The President's Panacea for Business Regs: The Cost-Benefit Ratio

NEW YORK -- Not content with having crafted a recovery plan that helped banks and financial services firms recover far more nicely than other folks, President Obama has reached out to the rest of the business community with a plan for all federal agencies to reexamine their regulations, the Washington Post reported.

Red tape stinks, of course. Just ask the hundreds of thousands of New Orleans citizens who had to jump, dance, and pirouette through federally-mandated hoops to even hope to qualify for compensation for the damage and destruction caused by the 2005 failure of the federal "hurricane protection system." And any federal agency, like any other organization, can benefit from a brisk and clear-headed review of its policies and regulations, clearing out the outdated and the unnecessary.

Buried in the Post story on this initiative, however, are these words that should set off warning bells:

Agencies "must consider costs and benefits and choose the least burdensome path."

This sounds so reasonable, so -- to use the current cliche, common sense -- that it might seem unobjectionable. Balance costs and benefits. It's objective. Almost, pardon the expression, scientific.

Unless you've had some experience with one federal agency that has long used "benefit-cost ratio" as a supposed guide to decision-making: the US Army Corps of Engineers. Take one example -- the Mississippi River-Gulf Outlet (MRGO), which the Corps built (over local and environmental objections in the 1950s), and which a federal judge has ruled (in a landmark case) was responsible for much of the 2005 flooding on the eastern side of New Orleans and all of St. Bernard Parish.

As outlined in the book Catastrophe in the Making by, among other authors, the late William Freudenberg, the Corps' practice in this case, as in many others, is to exaggerate, sometimes wildly, the supposed future economic benefits of a construction project. At other times, as when the Corps opposes the local community's preference for the so-called Option 2 plan for permanent improvements on the outfall canals whose walls failed catastrophically in 2005, the Corps is believed to exaggerate the costs of a project it doesn't want to build.

And, as documented in The Big Uneasy, the Corps is also known to claim that emergency conditions prevented it from conducting benefit-cost analyses when, in fact, a Corps whistleblower pointed to documented evidence that precisely such an analysis existed.

The Corps may be unique among federal agencies in its willingness and ability to, let's be gentle, massage the benefit-cost analysis process. Or it may be typical. But any such analysis of regulations, especially when it concludes that safety regulations pose excessive burdens on businesses, should be taken with at least the minimum daily requirement of sodium chloride.