Environmental Economics

The Institute for Policy Integrity's Statement on Trump Executive Order on Regulation

From the inbox:

In response to President Trump’s executive order on reducing regulation, Richard Revesz, director of the Institute for Policy Integrity at NYU School of Law, has released the following statement:
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This “one in, two out” policy is a deeply flawed and irrational approach to regulation. Judging a regulation based solely on its costs, without considering benefits, is illogical. Yet the order makes no mention of accounting for a regulation’s benefits, which are often carefully quantified by the issuing agency. The executive order’s separate requirement that all regulations’ costs in a given fiscal year must sum to zero, regardless of their benefits, is similarly arbitrary and dangerous.

The wording of this executive order is likely to cause confusion and chaos. It is unclear how the order applies to new rules that federal agencies are legally required to issue, or how it will treat deregulatory actions. It is also unclear how the order asks agencies to weigh costs; some new regulations, such as energy efficiency rules, are projected to generate cost savings for consumers.

Since the Reagan administration, Presidents of both political parties have worked to improve the quality of federal regulatory decisionmaking. In particular, the Office of Information and Regulatory Affairs (OIRA) has promoted sophisticated analytical methods to ensure that regulations are properly vetted and that they will move forward only if their benefits to society justify their compliance costs.

Regulations help improve the quality of life for Americans: they ensure food safety, protect clean water, and make airplanes and cars safer. Making regulations more efficient and less costly is a worthy goal, but this executive order will not help achieve it. Instead, this order will likely hurt the American public and hinder the functioning of the government.

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The Institute for Policy Integrity at New York University School of Law is a non-partisan think tank dedicated to improving the quality of government decisionmaking. The institute produces original scholarly research in the fields of economics, law, and regulatory policy; and advocates for reform before courts, legislatures, and executive agencies.

The idea is that the benefits of regulations are zero

From the "text of executive order on eliminating rules":

(b) For fiscal year 2017, which is in progress, the heads of all agencies are directed that the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget (Director).

(c) In furtherance of the requirement of subsection (a) of this section, any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations. Any agency eliminating existing costs associated with prior regulations under this subsection shall do so in accordance with the Administrative Procedure Act and other applicable law.

via www.marketwatch.com

So let's say you want to impose a job-killing regulation that has benefits equal to 100 and costs equal to 20. The net benefits are 80 and so you go looking for two or more existing job-killing regulations to get rid of. Their costs must be greater than or equal to 20. The magnitude of their benefits do not matter. 

There is nothing in economics that leads to the conclusion that the benefits of job-killing regulations are zero. Regulations have benefits and costs. If the benefits of the regulation is less then the costs then that regulation should not be implemented. If the benefits are greater than the costs then that regulation should be implemented because it would improve the overall welfare of society.

But with this executive order, in order to improve social welfare we need to find at least two regulations (that may also have improved social welfare) to eliminate. 

Benefit-cost analysis should be used to determine whether regulations come or go

Back in November Cass Sustein considered the 2 for 1 regulation executive order (emphasis added):

Donald Trump promises to impose, soon after his inauguration, a new requirement on federal agencies: If they want to issue a new regulation, they have to rescind two regulations that are now on the books. The idea of “one in, two out” has rhetorical appeal, but it’s going to be extremely hard to pull off.

In the abstract, of course, it sounds like a gimmick, and it’s a pretty dumb idea. As presidents from Ronald Reagan to Barack Obama have recognized, the real question is whether regulations, whether new or old, are justified. That requires a careful analysis of their costs and their benefits. ...

The conclusion? In theory, “one in, two out” is silly, and in practice it’s likely to be a bit of a mess. It’s hardly the most sensible approach to regulatory reform. But with a little flexibility, and a lot of determination, executive branch officials might be able to make it work.

Read the guts for yourself, but I can't find any justification for the last line. 

 

The arbitrary executive orders continue

I like the approach that is being taken to quote the president verbatim:

President Donald Trump signed an executive order Monday morning requiring that for every new federal regulation implemented, two must be rescinded.

“This will be the biggest such act that our country has ever seen,” Trump declared moments before signing it inside the Oval Office. “There will be regulation, there will be control, but it will be a normalized control where you can open your business and expand your business very easily. And that's what our country has been all about.”

The executive order signing, which fills a campaign pledge, comes after the president held a listening session with small-business leaders.

“If you have a regulation you want, number one, we’re not gonna approve it because it’s already been approved probably in 17 different forms,” Trump said. “But if we do, the only way you have a chance is we have to knock out two regulations for every new regulation. So if there’s a new regulation, they have to knock out two.”

