Why Obama’s Choice for Regulatory Czar Is Making Liberals Nervous

Why Obamas Choice for Regulatory Czar Is Making Liberals Nervous

Cass Sunstein would not seem the kind of presidential appointee to get liberal groups up in arms. A professor at the University of Chicago Law School and prolific author, Sunstein is a reliable liberal on most questions of law and policy. So when President Barack Obama chose his old friend for a very powerful Washington job, director of the Office of Information and Regulatory Affairs , it seemed safe to assume that the appointment would be treated as good news by the environmental, labor and consumer groups that have been in despair for most of the Bush years.

The reaction, however, was much more muted. Since Sunstein is expected to be easily confirmed by the Senate, few people are willing to go public with criticisms. But “extremely disappointed” is how one person describes the general reaction among liberal advocacy groups at the prospect of Sunstein becoming what many call the “regulatory czar.”

The reason is Sunstein’s support for cost-benefit analysis, the practice of examining regulations to ensure that their benefit to society outweighs whatever costs they impose. Liberal advocacy groups claim that cost-benefit analysis has been a weapon that every Republican President since Ronald Reagan — who created OIRA — has used to thwart effective government regulation of the environment, workplace and consumer safety. OIRA, after all, examines all proposed federal regulations before they take effect — be they issued by the Environmental Protection Agency, the Food and Drug Administration or the Occupational Safety and Health Administration — and it has the power to delay or reject the ones it believes will be too costly to impose. “Every time the agencies come out with a regulation that’s controversial, OIRA tries to stop it,” says Rena Steinzor, president of the Center for Progressive Reform, which in January issued a report critical of Sunstein’s support for cost-benefit analysis. “And their main tool is cost-benefit analysis.”

On the face of it, the idea of cost-benefit analysis seems like a relatively uncontroversial idea. It seems reasonable to assess, for instance, whether improvements in public health are significant enough to justify the financial costs imposed on polluters to curb the emission of harmful particles into the air. Reasonable, that is, until you start to fashion formulas for deciding just how costs and benefits should be measured.

Consider government standards for allowable amounts of arsenic in water, a topic Sunstein has written about. A standard set at 3 parts per billion will save more lives than a standard set at 10 parts per billion, but it will also cost more to achieve — a cost that will in turn be passed on to consumers in their water bills. If it can be shown that the more stringent standard would result in saving 10 lives per year, how much would society be willing to pay to achieve that Ten million dollars A hundred million A billion

Making that calculation, of course, requires placing a dollar value on human life, which can mean getting into some sensitive areas. Sunstein has written in support of what some people call the “senior death discount,” the statistical practice of taking into account years of life expectancy when evaluating a regulation. By that measure, for example, it would be harder to justify spending to correct an environmental hazard that posed more of a threat to the elderly than one that was more dangerous to children, who have many more years ahead of them.

In his voluminous writings, Sunstein has repeatedly defended the idea of a strong regulatory state. But his critics say that on a case-by-case basis he routinely comes down in favor of applying cost-benefit analysis in a way that would disallow the regulation in question. And they haven’t forgotten that in 2001, Sunstein backed George W. Bush’s choice of John Graham to head OIRA, though 37 Senate Democrats voted against him. Under Graham and his successor Susan Dudley, OIRA applied cost-benefit analysis stringently, with what their critics say were predictable results. “We’ve had eight years that were absolutely Siberia for protective regulation,” says Steinzor.

Other supporters of strong regulation aren’t worried about the Sunstein nomination. They expect OIRA under Sunstein to preserve cost-benefit analysis as a tool, but not to use it in such a way as to always reach the conclusion that regulation is too costly to impose. “It’s true that cost-benefit analysis has been used in a very anti-regulatory way,” says Michael A. Livermore, co-author, with Richard L. Revesz, of Retaking Rationality: How Cost-Benefit Analysis Can Better Protect the Enviroment and Our Health. “But cost-benefit analysis can be fixed to be more of a neutral tool.” And in the midst of a severe economic downturn, he says, “it’s going to be essential to have a strong cost-benefit analysis in support of any regulation as a way of selling it to the American public. If I were a President who wanted to have a strong environmental agenda, the last thing I would do is say, “We’re not going to look at the costs of these regulations; we’re just going to do them.’ ”

Meanwhile, everyone with a stake in regulatory law will be watching closely to see what develops from a request that the Obama White House put out last month to the heads of federal agencies, asking for their ideas on how to revise both the government rulemaking process and the way OIRA reviews those rules. For one thing, it appears to mean that the new Administration will be looking for ways to apply cost-benefit analysis differently. The Institute for Policy Integrity, a progressive group headed by Livermore at New York University School of Law, has issued a list of proposed reforms that would include greater transparency for the OIRA review processes and reviews to determine the cost of deregulation or inaction. At the very least, it looks like Obama’s regulatory czar will preside over an expanded realm.

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