cass sunstein

CEI Podcast for July 7, 2011: How Much Does Regulation Cost?

by Ryan Young on July 7, 2011

in Podcast, Regulation

Have a listen here.

One federal government study says federal regulations cost $1.75 trillion. Another says it’s $62 billion. That’s a difference of almost a factor of 30. Vice President for Policy Wayne Crews compares the two, and talks about the hazards of calculating regulatory costs and benefits. As it turns out, $1.75 trillion might be an understatement.

CEI Podcast for May 26, 2011: President Obama Proposes Deregulation

by Ryan Young on May 26, 2011

in Podcast, Regulation

Have a listen here.

Cass Sunstein, President Obama’s regulatory czar, announced today that the administration intends to repeal regulations from 30 different agencies. CEI Vice President for Strategy Iain Murray thinks this is a good step, though a small one. He estimates today’s proposal would save about $1.5 billion, which is one-tenth of one percent of the $1.75 trillion total burden of federal regulation.

Sunstein and Obama, Deregulators?

by Ryan Young on May 26, 2011

in Deregulate to Stimulate, Economy, Regulation

Winston Churchill observed that “Americans can always be counted on to do the right thing…after they have exhausted all other possibilities.” We may finally be seeing a small step in that direction. The Bush and Obama administrations have tried fiscal stimulus to speed up economic recovery. It didn’t work. The Federal Reserve tried increasing the money supply, which they called “quantitative easing” because it sounds much more pleasant than “printing money.” That didn’t work. Then they tried it again. That didn’t work, either. What to do?

We at CEI have been pushing a deregulatory stimulus for years. Now that all other possibilities are exhausted, the administration appears to be taking small steps in that direction. Regular readers are aware that federal regulation costs about $1.75 trillion, and that the Code of Federal Regulations is over 157,000 pages long. Both of those numbers grow every year, as over 3,500 new rules hit the books annually. This morning, OIRA chief Cass Sunstein is announcing a 30-point plan that would “save American companies billions of dollars in unnecessary costs,” according to The Washington Post.

This new initiative stems from Obama’s Executive Order from earlier this year that ordered agencies to comb their books and recommend obsolete or harmful rules for elimination. Agencies hardly have an incentive to reduce their size or scope, which is why an independent commission would be a better vehicle for getting rid of old rules. The rules Sunstein is proposing to eliminate are very modest. But it’s better than nothing.

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Will Cass Sunstein stick up for small business, or bless EPA’s legal hair splitting?

by Marlo Lewis on January 21, 2010 · 3 comments

in Energy, Global Warming

Today, Reps. Lamar Smith (R-TX), Sam Graves (R-MO), Trent Franks (R-AZ), and Lynn Westmoreland (R-GA) sent a letter to Office of Information and Regulatory Affairs (OIRA) Administrator Cass Sunstein sharply critical of EPA’s December 7, 2009 finding that “air pollution” from carbon dioxide (CO2) and other greenhouse gases (GHGs) endangers public health and welfare. 

“On the basis of EPA’s endangerment finding,” the legislators warn, “virtually every economic activity undertaken in America stands to come under the thumb of federal regulation.” They explain: “These actions begin with EPA’s and the Department of Transportation’s proposed new light vehicle emission standards, continue through greenhouse gas (GHG) preconstruction and operating permit requirements for stationary sources and extend as far as the mind can contemplate.” They continue: “In these ways, EPA threatens to burden our economy with vastly expanded regulation not contemplated by Congress when it passed the Clean Air Act.” 

Yes, indeed. As I discuss here and here, EPA’s endangerment finding starts a regulatory cascade that could (1) subject tens of thousands of previously unregulated small businesses to Clean Air Act (CAA) Prevention of Significant Deterioration (PSD) pre-construction permitting regulations, (2) subject millions of small businesses to CAA Title V operating permit requirements, and (3) compel EPA to establish national ambient air quality standards (NAAQS) that would effectively require the United States to de-industrialize. The Supreme Court pushed EPA to make the endangerment finding in its April 2007 Massachusetts v. EPA decision.

The four Members of Congress ask OIRA chief Sunstein to make EPA convene a Small Business Advocacy Review Panel to develop and evaluate regulatory alternatives to mimimize the endangerment finding’s impacts on small business. Until and unless EPA does this, the lawmakers say, the endangerment finding should be “withdrawn.”

The representatives acknowledge that EPA’s proposed October 2009 Tailoring Rule  “seeks to delay for a handful of years the imposition of requirements on sources emitting less than 25,000 tons of carbon dioxide per year.” However, this fix is by design temporary, and it is legally dubious, since EPA would be flouting clear statutory language. Under the CAA, entities must obtain a PSD permit in order to construct or modify a facility with a potential to emit 250 tons per year of a CAA-regulated air pollutant, and a Title V permit in order to operate a facility with a potential to emit 100 tons per year.

