Sometimes, ex ante estimates seriously understate actual regulatory compliance expenditures. This can occur because analysts are overly optimistic, because unforeseen complications arose, or because unexpected political constraints intervened. All three problems seem to apply in this case. But what’s especially interesting about it is that the regulated party that underestimated compliance expenditures.
Category Archives: Dod
Two articles of interest appeared in the Washington Post Sunday “Opinion” section, one by reporter Michael Grunwald and the second by freelance author John Barry. Grunwald and Barry say the Army Corps of Engineers is a failed civil works agency whose errors were responsible for the flooding of New Orleans after Hurricane Katrina. Moreover, they place the blame for the Corps’ failure squarely on Congress.
One thread running through both articles is that it really doesn’t matter whether these projects actually deliver any of the benefits promised. The essence of earmarking is that Federal spending is its own reward. It is in every Member’s interest to deliver the largest possible share of federal spending to his own district or state. Spending on construction projects is especially attractive because it creates or sustains employment.
The concept of opportunity cost is central to benefit-cost analysis and generally not understood by non-economists. Previously we explained how the opportunity cost of regulation differs from expenditures on regulatory compliance. We are building a list of real-world examples that show why this concept matches up with common sense.
On April 17, Wall Street Journal reporters Greg Jaffe and Neil King Jr. published a Page One article (subscription may be required) concerning conflicts between certain senior military officers and Defense Secretary Donald Rumsfeld. The conflict appears to concern Sec. Rumsfeld’s longstanding plans to transform the services into “faster, streamlined forces to make warfare more efficient.” These issues transcend matters related to the wars in Afghanistan and Iraq.