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Sledgehammer Politics

Ruth Marcus on

A new report from the Institute for Policy Integrity at the New York University School of Law attempts to bring some economic rationality to the regulatory discourse -- however quixotic that might be in the current political environment, not to mention in a presidential election year.

The report is titled "The Regulatory Red Herring: The Role of Job Impact Analyses in Environmental Policy Debates." Yet somewhat surprisingly, Michael Livermore, the institute's executive director, does not oppose factoring job impact into the cost-benefit analysis. Rather, he argues for adopting a more sophisticated approach than the prevalent knuckleheaded assumption -- my words, not his -- that increased regulation inevitably results in fewer jobs.

If an employer's costs increase as the result of a regulation, Livermore notes, that is another way of saying that the employer has to hire workers to, say, install new technology while other employers hire workers to produce the new equipment.

In a healthy economy, the cost of layoffs should be transitory, as workers quickly find new jobs. In an economy like the current one, the impact of such layoffs may be more persistent -- but any new jobs created may be more significant since, in a soft labor market, otherwise unemployed workers may be hired.

Can these cross-cutting impacts be accurately measured in a dynamic economy? Perhaps more important for the current discourse, is it possible to have the jobs and regulation discussion without ignoring the inherent limitations of economic modeling?

"The jobs impact analysis is important and we should do it, but the way it's discussed now is completely wrong," Livermore told me.

 

First, he said, "we talk about the jobs impact on the one hand and the other impacts (such as health and safety improvements) on the other hand, and they're treated as apples and oranges." Instead, he said, "we need to integrate the jobs impact into the broader cost-benefit analysis."

Second, Livermore said, is a failure among those doing the analyzing to disclose the assumptions and limitations of their models -- and the willingness of politicians (and the media, for that matter) to treat the resulting figures as gospel rather than guesstimate.

"The real problem is the way they're used in the political back and forth," Livermore said. "They're used as sledgehammers to beat up the other side."

No surprise there. But a useful reminder at a time when the phrase job-killing has become mind-numbing.


Copyright 2012 Washington Post Writers Group

 

 

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