President Obama last week abandoned stricter air quality standards, caving to industry objections over cost. Tighter standards would not have been free, but abandoning them clearly isn’t either, for two reasons:
#1: The lack of tighter standards will cause some 12,000 premature deaths and hundreds of thousands of lost work and school days. That comes with real costs to the economy. It’s clear by now that the Clean Air Act of 1970 has improved worker productivity and growth. By 2010, GDP was as much as 1.5% higher because of the Clean Air Act. Cleaner air doesn’t just smell better, it also helps the economy.
#2: There’s an even more direct connection. Most economic models assume a Panglossian world of no unemployment and the economy humming along at full speed. That’s clearly not the world we live in right now. A time with record unemployment is precisely when you want to boost the economy with additional investments: digging those proverbial holes and filling them, just to get things going again. Putting new scrubbers on power plants seems to be a much better idea than digging and re-digging holes, especially since it may well lead to additional benefits down the road. See point #1.