategy to win control of the legislative, executive and judicial branches of government and impose their regressive agenda on society. The idea is to place enough obstacles in the way of voting—designed to disadvantage poor folks, people of color, students, the homeless and the disabled—to tip elections their way. Only a small percentage of these people would need to be disenfranchised in order for the plan to be effective. Depressed voter turnout—along with unlimited corporate cash—would secure Tea Party/Koch Brothers/Republican dominance in state legislatures thus giving them control over Congressional redistricting plans, ensuring their electoral advantage for the foreseeable future. Control over the White House and governor's offices would give them the power to appoint many judges and prosecutors. That would lessen the likelihood of courts blocking their decisions. With their authority to pass and revoke laws unilaterally guaranteed, they will at last be free to 'legally' impose their blueprint for society: targeting communities, public services and social, labor and environmental protections, and privatizing government functions. The LGBT community has a place of honor on the Right's hit list.
"The blueprint for eliminating fifty years of LGBT advances in all areas of life and law is to be found in their voter suppression strategy, not the Marriage Amendment."
Read the whole article HERE.
On the Think Progress website this past April appeared an article that began with these words: "Between 2007 and 2011, use of the phrase 'job-killing regulations' in U.S. newspapers increased by 17,550%." This prompted the article's author, Michael A. Livermore, to add, "Claims that regulations have a significant impact on American employment call for careful scrutiny." Ya think?
Just looking at some news articles over the past few months, here are some quotations on this subject from various people in positions of power and influence:
The Speaker of the U.S. House of Representatives, Ohio Republican John Boehner, said in a March 27 press release, "The House has already passed legislation to fight the President's job-killing regulatory agenda, and we will keep fighting the administration's continued assault on American energy."
The business-friendly newspaper Investors Business Daily, in a June 28th editorial, said that "Mitt Romney and Bain Capital oversaw the creation of tens of thousands of jobs by companies like Staples, Sports Authority and Domino's Pizza. President Obama would keep the highest corporate tax rate in the world, carry out a job-outsourcing energy policy, expand job-killing regulations and impose job-killing ObamaCare."
The Republican nominee for one of New Jersey's seats in the House of Representatives, Joseph M. Kyrillos, was the subject of a story in the June 6th Herald News of Passaic County, NJ. In a race "that will mirror the presidential campaign," Kyrillos "is promising to repeal the 2010 'Obamacare' health insurance law, cut taxes on 'job creators,' get rid of 'job-killing regulations' and balance the federal budget."
Massachusetts Republican Senator Scott Brown defended his recent vote against the Paycheck Fairness Act (aimed at deterring gender-based wage discrimination), by "saying it would impose job-killing regulations on businesses, at a time when they are already struggling to maintain jobs," according to a report in the Telegram and Gazette of Worcester, Massachusetts.
Virginia Republican Senate hopeful George Allen, reports the Richmond Times-Dispatch, has been "traveling the state bashing 'Obamacare,' what he calls the Obama administration's 'job-killing regulations' and the government's 'unelected, unaccountable bureaucrats."
In a slightly less hysterical opinion piece, commentator Nick Schulz of the conservative American Enterprise Institute wrote last year about "new EPA [Environmental Protection Agency] rules regulating greenhouse gases." Schulz opined that "The rules amount to a tax on business activity, one that will result in job losses or shipping jobs overseas to countries without a zealous EPA."
Various other candidates around the nation are running on similar themes, calling for "a moratorium on job-killing regulations" (Heather Wilson, New Mexico Republican), and calling on President Obama to "Stop the job-killing regulations that are strangling small businesses in this country..." (Sen. John Thune, South Dakota), and claiming that "We've seen an avalanche of job-killing regulations." (Repub. Lt. Gov. David Dewhurst, front-runner for a Texas Senate seat).
Since no political commentary originating in Minnesota would be complete without the words of Minnesota Republican Representative (and former presidential candidate) Michele Bachmann, here is an excerpt from a report in the Congressional newspaper "The Hill," from June 15, 2011:
"Rep. Michele Bachmann (R-Minn.), the newly minted White House contender, used Monday night's GOP debate to call for clipping the Environmental Protection Agency's (EPA) wings. Bachmann called for limiting government's scope by passing the 'mother of all repeal bills' to target 'job-killing regulations.' 'And I would begin with the EPA, because there is no other agency like the EPA. It should really be renamed the job-killing organization of America,' she said, according to a CNN transcript of the debate." Sigh...
A recently-released ad for Republican Presidential candidate Mitt Romney says that "Day One" of a Romney presidency would see him "begin repealing job-killing regulations that are costing the economy billions."
