562562 Chapter 15 | Economic Policythe Clinton-era policy of “once in, always in” that aimed to lock in reductions of
hazardous air pollution from industrial sources. More than one-third of all rules
issued by non-independent agencies were reviewed, even when they did not have an
economic impact (which is a significant departure from previous administrations).
At least 67 regulations have been eliminated or are in the process of being revised.
According to the former head of the Environmental Protection Agency, Scott Pruitt,
this has saved businesses over $1 billion, but critics are concerned about the long-
term damage to the environment.^58
Despite these recent moves to tackle the trade-off between regulation and
economic growth by favoring free market policies, in recent years another approach
to economic policy has attempted to address the trade-off by using the free market to
further environmental goals. First, economists have long argued for introducing more
market incentives and reducing government regulation to achieve environmental
goals. Under cap and trade, the government sets an overall cap on carbon emissions,
and then companies buy permits that allow them to emit a certain amount of carbon.
Companies that reduce their carbon emissions can sell their permits to companies that
want to emit more carbon. The benefit of this approach is that it uses market forces,
rather than regulations, to find the best way to reduce carbon emissions. Launched
in 2013, California’s cap-and-trade program has been called “the best-designed
program in the world” and is expected to reduce carbon emissions by more than 16
percent between 2013 and 2020, and by an additional 40 percent by 2030.^59 In cases like
this, environmentalists have learned that using market principles can work to their
advantage; another example, involving grazing rights in the West, is discussed in the
Take a Stand feature.
Second, rather than simply regulating old sources of dirtier energy, an alternative
is to promote a clean-energy economy or “green jobs” focused on biofuels, hybrid
and electric cars, hydrogen fuel cells, and renewable energy sources such as solar
and wind. Barack Obama promised to create 5 million green jobs and laid out a plan
to invest $150 billion over 10 years. Those goals were not fully funded, nor was the
target reached, but green jobs are a growth area. The Bureau of Labor Statistics (BLS)
provided the first count of green jobs in 2009: 2.2 million jobs. By 2011 that had grown
to 3.4 million jobs, but the BLS stopped collecting this information because of budget
cuts.^60 However, other estimates reveal that green jobs continue to grow. In 2016, the
Department of Energy counted 3.4 million people directly employed by clean energy
businesses and another 2.2 million jobs related to energy efficiency.^61
So while political debates over regulatory policy may still be quite intense,
common ground may be found in pursuing market solutions to regulatory problems.
In general, the public interest is often served by regulations that protect the
environment, ensure the safety of the food supply, and regulate the dumping of
hazardous chemicals, whether it is through traditional economic regulations or
market approaches. In each instance, politics ends up defining how the public interest
is served through regulation.Trade Policy and the Balance of Payments
Many of the factors that shape trade policy are beyond policy makers’ control. It is
extremely difficult for the U.S. government to influence the strength of the dollar
relative to other currencies, consumer tastes, the low cost of labor in developing
nations (especially China and India), and economic conditions worldwide—all issues
that influence the trade balance. As such, strategies aimed at influencing trade can be
considered the most difficult area of economic policy making.Many American consumer products,
including cars, clothing, and
electronics, are made overseas
because labor costs are so much less
in developing countries. Even people
who want to “buy American” have a
difficult time, given the increasing
globalization of multinational
corporations.Full_16_APT_64431_ch15_530-571.indd 562 15/11/18 2:35 PM