The myth of job-killing regulations

Among the scores of talking points floating around D.C. these days, few are as ubiquitous as the phrase “job-killing regulations.” It’s a tidy sound bite that evokes a simple narrative: when government regulates, jobs are sacrificed (and presumably when government deregulates, job creation soars). It is such an article of faith among critics of regulation that few attempt to test the empirical foundations of the claim.

Yet, in a report issued today, Public Citizen looked back at previous claims linking job losses to regulations, and found that none of them turned out to be even remotely accurate. Indeed, the disconnect between rhetoric and reality could not be more stark.

{mosads}In each case covered in the report, industry’s claims look preposterous in retrospect. For instance, in the late-1970s, the petrochemical industry claimed that the phasing out of lead from gasoline would threaten an eye-popping 43 million jobs. Instead, the phase-out became an unmitigated public health and safety success story across the world. A 2011 study backed by the United Nations concluded that banning lead from gasoline had led to $2.4 trillion in annual benefits and 1.2 million fewer premature deaths, annually. The technological hurdles to find a suitable substitute for lead to stop engine “knock” barely rated a speed bump.

The report cites many more examples, and in each the pattern remains the same. Industry makes apocalyptic claims about the jobs that will be killed by the next regulation coming down the pipeline, the regulation is enacted and industry complies fairly easily, and the flawed predictions silently slip from memory.

Lost in the sea of rhetoric is the reality that sensible regulations often create and preserve jobs. Proponents of the “job killing” argument conveniently forget the results of the most highly visible recent experiment with deregulation: the deregulation of Wall Street. That gambit ended horribly for the American public, with millions of lost jobs and trillions of dollars in lost wealth. Instead, proponents rely on flawed models to gin up outlandish projections of jobs that could be gained by rolling back the rules. For example, the Washington, D.C., Phoenix Center, projects that a 16 percent decrease in the federal regulatory budget would magically generate 18.8 million new jobs in five years, quite a trick since there are only 11.3 million Americans currently unemployed.

Unfortunately, lawmakers continue to cite distorted, and in many cases downright false, claims about regulations killing jobs without reservation and without impunity. A 2010 study sponsored by the Small Business Administration’s Office of Advocacy that purported to show federal regulations costing $1.75 trillion every year has been thoroughly discredited by virtually every source that has commented on it, including former Reagan and Bush officials, current and former Obama Administration officials, the Congressional Research Service. The SBA itself now says the study has been “taken out of context” and it was “not a bottom-up precise accounting of the overall cost of regulations.” Yet, not a House hearing on regulation goes by without anti-regulatory critics citing this $1.75 trillion figure as if it were an accepted fact beyond dispute.

When crucial public health and safety measures to protect the public from tainted food, air and water pollution, unsafe workplaces, reckless financial practices and dangerous consumer products are at stake, the public has a right to expect that decisions made by Congress are based on reality, and not on exaggerated rhetorical claims based on indefensible analysis.

Narang is a regulatory policy advocate at Public Citizen.