All posts by RegsTalk

This is the official blog of the Coalition for Sensible Safeguards, an alliance of consumer, small business, labor, scientific, research, good government, faith, community, health, environmental, and public interest groups, as well as concerned individuals, joined in the belief that our country’s system of regulatory safeguards provides a stable framework that secures our quality of life and paves the way for a sound economy that benefits everyone.

Quick Thoughts About NAM’s Hyperbolic Report on Smog

by Frank O’Donnell, President, Clean Air Watch
I know few of us are thinking about smog on a day like this. But I see that the good people of NAM are – out with yet another hyperbolic report about the alleged impact of cleaning up the air. http://www.nam.org/ozone/

Power Plant

As you can see, NAM has produced a very florid map purporting to show areas of the country that would be out of compliance with an ozone standard of 65 parts per billion, down from the current level of 75. (As I am sure you know, this is the most extreme outcome of EPA’s proposal, which was a range of 65-70).

But this map appears to be based on old information – data from 2011-2013. It apparently does not factor in one basic reality – that the air will be cleaner a decade from now than it is today because of various in-the-works pollution controls such as the Tier 3 clean-car, clean-gasoline standards.

EPA’s own projections conclude that outside California, only 9 counties in the entire country would be out of compliance with a standard of 70 in 2025, and that an additional 59 counties would fall short of a 65 standard. http://www.epa.gov/glo/pdfs/20141126-2025datatable.pdf

By the way, I believe many if not most of these counties would meet a standard of 65 if EPA adopted tougher standards to reduce smog-forming nitrogen oxides from new big-rig trucks. California is looking at exactly such a strategy. (Parts of California might not have to meet a new standard until as late as 2037.)

Another huge flaw in NAM’s logic: the business lobby contends that tougher air quality standards equate to “no growth.” All you have to do refute this notion is look at the facts:

IF NAM were correct, there would be “no growth” today in current dirty-air areas such as Texas and California. I offer for your consideration the most recent data on economic growth from the U.S. Department of Commerce http://1.usa.gov/1MUYZlf Growth was very high in such “nonattainment” states as Texas – and was pretty strong even in California!!

Perhaps NAM has decided to appropriate a line from Groucho Marx: “Are you going to believe me, or what you see with your own eyes?” http://quotations.about.com/od/funnymovieandtvquotes/a/grouchomarx1.htm

Originally posted here.

Industry-Backed Study Exaggerates Regulatory Costs, Ignores Benefits

What are the costs and benefits of the safeguards that protect Americans from big polluters, predatory lenders and junk food giants?

It’s not an unusual question, but you won’t get a fair answer in a new report published this morning by the American Action Forum (AAF) – a front group for corporate interests headed by former Bush administration officials. The report purports to provide the cost of all regulations, proposed and final, issued during 2014.

As has been the case with previous AAF reports, this one focuses exclusively on costs – leaving out both the quantifiable and non-quantifiable benefits of the rules and regulations they considered.

Just look at the White House’s new Clean Power Plan to see why it’s wrong to ignore the benefits of safeguards. Cleaning up our nation’s power plants would cost less than $9 billion, but could yield more than $90 billion in health and environmental benefits – preventing more than 6,000 premature deaths and as many as 150,000 asthma attacks annually.

You’d think industry and their well-paid spokesmen would understand the concept of “return on investment,” but apparently not when it comes to our children and families.

History has shown that regulations (once implemented) usually cost far less than the estimates AAF uses. That’s because those estimates are based on exaggerated industry figures, ignore flexibilities built into the regulations and fail to account for technological innovations that reduce costs.

Indeed, AAF’s report is misleading from the very first line. It claims to have found $16.9 billion in costs from final rules issued in 2014. But its $181 billion total for proposed and final rules issued last year in fact includes rules issued in all previous years of the Obama administration – assuming that the annual costs of previous rules just continue in perpetuity. That assumption is plainly false.

And so are the group’s claims about the effects on our economy. Despite the doom and gloom forecasts in AAF’s report, the past year has seen outstanding job growth and rising consumer confidence – exactly the opposite of what AAF predicted.

If this report demonstrates anything, it’s that some people know the cost of everything and the value of nothing.

The Benefits of Public Protections: Ten Rules That Save Lives and Protect the Environment

benefitsreport

Protecting the public from harmful products and services is an important role of the American government. But regulators struggle to achieve this goal as they encounter relentless push-back from industry lobbyists trying to weaken or kill rules. Most media coverage of public protections focuses on Industry complaints about the cost of new standards (without any acknowledgment of the benefits) or devastating stories of consumer deaths resulting from a lack of regulation. Without a positive narrative, we forget about the incredible quality of life that effective safeguards afford the American public.

