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EXECUTIVE OFFICE OF T H E P R E S I D E N T
COUNCIL ON ENVIRONMENTAL QUALITY
7 2JACKSON P A E N W
2
LC. . .
WASHINGTON. 0 C 20006
..
W
S ep te m b er 1 8 ,

1978

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MEMORANDUM FOR THE PRESIDENT
FROM:

C h a r le s W a rre n / p . i,
GuS S p e th

SUBJECT:

" I n f la t io n

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Z t t r Z Z S
, j&ro^WcjfTV-i’Mli .
and E n v ir o n m e n t a l and H e a lt h R e g u la t io n s
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co u rse o f.A d m in is t r a t io n a n t i- in f la t i o n

Z

p o lic y :

°
T h e o n l y c o m p re h e n s iv e q u a n t i t a t i v e a n a l y s i s o f th e r e l a t i o n ­
s h i p b e tw e e n i n f l a t i o n and e n v ir o n m e n t a l r e g u l a t i o n s was p e rfo rm e d b y
C h a se E c o n o m e t r ic s , and i t c o n c lu d e s t h a t t h e s e r e g u l a t i o n s do n o t
c o n t r ib u t e s u b s t a n t ia lly to i n f l a t i o n .
F o r t h e p e r io d 1970-83, t h e s t u d y
i n d i c a t e s t h a t f e d e r a l a i r and w a t e r p o l l u t i o n c o n t r o l r e q u ir e m e n t s w i l l
c a u s e an a v e r a g e a n n u a l i n c r e a s e i n t h e consum er p r i c e in d e x o f b e tw e e n
0.3% and 0.4% .
T h u s , any r e a l i s t i c r e l a x a t i o n o f t h e s e program s w o u ld
p r o d u c e no s i g n i f i c a n t r e d u c t i o n i n t h e o v e r a l l C P I .
I f th e i n f l a t i o n a r y
im p a c t o f t h e s e r e q u ir e m e n t s c o u ld b e r e d u c e d by 20% — a s u b s t a n t i a l
r e l a x a t i o n — t h e C P I 's i n c r e a s e w o u ld be r e s t r a i n e d 0.1%.
The n e t
e f f e c t o f a m a jo r r e l a x a t i o n c o u ld be t h e d i f f e r e n c e betw een a 8.0% and
a 8.1% i n c r e a s e i n t h e C P I.
* T h e t o t a l b e n e f i t s o f e n v ir o n m e n t a l and h e a l t h r e g u l a t i o n s a r e
d i f f i c u l t t o q u a n t i f y , b u t t h e r e i s no q u e s t io n t h a t th e y a r e v e r y
l a r g e : im p ro v e d p u b l i c h e a l t h , re d u c e d p r o p e r t y damage, in c r e a s e d
a g r i c u l t u r a l and r e s o u r c e y i e l d s and e n h a n ced r e c r e a t i o n and e n jo y m e n t
o f l e i s u r e t im e .
The p u b l i c p e r c e iv e s t h e s e b e n e f i t s as w e l l w o r t h th e
c o s t s : a r e c e n t n a t i o n a l p o l l i n d i c a t e d t h a t 62% o f th e p u b l i c w o u ld be
w i l l i n g t o p a y h ig h e r p r i c e s t o r e d u c e p o l l u t i o n , com pared w i t h o n ly
18% who w o u ld f a v o r lo w e r p r i c e s a t th e e x p e n s e o f more p o l l u t i o n .
«
t io n s

The p o l i t i c a l
an a n t i - i n f l a t i o n

fro m a l a r g e




c o a lit io n

c o s t s o f m a k in g e n v ir o n m e n t a l and h e a lt h r e g u l a ­

t a r g e t a r e h ig h .
o f la b o r

•

I

^

We w is h t o o f f e r y o u any a s s i s t a n c e we c a n i n d e v e lo p in g s t r o n g and
e f f e c t i v e i n i t i a t i v e s a g a in s t i n f l a t i o n .
One i s s u e o f p a r t i c u l a r
i n t e r e s t t o u s , s in c e i t h as b een r a i s e d b y b u s in e s s le a d e r s and some
A d m i n i s t r a t i o n o f f i c i a l s in v o lv e d w it h i n f l a t i o n , i s th e r e l a t i o n s h i p
b e tw e e n i n f l a t i o n and e n v ir o n m e n t a l and h e a l t h r e g u l a t i o n s .
We u n d e r ­
s t a n d t h a t t h e Chamber o f Commerce and t h e NAM may r a i s e t h i s i s s u e
wEen th e y m eet w i t h y o u .
We h a v e i n v e s t i g a t e d t h e is s u e and b e l i e v e y ou
w i l l w a n t t o c o n s i d e r t h e f o l l o w i n g p o i n t s i n d e t e r m in iu g th e f u t u r e

0

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r.

An A u g u s t 3 l e t t e r

t o you

and e n v ir o n m e n t a l g ro u p s s t a t e d

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th e r e g u l a t o r y r e v ie w p ro gram o f CEA and COWPS "h a s become a s e r io u s
t h r e a t t o t h e m i l l i o n s o f A m e ric a n s who i d e n t i f y w i t h th e e n v ir o n m e n t a l,
l a b o r , and consum er p r o t e c t i o n m ovem ents.
We b e l i e v e t h a t th e p ro g ram
i s u n d e r m in in g y o u r s u p p o r t w it h many o f t h o s e who h ave been y o u r
stro n g e s t

s u p p o rte rs .”

° M a j o r c o r p o r a t i o n s a r e c u r r e n t l y p u r s u in g a s o p h i s t i c a t e d m ed ia
cam paign aim ed a t m a k in g "g overnm ent r e g u l a t i o n " a p e j o r a t i v e p h r a s e .
I t i s t o o e a r l y t o t e l l w h e th e r t h i s and r e la t e d , e f f o r t s w i l l p o s e a
m a jo r t h r e a t t o t h e fra m e w o rk o f p u b l i c i n t e r e s t r e g u l a t i o n t h a t has
been p a i n s t a k i n g l y b u i l t o v e r t h e p a s t two d e c a d e s .
R e g a r d le s s ,
A d m i n is t r a t io n r e g u l a t o r y r e fo r m and a n t i - i n f l a t i o n e f f o r t s s h o u ld
n o t i n a d v e r t e n t l y c o n t r i b u t e t o t u r n in g p u b l i c s e n t im e n t a g a in s t
g overnm ent r e g u l a t i o n g e n e r a ll y .
In " s u m ,“ we t h i n k t h e r e i s l i t t l e t o g a in and much t o l o s e by c u t t i n g
b a c k on e n v ir o n m e n t a l and h e a l t h c o n t r o l s f o r t h e s a k e o f i n f l a t i o n .
Agency, e f f o r t s t o e l i m i n a t e u n n e c e s s a r y r e d ta p e and t o a v o id o v e r r e g u l a t i o n s h o u ld c o n t in u e , and E P A 's r e c e n t e f f o r t s can s e r v e a s a
m o de l i n t h i s r e g a r d .
A d m i n is t r a t io n r e g u l a t o r y r e v ie w e f f o r t s s h o u ld
f o c u s m ore on f e r r e t i n g o u t o ld r e g u l a t i o n s t h a t a r e a n t i- c o m p e t it i v e
o r n o l o n g e r s e r v e a u s e f u l p u rp o s e and much l e s s on new r e g u l a t o r y
p r o p o s a ls i n t h e h e a l t h and e n v ir o n m e n t a l a r e a s .





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102