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January 2012
In the interest of ensuring public access to climate-related documents that may be hard to find, I am posting here the original, June 1998 study by technology analyst Mark P. Mills of the sprawling compliance burdens of EPA regulating carbon dioxide (CO2) as an air pollutant under the Clean Air Act (CAA).
The study, entitled A Stunning Regulatory Burden: EPA Designating CO2 As A Pollutant, estimated that applying CAA permitting requirements to CO2 would compel EPA to regulate over 1 million small- and mid-size businesses.
In September 2008, Mills and his daughter Portia updated the study for the Chamber of Commerce in a report entitled A Regulatory Burden: The Compliance Dimension of Regulating CO2 as a Pollutant.
Although superceded by the later report, the June 1998 report remains highly relevant to the climate policy debate.
A Stunning Regulatory Burden was a direct response to the April 1998 Memorandum by then EPA General Counsel Jonathan Z. Cannon asserting EPA’s authority under the Clean Air Act to regulate CO2 and other greenhouse gases (GHGs). Petitioners in Massachusetts v. EPA partly relied on the Cannon memorandum to press their claim that EPA had a statutory obligation to issue an endangerment finding and regulate GHG emissions from new motor vehicles under Sec. 202 of the Act.
Most importantly, the June 1998 Mills study reminds us that EPA had to know all along that a victory for petitioners in Massachusetts v. EPA would dramatically expand its regulatory reach beyond any plausible delegation of regulatory authority from Congress.
Yet during all the years when the case was being litigated (Sep. 2004 – April 2007), EPA never pointed out the regulatory ramifications of a victory for petitioners. Only long after losing case, in its Advanced Notice of Proposed Rulemaking (July 2008) and Tailoring Rule (October 2009), did EPA acknowledge that the endangerment finding tees up the very sorts of regulatory excesses Mills warned about a decade earlier.
The 5-4 majority in Mass v. EPA decided in favor of petitioners partly in the belief that an endangerment finding would not lead to ”extreme measures” (p. 531). But according to the Tailoring Rule, unless EPA “tailors” — that is, amends — the CAA, the endangerment finding will lead inexorably to a host of “absurd results” that conflict with and undermine congressional intent.
The question arises: Why didn’t EPA explain this when it really mattered? Why did EPA pull its punches in Mass. v. EPA? Why didn’t EPA make the case that the endangerment finding sought by petitioners would lead a regulatory cascade that Congress never intended and would not approve?
I think the answer is obvious. For EPA, losing the Massachusetts case meant gaining the power to regulate fuel economy for the auto industry and, more importantly, the power to determine climate and energy policy for the nation. Strong circumstantial evidence suggests that EPA wanted to be thrown into the greenhouse briar patch all along.
In Massachusetts vs. EPA, the Supreme Court sided with a group of Green States seeking to impose draconian energy rationing schemes on America. A few states have access to non-carbon energy sources (hydro-power or older nuclear power) and, thus, can reward their ideological majorities at lower cost. But most Americans will become poorer as energy prices sky rocket. With EPA moving aggressively toward mandating this new power, restricting energy use throughout the nation, conflict will surely erupt among the states of the union.
One of the most creative features of our Constitution was its concept of competitive federalism. States were to be the laboratories of democracy. The goal was not to impose national uniformity but to allow states to try different ideas – as long as those policies did not harm interstate voluntary exchanges.
The Massachusetts decision harmed that arrangement as did the 1857 Dred Scott decision, which forced northern states to enforce southern slavery rules. The concept of ensuring voluntary interstate commerce had little to do with the coercive institution of slavery but the recognition that slaves were “property” was stretched to force non-slave states into policies that they viewed as harmful and immoral. Non-slave states responded by enacting laws nullifying that decision, refusing to allocate funds for its implementation and eventually to the Civil War.
The impact of Massachusetts is different but perhaps as significant. Religious Malthusians are determined to enforce their Puritanical vision on America. They are most powerful in a handful of coastal states and seem very willing to use federal coercion to force their beliefs on middle America. States are already moving to enact laws and resolutions to oppose this push. And as the lights go out and plants are shuttered throughout America, we may find ourselves moving toward greater conflict here too. The prospect is worrisome.