To draw attention back to the health, environmental and worker safety benefits we reap from government safeguards, the Center for Effective Government has released a report on 10 rules that will save over 10,000 lives and prevent 300,000 cases of disease, illness or injury each year.

The rules are:
1. Occupational Exposure to Respirable Crystalline Sillica
2. Federal Motor Vehicle Safety Standards, Ejection Mitigation
3. Federal Motor Vehicle Safety Standards, Electronic Stability Control Systems for Heavy Vehicles
4. Nutrition Labeling of Single-Ingredient Products and Ground or Chopped Meat and Poultry Products
5. Prevention of Salmonella Enteritidis in Shell Eggs During Production, Storage, and Transportation
6. National Ambient Air Quality Standards for Particulate Matter
7. Mercury and Toxics Standards
8. Control of Air Pollution from Motor Vehicles: Tier 3 Motor Vehicle Emission and Fuel Standards
9. Identification and Listing of Special Wastes; Disposal of Coal Combustion Residuals from Electric Utilities
10. Effluent Limitations Guidelines and Standards for the Steam Electric Power Generating Point Source Category

Using the traditional, regulatory methodology of benefit-cost analysis, the report shows that these 10 rules have monetary social benefits that far exceed their estimated compliance costs. In addition, three of the rules are likely to create new jobs.

This just goes to show that the sky-is-falling, anti-regulatory rhetoric of industry and its allies in Congress is false. Standards and safeguards can spur innovation and even create entire new industries. Lost consumer confidence and shaky financial markets are the real job killers. We need standards and safeguards so that families who work hard and play by the rules can build a better future for themselves and their children.

The Truth in Settlements Act: A Good First Step toward Ending the Tax Deduction for Corporate Fines and Settlements

truth-in-settlements
(This post originally appeared on The Fine Print, the blog of the Center for Effective Government)
By Scott Klinger | July 29, 2014

*Note: The Truth in Settlements Act was reported out of the Homeland Security and Government Affairs Committee on Wednesday.

When corporations commit fraud or have an accident that threatens human health or damages the environment, they pay a fine or settlement to resolve legal claims. These costs can run into the billions of dollars. In general, out-of-court settlements paid to a government for punitive damages (those designed to punish corporations for lax business practices that cause public harm) cannot be deducted from a firm’s taxes.  However, if settlements are paid to private parties or to a governmental agency as “compensation” to offset costs incurred in clean-up or during an investigation and prosecution, these fees may be written off as tax deductions. This essentially reduces costs of the settlement by one third.

In many cases, the terms of the settlement are kept secret. Recently, a few government agencies issued clear public statements on tax deductibility when announcing settlements. Upon announcing a $4 billion settlement with BP resolving criminal charges that the oil giant lied about the rate of oil leaking from its Deepwater Horizon drilling platform, a Department of Justice spokesman, when asked whether the settlement was deductible, replied, “They are not. The Attorney General was very clear that nothing in the criminal settlement could be tax deductible…” But not all agencies are as clear as this when they announce fines or settlements for corporate incidents and misdeeds.

A new bipartisan bill, The Truth in Settlements Act (S. 1898), will be marked up on Wednesday by the Senate Homeland Security and Governmental Affairs Committee. The bill, sponsored by Sens. Elizabeth Warren (D-MA) and Tom Coburn (R-OK), would require federal agencies to provide certain information about all fines and settlements over $1 million.  The agencies would have to disclose information on the tax benefits associated with the settlement. If settlements are deemed confidential, the agency would be required to explain why. The legislation also requires public corporations to disclose in their SEC filings any tax deductions they receive from fines or settlements with government agencies.

The disclosures required by the Truth in Settlements Act would allow citizens and taxpayers to understand the real costs of the fines and penalties corporations pay for misbehaving and to judge for themselves whether they think the punishment fits the misdeed.

We need to believe in a regulatory system that works, and to do that, we need to believe that bad actors will be held appropriately accountable. The Truth in Settlements Act is a good first step toward ensuring that fines and penalties truly deter bad corporate behavior. When corporations break the law or violate regulations, hurting the public or damaging the environment, the American people pay a price. Shareholders, not taxpayers, should pick up the full tab for damage done by corporations and for penalties imposed for illegal behavior.

We urge the Homeland Security and Governmental Affairs Committee to pass the Truth in Settlements Act and hope the entire Senate adopts this important reform before this Congress ends in December.

