The Sunstein Appointment: More Here Than Meets the Eye

Thursday’s big news on the regulatory front was that President-elect Obama plans to nominate Harvard Professor Cass Sunstein to be the head of the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) – the so-called “regulatory czar” of the federal government. The appointment means that those of us expecting a revival of the protector agencies—EPA, FDA, OSHA, CPSC, and NHTSA—have reason to worry that “yes, we can” will become “no, we won’t.”

The reason for the pre-Russian Revolution appellation is that over the past quarter century, OIRA has become a choke point for federal regulation. Since Ronald Reagan, regulations with any significant impact have had to pass through OIRA’s doors, and while there, many a protective regulation has come to grief. During the Bush years, now a mere 11 days away from ending, OIRA ably accomplished the objective that the Administration plainly had in mind for it: watering down protective regulations or drowning them altogether. In fact, many wise observers came to think of OIRA as the true architect of the Administration’s policy on public health protections, drug safety, workplace safety, consumer product safety, and the preservation of natural resources, not to mention climate change.

How will Cass Sunstein fit into the storyline? Unfortunately, Sunstein’s views on cost-benefit analysis – the principal tool used to dismantle and derail regulation – are not much different from those reflected in the record compiled by John Graham, who served for six years as George W. Bush’s regulatory czar. Sunstein embraces cost-benefit analysis enthusiastically.

Defenders of cost-benefit analysis argue that we should reduce the societal costs and benefits of regulation to absolute dollar figures, no matter how ephemeral the numbers’ relationship to reality may be. Indeed, when it comes right down to it, they’re willing to tolerate the failure of cost-benefit analysts to come up with dollar figures for a good many benefits, effectively zeroing out or drastically understating some benefits of protective regulations.

Moreover, cost-benefit analysis focuses solely on whether the generation that now lives on earth is “willing to pay” for protections that will affect our children. If we don’t feel like paying—or cannot afford to pay--a lot of money to, say, clean up the air, then the air stays dirty, not just for us, but for generations to come.

That formula is most definitely not what Congress intended when it passed numerous health and safety laws over the last four decades. Instead, Congress asked the question, “what can government do now to protect people from pollution, hazards in the workplace, dangerous drugs, and defective consumer products?” As in the area of financial markets, the answer was to regulate, requiring companies that spew pollution, cut corners on workplace safety, or peddle dangerous drugs to do their best to minimize those hazards.

This difference between the two approaches is stark. In the economists’ world, the assumption is that once the air is fouled, the water polluted, and the workplace made unsafe to increase corporate profits, the general public—not the companies that caused the problem—must dig into their pockets to make things right again. But under health and safety law, the goal is to prevent harm by preventing the creation of those hazards. Although he is a law professor, Cass Sunstein has joined the first camp. So, he defends cost-benefit-based decisions not to regulate hazards by writing:

Why should people be forced to pay an amount for regulation that exceeds their willingness to pay? People are making their own judgments about how much to spend to avoid various risks—and those judgments should be respected.

Now I don’t know about you, but I have never been asked to make a judgment about how much I was “willing to pay” so that my asthmatic daughter could go outside to play any time she wants in the summer months. As it turns out, the air in my city—and almost all big cities in the U.S.—is so polluted that I cannot allow her to do that on several summer days each year. The air is dirty because power plants, oil companies, and auto manufacturers do not want to pay to prevent nitrogen oxide and volatile organic pollutants to go into the air. They have persuaded Sunstein and other influential people that they will pass all these costs directly on to consumers. Under this theory, no corporation with the power to pollute or manufacture dangerous products or import unsafe food would ever have to find a way to conduct its business more carefully because individual citizens might not have the money to cover those expenses. Under this reasoning environmental protection and workplace, drug, and food safety could easily become “luxury goods” that working people could never afford. Future generations and the moral principle of safeguarding the planet for their well-being vanish into thin air.  Read more on cost-benefit analysis and its implications.

As applied by OMB, cost-benefit analysis is used routinely to force agencies to justify protections by toting up compliance costs overestimated by industry against the “monetized” benefits to the victims of the harmful behavior. So, for example, an IQ point lost to a child who is exposed to mercury emissions from power plants is worth $8,900; a child’s visit to the emergency room for an asthma attack on a Code Red smog day is worth $34. Under this fuzzy math, people, critters, and the environment just cannot win. Sunstein not only endorses these approaches but would go even further, arguing that a year in the life of an older American is worth less than a year in the life of a young adult because old people are not vigorous and therefore cannot enjoy life to the fullest. Called the “senior death discount” the doctrine was too extreme for even the Bush era EPA.

Compounding these questions about Sunstein’s views on regulation is a recent paper he posted on the Internet arguing that Congress’ decision to create OSHA 40 years ago is unconstitutional.  Poor old OSHA--the agency charged with responsibility for keeping workers safe from toxic chemicals and dangerous equipment on the job site--is barely breathing today, having issued just two rules in a decade on toxic chemicals. Yet Sunstein seems to fear that the agency will suddenly spring to life and exercise the excessive power Congress gave it. In that case, he says, companies could argue that after close to 40 years of existence, a federal court should conclude that Congress must go back to the drawing board, rewriting the OSHA statute from scratch.

This attack does more than challenge OSHA’s mission. It is an assault on the legal principles that justified the creation of all the health and safety agencies.

During the campaign, Barack Obama articulated a very different view of what government—including health and safety agencies—should be about:

Now, understand, I don't believe that government can or should try to solve all our problems. You don't believe that either. But I do believe that government should do that which we cannot do for ourselves -- protect us from harm; provide a decent education for all children -- invest in new roads and new bridges, in new science and technology.

Even amidst the flush of excitement surrounding President-elect Obama’s inauguration, we need to be certain that Obama’s appointments are not given a free pass by progressives and that the Senate is vigorous in its advice and consent role. At his confirmation hearings, progressives concerned about regulatory policy and Sunstein’s ample writings on the subject will want to hear assurances that under his leadership OIRA will stop serving as a roadblock to much needed protections.

CPR will produce a full analysis of Sunstein’s views shortly.