Fox & Friends has revived a report prepared by outside researchers for the Small Business Administration that has been criticized for using flawed methodology to claim the cost of regulations under President Obama is $1.7 trillion. Moreover, a recent report by the Office of Management and Budget revealed that the economic benefits of federal regulations significantly overshadowed the cost of the rules.
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Fox Uses Discredited Research To Attack Obama For Annual Cost Of Federal Regulations
Doocy: "The Estimated Annual Cost" For Federal Regulations Is "1.7 Trillion Dollars." On the September 12 edition of Fox & Friends, co-host Steve Doocy attacked President Obama for new federal regulations and added that the "estimated annual cost" is "1.7 trillion dollars" to fund the regulations:
STEVE DOOCY: Time now for your "News by the Numbers" on this Wednesday. First, 11,327; that's how many new pages of federal regulations have been added under President Obama. The estimated annual cost? 1.7 trillion dollars, for the regulations. [Fox News, Fox & Friends, 9/12/12]
Fox's Stats Echo CNSNews.com Article Claiming "The Annual Compliance Price For All Federal Regulations At $1.7 Trillion" In 2008. CNSNews.com cited a study commissioned by the Small Business Administration that estimated "the annual compliance price for all federal regulations at $1.7 trillion" in 2008:
The figures were released on Monday at the U.S. Chamber of Commerce in Washington, D.C., when the business federation held its annual Labor Day briefing on the state of the economy, obstacles to job creation and the burden of regulations on the labor market.
Randy Johnson, senior vice president of labor, immigration and employee benefits at the U.S. Chamber of Commerce, distributed a handout of a Congressional Research Service analysis of a 2008 study commissioned by the Small Business Administration that estimated the annual compliance price for all federal regulations at $1.7 trillion that year.
Seventy percent of the regulations were economic, accounting for $1.236 trillion of the annual cost. The other regulations were, in order of cost, environment regulations ($281 billion), tax compliance ($160 billion) and occupational safety and health and homeland security ($75 billion). [CNSNews.com, 9/10/12]
SBA Report Claimed "Annual Cost Of Federal Regulations" Was "$1.75 Trillion In 2008." CNSNews.com cited a 2010 report conducted for the Small Business Administration, Office of Advocacy by Nicole V. Crain and W. Mark Crain of Lafayette College, that claimed "[t]he annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008":
The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008. Had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008. [Small Business Administration, September 2010]
But The Study Has Been Criticized For Its Flawed Methodology And For Cherry-Picking Data
CRS: SBA Demonstrated That Researchers Cherry-Picked Data, Ignored Economic Benefits Of Regulations, And Used "Inherently Flawed" Methodology. The Congressional Research Service analyzed the Crain and Crain study and noted that critics -- including one of the authors whose index was used in the paper -- have pointed out that the study relied on outdated data, did not take into account the economic benefits of regulations, used invalid measures, utilized what OMB called an "inherently flawed" approach, and cherry-picked the highest cost estimates of regulations. Crain and Crain themselves made clear that their report was "not meant to be a decision-making tool for lawmakers or federal regulatory agencies." [Congressional Research Service, 4/6/11]
CPR: SBA Study Used "Flimsy" And "Crude" Data. The Center for Progressive Reform -- in an analysis cited by the Congressional Research Service -- criticized the study's lack of transparency and condemned Crain and Crain for using "crude" data:
The report's estimate of "economic regulatory" costs--financial regulations, for example--which account for 70 percent of the total regulatory costs, is not based on actual cost estimates. Instead, this estimate is based on the results of public opinion polling concerning the business climate of countries that has been collected in a World Bank report. The authors of the World Bank report warn that its results should not be used for exactly the type of extrapolations made by Crain and Crain, because their underlying data are too crude. Crain and Crain nevertheless enter the World Bank data into a formula, which they appear to have created out of whole cloth, that purports to describe a relationship between a country's regulatory stringency and its Gross Domestic Product (GDP). OMB has repeatedly warned against trying to reduce the complex relationship between these two concepts to such simplistic terms, yet this is precisely what Crain and Crain do. [Center for Progressive Reform, February 2011]
EPI: SBA Report's Methodology Is So Flawed That It "Should Not Be Used" "As A Valid Measure Of The Costs Of Regulation." The Economic Policy Institute reviewed the Crain and Crain study and concluded that "the original Crain and Crain results are driven by a combination of poor data, and a flawed empirical approach" and that the report's estimated cost of regulations "should not be used either as a valid measure of the costs of regulation or as a guide for policy." [Economic Policy Institute, 7/19/11]
Furthermore, OMB Report Shows Annual Benefits Of Regulations Overshadow The Costs
OMB Report Shows Regulations Benefits Are Significantly Greater Than Their Costs. The Office of Management and Budget (OMB) prepared a report for Congress on the Benefits and Costs of Federal Regulations. The report is a "10-year aggregate of annual benefits and costs of regulations rules." The OMB report shows that the estimated total annual benefits of regulations for federal agencies was between $141 billion to $700.6 billion compared to the estimated $43.3 billion to $67.3 billion in costs from October 1, 2001 - September 30, 2011. They also explain that "[o]f these OMB-reviewed rules, 531 are considered major rules, primarily as a result of their anticipated impact on the economy (i.e., estimated benefits or costs were in excess of $100 million in at least one year)." A graph from the report shows that "major rules" benefits were greater than their cost every year:
[Office of Management and Budget, March 2012]