For more information on this issue, we recommend: Subsidizing Bad Business: How Corporate Legal Settlements for Harming the Public Become Lucrative Tax Write Offs, with Recommendations for Reform, published by the U.S. PIRG Education Fund in January 2014.

Four Years After Dodd-Frank: A Lot to Celebrate, A Lot More Work to Be Done

Dodd-Frank2

Six years ago in September, following a decade of under-regulation, reckless Wall Street practices crashed our economy. Two years later, in July 2010, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since then, the process of turning the financial reform legislation into implementable law has frequently been stalled. Armies of well-financed lobbyists representing banks and industry interests have labored to water down and delay the rules, but still, consumers are reaping huge benefits from the legislation. These accomplishments are exemplary of the way our regulatory system should work to hold corporations accountable and protect the public from harm, but they are only the first steps on a longer journey to financial security and regulatory transparency.

Without a doubt, the Consumer Financial Protection Bureau (CFPB), first envisioned by then-Professor Elizabeth Warren, has had an incredible impact on the ability of consumers to make informed decisions about financial goods and services. Since beginning to accept consumer complaints in July 2011, the CFPB has now reviewed more than 395,000 complaints on products ranging from credit cards to mortgages to student loans. This public record of complaints, along with educational tools and programs, has greatly reduced the types of predatory lending and misleading advertising that sent many consumers into debt leading up to the 2008 financial crisis.

However, powerful industry interests have taken advantage of the fact that the other regulators tasked with implementing the law, the Securities Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), must rely on congressional appropriations for their funding. By lobbying Congress to starve the agencies of funds and resources, Wall Street representatives have succeeded in delaying many of the rules mandated by Dodd-Frank. To date, 208 of the 398 rules associated with the initial legislation have been finalized, and of the 190 rules waiting to be implemented, 96 requirements have yet to even be proposed.

These rules are critical for protecting the country from a similar financial crisis. Here are the top three that consumers should know and care about:

1. Under Dodd-Frank, the SEC has the authority to prevent professional brokers from misleading consumers. As it stands today, brokers acting as financial advisers can make bad investment recommendations to unsuspecting consumers for their own profit. This rule has been stalled repeatedly by fierce opposition from industry representatives who benefit from these exploitive practices.

2. Another important provision under Dodd-Frank addresses executive compensation. Many of the highest-paid CEOs in the finance industry needed to be bailed out after the 2008 financial crash. The SEC has the authority to require companies to report their CEOs’ compensation, as well as the median compensation of all other employees, allowing the public to compare these values and make judgments about the type of company they are supporting through their investment. This is necessary to bring more attention and transparency to issues like income inequality and social mobility that consumers have a right to know about.

3. Although Dodd-Frank allows the SEC to more closely regulate credit ratings agencies, little has changed since the 2008 financial crash. These are the very agencies that gave toxic mortgage securities triple-A ratings, fueling the housing bubble and leaving the economy in disarray after the crash. The SEC can and should prevent the ratings agencies from getting paid by the very companies whose securities they are assessing.

Financial reform garnered widespread attention from millions of Americans of all backgrounds and political identities – particularly those who lost their jobs and homes because of Wall Street greed. It is this unprecedented support from the public that allowed congressional leaders and champions of reform to fight hard to pass the Dodd-Frank legislation. We must continue that fight to bring security to our markets by promoting greater transparency, holding offenders of the law accountable, and pushing regulators to fully implement Dodd-Frank. This is just one example of the way regulation of all kinds ensures that families who work hard and play by the rules can build a better future for themselves and their children.

Hide No Harm Act: We Need Corporate Accountability

A new piece of legislation introduced this week by Sen. Richard Blumenthal (D-CT) would ensure that corporate executives who knowingly market life-threatening products or continue unsafe business practices are held criminally responsible when people die or are injured.

Under the Hide No Harm Act, key corporate managers will be required by law to report serious dangers to relevant government agencies, employees and affected members of the public. No longer will corporate executives be able to walk away from their crimes with a light fine. When individuals knowingly allow harmful products and practices to endanger the lives of workers and consumers, the penalties will be appropriate and proportionate: heavy fines and jail time.

