Gainful Employment and Ozone – Regulation and Jobs

Seemingly as a prelude to President Obama’s major address on jobs, the Administration moved away from more regulation, at least in one area that impacts energy production.  It called on the Environmental Protection Agency (EPA) to back away from its proposal to tighten the range for ozone emissions.  The additional restriction would have increased the challenges of ozone compliance for cities and counties and restricted the expansion of new oil and gas projects.

The threat of new regulation impacts markets, raising the potential costs of doing business, reducing potential return for investors, and ultimately adding risk to a business decision to expand jobs.  New regulation in a fragile economic environment is especially fraught with peril for job growth and economic recovery.  In January, President Obama recognized the impact of regulation with his executive order, Improving Regulation and Regulatory Overview, and in his commentary, Toward a 21st-Century Regulatory System.  Nevertheless, there has been little evidence that the Federal Government would slow its introduction of new regulations with their significant impact on industries such as energy and education.

In the case of the energy industry, the enormous reserve of natural gas in the various shale basins is being exploited at a slow pace, in part because of state regulation and moratoria in New York and Maryland and in part because of the uncertainty associated with potential new, federal regulation.  Earlier in August, Reuters reported the results of a federal panel’s considerations of new regulation on the extraction of natural gas from shale basins such as the Marcellus Shale Basin.  The panel acknowledged that the potential for leakage of chemicals into ground water was remote.  The energy industry increased jobs in August, according to the Labor Department, but uncertain, additional regulation in areas like natural gas extraction is likely to restrict industry expansion and limit the economic recovery – directly from slowed construction of new wells and indirectly from limiting growth in the supply of natural gas which has the potential for lowering prices for consumers and costs for manufacturers.

In the higher education industry, we have seen for two years the impact of the threat of regulation in the Gainful Employment rule.  The regulatory process from the Department of Education (DOE) has rivaled the EPA’s with its negative impact on consumers and businesses.  Moreover, it has been counterproductive to the nation’s goals of increasing participation in higher education and reeducating and retraining the unemployed for a more rapid recovery from the Great Recession.

Calling Gainful Employment a misguided regulatory effort that has had a chilling effect on new entrants into the higher education market place understates its negative impact. It has distracted us from President Obama’s 2020 goal of our being the country with the highest number of college graduates.  It was based in a flawed process with an inaccurate GAO report on the industry and inappropriate, perhaps unethical, access by short-sellers to regulators.  It was harmful to our most vulnerable students in that it was applied only to proprietary institutions that are disproportionately serving minority, working adults.  And if the rationale for its introduction were the sincere belief by DOE regulators in its efficacy, it should have been applied across the board to proprietary and non-proprietary colleges and universities.  Finally, it was based on a faulty justification by the DOE that the 1965 Higher Education Act created intent to treat “gainful employment programs” differentially.  Instead, the Act’s original intent, based in the testimony of Iowa’s Distinguished Professor Hoyt, was fair and equal application of law and loans to proprietary schools whose role was gainful employment along with traditional colleges and universities.

Unnecessary and ill-timed regulation has an impact.  President Obama was right about that with his early 2011 executive order.  The challenge, apparently, is to obtain the cooperation of bureaucrats in the EPA and DOE in considering new regulation against the backdrop of a struggling economy and the millions of jobless.

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