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John Graham’s Distortions: Study Was Used
By Him to Mislead Congress & the Media About
the Cost of Health, Safety and Environmental Regulation

John Graham is President Bush’s nominee to be Administrator of the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB). As OIRA Administrator, Graham would operate as the federal government’s regulatory gatekeeper, and have the authority to approve or deny new health, safety and environmental protections.

Graham has made it very clear throughout his career in academia and in appearances before Congress and the news media that he advocates for a heightened use of cost-benefit analysis when reviewing agency regulatory proposals. There are enormous biases and distortions with the use of cost-benefit analysis as employed by Graham that favor industry wishes over the needs of society to ensure safe workplaces, healthy communities and a clean environment.

The regulatory biases and distortions inherent in John Graham’s work, and his lack of candor with members of Congress, are evident in a study Graham co-authored, with graduate student Tammy Tengs, that purported to show that 60,000 additional lives could be saved annually if the nation invested in more "cost-effective" programs. Graham essentially accused the federal government of statistical murder. (See Tengs and Graham, "The Opportunity Costs of Haphazard Social Investments in Life-saving Programs," in Hahn (editor), Risks Costs and Lives Saved: Getting Better Results from Regulation, 1996).

The conclusions of the Tengs-Graham study, which was never peer reviewed, have been used over and over again by Graham and others to show the need for regulatory "reform" legislation that would make it much more difficult for federal agencies to promulgate new health, safety and environmental standards. For example, at a February 15, 1995 hearing before the Senate Governmental Affairs Committee, Graham stated:

That leads me to the theme of smarter regulation. We could reallocate resources, save more lives, do more for the environment. And here I would like to quote my student, Tammy Tengs’, recently graduated from Harvard and now on the Duke Medical School faculty. Her thesis did the following calculation. She looked at 200 Federal programs covering 20 different Federal agencies. She said if you could reallocate resources from the expensive ways of saving lives to the inexpensive ways of spending lives, we could save 60,000 lives per year in this country at no increased cost to the tax-payer, at no increased cost to the private sector. Smarter regulation using risk analysis. [emphasis added]

In addition, on February 2, 1995, Graham testified at a joint hearing before two Subcommittees of the House Committee on Commerce that, "if we reallocated current Federal risk protection dollars from little threats to big threats we could save 600,000 life years per year at no greater cost to government or the private sector.

This year, a scholarly critique of Graham’s work was finally produced by Professor Lisa Heinzerling, of the Georgetown University Law Center, and submitted to the Senate Governmental Affairs Committee in testimony regarding Graham’s nomination. For the complete testimony go to: http://www.citizen.org/congress/regulations/graham/heinzerling_testimony.html

Heinzerling establishes in her testimony that many of the cost-ineffective "programs" Graham considered were never implemented by any government body. According to Heinzerling, only 11 of the 90 environmental regulations considered by Graham and Tengs were ever promulgated by the government. However, Graham and Tengs considered dozens of these environmental programs as if they had in fact been implemented as a result of government mandates. Since many of these never-implemented environmental programs were concluded to be outrageously expensive by Tengs and Graham, the 60,000 lives figure is clearly meaningless as evidence that the current regulatory system is broken. However, in his career Graham has used this figure, over and over again, for just that purpose.

Heinzerling also establishes that Graham perpetuated and encouraged a misinterpretation of his own research data that wrongly concluded Graham's data show that actual federal regulations result in the "statistical murder" of 60,000 Americans every year. This is a misleading overstatement of the results of his studies, which in fact reviewed proposed but unimplemented programs, as well as medical interventions, which are not typically part of a federal program at all.

Moreover, Graham’s "statistical murder" hypothesis requires that money saved by regulation be available for other government programs, yet the industry compliance costs that are "saved" through de-regulating the environment or decreasing health or safety standards goes to company shareholders, not the government or public.

In his response to Professor Heinzerling, Graham has now acknowledged that some of the cost-ineffective "programs" he and Tengs considered were never approved by any government agency. In response to written, pre-hearing questions submitted by Senator Lieberman, Graham admitted that if "reallocations were allowed only within REGULATORY programs . . . the efficiency savings are much less than 60,000 lives." (emphasis in original)

Thus, the Graham study that purports to show the need for regulatory "reform," which has been cited dozens of times by the media and Members of Congress as evidence that such "reform" is needed, is essentially meaningless as an indictment of the current regulatory state. But it is an indictment of the type of bias and lack of objective review of the costs and benefits of regulations that Graham would bring to the OIRA Administrator job.

 



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