This bill comes in the devastating wake of the many preventable deaths and injuries caused by General Motors’ vehicle ignition defects. Although GM officials knew about the defects for as long as 13 years before issuing a recall on their cars, no one is going to jail. Unfortunately, this is just one recent example in a long list of cases of corporate malfeasance leading to unnecessary death:

  • Toyota intentionally concealed information from the public about defects in their automobiles that caused them to accelerate even as drivers were trying to slow them down, leading to at least five deaths and resulting in no criminal penalties for individual Toyota executives.
  • Guidant, a company that manufacturers cardiovascular medical products, allowed 37,000 malfunctioning heart defibrillators to be sold, even after executives learned of deaths caused by the short-circuiting of their devices.
  • Second Chance Body Armor, a bulletproof vest manufacturer, sold defective vests to hundreds of thousands of law enforcement and military personnel, fully aware that the Zylon material used in the product was degrading and therefore penetrable, meaning bullets could pass through them.

These examples demonstrate the need for legislation that sets serious consequences for corporate executives who place the value of company profits over human lives. The American public and the families of these victims deserve justice. “No money will ever bring my wife’s daughter back,” said Ken Rimer, the stepfather of a young woman who was killed in a car crash after her air bags failed to deploy due to the ignition switch failure. But “unless there’s a consequence for them doing something wrong, what’s going to stop them from doing something wrong again?”

White House Cozies up to Big Tobacco

White House changes to a recent proposal by the Food and Drug Administration (FDA) have weakened draft health and safety standards related to tobacco products and have more broadly paved the way for watering down consumer protection in other sectors.

Nestled inside the White House is a little-known, small office with extraordinary power over our government agencies. This office, known as the Office of Information and Regulatory Affairs (OIRA), has routinely contributed to the delay and weakening of health, safety and financial protections. Operating quietly with little media attention, OIRA has struck again – this time to weaken a recent FDA proposal to regulate electronic cigarettes, cigars and pipe tobacco.

The FDA’s original draft proposal contained an extensive section on the health benefits from reduced smoking, including the number of lives that would be saved and the value of those additional lives. Following review by OIRA, this section was deleted and edits were made that weakened language about the FDA’s health concerns over e-cigarettes. OIRA also altered language about restriction of non-“face to face” sales, which will prevent the FDA from regulating online sales of tobacco products, a platform that is used by children because of the difficulty in verifying the age of the person making the purchases. Even worse, in a blatant display of White House acquiescence to industry interests, “premium cigars” could be exempt from regulation altogether.

As if this weakened rule wasn’t bad enough, in a preliminary assessment of the benefits of regulating e-cigarettes, OIRA included a 70 percent discount to account for the “lost pleasure” that would result from reductions in tobacco use. In other words, if the health benefits of this new regulation were estimated to be $1 billion, they would be reduced by 70 percent to just $300 million because people will “lose pleasure” from smoking fewer cigarettes.

Cost-benefit analysis has long been a tool used by industry to weaken, delay or prevent the imposition of new regulation by government agencies. U.S. agencies routinely determine the potential costs and benefits of their rules and, in certain instances, are required to prove that the benefits of a proposed rule outweigh the costs of its implementation. While this may seem like a sensible request at face value, its real application has been devastating for public protection: costs of compliance are often overstated by industry, while non-quantifiable societal benefits are undervalued. How do we quantify the value of a saved IQ point in children not exposed to lead, or the value of a measure of increased privacy for online consumers?

Not only will this “lost pleasure” approach make it much more difficult for government agencies to regulate tobacco, but this principle also could be applied to other sectors to weaken protections against trans-fat-loaded fast food, alcohol consumption and even reckless driving. Some people find it fun to drive really fast on the highway, but does that mean we should deduct a measure of “lost pleasure” from the benefits we derive from speeding laws the next time state legislatures propose traffic rules? “It will undermine anything they try to do about anything,” said Dr. Stanton Glantz, a tobacco control expert and professor of medicine at the University of California, San Francisco.

Even more complicating is the fact that tobacco products contain highly addictive nicotine. Consumer surplus, the economic principle for which this “lost pleasure” discount is based, relies on the assumption that consumers will act rationally in determining whether or not to purchase a product. Highly addictive substances and practices make this rational thinking next to impossible – just think back to World War II, when desperate Europeans traded their scarce food rations on the black market for cigarettes!

Jonathan Gruber, a health economist at MIT whose work was cited by the FDA as a source for their 70 percent calculation, thought the choice to account for consumer surplus in this instance was wrong. “I think this is really a misapplication of my work.”
When corporate interests override the public interest and dominate the policymaking process, government agencies can’t do their job to safeguard public health. The U.S. needs a regulatory system that puts American families, children and consumers first. Let the FDA know what you think about its proposal as it accepts public comment through Aug. 8.