Obama Regulates Away Jobs

Story Stream
recent articles

It's ironic that just as the Department of Labor announced on Friday a loss of 85,000 jobs in December, the lead headline in the New York Times read "EPA Seeks Tighter Rules to Cut down Air Pollution."

The December employment performance was disappointing. There had been some hope that job losses had fallen to zero-and yet the Obama administration is about to risk more job loss by imposing more stringent controls on air quality.

It would require power plants, factories, and automobiles to reduce emissions, in order to lower permissible levels of ozone in the atmosphere.

The widespread forecasts that any jobs recovery will be slow in 2010 and beyond should be a wake-up call to President Obama that he risks regulating jobs out of existence, but his solution is to continue on the same path. Albert Einstein reportedly said "The definition of insanity is doing the same thing over and over again and expecting different results."

The Environmental Protection Agency's decision to tighten emissions standards was made before the negative jobs report. But the president's reaction to the December jobs numbers was to announce a new initiative to expand production of alternative energy. In a televised White House statement on Friday, Mr. Obama declared, "Through this initiative, we're awarding $2.3 billion in tax credits for American manufacturers of clean energy technologies-companies that build wind turbines, and produce solar panels, and assemble cutting edge batteries."

This, too, is likely to hurt the economy. Credits for alternative energy might create some jobs in those sectors, but would add to the economy's inefficiency, diverting resources from productive to unproductive sectors. Solar, wind, and biomass power only 4% of America's electricity. More jobs could be created by allowing companies to explore America's own oil and natural gas.

The Labor Department report showed that although the economy scored a small net gain of 4,000 jobs in November, a better outcome that the initial estimate of 11,000 jobs lost, December came in with a return to significant job losses, 85,000.

The only reason that the national unemployment rate stayed unchanged at 10% was that a lot of people-843,000-left the labor force, taking themselves out of the "unemployed" category. At 64.6% the labor force participation rate for people of working age stood at its lowest since August 1985.

Even worse, the percent of the unemployed who were out of work for 27 weeks and longer rose from 39% to 40%, the highest since the Labor Department started keeping records in 1948. This brings America closer to European models of large numbers of workers without employment for prolonged periods of time. The longer these individuals stay out of work, the harder it is to get new jobs, because they lose jobs skills and work habits.

Council of Economic Advisers chair Christina Romer said optimistically on Sunday, "I think we are getting closer to stability in employment." Ms. Romer continued, "The next step is, obviously, to finally start adding jobs. ... The big variable in all of this is the private sector."

Perhaps Ms. Romer could convey that to the president. New EPA rules proposed last week would drive private sector jobs overseas, especially in manufacturing. They would lower the standard for permissible ozone from the current level of 0.075 parts per million set in 2008 to a range of 0.060 to 0.070 parts per million in 2020, depending on the final regulation. Before 2008, the maximum level permitted was 0.084, set by President Clinton in 1997.

Moving from 0.075 ppm to 0.070 might not seem like a large step, but 515 of the 675 counties required to measure ozone are now out of compliance with the weaker rule. If the standard were 0.060 now, EPA estimates that 660 counties would be out of compliance. Counties would have to phase in the new rules in 2014 and be fully compliant by 2031.

EPA estimates that it would cost $19 billion to $90 billion a year for America to comply with the new ozone standard, an amount that it juxtaposed to projected health benefits of $13 billion to $100 billion annually. With a 0.060 standard, for example, EPA estimates that there would be 53,000 fewer cases of asthma and 2.5 million fewer missed days of work and school.

Whereas the costs to Americans in terms of new designs for automobiles, more expensive technology for power plants, and movement of additional manufacturing plants to China are clearly predictable, the savings in health care costs are more murky.

Take asthma, for instance. America's air has been gradually getting cleaner since 1980, as EPA's own data show, but the number of children with asthma has risen. According to the Centers for Disease Control, 3.6% of children had asthma in 1980, and almost twice the percentage, 7.5%, in 1995. Now, using a slightly different measure, 8.9% of children have asthma. CDC acknowledges that "the causes of asthma remain unclear and the current research paints a complex picture," yet EPA forecasts 53,000 fewer asthma cases from ozone reductions.

With the December jobs numbers, it's time for Mr. Obama to press the reset button on economic policy. How about keeping taxes at current levels so businesses and consumers have the certainty to resume hiring and spending? Or cutting back on large federal spending projects to get the deficit under control? Even better, stop driving jobs overseas through increased environmental regulation. That would be change we could believe in.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

Show commentsHide Comments

Related Articles