Here's a thoughtful piece from Aaron Renn on an unintended consequence of the Clean Water Act. EPA mandates are forcing Cleveland to spend $5 billion to overhaul its sewer system. That's a lot of money for any city, but especially for a struggling rust-belt town. Cleveland will be forced to raise water and sewer rates dramatically, and probably a bunch of other taxes, too.
Cleveland can't go anywhere, but its residents can. (This is a city where the police and firefighters openly celebrated an Ohio Supreme Court ruling that allows them to move to the suburbs.) Renn predicts -- accurately, I think -- that the higher taxes will speed up the depopulation of Cleveland as homeowners have one more reason to move to the suburbs. In fact, the mandate will kick the city twice: Cleveland must not only raise taxes, but it will lose money that it could have spent on other improvements that would have attracted suburbanites back to the city.
Cleveland needed to make dramatic improvements in water quality; after all, this is the city whose river famously caught fire in 1969 (which itself provided much of the momentum for the Clean Water Act). But the Cuyahoga is now clean; residents fish from it, in fact. Spending another $5 billion to get that last 10% improvement is a bad use of money when Cleveland has more pressing needs. And it is counter-productive to drive residents to the suburbs to leave rotting infrastructure sitting unused in the central city.
Renn suggests that the federal government assume the cost of replacing ancient sewer systems. That might be the only solution. The federal government has no incentive to weigh costs and benefits accurately when it can simply issue a mandate. And the moral hazard risk is smaller than one might think: the city's main "crime" is being old enough to need a new sewer system.
Guarding against strategic behavior by a city is tricky anyway since, again, its residents can simply move when things get bad. Rather than stick central cities with crippling legacy costs, it makes more sense for the federal government to issue reasonable regulations and pick up the tab for unforeseen costs.