ELC's Steinzor, Mercatus Center's Mannix debate OMB's cost-benefit analysis

Is the White House's expanded use of cost-benefit analysis good for the regulatory process? Will outside peer review bog rules down in endless analysis? Rena Steinzor, director of the Environmental Law Clinic at the University of Maryland, and Brian Mannix, senior research fellow for the Mercatus Center, join OnPoint to debate the merits of OMB's new regulatory strategies.


Colin Sullivan: Welcome to OnPoint. I'm Colin Sullivan. Today we're joined by Rena Steinzer, a law professor at the University of Maryland and a founder for the Center of Progressive Regulation, and Brian Mannix, a senior research fellow at the Mercatus Center. Also here is Ben Geman, a reporter for E&E Daily and Greenwire. Thank you all for being here today.

Brian Mannix: Sure, thank you.

Colin Sullivan: Rena, I'd like to start out with you. Your organization's been fairly critical of how the White House reviews environmental policy, which can affect any number of areas from endangered species to clean air to clean water. What's the significance of what the White House has been doing to, how it reviews environmental rules?

Rena Steinzer: The White House, this White House is more intrusive in the regulatory process than any in recent memory and that includes the Reagan administration and also the administration of the president's father. The significance is that proposals that are mandated by law are either slowed down to a crawl or are changed to be much weaker than what the law intended offering much less protection for public health and the environment.

Colin Sullivan: Brian, what's your response to that?

Brian Mannix: I guess my main response is I find it odd to use the word intrusive when it's the president's responsibility to carry out the functions of the executive, issuing regulations is an executive function. It is his job. If he were not supervising the agencies he would not be doing his constitutional duty, so I don't find anything troubling about his actively monitoring what the agencies are up to.

Ben Geman: Let's take some of the sort of pillars with what the White House has been doing with regulatory policy. I guess the John Graham-ification, if you will of OMB. Rena, one of the main things that has happened is the really strong emphasis on cost benefit analysis. It sounds fine, I mean, is that a good thing or a bad thing?

Rena Steinzer: The way it's practiced it's a bad thing, but to sort of join your point with what we were just talking about, there are a series of statutes on the books including the 1990 Clean Air Act amendments. Certain portions of the statutes do not allow EPA to consider costs when they're setting a health-based standard. They are allowed to consider costs when it comes to executing the mandate and finding the best way to reach that health-based standard. In this White House, every regulation, no matter what the statute says, is accompanied by a cost benefit analysis and John Graham, the head of the Office of Management and Budget, asserts that he has a right to send regulations back if they don't perform this analysis. The fact that the Clean Air Act does not allow certain provisions of it, consideration of costs was recently upheld on a 9-0 vote by the Supreme Court in an opinion written by Justice Scalia. So I don't think this is, it's a separation of powers issue, it's a question of what happens when a statute is duly enacted by the Congress and signed by the executive and whether the White House has the ability to ignore the statutes when it's overseeing regulatory policy.

Ben Geman: Do you feel like the problem has only come with some of the Clean Air Act rules or do you feel like, much broader brush, the use of cost benefit analysis has been elevated too sort of high --

Rena Steinzer: Much broader brush. There are other statutes that also have similar provisions, and I want to be clear that the Center for Progressive Regulation, the group that I'm a part of, does not believe that we ignore costs and print money and clean up everything back to Jamestown. We do think that considering costs in a responsible way is part of the process already and that what is most troubling is this mathematical precision, this illusion that if we quantify benefits and quantify costs that we're exactly accurate and that the benefits have to exceed the costs.

Ben Geman: Brian, I wanted to get a response to that. I think we're hearing Rena saying that cost benefit analysis has become the sort of, almost this kind of religion or too entrenched of a doctrine within the White House. On the other hand, your organization has been somewhat supportive of some of the things the White House has been doing. Can you weigh in on that?

Brian Mannix: We've been somewhat supportive. We're not unbridled advocates of cost benefit analysis either, and I think there are lots of other principles that we would apply, identifying a market failure that requires government intervention, considering federalism, when is it appropriate for states to intervene and when is it appropriate for the federal government to do so. But, by and large, I think the work they've been doing at benefit cost analysis has been helpful at OIRA. John Graham is the head of the Office of Information and Regulatory Affairs within OMB, not the director of OMB, and the guidelines he's following, what he's following is an executive order signed by President Clinton. The same principles have been articulated by a whole series of presidents asking for both the costs and benefits of regulations to be weighed. In other words, statutes that prohibit that in certain decisions, there are statutes that require it and there are statutes that leave it to the discretion of the agency. And to the extent they have discretion, I think it's a good idea to do a benefit cost analysis and every president has thought so since Nixon, I'd say. So I don't think he's doing anything radical. I think that John Graham has implemented President Clinton's executive order a lot more faithfully than the Clinton appointees did, but the principles that he's applying are not all that controversial.

