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Will More Smog Create Jobs? Republicans Think So.

Republicans continue to tout deficit reduction in the form of dramatic, immediate spending cuts as the best way to boost the economy. But with President Obama set to introduce a new jobs agenda after Labor Day, Republicans are now signaling they want to do something else, as well: Get rid of regulations.

In a new memo released on Monday, House Majority Leader Eric Cantor produced a list of "Top 10 Job-Destroying Regulations," including new rules on pollution, labor organizing, and health insurance. This fall, Cantor said, his caucus will hold separate votes on repealing each one of them.

This impulse is not new: Republicans have been waging an all-out assault on regulation at least since the Reagan era. But they've been talking about it a lot more in just the last few weeks. Senator John Barrasso, for example, has been promoting a new Senate Republican Conference report that purports to show how one month’s worth of regulations (July’s) have imposed more than $9 billion in new costs on the economy. "Republicans will continue to hold the White House accountable for relentlessly rolling out more red tape that strangles America’s job creators," Barrasso has said.

Regulation is a complex topic, one that economists and other experts have been debating for a very long time. Whether you think a particular regulation is really “destroying jobs” will depend a great deal on which regulation you have in mind, which experts you believe, and which variables you are willing to throw into the mix. But critics of regulation tend to offer a particularly one-sided argument that looks only at costs, with no consideration of possible benefits. As economist and writer Joel Waldfogel notes, "For the most part, the people who study regulation are the people who quantify it and say what it costs us. But in some ways, that's the wrong question. ... Instead, you also want to say what are the ill effects of not regulating?"

Consider the Environmental Protection Agency’s long awaited "interstate transport rule," which goes by the acronym CSAPR and which regulates emissions of sulfur dioxide and nitrogen oxide from coal plants. Scrubbers that remove these particles from emissions have been available for more than thirty years, but, according to the EPA, plants in some parts of the country have been slow to adopt them, spewing these pollutants into neighboring states downwind. By 2014, the agency predicts, the new rule will reduce sulfur dioxide emissions by 71 percent and nitrogen oxide emissions by 52 percent. 

Of course, the companies that still maintain plants with high emissions will have to spend money to comply with the new rule. And, according to the Barrasso memo, the bill for that compliance (including, as far as I can tell, higher prices the companies might pass along to customers) comes to $2.4 billion a year. But the source of that figure is the EPA’s own assessment, which notes that $1.6 billion of that represent a one-time-only capital investment, already underway – and that even the $2.4 billion pales next to the $120 to $280 billion in annual benefits that the regulation will generate. (See graph below.) Those benefits include reduced emergency room visits, missed days at work, and mortality.

Estimates of such savings are famously imprecise and subjective, so I wouldn’t put too much stock in those specific figures. But the principle that regulations can help more than they hurt seems beyond dispute. And keep in mind that the Obama Administration has, to the consternation of many liberals, subjected regulation to plenty of scrutiny – appointing as its regulatory czar Cass Sunstein, a well-known promoter of cost-benefit analysis to judge regulations, and calling for agencies to scale back rules that seem too onerous. Of course, as my erstwhile colleague Brad Plumer observed earlier this year, this hasn't satisfied the Republicans. 

Still, the real problem with this push to deregulate is what it's unlikely to do: Provide a substantial stimulus to the economy. Notwithstanding complaints from the Chamber of Commerce crowd, most mainstream economists think the reason businesses aren't investing and expanding is a lack of demand: In other words, too few customers rather than too many regulations.  

Update: In the original version of this item, I used the word "soot" to describe sulfur dioxide and nitrogen oxide emissions. But soot isn't a gas. It's the fine, powdery particles of carbon you find in smoke. Thanks to reader "gwcross" for pointing out this rudimentary error.