How Much will the Obama EPA Increase the Cost of Government?

The Cost of Government Day Report, published annually by Americans for Tax Reform Foundation, measures the number of calendar days Americans must work to pay off spending and regulatory burdens at all levels of government. In 2011, Americans labored 224 days to pay Uncle Sam–until August 12. 77 days went solely towards paying off regulatory costs. These costs will only grow under the aggressive regulatory regime envisioned by the Obama Environmental Protection Agency (EPA). Coupled with the existing 77 day burden, proposed EPA regulations promise to increase the costs of electricity and household items for all Americans.

In a 2008 talk with the San Francisco Chronicle, then-Senator Obama boasted that his emission reduction plan would cause electricity prices to “necessarily skyrocket.” As President, Obama quickly pushed for higher energy prices through the American Clean Energy and Security Act of 2009, better known as “Cap and Trade.” While the Act did not pass the Senate, the 2009 Cost of Government Day Report estimated that Cap and Trade would have increased the Cost of Government by three additional days.

The failure of Cap and Trade to net legislative success inspired the Obama Administration to pivot to the EPA to pursue its environmental agenda. Enabled by unaccountable bureaucrats, the EPA enacts much more harm than the politically-conscious Congress could ever achieve.

Faithful to his promise to increase electricity costs, the Obama EPA proposed the Clean Air Transport Rule (CATR) and the Utility Maximum Available Control Technology (MACT) energy regulations. CATR and MACT require $184 billion in compliance costs according to National Economic Research Associates, Inc. The first year compliance costs are estimated to increase the Cost of Government by one and a half days in 2014.

The rules decrease economic performance too. Electricity costs will rise 11.5 percent and eliminate 1.44 million jobs between 2013 and 2020–destroying 4 jobs for every “green” job supposedly created. Throw in 17 percent higher demand for coal’s closest energy substitute, natural gas, and prices will rise at least 68 percent for all energy production in the United States. Higher electricity prices appear not only in the monthly utility bill, but in daily consumption–increased prices for relatively benign activity such as transportation or refrigeration will continue to hurt families and businesses as every energy dependent good sees a continued increase in price.

Unfortunately, the Obama EPA seems to have only scratched the surface of harm it intends to cause. Every five years the EPA updates the National Ambient Air Quality Standards (NAAQS). Some administrations tightened these standards; others loosened them during economic downturns. One harmful NAAQS heightened by the Obama EPA is for nitrogen oxide (NOx) and for “particulate matter with a diameter of 2.5 microns or less” (PM2.5 NAAQS). NOx and PM2.5 NAAQS are commonly referred to as ozone standards because when these particulates combine with hydrocarbons, ozone forms. By heightening the ozone standard to 60 parts per billion (ppb), it is estimated that the new ozone standard’s attainment will cost $1.013 trillion annually beginning in 2020. The more stringent regulation increases costs at breakneck pace because of the difficulty in conforming to an almost 50 percent more rigid standard. Achieving the decrease in ppb is similar to searching for fewer needles in a haystack; continual tightening of the ppb standard narrows the amount of particulates that can realistically be found. The ozone standard will single-handedly add an additional 18 days to Cost of Government Day projections in 2020.

Rapidly rising costs have defined the EPA since its formation. A 2008 study by the Mercatus Center found a clear upward trend in costs per statistical life saved by environmental regulations. After picking certain low-hanging fruit at a “low cost” of $6.1 million per life saved, regulations became progressively less cost-effective until costs per life supposedly saved were in the billions. The study concludes: “If the EPA Administrator continues to be unable to consider costs in setting NAAQS, then society will eventually be made worse off, if that has not occurred already.”

Prior to the EPA’s emergence in 1970, environmental air quality improved while other values of wellbeing were balanced. Between the 1940s and the 1970s the United States achieved higher standards of living and eliminated parasitic diseases while air pollutants such as sulfur dioxide and carbon monoxide plummeted. Society was bettered by the market’s integration of new technology that reduced emissions; regulators did not exist.

Yet the EPA continues to narrowly focus upon environmental quality as a complete measure of human wellbeing rather than incorporating the true costs of the economic damage caused by it regulatory prerogatives. Certain economic growth is foregone in the form of less disposable income among consumers and reduced production under restrictive environmental regulation. For example, the ozone standard is expected to destroy an additional $677 billion in wealth in 2020 in addition to the trillion dollars of attainment costs. No measure of foregone economic growth is typically provided by EPA estimations; betraying, perhaps, the nature of the EPA’s true agenda.

One reason the EPA does not calculate the economic growth foregone is because the Clean Air Act exempts final regulatory rules from cost-benefit analysis.

The EPA ordains a specific threshold for pollutants and then periodically increases the measure as the agency deems appropriate. If an agency’s true objective is to improve total quality of life, it should at least be addressed by a broad index of human welfare measures including higher standards of living and employment. Instead, every EPA regulation increases the cost of government through higher compliance costs and a smaller economy, punishing businesses and consumers for crimes they haven’t committed. The regulatory Cost of Government Day will continue to grow as long as the EPA and other executive agencies are encouraged to regulate, rather than respect, the engines of prosperity in the American free market.