And, most recently, the LA Times reported on an address by new vice-presidential candidate Paul Ryan to a crowd in Colorado on August 14th, saying, "We will streamline the regulations, we will open up these resources so that we can create jobs here," [Ryan] said as the audience stomped its feet on the bleachers, creating a rumble." There's no doubt that, in this context, the word "streamline" is code for "weaken and/or eliminate."
In light of all this, it seems worthwhile to look at some actual studies about the actual effects of actual regulations on actual jobs. And to consider, at the same time, that jobs are not the only thing to think about when we talk about regulations.
In the previous article I underlined the extent to which the current public debate about the economy is permeated with the idea that something called "regulations" take jobs away from people. There are a couple of questions that should be asked—but rarely are asked—when this issue is discussed. The first question is: Do regulations really cost jobs? The second question is: Are jobs the only thing to think about when we talk about regulations? Let's take them in order.
Do Regulations Cost Jobs?
The answer to this seems to be Yes. And No. The Yes is misleading. The No is more accurate.
Back in February, Business Week magazine ran an article headlined "Regulations Create Jobs, Too," in which they noted how Romney (and, earlier, Newt Gingrich) frequently refer (or referred) to regulations as "job-killers." Then Business Week commented that "Romney and Gingrich aren't wrong. Government regulations do kill jobs, often by the thousands." "But," adds the magazine, "that's not the whole picture. Government employment figures also show that those same regulations usually wind up creating about as many jobs as they kill. 'We find there is no net impact,' says Richard Morgenstern, the Environmental Protection Agency's director of policy analysis in the Reagan and Clinton Administrations and now a researcher with Resources for the Future, a nonpartisan energy think tank in Washington. 'The job creation and the job destruction roughly cancel each other out.'"
So I wasn't being wishy-washy when I said the answer is "Yes and No"!
There's not an enormous amount of research on this, but what there is seems to support Morgenstern.
For instance, on April 12th of this year the Economic Policy Institute (EPI) released a 27-page report called "Regulation, Employment, and the Economy: Fears of Job Loss Are Overblown." In it they review numerous studies on the issue of regulation and employment. EPI notes that "The most common general studies are of environmental regulations [which] have consistently failed to find significant negative employment effects." And, when looking at "the effects of particular regulations on particular industries. . . A surprising number of studies actually show that regulations have a small positive net effect on employment. . ." In other words, regulations often give birth to more jobs than they kill.
While this may seem counter-intuitive, there are some fairly-obvious reasons why it's true. For one thing, as the study notes, "The direct cost of complying with regulations translates into increased employment. For example, an environmental regulation will mean more jobs for those engaged in pollution abatement. Further, it is possible that regulations may produce more labor-intensive production processes." For these, and other, reasons, then, "A true accounting of the direct employment effects of a regulation thus considers both jobs lost and jobs gained."
What do employers themselves say about the "job-killing" effects of regulation? On page 3 of its study EPI says, "This report also examines the most direct government data on the extent of job loss from regulations. Since 2007, the government has published information on how many 'extended mass job layoffs' employers attribute to government regulations/intervention. Over this period, only a tiny fraction of such job layoffs (about 0.3% of the 1.5 million of these layoffs [that occur] each year) were attributed by employers to government regulations/intervention. Similarly, a study that reviewed job layoffs due to environmental regulations in previous decades found that such regulations caused well below 1% of extended mass layoffs." [Emphasis added.]
So, really, regulations do not result in fewer jobs, and anyone who says they do is either ignorant or dishonest.
Beyond the Labor Market
Regulations do have effects. As we've seen, the effects on jobs are significant, with many jobs lost due to regulation, and many gained. But simply looking at the numbers of jobs doesn't tell the whole story. Regulations may have social impacts even when they do not have economic impacts, and sometimes the effects are both social and economic. In order to understand the meaning of this statement, one has to be willing to accept the idea that regulations have benefits, and not just costs.
In that light, I wish I could reproduce the little blue-and-red chart that appears on page 21 of a 2011 report from the federal Office of Management and Budget (OMB). It has an ungainly title—"2011 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities"—and the chart is a graphic display of the costs and benefits to the country of what OMB calls "major" rules. It clearly shows the degree to which the benefits of these major rules have outweighed the costs over the past ten years.
Using estimates (that are admittedly rough, given the difficulty in "quantifying or monetizing" a lot of the costs and benefits) OMB says that the costs of major regulations over the past 10 years add up to somewhere between $44 billion and $62 billion. That's a lot of money! However, those numbers take on a different meaning when we consider that the benefits of those same regulations add up to somewhere between $132 billion and $655 billion. That is, the benefits are worth four to ten times more than the costs.
