MAPI report on regulation is latest example of business-sponsored junk science
Republicans in Congress have been engaged in a two-year long assault on the government’s regulatory powers, attacking everything from the Clean Air Act and mercury pollution controls to the National Labor Relations Board’s enforcement powers. Their actions have been directed by business groups like the Chamber of Commerce, which publish seemingly-credible reports with big numbers about regulation’s supposed negative impact on the economy, relentlessly shifting blame away from themselves for the failure of wealthy corporations to create jobs in the United States instead of in China, Mexico and Bangladesh.
The latest installment in this wave of faux reports comes from the Manufacturers Alliance for Productivity and Innovation. Yesterday, they released a commissioned report on the costs of regulation that was so slanted and sloppy it seems like a parody. The authors throw out a bunch of big numbers with no supporting data and then—“extrapolating”—pretend that they can reasonably estimate how much regulations have reduced manufacturing activity. But the fact, of course, is that manufacturing employment has risen over the last two years—for the first time in a decade—just when the supposed cumulative impact of regulations should have been taking its biggest toll.
The authors acknowledge that they made no attempt to estimate the benefits of regulation, either to the public in general, workers, consumers, or the industries themselves. Why not? They simply have no interest in a balanced discussion of regulation.
The report’s entire methodology is faulty, starting with the survey of 25 CEOs (admittedly not screened for bias) who gave their personal estimate of the effect of regulation on their company’s profits, which the report then extrapolates to all manufacturing firms. What science is there in the opinions of 25 executives among thousands? Who are they? What are their firms’ profits, and what interest do they have in disparaging government regulation?
Even the report’s addition of many years of Office of Management and Budget cost estimates to come up with an annual total cost is faulty, since the costs at the time a rule was adopted more than a decade ago are not necessarily imposed today. For example, the cost of initially training supervisors and employees in respirator use to protect them from hazardous dust or workplace toxins was initially estimated at more than $100 million, but the cost is far smaller now than when first imposed because the rule is now well understood, the number of workers exposed to the hazards has been greatly reduced, and the original estimates were exaggerated even when made 14 years ago. Similarly, the current cost of rules on scaffolding, fall protection, lockout/tagout, electrical and wiring methods, ladders, and machine guarding is a fraction of their initial cost, when replacement equipment had to be purchased, work procedures had to be changed, and extensive training had to be conducted.
Not satisfied with distorting and inflating the OMB cost estimates, the report then increases them arbitrarily to take into account supposed “super-additive” interaction effects. This very inventive and arbitrary calculation manages to more than double the initial, already exaggerated figure. This is pure junk science.
The report’s choice of Labor Department rules that supposedly add up to $35.5 billion in annual costs is instructive. Some are, in reality, virtually cost-free, like the WARN Act’s plant closing notification requirements from 1988. Another, the Bush administration’s 2004 overtime rule, was designed to exempt new groups of employees from coverage and to clarify exemptions and reduce litigation costs; it was adopted for the benefit of employers and was strongly supported by the National Association of Manufacturers and scores of other business associations. Other rules on their list, such as the ergonomics rule and a pair of NLRB rules, were blocked by Congress or by the courts and imposed zero cost because they never took effect.
The weirdest choice in the report’s list of burdensome regulations is almost certainly the Emergency Unemployment Compensation program enacted during the Great Recession, a program that has paid tens of billions of dollars in weekly benefits to laid-off workers, without requiring a penny of cost-sharing by employers. By putting money in the hands of the unemployed, who spent it on services and products of U.S. businesses, EUC increased business activity; the impact on manufacturers was unmistakably positive.
All in all, the report is a confounding mess of unsubstantiated cost estimates, devoid of real analysis or balance, and useless as a guide to public policy.