Hold the REINS: Regulations Generate Major Economic Benefits

01/04/2011 12:48 pm ET | Updated May 25, 2011

When human health and safety are at risk, Americans expect their government to protect them. We assume we are guarded against risks like lead in children's toys or poisons in our drinking water. And for the most part, these protections deliver benefits well beyond what they cost.

A proposal on Capitol Hill would require Congress to vote on every large regulation put forward. The measure (PDF), given the acronym "REINS," and introduced by Jim DeMint in the Senate and Geoff Davis in the House, has as its goal slowing down what they call "costly anti-free market regulations that are destroying jobs." But its real effect will be to grind action by administrative agencies nearly to a halt.

By focusing exclusively on the downsides of regulation, and not the benefits, the implication of this proposed legislation is that protecting the health and safety of Americans is not worth the costs that regulated entities must pay. But in fact, the opposite is often true: These rules can produce billions of dollars in net benefits.

Such protections generate economic value through lives saved, lower hospital bills or energy costs, and increased worker productivity from fewer health problems. Many times, these benefits significantly exceed the costs of the additional technology and changes in production processes needed to meet the regulatory requirements.

For example, a recent proposal by the Obama administration (which may end up being tabled for a year) to regulate hazardous air pollutants from industrial boilers would generate billions in net social benefits, largely due to a reduction in premature deaths.

Starving government authority and refusing to impose any costs on businesses means devaluing human health and safety to $0. Economically speaking, that simply doesn't make sense. If Republican committee members focus exclusively on how much regulations cost, they risk both bad economics and implying that the many obvious benefits of environmental protection -- like saving lives -- aren't important.

Of course there are costs for protecting health and safety -- agencies calculate in fine detail the economic downsides of creating a new rule. But often these numbers are overly cautious -- relying on industry-provided estimates that fail to account for speedy adaptation and innovation in the marketplace.

This is a scene we have seen played out again and again: EPA moves to regulate hazards like workplace benzene exposure or acid rain. Howls of fear emerge from industry, understandably averse to an unpredictable risk that comes with little reward for regulated businesses. They warn us of unlikely worst-case scenarios of lost jobs, shuttered plants, and higher prices. When the rules go into effect, instead of calamity, a smooth transition is made: businesses find clever, cost-cutting ways to comply, sending the price tag of the regulation plummeting.

It is worth noting that there is already a process in place to check to make sure regulations generate net economic benefits. For each regulation deemed to have an effect on the economy of $100 million or more (the same trigger used in this bill,) the federal government runs the numbers through the Office of Management and Budget to ensure that Americans will receive a high return on their investment.

It's true that not every regulation makes perfect sense: there are plenty that could be tweaked and improved, some that should no longer be on the books, others that are inadequate to the task.

But ironically, given the severe limits on the number of contested issues that can be resolved each year in Congress, the DeMint-Davis Bill will make it extremely difficult to improve regulation. Between a finite legislative calendar and the reality of hyper-partisan politics, there is little hope that Congress will be able to efficiently and effectively address regulatory matters. As a consequence, the bill would effectively doom us to the regulatory status quo, with serious risks that still need to be addressed and rules that need to be updated.

Slowing down the regulatory process often means imposing needless harms on the American public, from lives lost to unnecessary illness. In an attempt to reduce compliance costs for industry, this bill shifts greater costs onto everyone else.