Freeman

IDEAS AND CONSEQUENCES

Environmental Regulations Aren't Cheap

DECEMBER 01, 1994 by LAWRENCE W. REED

Are the costs of environmental regulations spiralling out of control? Just ask the city of Columbus, Ohio.

In 1991, the city commissioned a pioneering study of federal and state environmental requirements as they impinge upon city finances. Nearly 20 percent of the total city budget, the study predicted, would have to be spent by 1995 to comply—a sum well in excess of $100 million.

“We will spend millions cleaning up an already clean water system, and it’s questionable whether we would improve the health” of city residents, the mayor’s chief of staff said recently.

At least Columbus won’t have to spend any more to test water for a pesticide that was once used exclusively on pineapples in Hawaii and has been banned for nearly two decades. The federal Environmental Protection Agency (EPA) was finally convinced last year that cities shouldn’t have to do that any more.

Businesses and governments all across America are waking up to a shocking fact of life: environmental regulations are a super-growth industry, and one that threatens to swallow up their resources and cripple their ability to survive in an increasingly competitive, penny-pinching world. It’s enough for many to recall what the Founders accused King George of in 1776: “He has erected a multitude of new offices, and sent hither swarms of officers, to harass our people, and eat out their substance.”

The principal culprit in all this, America’s geyser of environmental rules, is the EPA. With lots of money and plenty of staff, the agency churns out regulations and mandates as if cost is no object and conjecture is sufficient evidence of likely benefit. It boasts a staff that exceeds 18,000 and an operating budget approaching $5 billion. Forbes magazine calculates that the EPA’s staff has quadrupled since 1970 and its inflation-adjusted spending has gone up ten times.

In 1990, the EPA estimated that compliance with its regulations was costing Americans approximately $115 billion per year—almost $500 for every man, woman, and child. That’s without a doubt the understatement of the decade. Municipalities, notes Science magazine Deputy Editor Philip H. Abelson, have reported instances in which real costs exceeded EPA estimates by a factor of 20 or more.

Philadelphia mayor Ed Rendell has cited many instances of EPA’s grossly underestimated costs to his city. The agency, for example, figured that preparing storm water permits would cost the city only $76,681, while the actual number turned out to be $916,950.

Experts in both government and industry are raising questions about the worth of all this spending for regulatory compliance. The federal Office of Management and Budget stated in 1990 that regulation of atrazine in drinking water as carried out by EPA under the Safe Drinking Water Act would cost $93 billion for every life prolonged. The Dallas-based National Center for Policy Analysis calculates that an EPA rule on wood preservatives costs an astounding $5.7 trillion for every life presumed to have been saved by it.

Statistical models developed in California have shown that one fatality is induced every time regulations reduce Gross National Product by between $5 million and $12 million. The expenses of compliance with EPA rules, those models suggest, already are responsible for inducing over 30,000 deaths per year. When the Clean Air Amendments are fully implemented, you can add another 5,000 to that.

“I’ve never seen a single rule where we weren’t paying at least $100 million per life,” Yale Law School Professor and recent EPA legal counsel E. Donald Elliott told Forbes.

Studies have confirmed that the death rates for high school football are anywhere from 100 to 2,000 times higher than death from asbestos in school buildings. Children are from 2,700 to 54,000 times more likely to drown than to die from asbestos. Yet, under orders from the EPA, communities have spent hundreds of millions to remove asbestos from schools.

There are other ways to assess the impact of the problem. The American Council for Capital Formation says that by the year 2005, environmental regulations as a whole will have reduced the U.S. capital stock by 4.3 percent and increased the cost of capital by 5.5 percent. CONSAD Research Corporation, a Pittsburgh-based consulting firm, projects that at least 200,000jobs will be lost due to the Clean Air Act amendments of 1990 alone.

Adding salt to the wounds, EPA Administrator Carol Browner boasted in November 1993 that her agency had issued 25 new air regulations in the first 10 months of the Clinton administration.

On and on it goes. The numbers add up as our standard of living and our liberties erode. The environmental juggernaut just rolls on oblivious to the damage it leaves in its wake. The EPA, the Congress, and many state agencies are presiding over the greatest expansion of the intrusiveness of government Americans have ever seen, all in the name of cleaning up the country and often with little or no good to show for it.

This is real money that governments and businesses are spending. These are real lives that regulations are costing. Neither money nor lives are inexhaustible resources. Nor are the freedoms we sacrifice each time we allow government to trample property rights in the name of environmental regulation.

All this zealous “regulate for the sake of regulating” activity is occurring, by the way, at a time when scientific evidence overwhelmingly suggests that our environment today is cleaner than it was 50 years ago, and safer for humans than at any time in history. That fact is documented thoroughly in a new book published under the auspices of the Chicago-based Heartland Institute, entitled, Eco-Sanity: A Common Sense Guide to Environmentalism.

Authors Joseph L. Bast, Peter J. Hill, and Richard C. Rue assemble unassailable facts and figures and the most compelling argumentation to make this point: government has been a poor environmental steward and a counterproductive regulator. Genuine environmentalism that keeps the environment clean calls for respecting property rights and utilizing marketplace incentives. It’s a case that cries out for public attention, for it constitutes the only viable alternative strategy to the current regulatory Inquisition.

Those of us who believe in both freedom and a clean environment must make the case that these two things are not at all incompatible or we may end up losing both.

ASSOCIATED ISSUE

December 1994

ABOUT

LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

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