Saturday, September 3, 2011

Budget Smog

A recent graph from the Congressional Budget Office (below) puts the US budget situation in an interesting light. Once you take the cost of running multiple wars off the books (the decade long decline in the green line) the spending side of the budget is pretty much in a steady state -- except for the cost of healthcare, which is rising dramatically.

So, you would think that environmental regulations that would limit air pollution and save billions in healthcare costs would be a good idea. Instead, as described in detail in Obama pulls back proposed smog standards in victory for business, the Obama administration has crumpled in the face of political pressure. Afraid of being labeled as responsible for "job killing regulation" during a period of high unemployment, the move effectively leaves in place 1997 era standards which even the Bush administration  admitted were lax and out of date. (The 1997 regulations were based on science showing that low-level ozone and other atmospheric pollutants contributed to various lung disease but not to death. Subsequent research has unequivocally tied such pollutants to both disease and death.)

Significantly, the regulations are, from a macro-economic perspective, effectively neutral. They would cost industry somewhere between $19 and 90 billion per year by 2020 (depending on the precise standard implemented) and would result in between $13 and 100 billion in healthcare savings. In other words, the total level of economic activity would remain the same, there would just be a shift from government expenditures on healthcare to private sector expenditures on pollution control.

The ozone standard is one of several air-quality rules the administration is in the process of adopting or has already finalized that are under attack. Others include new limits on mercury and air toxins, greenhouse gases from power plants, and a range of emissions from industrial boilers, oil refineries, cement plants and other sources.
This was the easy one. So the likelihood of action on the others is even less. Inaction on smog turns the big club of unilateral action on carbon emissions that the US courts gave the EPA when they ruled carbon was a pollutant into a plush toy. It is looking more and more like US environmental policy is another casualty of the divisive political culture. Return to slow and costly litigation in the courts may be the necessary path

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