Should a federal agency issue a regulation that will impose up to $3.5 billion in costs next year and billions more in the coming decade — while delivering essentially no benefits?
That sounds crazy. But a few weeks ago, the Department of Agriculture proposed to do exactly that.
OK, not exactly — but pretty close. The proposal is the outgrowth of the longstanding national battle over whether to require labels for bioengineered (or genetically modified) foods. The USDA’s analysis of costs and benefits deserves careful attention, even if it raises serious questions about its own proposal.
In the summer of 2016, Congress required the USDA to impose such labels. Last month, the department responded by inviting public comments on the rule, called the Proposed National Bioengineered Food Disclosure Standard.
The department was candid about the high costs of its proposal. In the first year, companies — mostly food manufacturers — would have to spend somewhere between $600 million and $3.5 billion in compliance costs. After a period of adjustment, the annual costs would range from $132 million to $330 million. In the history of federal regulation, that may not be monstrously expensive, but it’s a lot.
What do the American people get in return?
The department notes that there is no evidence that bioengineered food causes health risks. For that reason, its disclosure standard “is not intended to convey safety or health information.” It added that the rule “is not expected to have any benefits to human health or the environment.”
But that wasn’t the end of the story. The Department of Agriculture noted that many consumers have indicated an interest in the information and, in some surveys, say they would pay something to get it.
But the USDA didn’t trust those studies. People’s answers to survey questions may overstate their actual level of concern. And if people want to know whether food is bioengineered, it might be because they wrongly believe that it is unhealthy. If so, regulators should correct their mistake rather than cater to it.
At the same time, the department was aware that if the federal government did nothing, manufacturers might face a costly system of state-level labeling requirements. In 2014, Vermont enacted mandatory labeling legislation. In fact, that enactment provided the impetus for the federal legislation, which pre-empted state requirements.
The upshot of the USDA’s analysis is that if all manufacturers complied with Vermont’s approach, so that it became the de facto national standard, they would far higher costs than the federal proposal — between $1.9 billion and $6.8 billion in the first year alone. To that extent, the national standard would have benefits in the form of the cost savings.
The department also noted that without the federal standard, various states might mandate labels. It was unable to specify the resulting costs but said they would be very high.
In short: The federal disclosure standard would have no benefits for anyone — except insofar as it would pre-empt state laws that would be more costly still!
To be sure, the USDA could have tried to quantify benefits by referring to studies indicating that consumers would be willing to pay for the labels. In addition, some analysts suggest that, in the face of uncertain, incompletely understood risks of catastrophe, it makes sense to take precautions; some people, fearing environmental risks, believe that bioengineered food falls in that category.
It might have been productive for the department to engage these points. But it is clear that even if it had done so, it would have been reluctant to conclude that its proposal made much sense.
Skeptics might expect a federal agency in the Trump administration to highlight evidence against new regulation in any case. But the USDA’s analysis is consistent with the scientific consensus; it does not depart from the views of regulators in the Obama administration.
Here’s a simple summary of its conclusion: No government, federal or state, should be mandating labels for bioengineered foods.
Cass Sunstein is a Bloomberg Opinion columnist. He is the editor of “Can It Happen Here? Authoritarianism in America” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”