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Why the Axed Ozone Regulations Would Have Created Jobs

  • by
  • September 6, 2011
  • 12:00 pm
Why the Axed Ozone Regulations Would Have Created Jobs

One central theme in conservative orthodoxy is that regulations are bad for business — and bad for jobs. A central theme in Barack Obama’s presidency is that he will do exactly what conservatives want, lest they call him mean names. It was therefore sadly unsurprising when last week he cancelled plans to bring the EPA’s outdated standards up to the minimum health standard for the pollutant ozone.

That this was a terrible move for Obama and the nation has already been parsed out pretty thoroughly. These regulations, which would have tightened the National Ambient Air Quality Standards, would have reduced the incidence of killers like asthma throughout the country. For Obama, it has alienated him from a core constituency of environmentalists, conservationists and people who generally do not enjoy smog, who had previously supported him.

Even more puzzling for Obama, though, is that many economists are arguing that the EPA regulations would have created jobs, which is ostensibly Obama’s biggest goal right now. Even in non-recession conditions, industry claims about job losses have been greatly overblown. The New York Times reported today that previous regulations (that industry insiders predicted would cost tens of thousands of jobs) actually “had been a modest net creator of jobs through industry spending on technology to comply with it.” These statements bolster the argument made by economists that conservative cost-benefit analyses show that ozone reduction would significantly improve the welfare of people living in the US, no matter what†dastardly†pronouncements industry insiders make.

Some economists are arguing that given the current threat of a double dip recession, these public benefits — namely job creation — would have been even more pronounced in the nixed ozone regulation. According to the basic macroeconomic IS-LM model, in a recession the problem is that there is insufficient demand. Basically, because people, businesses and the government are not buying enough, businesses cut production, and jobs along with it. Firms, instead of investing their profits,†just stockpile cash for a day when demand picks up again. The trick to recovery is boosting demand in a way that leads firms to hire more people, thus giving previously unemployed workers disposable income that, in turn, increases their demand for goods.

In light of this economic model, many economists and activists are arguing that the conservative complaint of ozone standards — that it makes businesses spend money — makes absolutely no sense. As Nobel Prize-winning economist Paul Krugman writes on his blog: “it would have forced firms to spend on upgrading or replacing equipment, helping to boost demand. Yes, it would have cost money ó but thatís the point! And with corporations sitting on lots of idle cash, the money spent would not, to any significant extent, come at the expense of other investment.”

Krugman is not alone in this view.†Joe Romm of Think Progress pointed out that “the standard would not have any noticeable negative impact on the economy and, if anything, would have driven investment and innovation even in the short term.” Given that investment is an important part of the demand, this would have increased economic activity, creating jobs and sparking economic growth. Especially since businesses have huge cash reserves – in the trillions — this investment would have come out of nowhere, and wouldn’t have been redirected from anything else, meaning it would have represented real growth.

According to these standards, by the economic view of the situation, Obama passed up on a policy win-win that would have simultaneously improved public health and stimulated economic growth. Looking forward to his jobs speech on Thursday, the best the American people can hope for is that he will learn from his mistake on ozone.

Related Stories:

Obama Retreats on Ozone Rules

No New Jobs Created in August

College Students Back to School But Will They Find Jobs?

Read more: , , , , , , , , ,

Photo credit: jonny goldstein's Flickr stream.

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36 comments

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2:14AM PDT on Sep 28, 2011

Another Bad decision by sold out Politicians!

8:36PM PDT on Sep 7, 2011

What economist is Obama consulting with, a member of the tea party? I don't understand
how he could make such a bad decision on a policy that effects so many people's health and that would have been a boost to the economy. It seems like he is making many bad decisions lately that have been quite costly to our environment and many Americans too, because he is afraid to stand up to the conservatives or does he have a real strong leaning toward the right? He has certainly deserted his base on many important issues and his actions as president certainly seem to have veered in a much different direction than his campaign speeches. A real disappointment!

3:34PM PDT on Sep 7, 2011

This decision will create jobs- in the areas of health care and funeral services.

3:21PM PDT on Sep 7, 2011

The science is not settled, just the pay checks.

The Other Climate Theory
Al Gore won't hear it, but heavenly bodies might be driving long-term weather trends.

http://online.wsj.com/article/SB10001424053111904537404576554750502443800.html?mod=WSJ_hp_mostpop_read

How foolish are we going to feel when we figure out the lies of the last 20 years?

2:22PM PDT on Sep 7, 2011

Corporations are sitting on big money -- they are not reinvesting it. Cleaning up their smokestacks would force them to reinvest some money, save 12,000 lives, save money for health care expenses for many more people, and put people to work. It would have been a win, win, win, win.

Instead we have another lose for Obama.

1:17PM PDT on Sep 7, 2011

I would bet this will have no effect whatsoever on how the congress responds to him. They will say things like its nice first step But not enough. Its NEVER enough.

His concession will of course be ignored and no policies will come any easier than they have.

12:25PM PDT on Sep 7, 2011

hmmm

11:39AM PDT on Sep 7, 2011

Jobs creation is important, yeah, but what about people's health and climate change? We could have millions of new jobs created, but allowing corporations to continue polluting is going to cost us a lot more in healthcare and quality of life issues. Climate change deniers aside, our pollution could destroy life on earth as we know it! Where is the change Obama promised us???

11:28AM PDT on Sep 7, 2011

You know, sometimes these polls are so ridiculous, I feel like an idiot voting. OF COURSE OBAMA SHOULDN'T CUT REGULATIONS.
But trying to get through to Obama is like talking to a post. Apparently he doesn't read his ratings either, he just goes on smiling and waving at people.
Is he the one who just doesn't get it, or are his advisors fools or closet Republicans? The more Obama doesn't do and the more I hear about the Republican the more discouraged I become about 2012.

11:20AM PDT on Sep 7, 2011

There is no way I can every vote for Obama in good conscience again. How many times do we have to be sold out before we wake up?

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