Center for Progressive Reform

Crain and Crain are Back, and This Time They're Working for the National Association of Manufacturers

by James Goodwin

Having thoroughly tarnished their own reputations as well as that of the Small Business Administration’s (SBA) Office of Advocacy, economists W. Mark Crain and Nicole V. Crain are now preparing to make the big leap from thoroughly discredited academics to straight up shills for corporate lobbyists working to undermine public protections. The National Association of Manufacturers (NAM), an industry trade group that vehemently opposes such policies as cleaning up air pollution and improving worker safety, yesterday announced that it will release a report tomorrow, prepared by the Crains, that purports to measure the “annual cost of federal regulations.” That’s essentially what the Crains have been claiming to do for the Office of Advocacy until now, so it’s good news that at least it won’t be taxpayer money that’s footing the bill for their slanted research this time.

Just to review the bidding, in 2010, the SBA Office of Advocacy rather infamously sponsored a similar report by the Crains. The key finding of the 2010 Crain and Crain report, which antiregulatory members of Congress and allied business groups and advocacy organizations have wasted little opportunity to cite, purported to find that the total costs of federal regulation in 2008 was $1.75 trillion.

There were big problems with the 2010 Crain and Crain report, however: The authors relied on such flawed methodologies and data in conducting their study that its findings were completely inaccurate and unreliable. To make matters worse, the Crains deliberately presented their findings in a way that seemed calculated to deceive anyone who read the report—namely, by deliberately omitting an estimate of regulatory benefits to which their estimate of costs could be compared. Thus, even if the report’s findings had some kernel of truth to them, the public would still be left with the misleading impression that federal regulations are an inevitable drain on society. The report pretends that the important advances that were brought about by regulations and that every American enjoys on a daily basis—from cleaner air to safer cars—either don’t exist or are worth nothing.

A 2011 CPR white paper documented the many shortcomings in the earlier Crain and Crain report. These include the fact that the Crains derived 70 percent of the total costs—nearly $1.2 trillion—through a shady manipulation of public opinion polling data regarding business leaders’ views on the regulatory climate in different countries. (The authors of the public opinion polling at the World Bank later strongly criticized the Crain and Crain report for its gross misuse of their polling data.) The SBA Office of Advocacy also employed a meaningless peer review process, which failed to correct this and the report’s many other methodological flaws.

Soon thereafter, other damning critiques of the 2010 Crain and Crain report followed, including from the Economic Policy Institute and the non-partisan Congressional Research Service. All of this negative publicity caused then-Administrator of the Office of Information and Regulatory Affairs Cass Sunstein to dismiss the report as “deeply flawed” and an “urban legend” in congressional testimony.

The Crains meanwhile have repeatedly failed to cooperate in any government investigations related to their 2010 report. They rejected a request from the Congressional Research Service to turn over the data they used in the model they developed based on the public opinion polling data. (See pages 10-11.) This prevented the Congressional Research Service from attempting to independently verify the Crains’ results. More recently, the Government Accountability Office (GAO), while conducting an audit of research that the SBA Office of Advocacy had sponsored in recent years, sought the same underlying data. Again, the Crains rejected their request. As the GAO put it: “However, the authors [the Crains] would not speak with us, stating that they were no longer contractually obligated to respond to our requests for information.” (See pages 14-15.)

Given the Crains’ track record for producing grist for the antiregulatory mill, it only makes sense that NAM has now tapped them to produce a new report on the costs of federal regulation. As it just so happens, NAM has an impressive track record of sponsoring highly flawed research that aligns with their antiregulatory views. Most recently, for example, NAM has sponsored a study that finds that the Environmental Protection Agency’s (EPA) pending regulation for controlling ozone pollution will “[r]educe U.S. GDP by $270 billion per year” and “[r]esult in 2.9 million fewer job equivalents per year on average.” These are remarkably precise numbers considering that no one has seen the rule yet, since the EPA is unlikely to release its proposal until this upcoming December. Even then a definitive estimate of the rule’s impacts will be impossible considering (1) that the rule could be different when it is finalized and (2) the rule’s ultimate costs will entirely depend on the implementation plans that states develop, which won’t take place for several more years. Undeterred, the NAM ozone study assumed what the ozone rule would look like when finalized and then assumed that the technology for meeting the rule did not exist. Instead, to forecast the costs of achieving these technology advances, NAM extrapolated from a completely unrelated regulatory program that had unusually high costs. The predictable result of all these unsubstantiated assumptions and extrapolations was an outrageously large cost estimate that has no relationship to reality.

We won’t know until tomorrow what methodology the Crains have employed for the NAM-sponsored report; for now, they are all keeping the study and its results close to their chest until the big release. What is clear is that the study must be viewed with a healthy dose of skepticism, given their history.

One thing we can know for sure, however, is that this new Crain and Crain report, as the one before it, is advocacy, not scholarship.

For NAM, the purpose isn’t to devise a methodology that accurately gauges the full impact of regulation — positive and negative — on the nation. It’s much simpler than that: NAM wants the Crains to produce a really big number for them, one that can be repeated, tweeted and retweeted, and otherwise spread far and wide. Whether it’s in any way accurate and fair is of no apparent concern to NAM or the Crains.The more audacious and terrifying those numbers are the better.

In short, what NAM bought when they contracted with the Crains is a report that is designed to advance a political talking point, rather than a valid policy discussion. And NAM is holding the highest hopes that the news media will be complicit in its goal to advance this political talking point by uncritically regurgitating the new report’s findings to their respective audiences. From there, allied corporate interest groups—such as the Chamber of Commerce and the National Federation of Independent Business—along with conservative members of Congress can add to the echo chamber, citing the new report and the various media outlets that have covered the report’s findings with impunity.

Don’t get me wrong, I hope the media covers the latest Crain and Crain report. I just hope that it actually reads beyond the news release, takes a look at the methodology and asks itself if it makes any sense, or if the Crains have once again cooked their numbers to achieve the desired result.