What The Media Should Know About The Competitive Enterprise Institute's Regulation Report

Blog ››› ››› ALBERT KLEINE

As the Competitive Enterprise Institute (CEI) prepares to release its annual report on the cost of regulations, the media should be aware of the organization's documented and vested interest in attacking government regulations, as well as the report's flawed methodology and biased analysis.

According to a May 20 Wall Street Journal editorial, CEI plans to release its report on federal regulations for 2012, the cost of which CEI Vice President for Policy Wayne Crews estimates exceeded $1.8 trillion.

Conservative media will undoubtedly use the CEI's most recent report to criticize government regulation at large, and particularly the regulations enacted by President Obama.

Here are a few reasons why media should be wary of touting the CEI report.

CEI Has Been Funded By The Oil And Pharmaceutical Industry

The CEI's analysis of regulations, reported as being heavily focused on the alleged costs of Environmental Protection Agency actions and the Affordable Care Act, presents issues of objectivity considering the group's main sources of funding

According to a May 23, 2006, Washington Post article, CEI received the bulk of its donations from industries that seek to benefit from the activities of the group:

These promoters of capitalism don't really operate a commercial enterprise; like any think tank, CEI relies on donations from individuals, foundations and corporations. The most generous sponsors of last year's annual dinner at the Capital Hilton were the Alliance of Automobile Manufacturers, Exxon Mobil, the Pharmaceutical Research and Manufacturers of America, and Pfizer. Other contributors included General Motors, the American Petroleum Institute, the American Plastics Council, the Chlorine Chemistry Council and Arch Coal.

Indeed, Desmogblog.com provides a detailed review of the group's sources of funding, showing that it has deep ties with the fossil fuel industry.

CEI's Funding Background Affects Its Analysis

CEI staff make up part of the cast of media's "climate deniers."  On the PBS Frontline special "Climate of Doubt," CEI's director of energy and global warming policy Myron Ebell, commenting on the overwhelming evidence of anthropogenic climate change, stated: "We felt that if you concede the science is settled and that there's a consensus, you cannot -- the moral high ground has been ceded to the alarmists."

As Media Matters has previously noted, CEI's position on climate change -- a function of the interests of its fossil-fuel industry donors -- causes it to dispatch non-scientific "experts" to media outlets in an attempt to thwart any new regulations aimed at combating climate change.

CEI Systematically Ignores The Benefits Of Regulations

The purpose of the CEI report is to highlight the cost of regulations; however, in tallying up the total cost of the regulatory burden, CEI systematically ignores the economic benefits of regulation.

In an email to Media Matters, James Goodwin, a policy analyst at the Center for Progressive Reform, claimed that CEI's exclusion of the benefits of regulation is inherently misleading, hiding the positive effect that regulations have on the functioning of the market:

As we all know, this money is promoting the goals Congress intended: cleaner environment, safer workplaces, etc.  Moreover, it ignores the indirect economic benefits of regulatory compliance spending, which spurs economic activity (something our economy by and large is lacking).

Furthermore, Goodwin noted that CEI's history of framing of the cost of regulations and subsequent hiding of benefits as a "tax" is "obviously calculated to incite anger."

Regulations Have Been Shown To Have Little Negative Impact On The Economy

While right-wing media have repeatedly used reports on the costs of regulations to make sweeping claims about their impact on the overall economy, these claims lack supporting evidence.

According to the most recent Bureau of Labor Statistics data, government regulations led to a small share of layoffs. In the first quarter of 2013, only five layoff events were attributed to government regulations or intervention - roughly 0.5 percent of the 914 total layoff events. 

While conservatives may be quick to blame regulations for job losses, the BLS data also confirms what economists have repeatedly stated - that lack of demand, not government intervention, is the cause of weak labor market gains. "Business demand" was noted  as the number one reason for layoffs cited by businesses, accounting for more than 39 percent of all layoffs in the first quarter of 2013.

Even the conservative National Federation of Independent Business (NFIB) found that regulation has lagged far behind in the most important concerns of small business owners, particularly in the current economic climate. From the Economic Policy Institute:

EPI

Government Regulations Provide A Net Benefit To The Economy

While the CEI report does not tally the economic benefits of regulation, the Office of Management and Budget (OMB) releases an annual report that measures the total costs and benefits of major rules implemented. In the most recent report, OMB found that major rules have had a net positive benefit to the economy for the past 10 fiscal years:

OMB

The findings of the most recent OMB report are echoed in a February 23, 2011, Huffington Post column by Richard L. Revesz and Michael A. Livermore, both of the New York University School of Law. Discussing the impact of regulations, the authors claim that "one side of the balance sheet is often absent - the fact that regulations create significant economic benefits." Furthermore, they note that regulations that are too weak or lacking may impose a net cost on society:

Strong protections do cost businesses and taxpayers money, but when compared to the price of weak regulation, it turns out that they can be more than worthwhile. After giving them a closer look, regulations that might seem unaffordable are often bargains that avoid more serious monetary and social expenses.

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