The White House claim that Obama-era regulations have cost $890 billion

Source: By Glenn Kessler, Washington Post • Posted: Thursday, February 23, 2017

“The resolution is a start of rolling back harmful Obama-era regulations, which have cost the American business consumers a staggering $890 billion, making our companies less competitive and even driving some of them out of business.”
—White House press secretary Sean Spicer, press briefing, Feb. 14, 2017

The White House spokesman, in speaking about a House resolution signed by President Trump to roll back regulations enacted in the closing months of the Obama administration, cited an interesting statistic — that “Obama-era regulations … have cost the American business consumers a staggering $890 billion.”

That seemed like a rather specific number, so we wanted to explore how valid it might be.

The Facts

A White House spokesman said Spicer got the figure from a calculation done by the American Action Forum, a right-leaning issue advocacy group run by Douglas Holtz-Eakin, a former director of the Congressional Budget Office.

Sam Batkins, AAF’s director of regulatory policy, wrote that “with a last-minute flourish of $24 billion in final regulatory costs in the last three weeks, the Obama Administration passed $890 billion in cumulative burdens.” He said that the George W. Bush administration averaged $42 billion in average annual final-rule costs, compared with $111 billion for President Barack Obama. Under Obama, the agencies with the biggest regulatory impact were the Environmental Protection Agency ($344 billion) and the Department of Energy ($194 billion).

These numbers are supposed to represent net present value estimates, Batkins said, based on the published costs during the Obama administration. “Some of those regulations have been delayed by courts or the administration and have not imposed costs, but it’s just a measure of what regulators publish in the Federal Register,” he said.

On its website, the AAF has a nifty interactive feature called the Regulation Rodeo, which provides links to the costs and benefits of every rule cited. We used this to spot-check how the AAF calculated its numbers. Whenever possible, AAF used the net present value provided by the administration, but otherwise it would do its own calculation based on the range of cost estimates provided.

For instance, a Renewable Fuel Standard Program rule published in 2015 listed its annual costs as “$203 to $240 million in 2015 and $480 to $1,182 million in 2016.” The AAF listed the total cost as $1.4 billion ($240 million + $1.182 billion) which is the high end of the estimate. That’s the number that was part of the $890 billion. For the annual cost of the rule, AAF used a midpoint ($711 million). “We try to capture those ranges in our annual and total figures,” Batkins said.

Another nuance in the AAF data is that the estimated benefits of the rules clearly outweigh the costs. From AAF’s data:

Total Costs: $890 billion
Annual Costs: $139 billion
Annual Benefits: $458 billion

We realize that some experts have raised serious questions about how some of the benefits are calculated — and whether they are valid — but the fact remains that regulators who developed the cost estimates determined that the benefits would outweigh the costs.

Susan Dudley, director of the George Washington University Regulatory Studies Center and administrator of the Office of Information and Regulatory Affairs under Bush, said that “there aren’t glaring errors” in the AAF calculation, “but it suffers from the flaws all such estimates do. Those are ex ante estimates, rather than actual measured costs.”

Batkins noted that there is little research done to see whether an agency’s estimates actually came close to reality. “A comprehensive approach would conduct a retrospective review of everything during the Obama administration to determine actual costs imposed versus benefits generated, likely an impossible task,” he said. A 2015 retrospective study of environmental regulations found that most costs and benefits were often overestimated.

Dudley said any flaws in the estimates are even more likely in the agency calculations of the benefits. “I don’t think it’s wrong per se to speak only of the costs,” she said. “It’s equivalent to the fiscal budget, where we talk of the size of the budget while recognizing that those expenditures also have benefits.”

The Pinocchio Test

The Obama administration certainly imposed many regulations. But Spicer errs in suggesting that these costs have already been paid by consumers and businesses, when in fact some are in the future, and in claiming that this is an absolutely (“staggering”) solid figure. The number is derived from agency estimates, but in some cases, the high end of an estimate was used. Moreover, the estimates often have significant ranges — and it is unlikely that the actual costs of the rules will ever be determined.

Spicer would have been on more solid ground if he had said the regulations “were estimated to cost as much $890 billion,” since that would have signaled this was both an estimate and possibly a high-end one at that.

One Pinocchio