Colin Sullivan: Rena, if I'm a viewer that's coming to this topic for the first time, why does this matter? I mean, on the ground, in terms of environmental impact on the ground, what you're talking about in terms of what the Bush administration has done with cost benefit analysis, why does it matter? How does it affect people in everyday life?

Rena Steinzer: Let me give you a very concrete example. Fifteen percent of women of childbearing age have mercury levels in their blood that are above the reference dose, what is considered safe by EPA, which was a figure that was upheld by the National Academy of Sciences in a 300-page report a few years ago. There is an effort afoot to try and control power plants, which are a major source of that mercury. Rather than following the statute and finding the best technology cleanup that mercury this White House has decided that it can ignore that provision of the law and instead do a trading rule, which gives utilities the right to emit mercury and then trade among themselves to see who can reduce it most cheaply. That is part of legislation that is pending before the Senate right now. Under those proposals it would take until 2026, by some estimates, to reduce mercury from power plants. That's an issue that affects a large portion of our population, very concrete. Can you eat tuna fish if you're between the ages of 18 and, I think, it's 40?

Colin Sullivan: Isn't that the same approach though that worked with the acid rain program?

Rena Steinzer: Yes, but acid rain involved SO2, sulfur dioxide, which is much less toxic when it's concentrated. So overall it's important to reduce it, but it doesn't produce hotspots that collect in a certain location that are very dangerous.

Colin Sullivan: Brian, do you have a response to that?

Brian Mannix: Yeah, I'd go back to, I was at OIRA reviewing regulations in 1982 and designed a trading program for lead in gasoline that allowed the EPA to phase out lead a lot more quickly than it could have if it was setting technology-based standards, because if there were a few refiners who couldn't take it out fast enough, they could buy lead credits from someone else who could take it out faster. The net result was we phased it out, I think, completely by '87 and that is toxic like mercury and it was being found in children's blood and I think that was a very successful application of trading. I think it's quite likely that a rule that allows trading will allow mercury emissions to be reduced more quickly than if you relied on technology-based standards and feasibility and those kinds of considerations. Trading is quicker and more efficient.

Ben Geman: Your organization, is sort of being an advocate of market-based approaches, I mean stepping beyond just the mercury, generally are you comfortable with the level of sort of market-based approaches the White House is using or have they been going too slowly on that?

Brian Mannix: I think they've been doing a good job finding places to apply market-based approaches. I think there's a lot more opportunities out there. I think the pace of regulation has still been advancing faster, growing faster than the economy. The costs of regulation are growing faster than GDP. The number of regulators in the government and their budgets are growing as a fraction of the total federal budget. So I think regulation has a tendency to grow out of control because it doesn't have the same checks that budget expenditures do and for that reason, I think, it's still got a long way to go to get a handle on all the existing regulations and the flood of new regulations. It's a huge volume. It's a huge job.

Ben Geman: OK. You know, another sort of piece of the White House policy that's been brought to bear on environmental policy has been both peer review and "data quality." Rena, I know your organization has been very critical of the way the White House has been implementing the Data Quality Act, which allows outside parties to challenge what they see as the validity of information disseminated by federal agencies. What is afoot with the Data Quality Act? Is it a problem?

Rena Steinzer: It's a huge hidden problem as many of these problems are. The Data Quality Act is layered on top of elaborate procedures for doing rules and for arriving at final toxicological profiles for the integrated risk information system, for example, which currently has three levels of peer review that are involved, internal twice and then external. What the Data Quality Act says is if you run all those traps, if you're an affected industry, an industry that is producing risk, if you run all those traps and nobody listens to you, you have this final last resort to throw a wrench in the works known as the Data Quality Act. Very few of the requests for correction have been accepted by EPA, although the agency's knees are beginning to buckle because they're under tremendous pressure by Dr. Graham to take a look at these things and go back to the drawing board. It is a source of tremendous wasted resources and delay.

Ben Geman: Are there any particular either existing protections or proposed protections that you feel are kind of in jeopardy now because of data quality challenges?

Rena Steinzer: Yes. I'll give you another example. There is a parent in a major city, New York, Baltimore, Washington, on the Eastern Seaboard who hasn't had code red day warnings that ask them, warn them to keep their children inside on certain days during the summer. The reason for that is ozone or smog and one of the precursors or contributors to that condition is volatile organic compounds. The states on the East Coast are so desperate to reduce volatile organic compounds and get ozone under control that they have started regulating the gas cans in people's garages. Recently the paint industry, which was put under a regulation to reduce the VOCs in their product, won an appeal in the 3rd Circuit, this is after they had been through multiple layers of rulemaking and litigation, brought an appeal in the 3rd Circuit to challenge the Pennsylvania rule, yet again, under the Data Quality Act.

Ben Geman: Brian, would you agree that the Data Quality Act is being used in a way that's inappropriate and as a way to sort of undercut existing decisions on protections?