The so-called financial “reform” bill backed by President Obama gives federal bureaucrats new powers over the Internet, while doing nothing about the corrupt government-backed mortgage giants that spawned the financial crisis.
For example, “the bill contains provisions that would put the Federal Trade Commission in position to start issuing rules on Internet transactions that would not only slow down business growth but also have no relevance at all to the financial collapse that prompted the bill.”
Meanwhile, the bill does nothing to reform the government-sponsored mortgage giants Fannie Mae and Freddie Mac, admits Obama’s Treasury Secretary, tax cheat Timothy Geithner, even though he admits that “Fannie and Freddie were a core part of what went wrong in our system.“ Worse, the Obama administration lifted the $400 billion limit on bailouts for Fannie and Freddie, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation. The Obama Administration is now expanding the bailouts of these mortgage giants so that they can reduce the payments of deadbeat mortgage borrowers. (At the direction of the Obama administration, Freddie Mac is now running up $30 billion in losses to bail out mortgage borrowers, some of whom have high incomes. Federal regulators sought to make Freddie Mac hide the resulting losses from the SEC and the public.)
The bill will also enrich the Wall Street firm of Goldman Sachs, recently accused of fraud, which bankrolls liberal lawmakers.
Government pressure on banks to make risky loans was a key reason for the mortgage meltdown and the financial crisis. If Obama has his way, that pressure will increase. The House earlier approved Obama’s proposal to create a politically-correct entity called the Consumer Financial Protection Agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.” It would do so without regard for banks’ financial safety and soundness, even though the Community Reinvestment Act was a key contributor to the financial crisis.
So, too, were the government-sponsored mortgage giants, Fannie Mae and Freddie Mac. They helped spawn the mortgage crisis by acting as loan toilets, buying up risky mortgages and thus creating an artificial market for junk. “From the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime.”
Why did they buy these risky loans? They put up with Clinton-era affordable-housing regulations that required them to buy up lots of risky loans, in order to curry favor on Capitol Hill and thus retain their annual $10 billion in tax and other special privileges (which they possessed owing to their status as “Government-Sponsored Enterprises” or GSEs). They paid their CEOs millions in the process, and engaged in massive accounting fraud–$6.3 billion at Fannie Mae alone–to increase the size of their managers’ bonuses. As GSEs, they were exempt from the capital requirements that apply to private banks, so they did not have enough reserves to cover their losses when their mortgages started defaulting.
Banking expert Peter J. Wallison, who prophetically warned against the risky practices of Fannie Mae and Freddie Mac for years, says that Obama’s proposals will lead to “bailouts forever” and give big, politically-connected banks that are “too big to fail” the ability to drive smaller rivals out of business at the expense of consumers and taxpayers. His colleague Alex Pollock notes that Obama has not lived up his administration’s claims that it would back reform of Fannie Mae and Freddie Mac.
Obama claims that it will not lead to more bailouts, but even congressional Democrats admit that it will. As Congressman Brad Sherman (D-Calif.) admitted, the “bill has unlimited executive bailout authority…The bill contains permanent, unlimited bailout authority.”
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Richard Morrison and Jeremy Lott team up with Marc Scribner, Iain Murray, Alex Nowrasteh and Ryan Radia to bring you Episode 91 of the LibertyWeek podcast. We respond to the President’s anti-anti-government speech, handicap the British elections, examine anger over immigration and chew over the threats to the Google-AdMob deal.
It isn’t greedy CEOs, global warming, or even a really bad, really expensive decade of hurricanes in the Gulf of Mexico that is the cause of high insurance rates in the state of Florida. The real reason is uncertainty. That insurance companies are now holding their collective breath, waiting to find out if Governor Crist will put down his scepter and pick up a pen to sign a bill allowing private insurers to raise rates–that is the reason insurance will remain more expensive than it needs to be.
On Friday state lawmakers passed reforms that would allow the struggling property insurance market to raise rates, allowing the companies to charge rates that get a little closer to reflecting actual risks. But even if Charlie does sign the bill (unlikely) it doesn’t change the fact that it would have been a hard, really hard-won victory for the private companies.