EPA estimates that if these provisions are enforced as written, the number of entities applying for PSD permits would jump from 280 to 41,000 per year, and the number applying for Title V permits would jump from 14,700 to 6.1 million per year. The flood of permit applications would overwhelm agency administrative resources, the permitting programs would implode under their own weight, construction activity would grind to a halt, and millions of firms would find themselves in legal limbo — all in the midst of the worst economic downturn since the Great Depression.  

It will be interesting to see how Sunstein responds to the lawmakers’ letter. Will he stick up for small business and honor the spirit of the Regulatory Flexibility Act (RFA), or will he bless EPA’s evasive legal semantics? 

Under the RFA, agencies are to convene a small business review panel unless the agency head certifies that the proposed regulation will not have a “significant impact upon a substantial number of small entities.”  In a recent year, each PSD permit on average cost $125,120 and 866 burden hours for sources to obtain (just the paperwork and administrative costs, exclusive of any associated technology investments). The going rate for Title V administrative fees is $43.75 per ton, implying a virtual carbon tax (exclusive of administrative expenses) of $4,375 for a small business emitting 100 tons of CO2 per year. The Tailoring Rule estimates (p. 55338) that if small sources of CO2 must comply with the law as written, rather than as doctored by EPA, they will incur an expense of more than $38 billion just for Title V compliance over the next six years.  A significant economic impact by any standard.

Note also that the $38 billion figure refers just to the direct expenses small firms would incur to comply with Title V. It does not include the reduced output and job losses due to the diversion of resources to regulatory compliance. Nor does it include the loss of investment in firms that, due to their sheer number, face years of delay and uncertainty in obtaining permits to build or operate their facilities.

The endangerment finding is what tees up all these costs and consequences, so you’d think it would be a no brainer that it has ”significant impact upon a substantial number of small entities.”

Well, EPA says otherwise. In the Endangerment Finding (p. 66545), Administrator Lisa Jackson certifies that EPA’s findings “do not in-and-of-themselves” impose new requirements on small entities. Hence, there’s no need for an RFA review panel. Similarly, EPA’s GHG motor vehicle standards proposal (p. 49628) certifies that it would not have a significant impact on a substantial number of small entities, since the standards would apply to automakers, very few of which are small businesses.

By making new cars more costly, however, the rule could adversely affect thousands of auto dealers, most of whom are small businesses. EPA says not a word about that potential impact. More importantly, the GHG motor vehicle standards are what directly trigger the PSD and Title V requirements.

EPA says the Tailoring Rule (p. 55349) won’t have a significant impact on a substantial number of small entities, because it “will relieve the regulatory burden associated the PSD and Title V operating programs for new and modified major sources that emit GHGs, including small businesses.” So EPA acknowledges there is a burden to be relieved — a PSD/Title V burden. Where does that come from?  The endangerment finding and the GHG motor vehicle emissions rule. Yet EPA claims those actions have no impact of any consequence for small business.   

Isn’t legal hair-splitting grand? Of course, the findings “in-and-0f-themselves” regulate nothing — but they compel the adoption of GHG motor vehicle standards under CAA Sec. 202, which then automatically trigger pre-construction permitting requirements under Secs. 160-160 and operating permit requirements under Secs. 501-507.

The endangerment finding also sets the stage for regulation of GHG emissions from motor fuels under CAA Sec. 211, non-road engines and vehicles under Sec. 231, the establishment of GHG new source performance standards (NSPS) for scores of industrial source categories under Sec. 111, and the establishment of economy-wide NAAQS regulation of GHGs under Secs. 107-110.  ”Yes, Your Honor, I pulled the trigger, but I am innocent; the bullet killed the man!”

And if litigation and the logic of the CAA compel EPA to establish NAAQS for CO2 and other GHGs, which could easily qualify as the most expensive rulemaking in history, you can bet your bottom dollar what EPA will say. There’s no significant impact on a substantial number of small businesses, because NAAQS “in-and-of-themselves” don’t regulate anybody. The actual regulation of businesses large and small will be done by the states, through their State Implementation Plans (SIPs). “Once the rockets are up who cares where they come down, that’s not my department,” says Wernher Von Braun.

Small business clearly needs an advocate in the room and at the table whenever EPA deliberates about any regulatory action pertaining to greenhouse gases and CO2. Congress enacted the RFA to protect small business from regulatory excess. Right now it’s not working. Cass Sunstein has an opportunity to ensure that small businesses have a say in regulatory decisions affecting their very survival. He should seize it.

“ObamaCare’s Crippling Deficits”

by Hans Bader on September 9, 2009

in Healthcare, Politics as Usual, Stimulus to Nowhere

Martin Feldstein, an economic advisor to Obama, criticized “ObamaCare’s Crippling Deficits” in Monday’s Wall Street Journal, noting that “the higher taxes, debt payments and interest rates needed to pay for health reform mean lower living standards.”