Brian Mannix: No I don't. Nobody likes to be regulated and most especially the regulators don't like to be regulated. They are burdensome procedures sometimes, but they're writing regulations that have the force of law and they have to be able to defend them. I see the Data Quality Act as, it fits very well with John Graham and this administration's emphasis on transparency. That you need to be able to tell what information regulations are based on. Scientists don't get to keep it secret and say, well, I've done some research and I've decided this is what the standard should be and don't question it, just do it, you know, just obey. We don't work that way. We're not a scientocracy, we're a democracy and people have to see where the regulations are coming from and they're subject to judicial review and I think that's a good thing.

Ben Geman: But isn't there, I mean, it takes a long time to get a rule done right now. There's inevitably, not inevitably, but oftentimes there are court challenges. There are administrative challenges and such. Isn't this just going to slow down the progression of even good regulations if there's endless opportunities to take swings that it?

Brian Mannix: Well, hopefully it will be selective and I think that's the goal of a lot of these procedures. We're certainly not suffering from a shortage of regulation. The volume is huge and so we're trying to improve the quality. As an outside commenter at the Mercatus Center we file public interest comments. We're trying to move regulation in a constructive direction and I think the Data Quality Act helps improve the quality of regulation. I think, you know, the fact that it takes a long time to solve a problem by regulation, if it ever manages to solve the problem, should make people stop and think whether regulation really is the solution that's needed. In a lot of cases it is, in a lot of cases it is not.

Rena Steinzer: I want to say, which is very exciting, we agree. I absolutely agree with Brian that it is very important to keep the process transparent and that's one reason why the Center for Progressive Regulation has advocated requiring disclosure of all underlying data that is submitted by industry to support or deflect federal regulation. There is a federal law called the Shelby Amendment that requires federally funded scientists to put all their information on the table, but that isn't happening in the federal area.

Ben Geman: But that's, I mean I mean that's --

Rena Steinzer: In the industry area, in the private sector.

Ben Geman: Right, but that's but one example. I mean, broader brush, you know, several of the things the White House has done are in the name of transparency. Isn't your organization opposing several things that could arguably be considered to shine more light on the regulatory process?

Rena Steinzer: I don't think so. I wish you'd give me an example because we'd have to fix that. We're all for transparency and that's why I absolutely agree with Brian here that we need disclosure of underlying data. We need all this sunshine so we can see what people are basing things on.

Brian Mannix: We need sunset too. Would you agree with me on that?

Rena Steinzer: No. Sunrise, never set.

Ben Geman: Looking forward for a moment, Brian, your organization has weighed in on many of the sort of recent, or the last four years of recent White House policies on regulation. What is the sort of unfinished business of the White House on regulatory policy that you would like to see done over the next four years?

Brian Mannix: Well, I think they've got a good handle on the process for new regulations. I think they need to, as every administration does that inherits a huge volume of existing regulations and they need to find some way to examine those. Sunset provisions are one way to do that. That can be done, to some extent, within the executive. It can also be done in the legislature, but one way or another we've got to look at obsolete regulations. I think they've got a ways to go in implementing the guidelines on peer review. I think they could do expanded guidelines in risk assessment. I think the manufacturing initiative is involving the commerce department in looking at how the competitiveness of U.S. industry is affected by --

Ben Geman: I'm sorry, what is the manufacturing initiative?

Brian Mannix: Well, the Commerce Department did a study last year on manufacturing. As you know, we had a long recession and most of the economy pulled out of it, but the manufacturing sector pulled out very slowly, so they did a study and they're now reorganizing the department to look harder at the factors that affect the competitiveness of U.S. industry. They're working with John Graham on implementing part of that, so they've still got a lot of work ahead of them.

Ben Geman: Rena, your organization came out with a book very recently called A New Progressive Agenda for Public Health and the Environment. Your organization is called the Center for Progressive Regulation. It seems to me there's at least two words in the title of the organization that make you a little bit of a fish out of water in D.C. these days. What is your organization hoping to achieve going forward and what do you think is realistic?

Rena Steinzer: Well, we're trying to learn from our opposition. Thirty years ago conservatives realized that they had to develop affirmative vision and an affirmative agenda and promote those ideas out in the public and that's exactly what we're trying to do. We were founded as a counterpoint to institutions like Mercatus. It is true that we're fish out of water these days in terms of the kinds of things that Brian's talking about, but there is common ground. For example, the Bush administration could start charging market value for mineral and grazing rights, could remove some of the corporate subsidies that lead to unsustainable agriculture, could go back to the table at Kyoto using trading, which Brian has elevated as a very efficient tool. We don't disagree with that. Trading is the secret to dealing, or the crucial piece of dealing with global warming. So there are things that the Bush administration could be doing that are consistent with its ideology if not with the people in industry that make campaign contributions and support that.

Colin Sullivan: OK. We're going to have to let that be the last point. Rena Steinzer from CPR, Brian Mannix from Mercatus, thank you both for being here. Ben Geman thanks for being here. Join us tomorrow for another edition of OnPoint. Until then, I'm Colin Sullivan for E&ETV.

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