John Graham and Phony Numbers

As the nation’s regulatory gatekeeper, John Graham would use his position as OIRA Administrator to force federal agencies to place significantly more weight on the results of cost-benefit analysis. Unfortunately, Graham’s form of cost-benefit analysis systematically overstates the costs of regulation to industry. This overstatement occurs, in part, because federal agencies often have little alternative but to uncritically accept inflated industry cost estimates.

The most ambitious retrospective analysis of regulatory cost estimates ever undertaken bares this out. A 1995 congressional Office of Technology Assessment (OTA) report shows that the actual costs of many important regulations that protect worker safety cost industry much less than was originally estimated.

Because cost-benefit analysis systemically overestimates industry compliance costs, the safeguards listed below may not have survived a regulatory review by John Graham:

• In 1978, OSHA issued its Cotton Dust standard, which was estimated to cost industry $280.3 million (in 1982 dollars) annually. OTA estimated actual costs at only $82.8 million – 70% less.

• In 1987, OSHA issued its Formaldehyde standard where industry compliance costs were estimated to be $11.4 million (in 1987 dollars) annually. OTA estimated actual costs at only $6.0 million – almost 50% less.

• In 1974, OSHA issued its Vinyl Chloride standard, which was estimated to cost industry a total of $1 billion (in 1974 dollars). OTA estimated actual costs at only between $228 million to $278 million – 75% less.

• In 1978, OSHA issued a standard to protect workers from lead exposure, and the standard was estimated to cost $91 million (in 1976 dollars) in total capital spending. OTA estimated actual cumulative costs through 1994 at only $20 million (in 1992 dollars) – 79% less.

If the OTA had conducted a similar study of environmental regulations, the results would probably have been the same. To mitigate against the use of such phony numbers please vote against the Graham nomination.

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