Obama probably chose Feldstein as an adviser because of Feldstein’s support for big stimulus packages during recessions. But selecting him was politically unwise, since Feldstein has a history of candidly criticizing Presidents for allowing deficit spending to continue after recessions end (as an economic adviser to President Reagan, he warned against Reagan’s budget deficits), and Obama’s proposed budgets would result in massive, unprecedented budget deficits long after the current recession is over — despite major tax increases. The Congressional Budget Office estimates that Obama’s plans would produce an eye-popping $9.3 trillion in deficits, double the baseline left by the Bush Administration.

Earlier, Feldstein warned that the cap-and-trade energy-rationing scheme backed by the “Obama Administration and Congressional Democrats” would “have a trivially small effect on global warming while imposing substantial costs on all American households. And to get political support in key states, the legislation would abandon the auctioning of permits in favor of giving permits to selected corporations.” He notes that “the Congressional Budget Office recently estimated that the resulting increases in consumer prices” from capping the amount of carbon dioxide energy users can emit “would raise the cost of living of a typical household by $1,600 a year,” a figure that “would rise significantly” from year to year.

Unlike Feldstein, who sees Obama’s stimulus package as poorly-designed but nonetheless providing a modest short-term boost to the economy, I think that the stimulus package destroyed jobs even in the short run. The Congressional Budget Office predicted that the stimulus package would shrink the economy “in the long run,” by burdening the economy with increased national debt, but increase the economy in the short run, i.e., by the next election. That’s why Congress and Obama passed it: short-run political gain.

ObamaCare is full of special-interest giveaways and constitutionally-dubious provisions like racial preferences and set-asides, which has led to ObamaCare being criticized by the U.S. Commission on Civil Rights.

The Obama Administration is also full of left-wing ideologues who can’t be counted on to competently manage something as vast as a national health-care system. (Recently, Obama’s Green Jobs Czar, Van Jones, resigned after revelations that he signed a petition alleging that George Bush may have been behind the 9/11 terrorist attacks. Jones was hired despite the fact that Obama was well aware that he had been a “self-avowed communist,” and had defended Al Qaeda and repeatedly engaged in race-baiting). And it has mismanaged things like the $60 billion in auto bailouts, which ripped off taxpayers and non-union retirees to enrich the UAW union, and the cash-for-clunkers program, which cost far more than predicted and ran out of money after just a few days.

Feldstein earlier called into question Obama’s claims about how ObamaCare will supposedly let you keep your health coverage while cutting costs. “ObamaCare is all about rationing,” says Feldstein. Feldstein also noted that Obama’s health-care plan would harm people with insurance, and massively raise taxes.

Feldstein, a Harvard professor, warns that “For the 85 percent of Americans who already have health insurance, the Obama health plan is bad news. It means higher taxes, less health care and no protection if they lose their current insurance because of unemployment or early retirement.” Obama’s plan would “cost more than $1 trillion,” and raise the top federal “income-tax rate from 35 percent today to more than 45 percent,” he notes.

Fact-checkers say Obama is lying about health-care. CNN Money says that ObamaCare will take away 5 freedoms.

ObamaCare is likely to be a costly boondoggle like his stimulus package, which funds waste like a $15 million border-crossing facility for a deserted area on the Canadian border that only 3 people cross per day.

I’ve criticized Obama Administration officials like Van Jones because they are wacky, not because they are liberal. Elections have consequences, and President Obama, being duly elected President, is entitled to pick liberal nominees to carry out his policies. Some conservatives seem to have forgotten this, in attacking even well-qualified liberal nominees to head executive branch agencies, like Obama’s nomination of leading liberal law professor Cass Sunstein to head the OIRA and be the Administration’s “regulatory czar.” There is no point in defeating his nomination; any replacement for Sunstein will be just as liberal, just less competent. In that sense, it would be as pointless as the filibuster that blocked the appointment of Henry Foster to be Surgeon General under Bill Clinton.

Let the Sunstein In

by Iain Murray on January 8, 2009 · 1 comment

in Environment, Regulation

I was cheered this morning by the news that Cass Sunstein of the University of Chicago is to be the next head of OIRA, the Office of Information and Regulatory Affairs. While not someone a libertarian conservative would necessarily appoint, he is possibly the best choice possible that Obama could have made, and his friendship with the President-elect suggests he will have some power. In particular, Prof. Sunstein has been a very strong opponent of the Precautionary Principle, which is the rock upon which many environmental regulatory initiatives are built. He also called CEI’s litigation to draw attention to the fatal consequences of CAFE regulation “the principal case involving the issue of health-health tradeoffs.”

Todd Zywicki and Glenn Reynolds also applaud the appointment.