Whether it’s energy policy, global warming, or nuclear waste, if our regulators get the wrong answer, they make one up.
Effective policy cannot be built on lies and myths. But when it comes to energy policy that seems to be all we have to go on. A report recently released by the EPA, for instance, claims that by 2020 regulations enacted under the Clean Air Act will provide an annual benefit of $2 trillion for a cost of $66 billion, a 30-to-1 return on investment. And that is the EPA’s low estimate. In a best-case scenario, the benefits could reach as high as $5.5 trillion, a 90-to-1 return, or $48,000 for every American household. Where do I go for my check?
Unfortunately, the EPA is lying. Not about everything: The $66 billion cost is real, though probably low-balled. EPA regulations will most definitely remove that $66 billion from the economy, making it unavailable for job-creating investment. But what of the $2 trillion in benefits? According to analysis by economists W. David Montgomery and Anne E. Smith, these gains are an illusion. The $2 trillion figure was based on nothing more than a survey asking Americans how much they would pay to live an extra few weeks or months, or to have a little extra visibility on a clear day.
The EPA estimate, therefore, has nothing to do with job creation, economic growth, or real economic output. It has everything to do with hiding the fact that EPA regulations will place a crushing burden on the economy. The EPA knows this. In fact, in the same report that purports to prove that we all gain from more regulations, there is a real macroeconomic study, one done by EPA economists rather than policy officials. They find that past EPA rules slowed the economy by $79 billion in 2010, and will slow it by $110 billion in 2020.