Last February, in a legislative proposal to reduce power plant emissions, the U.S. Environmental Protection Agency (EPA) suggested that the economic value of saving the elderly from early death caused by air pollution was less than that of saving healthy adults. Two cost-benefit analyses for the rule, known as the Clear Skies initiative, were presented by the agency. A base analysis without the so-called "senior discount" yielded benefits of $93 billion. But an alternative analysis in which this age-adjusted factor was applied produced a much lower benefit of just $11 billion, barely twice the cost of the program. According to Reece Rushing, a policy analyst with the Washington, D.C.-based public interest group OMB Watch, health-protective regulations may not be adopted if benefits appear low relative to cost.
The backlash against the senior discount was swift and severe. Advocacy groups, religious organizations, and critics including former EPA administrator Carol M. Browner blasted the agency, charging that it had undervalued aging Americans in its benefits calculations.
Under fire, the EPA withdrew the alternative analysis in May. But while the senior discount may have been shelved for now, cost-benefit analysis for environmental rule making under the Bush administration remains controversial.
At the core of this issue is the growing influence of the White House office with responsibility for cost-benefit review: the Office of Information and Regulatory Affairs (OIRA), within the Office of Management and Budget (OMB). Traditionally, OIRA has had fairly minimal interactions with submitting agencies as they prepare cost-benefit analyses. But under its current administrator, John Graham, OIRA has become intimately involved in all aspects of the cost-benefit process.
Stacking the Deck
Although his technical abilities are highly regarded Graham's relationship with environmentalists is complicated by his industry associations. Prior to taking the reins at OIRA in July 2001, Graham directed the Harvard University Center for Risk Analysis, an organization that applies cost-benefit research to health and environmental decision making. Nearly 60% of the center's budget during Graham's tenure was supplied by corporate sponsors, including chemical companies such as Monsanto and Union Carbide.
Today, Graham is among the most powerful environmental officials in the country: all health and environmental rules valued at $100 million or more cross his desk before they go into force. During the eight years of the Clinton administration, OIRA sent 16 rules back to agencies for rewriting. Graham sent back 19 rules (not all of which were environmental) during his first year alone.
OIRA's growing participation in the cost-benefit process has drawn mixed reactions from EPA officials. Some welcome the infusion of new science they say OIRA brings to the process. For instance, Al McGartland, director of the EPA National Center for Environmental Economics, suggests the collaborations foster innovation on new methods and approaches. But other officials say OIRA has become excessively intrusive. Critics also suggest that OIRA's involvement in the cost-benefit process itself undermines the office's ability to perform an objective review of the outcome, going against the purpose of having OMB as an independent review body.
In a further divergence from past practices, OIRA has also begun to critique the science behind proposed rules in addition to the economics assumptions. Once staffed mainly by economists and policy analysts, OIRA now also employs a variety of health and environmental scientists, present at Graham's request. Among them are Margo Schwab, an epidemiologist previously with the Johns Hopkins Bloomberg School of Public Health, and Nancy Beck, a toxicologist drawn from the EPA National Center for Environmental Assessment. "OIRA's investment in science and engineering has permitted us to ask more informed and penetrating questions about regulatory proposals," Graham says. …