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The Harms of Regulation Phobia

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Safe food. Seatbelts. Safety on the job. Clean air and water. A functioning financial system. These are all things that we as Americans have come to take for granted in our daily lives. And, though it has become unfashionable to say so, these are all things provided by robust federal regulation.

Regulations are getting a bad rap in Washington these days. Despite the collapse of our financial system, financial regulatory reform has been chastised. Despite the continued need for clean air and water, some in Congress are exploring ways to prevent the implementation of rules to stem pollution. And, Rep. Darrell Issa, chairman of the House Committee on Oversight and Government Reform, has devoted his time not to finding ways to reduce the deficit through duplicity in federal agencies, but instead by rallying against any and all regulations that large corporations have suggested they would like to see go.

These misguided efforts distract from dealing with the real issues impacting economic growth. While over-burdensome government regulations may be harmful, those which Congress is currently focusing on will not strangle job creation. This is a myth repeated by politicians and CEOs who stand to increase profits while decreasing safety if standards disappear -- standards that ensure product and food safety, protect our environment, and guarantee the proper regulation of our financial, medical, and legal industries.

Though the Obama administration recently identified thousands of non-functioning, or wasteful rules that are unnecessary and can burden businesses or agencies, responsible reform must leave in place and ensure proper enforcement of the many hard-won regulations that protect the health and safety of Americans.

The anti-regulation mania that's swept Washington conveniently ignores the positive impact that common sense regulations have on all of our daily lives, while threatening to harm the basic protections that we have come to expect. For instance:

  • Attempts to protect the public from salmonella in eggs faced years of roadblocks even after President Clinton proposed an egg safety rule that would have saved 1.4 billion in medical costs and prevented 79,000 illnesses and 30 deaths a year. Heavy lobbying by big agriculture interests delayed implementation of these rules from their inception in 1999 to the final enactment in 2010 -- but not in time to prevent the 2010 salmonella outbreak that left 2,000 Americans sick and led to the recall of half a billion eggs.
  • In 2004, in response to a request, OSHA drafted a rule that addressed the major causes of construction worker injury and death from cranes and derricks (electrocution, collapse and overturning). The final rule established common-sense standards for operator certification, crane inspection, set up and disassembly. But the rule took six years to clear bureaucratic hurdles -- a delay that resulted in an estimated 132 unnecessary deaths and 1,050 preventable injuries at a cost of more than 1 billion.
  • Earlier this year, the House took aim at the Environmental Protection Agency's ability to regulate toxic air pollution. The House bill, designed to "rein in" environmental protection, would block the implementation of the agency's new mercury emissions rules, designed to prevent up to 2,500 premature deaths, 1,500 heart attacks, 17,000 cases of aggravated asthma and 130,000 days of missed work due to illness. This, despite the fact that many of those members who voted to prevent implementation of the rule, voted for it in the Clean Air Act Amendments of 1990.
There are similar stories to be told about industries that affect all areas of American life. Lax regulatory supervision of Massey Energy allowed the company to get away with safety violations that eventually led to a deadly mine collapse in West Virginia. The financial industry's long campaign to escape government checks led to an epidemic of profiteering from reckless practices and an unprecedented economic crisis. The absence of stringent off-shore drilling safety regulations, and enforcement authorities that were missing in action, led to a catastrophic oil spill in the Gulf that will have repercussions for years to come.

The fact is that time and again, the impact of lax regulations is felt more broadly by the country -- from the cost of a near depression to the cost of environmental clean-up. This is not good for most businesses, nor the economy.

In the short run, regulations require investment, but that does not translate into a drag on the economy -- in fact, analyses show that the economic benefits of smart regulation greatly outweigh their costs.

The Office of Management and Budget studied all the major regulations issued between 2001 and 2010, and found that compliance costs of $44 billion to $62 billion were dwarfed in comparison to the $136 billion to $651 billion of annual benefits that those rules created. The OMB in part calculates the economic benefits of regulations by assigning monetary values to the human lives saved. We would like to think that the saving of those lives alone would be reason enough to applaud, rather than scorn, the government's regulatory efforts.

Those investments also create jobs. And, if companies began investing earlier, they would reduce overall costs, benefit from early compliance and be in a position to spread out the cost of regulations over a longer period of time, thus dampening any economic impact.

While Congress engages in ways to prevent implementation of important health and safety regulations, it is sleeping when it comes to identifying real efforts that can jump start the economy, including:

  • Increasing capital access to small business and entrepreneurs to create jobs;
  • Incentivizing new forms of energy, clean transportation and other technologies that will help us lead in the 21st century instead of lagging behind our worldwide competitors;
  • Passing legislation that would encourage greater use of non-toxic chemicals which help save companies compliance dollars, increase worker safety and reduce costs to state and local governments; and
  • Leveling the playing field by precluding companies from escaping their corporate tax obligations by using tax havens outside of the United States.

Too much time has been spent on Capitol Hill arguing over one message or another. When will our elected officials stop the rhetoric, end the charge to implement everything they think their campaign contributors are seeking and start putting Americans first? As supporters and founders of businesses that have proven that we can thrive in a world that encourages a balance in meeting environmental goals, employee goals and profit, we are urging Congress to move away from the lexicon of corporate protection at all costs, and toward the lexicon of protecting the citizens they are supposed to represent.

We must work toward this: real, forward-moving regulatory reform that helps to create a new economy -- one that values people, planet and profit.

David Levine is the co-founder and executive director of the American Sustainable Business Council, a growing coalition of business networks and businesses who represent more than 100,000 businesses and more than 200,000 entrepreneurs, owners, executives, investors and business professionals, advancing a new vision, framework and policies that support a sustainable economy.
Jeffrey Hollender is the co-founder and former CEO of Seventh Generation and the co-founder of the American Sustainable Business Council. He also blogs about these topics and more at JeffreyHollender.com.