The bill, SB 2044, now goes to Gov. Charlie Crist, who can sign or veto the bill. He has said that he doesn’t support anything to allow rate increases but he hasn’t made a decision on the bill, according to his staff.
It’s another bill that Crist — who is running for the U.S. Senate — can “hit out of the park” with a veto, said Bill Newton, executive director of the Florida Consumer Action Network said, referring to the governor’s recent veto of a teachers merit-pay measure. “He probably needs money and insurance companies have a lot of money so you never know what he might do.”
Yes, location has something to do with it (living near the beach is more risky) and yes, the hurricanes of the past contribute as well, but really the higher costs can be linked to regulatory uncertainty. It takes such teeth pulling for insurers to earn the sanction of the governor in order to set rates that, of course, they are going to high-ball the estimate knowing full-well that any increase in rates will be just as hard to get, if not impossible. It is the job of an insurer to foresee the future and plan as best as he can for the worst-case scenario. When the regulators continual change the rules on a whim insurers have no choice but to assume the very worst and the very worst is the most expensive for everyone.
It will take a much bigger overhaul to improve the economy of Florida [and the rest of the country].
In 2000, Florida voters approved a constitutional amendment (the “Monorail Initiative“) authorizing the creation of a high-speed intercity rail network. However, as the economy slowed down shortly thereafter, expected tax revenue never materialized, and further analysis painted a less-than-rosy picture of the long-term prospects for high-speed inter-modal rail, nearly two-thirds of voters opted to repeal the amendment’s pro-rail language only a few years later.
Enter President Obama, a guy who seems to have a “thing for trains.” Not only did he stuff $8 billion worth of high-speed rail subsidies into his stimulus package, he selected Florida to be his political guinea pig. Of that $8 billion, $1.25 billion went to the 84-mile I-4 corridor running from Tampa to Orlando International Airport (yes, the Orlando terminus is actually 10 miles outside of Orlando city-proper). State transportation planners estimate that the line will take at least $3 billion to complete, but this estimate is based on incredibly optimistic assumptions.
While state officials seem to believe that the “market for intercity rail is projected to expand significantly,” the estimated costs are startling. Cato’s Randal O’Toole produced this excellent paper on the state of high-speed passenger rail in the United States, and calculated the cost per annual passenger mile (APM) for the Tampa-Orlando I-4 project to be at $5.40. To put this in perspective, he calculated the capital investment per APM for rural Midwest freeway lanes to be at $0.68. While it certainly costs more per APM to maintain the I-4 highway corridor, it is not eight times more expensive than rural Midwest freeway lanes.
But why then the passenger rail push? So we can mimic the wasteful rail systems of Europe and Asia that are losing more and more of their market shares to cars as people become wealthier? Well, yes; a “national greatness” transportation policy is apparently a key component of Obama’s imagined future. What this really means is that, decades from now, we’re likely going to be stuck with crumbling public transportation infrastructure that taxpayers and travelers never wanted in the first place.
As I’ve written before, there are plenty of cheaper, superior alternatives to government-subsidized passenger rail in the U.S.:
- Stop allowing Amtrak and regional government-provided passenger rail to engage in predatory pricing against intercity bus operators. The private intercity bus market has been growing steadily across America–and with dramatically improved service thanks to new competition from operators like Megabus–but government rail has been allowed to sell fares at a loss for as long as it’s been in existence. Congress, state legislatures, and regional transit boards should stop subsidizing these wasteful projects immediately.
- Amtrak’s more profitable lines could be easily privatized, and the rest (e.g., cross-country service) could be turned over to the states who could then decide whether or not to keep these inefficient, unpopular lines afloat.
- Regional and urban transit authorities could work to get highway financing right through the creation of turnpikes managed through public-private partnerships, preferably with a divestiture component whereby the private firm would eventually own some or all of the infrastructure and assume the associated risk.
- Once tolled, highways could introduce congestion pricing to alleviate gridlock.
- The air traffic control system should be privatized as rapidly as possible. Airline and airport stakeholders could then decide how to best upgrade the system in order to develop and accommodate the air travel of the future. If Canada can do it, why can’t America, Mr. Obama?
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