Consider that the value of regulations can not all be measured in dollars. One of the effects of regulation is that it can change the types of jobs in the economy, if not the number of jobs. And this is often desirable. After all, most people would gladly trade a job spewing carcinogens into the air for a job scrubbing the carcinogens out of the smokestacks. Or, in the financial world, regulations may replace a lawyer whose job it is to figure out tax loopholes with an educator whose job it is to make sure people understand their mortgages.
Regulations do all sorts of uncountable things, such as preventing irreparable damage to the environment, improving public health, and maintaining human dignity. While these things can't really be quantified, they can be—and are—widely valued.
Environmental examples are easy to find. The EPI study notes, for instance, that "the British Petroleum Deepwater Horizon oil spill . . . occurred in a regulatory context that was lax to the extreme. According to the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, the lack of concern by government officials over the safety of deepwater oil drilling meant that, 'the only question had become not whether an accident would happen, but when.'"
There are all sorts of other environmental regulations that have non-monetary benefits: Personal watercraft in Minnesota, for example, cannot be buzzing around after sunset; hunting of animals at risk of going extinct is forbidden; federal and state governments regulate noise sources, such as construction equipment, trucks, and motorcycles. Many more examples could be cited.
In the realm of public health there are also many examples of the benefits of regulation. One of the most comprehensive pieces of regulatory law is the Clean Air Act. Passed in 1970 and amended in 1990, the law has saved tens of thousands of lives and had a dramatic impact on public health. In a major report released in March of 2011 called "The Benefits and Costs of the Clean Air Act from 1990 to 2020," the Environmental Protection Agency reported some remarkable numbers, saying "In 2010 alone, the reductions in fine particle and ozone pollution from the 1990 Clean Air Act amendments prevented more than: 160,000 cases of premature mortality; 130,000 heart attacks; 13 million lost work days, and; 1.7 million asthma attacks." Too bad this major, 238-page, peer-reviewed report was completely ignored in the U.S. media.
Some regulations have to do with things that are impossible to quantify, such as dignity. What is the dollar value, for example, of regulations requiring that bathrooms be accessible to people with disabilities? Or regulations that require translation services for non-English speakers at public facilities? State regulations say that in Minnesota nursing homes, "Residents needing help in eating must be promptly assisted upon receipt of the meals and the assistance must be unhurried and in a manner that maintains or enhances each resident's dignity and respect." What's the dollar value of that? Nothing, really, but if you've spent time in a nursing home you'll know the importance of dignity and respect.
Toxic and Costly Rhetoric
While there are no doubt many useless regulations on the books, and some that deserve to be gotten rid of, it does not follow that regulations are necessarily a drag on the economy, that they are invariably "onerous," nor that they are without exception "job-killers." And the constant assertion of—and resulting widespread belief in—the idea that regulations are always and everywhere a social evil is not simply a curious misunderstanding of the facts. Things get done (or remain undone) as a result of such misunderstandings.
An April 2012 report from the Institute for Policy Integrity entitled "The Regulatory Red Herring: The Role of Job Impact Analyses in Environmental Policy Debates" tells us that "Since the 112th Congress was gaveled into session in January 2011, numerous bills have been introduced to directly or indirectly weaken EPA's regulatory authority, in the name of job protection. In fact, there are so many pending bills that House Majority Leader Eric Cantor created a website, Jobs Legislation Tracker, to keep tabs on the multiple proposals aimed at 'remov[ing] onerous regulations that . . . impede private sector growth and job creation.' Adding more reviews, analyses, and audits to the rulemaking process in order to 'reduce regulatory burdens' is page one of the House Republican Plan for America's Job Creators. Nearly two dozen bills introduced or drafted directly target EPA regulations, seeking to delay implementation of rules or to strip EPA's regulatory authority entirely, with the impact on jobs as a leading justification. At least a few bills introduced would take the even more draconian measure of imposing across-the-board moratoria on rulemakings."
To consider the outlawing of any new regulations even as the evolution of humankind's capacity to endanger ourselves and the planet accelerates is the height of irresponsibility.
So, do regulations really cost jobs? No. Are jobs the only thing to think about when we talk about regulations? No. In the short term, we have a system that is based on the idea that the primary (if not the only) goal of the people we call "job creators" is to make a profit. As long as that's the case, then regulations will be absolutely needed to prevent that lust for profit from driving us off the capitalist cliff, environmentally, fiscally, and socially.
In the longer term, we need to imagine, and begin to build, a political economy that is based on something beyond profit. An economy that places people, and the planet on which we live, at the center. In a people-and-planet-oriented economy, regulation will only be necessary for the details, since the incentives for doing the right thing will be built-in. If we can build a system in which the people doing the jobs—you and me—become the "job creators," we'll all be working for the common good. That's the kind of economy that we won't want to regulate too much.