The White House has yet to release text of the executive order, but the president added that “it goes far beyond that.”

“We’re cutting regulations massively for small business — and for large business,” he said. “But they're different. But for small business, and that’s what this is about today.”

via www.politico.com

The quotes illustrate just how little thought has been devoted to this. 

Daily Demand and Supply: Who will pay for the wall if a 20% import tax is imposed?

On Wednesday, President Trump either did or didn't suggest that Mexico will pay for the construction of a border wall between the U.S. and Mexico through a 20% import tax on all goods imported from Mexico.   Here's how the NYTimes reports it:

President Trump’s decision to build a wall along the length of the United States’ southern border with Mexico erupted into a diplomatic standoff on Thursday, leading to the cancellation of a White House visit by Mexico’s president and sharply rising tensions over who would pay for the wall.

With the conflict escalating, Mr. Trump appeared to embrace a proposal by House Republicans that would impose a 20 percent tax on all imported goods. The White House press secretary, Sean Spicer, told reporters that the proceeds would be used to pay for the border wall, estimated to cost as much as $20 billion.

The White House has backed off the claims a little bit, so it's not clear whether the import tax is a solution, a proposal, a suggestion, a trial balloon or something else...but, regardless of the politics, it can still be used as a teaching point:  Who would really pay for the wall if a 20% tax were levied on all imports from Mexico?

The simple logic of the import tax goes something like this:  Every time Mexico wants to sell something in the United States, Mexico will have to pay 20% of the proceeds to the U.S. government.  The revenues collected from Mexico will be used to pay for the construction of the wall.    Therefore, Mexico is paying for the wall.

But does that logic hold up to economic analysis?  Let's take a look at a series of pictures.

My advice to the EPA Administrator? Use science.

I am an appointed member of the EPA Science Advisory Board Environmental Economics Advisory Committee. As a committee, our charge is to provide "independent advice to the EPA Administrator, through the chartered SAB, regarding the science and research to assess public benefits and costs of EPA’s environmental programs."

My independent advice to the EPA Administrator?

Use science.

That's all.

 

False alarm? "No plan to take down climate webpages"

I got all worked up for nothing?

An Environmental Protection Agency (EPA) spokesman said the Trump administration is not currently planning to take down website content regarding climate change.

Doug Ericksen, spokesman for the so-called beachhead team working to transition the agency to the Trump administration, said officials are reviewing all of the “editorial” parts of the EPA’s website for possible changes.

But he pushed back against a Tuesday Reuters report that said the beachhead team had already instructed career officials at the EPA to remove climate change-related content.

“We’re looking at scrubbing it up a bit, putting a little freshener on it, and getting it back up to the public,” said Ericksen, who is currently a Republican state lawmaker in Washington.

“We’re taking a look at everything on there,” he said.

via thehill.com

I doubt it. An overreaction is probably the correct response when confronted with alternative facts and anti-science. It will be interesting to see what they mean by "editorial," "scrubbing" and "freshening". 

An alternative strategy to climate research denial is to cover your ears and scream "LALALALALALA, I CAN'T HEAR YOU!"

At least the vetting isn't 'extreme':

Scientists at the Environmental Protection Agency who want to publish or present their scientific findings likely will need to have their work reviewed on a "case by case basis" before it can be disseminated, according to a spokesman for the agency's transition team.

In an interview Tuesday evening with NPR, Doug Ericksen, the head of communications for the Trump administration's EPA transition team, said that during the transition period, he expects scientists will undergo an unspecified internal vetting process before sharing their work outside the agency.

"We'll take a look at what's happening so that the voice coming from the EPA is one that's going to reflect the new administration," Ericksen told NPR.

Ericksen did not say whether such a review process would become a permanent feature of Trump's EPA. "We're on Day 2 here. ... You've got to give us a few days to get our feet underneath us."

Any review would directly contradict the agency's current scientific integrity policy, which was published in 2012. It prohibits "all EPA employees, including scientists, managers and other Agency leadership from suppressing, altering, or otherwise impeding the timely release of scientific findings or conclusions."

"Find climate & EPA data at UPenn's Data Refuge Project"

Find #climate & EPA data at UPenn's Data Refuge Project https://t.co/gLE6XlS1J1, @internetarchive & @UofT.

— Kate Cell (@ucsk8) January 25, 2017

Remove climate + sustainability

a former #EPA colleague (he's there, I'm not) just said his office was told to remove ALL mentions of climate + sustainability from website

— Kaitlin StackWhitney (@KStackWhitney) January 25, 2017