WMC, Corporate Conservatives pushing the lie of government regulation costs

A filing with the Wisconsin Public Service Commission this week requested the deregulation of public utilities. In its filing, the “Compete Coalition” cites the need for “free market” principles to reduce costs to consumers:

“Electricity consumers can only win if Wisconsin takes steps to reduce the adverse impact of protected monopolies and adopts laws and policies allowing competitive market forces to provide incentives for increased efficiencies, lowest available costs, and environmental improvements.”

The Compete Coalition is a front group for Washington DC lobbyists affiliated with three powerful firms – Wexler & Walker PPA, The Nickles Group, and Covington & Burling LLC. Each of these firms individually spend tens of millions of dollars annually on behalf of corporations looking to influence energy, health, and financial legislation. In addition, Compete Coalition members contribute millions more to this lobbying effort. The group’s request with the PSC is, in reality, self-serving, and holds no benefit for taxpayers or consumers. Further study reveals this to be the case with Wisconsin Manufacturers and Commerce (WMC) and conservative lawmakers’ calls for regulation reform.

In its 2011-2012 Legislative Policy Agenda, WMC lists “foster a competitive regulatory environment” as first priority. According to WMC, regulation easing and reform:

…will improve the business climate by
reducing the costs and barriers to business expansion and job creation, imposed by government.

On July 26, 2012, WMC praised Congressman Reid Ribble’s (R-WI 8th CD) “Midnight Rule Relief Act,” passed by the House as part of the “Red Tape Reduction and Small Business Jobs Creation Act” (HR 4078). Ribble’s Act would serve to:

…have an economic impact of $100 million or more annually with the exception for emergency health, safety, criminal, and national security purposes.

Just one day before, Ribble spoke in support of the bill; citing the high cost of regulation and impact on job creation. In the remarks, Ribble speaks from experience as a small businessman – suggesting that data to the contrary be ignored in favor of his anecdotal testimony.

Yesterday (August 23, 2012) Green Bay Rep. John Klenke (R-88th) issued a statement praising an activist Appeals Court opinion striking down EPA authority to strengthen coal emissions standards. According to Klenke’s statement:

These mandates are also costing thousands of jobs yet provide marginal  environmental benefit.”

Conservative think-tanks and “scholars” have published their own studies supporting policy advocates like WMC, and conservative legislators like Klenke.  The most highly regarded and cited study was commissioned by the Small Business Association Advocacy Office in 2010, “The Impact of Regulatory Costs on Small Firms” by Nicole V. Crain, Lafayette College. The study quantifies the regulatory costs to business at $1.75 trillion. For conservative legislators and corporate, free market advocates, that number is gospel. In reality – it misses the big picture, ignoring significant data. Just how does regulation impact jobs and the economy?

For the first time, in 2011, The Office of Management and Budget (OMB) issued a report to Congress on the costs of regulation and unfunded federal mandates. The key findings show that current regulation benefits far outweigh the costs to taxpayers:

1. The estimated annual benefits of major Federal regulations reviewed by OMB from October 1, 2000, to September 30, 2010, for which agencies estimated and monetized both benefits and costs, are in the aggregate between $132 billion and $655 billion, while the estimated annual costs are in the aggregate between $44 billion and $62 billion.

2. Some rules are estimated to produce far higher net benefits than others. Moreover, there is substantial variation across agencies in the total net benefits produced by rules. For example, the air pollution rules from the Environmental Protection Agency (EPA) produced 62 to 84 percent of the benefits and 46 to 53 percent of the costs.Most rules have net benefits, but several rules have net costs, typically as a result of statutory requirements.

To reiterate – the benefit to taxpayers of current regulations and mandates far outweighs the costs – particularly EPA regulations. Benefits measured include medical/health benefits as life expectancy and cost savings, environmental safety and protection, and actual costs of programs. These benefits include protections and benefits to business – not just consumers.

But government regulations are “job killers…” Are they? The Bureau of Labor Statistics (BLS) documents statistical reasons for business closings and layoffs. In the most recent release of Mass Layoff Statistics (MLS) (August 14, 2012), the numbers clearly show that government regulation has a very small impact on employment.

In 2011-2012, Government Regulation/Intervention  accounted for 8 of 3,100 Mass Layoff events (.2%). By contrast, 301 layoff events were caused by “insufficient demand” (10%).

In 2011-2012, Government Regulation accounted for 1,218 separations (individuals) out of a total of 563,447 separations (.2%). “Insufficient demand” caused 38,788 separations (7%).

A five-year study published in 2010 by the BLS shows the data is consistent. From 2006-2010 there were 3,815 Mass Layoff Events; 26 were a result of Government Regulation (0.7%). Of 851,767 separations, 7,843 were a result of regulation (0.09%). This data is based on surveys of the affected businesses.

The facts do not bear out the argument against necessary regulation; nor do they support deregulation as a cost/job saving mechanism. In fact, the very Crain/SBA study being cited by conservatives as proof of economy – killing regulatory practices appears to be a fraud.

Sidney Shapiro, Professor of Law at Wake Forest Law School, examined why the $1.75 trillion regulatory costs  cited in the Crain/SBA study (link above) far exceeded the $62 Billion cited by the OMB study (link above).

Crain’s calculations for the regulations not covered by OMB’s report appear to be based largely on a decidedly unusual data source for economists – public opinion polling, the results of which Crain and Crain massage into a massive, but unsupported estimate of the costs of “economic” regulations.

That’s right – they extrapolated data not from actual statistics, but opinion polling. The skewering of the study continues.

Crain and Crain have refused to make their underlying data or calculations public – apparently even withholding them from the Small Business Administration office that contracted for the study — it is difficult to know precisely how they arrived at the result that economic regulation has a cost of $1.2 trillion dollars, comprising more than 70 percent of the total costs in their report.

Secret data based on opinion polling. Not a good source for an economic “study.” It turns out even the source of the poll used disputes the validity of the data from the poll.

…their numbers are based on the results of public opinion polling, specifically a poll concerning the business climate of countries that has been collected in a World Bank report. The authors of the World Bank report warn that its results should not be used for exactly the type of extrapolations made by Crain and Crain, because their underlying data are too crude.

The self-serving attacks by the corporatic Robber Barons aimed at regulation have no valid place in a responsible debate on governance. The very studies they commission and cite are a fraud. The data are sifted and sorted to support a foregone conclusion, receive no peer review, and are used for one purpose – to influence gullible, ideologically driven legislators.

As Ronald Reagan once said, “…facts are stubborn things.” Things too ignored today by conservatives.

(BD note: WMC and Congressman Ribble were contacted for a response to this article by phone and email on August 22, 2012. They did not respond)

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2 thoughts on “WMC, Corporate Conservatives pushing the lie of government regulation costs

  1. Fine article. Suggest changing the title to something along the lines of “Corporatists want to save themselves a maximum of $62 billion at a cost to US citizens of at least $132 billion”

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