Amidst the congressional back and forth to extend payroll tax cuts, the Republican-controlled House of Representatives presented its alternative last week to the failed Senate bills. The primary source of contention is how to pay for the extensions. The GOP led the charge demanding a path to pay for what are, essentially, middle class tax cuts yet have made no such demand to offset the cost of tax breaks for the highest earners. Democrats’ plans placed a surcharge on incomes over a million dollars (now removed through a compromised Senate bill) while the House paid for theirs through entitlement cuts, federal employee wage freezes and cutting 10% of the federal workforce. The caveat to the Republicans’ bill is the inclusion of two unrelated provisions. The first pushes Keystone Pipeline construction forward while the second limits the EPA’s recent industrial broiler standards and bans the agency from implementing them in the future.
The second provision is one in a long line of EPA and environmental regulation limiting bills the House has offered in recent months as job creation legislation. The Forgotten 15, a group of bills which seek to eliminate regulations congressional Republicans contend are hindering job growth, is a well publicized example of this trend.
What drives this trend?
The broadest reason is an ideological one, the pursuit of small government, one which often gains prominence in difficult economic times. Polls, like a recent Gallup survey place regulations at the forefront of small business owners’ hiring concerns, provide support for anti-regulation proponents. Industry’s dire predictions of the detrimental economic impacts of government regulation, which contend will lead to severe job losses, restrict their ability to function, increase consumer costs and will shatter an already fragile recovery, provide further support for deregulation.
How accurate are these perceptions and claims?
In response to the Clean Air Act’s emissions standards, Lee Iaccoca issued a press statement predicting;
“[The provisions] could prevent continued production of automobiles after January 1, 1975. Even if they do not stop production, they could lead to huge increases in the price of cars. They could have a tremendous impact on all of American industry and could do irreparable damage to the American economy.”
Ernie Starkman, an executive with General Motors stated the regulations requiring catalytic converters on 1975 vehicles would create an “unreasonable risk of business catastrophe” and may well lead to a “complete stoppage of the entire production.”
Through the benefit of 36 years of hindsight and observation, it is evident that the auto-industry did not suffer the irreparable damage predicted. It continued to produce vehicles for both domestic and international markets and, according to the EPA administrator Lisa Jackson’s article in The Hill, the catalytic converter requirement resulted in a new global market where American manufactures enjoyed a top position. Additionally, the compliance costs turned out to be less than half of what industry analysts estimated.
During the debates surrounding the new 1990 Clean Air Act amendments designed to eliminate leaded gasoline and curb sulfur dioxides and nitrogen dioxides emissions, the principle sources of acid rain, industry lobbyists warned lawmakers this would cause a “quiet death for businesses across the country.” due to the additional costs of meeting the standards. In reality, since their implementation, the economy grew by 64% and another global market for smokestack scrubbers was created, again with American manufactures situated on the top tier. In order to meet the EPA’s standards, two coal power plants in Ohio required retrofits resulting in the hiring of plumbers, painters and electricians. One of those reported the creation of 1000 temporary jobs and 40 permanent positions. Two plants in New Jersey hired 1,600 people for a 2 year period and created 24 permanent jobs.
When the Clinton Administration proposed new Corporate Average Fuel Economy (CAFE) fuel economy standards the auto industry claimed between 150,000 and 300,000 jobs would be lost. A Los Angeles Times investigation found these numbers were based on plant shutdowns instead of industry redesigning the vehicles to meet the standards. Industry cost analysis for the implementation of California’s Low Emission Vehicle standards resulted in estimates 10 times higher than the actual compliance costs. More recently, the same industry analysts estimated California’s new global warming standards will increase the average price of a car by $3,000. Non-industry analysts and a Vermont court deciding a case involving similar standards found the industry claims were “flawed” with estimated costs 3 times higher than independent assessment results.
Industry predicted use of the Act to phase out ozone depleting compounds chlorofluorocarbon (CFC’s), frequently used as refrigerants, would result in “severe economic and social disruption.” . However, according to Jackson’s article, the resulting new technologies improved productivity, cut costs by 30% and, due to the technological improvements, overseas markets opened up to American manufacturers.
Now, with the eminent implementation of new, climate change related regulation the EPA and the Obama administration are under attack from industry leaders and Republicans in Congress. Fred Upton (R- Michigan) chairman of the House Energy and Commerce Committee stated the new rules will impose a “restrictive regulatory stranglehold on industry.” and the EPA’s new public health-based, ground-level ozone standards alone would result in the loss of 7 million jobs and cost industry $1 trillion per year. National Association of Manufacturers (NAM) President and CEO Jay Timmons stated the new EPA regulation are;
“…only adding economic turmoil to the nation’s struggling job market. Such aggressive and unattainable standards only hurt manufacturers’ ability to compete on a level playing field in the global marketplace.” [and will] “…impose these unrealistic standards that build uncertainty for job creators.”
Pursuant of the 2007 Supreme Court case, Massachusetts v. Environmental Protection Agency in which 3 cities and 13 states and US territories sued the EPA to regulate greenhouse gas emissions, the Agency has set about fulfilling this obligation. This is a point which is missing from the much of the criticism of the Obama administration and the EPA. The opposition appears to have forgotten the lawsuit designed to require the Agency, then under the George W. Bush administration, to create greenhouse gas emission standards. According to Lisa Jackson’s article in The Hill, the EPA has put forth commonsense, peer-reviewed, science-based regulations. To curb the burden on small businesses and nonprofits, the Agency has exempted many from some of these new rules.
Given the spurious predictions of the past, what is the impetus to bestow any credibility upon today’s pernicious warnings? And given the attention the congressional Republicans have placed on deregulation as a means of job creation one must ask, on what is this policy focus based? On the predictions discussed previously? Judging from their comments, it appears this is the case.
Do environmental regulations, specifically do Clean Air Act requirements, kill jobs? The simple answer is…”No”.
Part 2 – Are environmental regulations job killers? And the Clean Air Act… more than jobs.