My Talk at “Regulatory Change & the Trump Administrative State”
I’m following Professor Aaron Nielson’s (BYU) lead and sharing an abbreviated summary of my remarks from the recent & excellent day-long Yale Journal on Regulation conference on “Regulatory Change & the Trump Administrative State.”
I was delighted to be part of the panel on “Changes in Administrative Law in the Executive Branch,” along with Professors Gillian Metzger (Columbia) and Bijal Shah (Arizona State), and moderator Professor Nicholas Parrillo (Yale). I used my time to offer a crash course on (1) OIRA review of regulations, (2) the potential for OIRA’s review of independent regulatory agencies, (3) a recent development involving the IRS, and (4) an update about the current administration’s deregulatory initiative.
OIRA Review. As readers of this blog probably know perfectly well, before issuing a new proposed or final rule most federal agencies must send their significant regulations through a policy review process that’s managed by the Office of Information & Regulatory Affairs (OIRA). OIRA’s regulatory work is described in several executive orders, the most important of which, from my perspective, is Executive Order 12866. This is the executive order that, among other things, asks agencies to identify the nature and significance of the problem they’re trying to solve with their regulation and to identify and assess alternative solutions, along with many other important provisions such as directing agencies to “select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another regulatory approach.”
Independent Regulatory Agencies & OIRA Review. If those principles of regulatory analysis sound reasonable, it might surprise you to know that not all agencies are subject to them. In fact, there’s a small number of agencies known as the “independent regulatory agencies” that are carved out of EO 12866. It includes big regulatory agencies like the Federal Communications Commission, the Securities and Exchange Commission and other financial regulators, and more. Based on writings from people who were there when the carve-out was crafted, I understand this to have been more of a political compromise than a legal constraint.
There’s much debate about the legal and political significance of the structural features and authorities that set independent agencies apart from other agencies (e.g., removal protections for the agency heads). But in practice we ask the regulators for prescription drugs, medical devices, passenger cars, workplace safety, air transport, and endangered species to adhere to these principles of regulatory analysis, and we don’t ask the regulators for cellphones, children’s products, all-terrain vehicles (ATVs), ocean transport, or nuclear power plants to do the same. And those are just the examples I brainstormed in 2 minutes. You can’t reconcile this carve out on the merits of the regulations themselves.
But when you think about extending OIRA review to independent regulatory agencies, there are lots of practical questions (e.g., why would they agree to be subject to OIRA review and what happens when there’s a disagreement?). Some conference participants raised the question of whether OIRA’s placement in the Executive Office of the President should preclude it, for political reasons, from reviewing the independent regulatory agencies’ rules. That question, among others, is why we need to lay out potential models to show how OIRA review could work. The details really matter. (I’m doing some writing on this now.)
IRS-Related Update. Last April, OIRA signed a Memorandum of Agreement with IRS to subject certain tax regulations to review. These had been carved out a while back and this agreement signaled a new phase in this relationship. We’re coming up on the one year anniversary of this MOA and the GW Regulatory Studies Center (where I work!), will be taking a look at this first year to provide some early thoughts. I’m also writing this year about what we can learn from the bilateral configuration of this agreement and the terms of the MOA itself.
This Administration’s Deregulatory Initiative. Just 10 days into his term, President Trump signed an executive order following through on his campaign promise to cut Federal red tape. Executive Order 13771 imposed new constraints on executive branch regulatory agencies, directing them to cut two rules for any new rule issued and to offset any costs imposed by new rules.
The rule counts show a dramatic reduction in new rulemaking. In the first 18 months of the Trump Administration, OIRA reviewed 70% fewer regulatory actions in the Trump Administration than in the Obama Administration and 66% fewer than in the Bush Administration. (My colleague Susan Dudley provides some 2-year stats here.) I stop short of saying that the regulatory 2-for-1 initiative “caused” this precipitous drop in new rules, because of confounding impact of the personnel choices that the President has made – many of his cabinet secretary selections are or were avowed deregulatory supporters.
Turning to the regulatory budget, in its first year (FY 2017), the agencies were directed to impose zero net costs. In subsequent years the agencies have negotiated a cost cap with OMB. Agency-specific caps so far have been zero or negative, meaning they project cost savings. In FY 2017 and FY 2018 the agencies stayed under the caps. In its most recent report, OIRA shared that agencies completed rules totaling cost savings of $23.4B in FY 2018. Looking forward, the cap for rules completed in FY 2019 is negative $17.9B.
Does this mean that we are in a period of massive and unprecedented deregulation? Not really. To understand why, a useful concept is regulatory stock and flow. The stock is those rules that have accumulated over decades, there are thousands and thousands of these. The flow is the new ones coming off the regulatory assembly line. This Administration has greatly reduced the flow of new regulations. But, in terms of the effect on the stock, the effect is much, much lower. Rolling back a handful of rules barely scratches the surface of the breathtakingly vast regulatory system in the U.S. Any major deregulatory effort would likely need to involve Congress, which enacted many of the regulatory systems that are in effect today. Any president can only do so much unilaterally.