Economy & Business

President Trump Should Rediscover Regulatory Reform

President Trump waves in Minneapolis, Minn., April 15, 2019. (Carlos Barria/Reuters)
Even faced with a Democratic House, he can make agencies quantify and justify their regulations.

President Trump, who made regulatory reform a priority early in his term, claims to have reduced federal regulatory burdens by $23 billion in fiscal year 2018. That’s the good news. The bad news is that he has hinted at declaring premature victory and given indications of abandoning the issue altogether.

After losing the House in the 2018 elections, congressional Republicans may have blown their best chance in decades at passing significant regulatory-reform legislation. It may be years before they have another opportunity. What can reformers do until then?

One patch of fertile ground is addressing what we term regulatory “dark matter” — interpretive rules and policy statements that do not go through the public notice-and-comment requirement that applies to ordinary regulations, yet still carry regulatory weight. There is much that the executive branch can do on its own here.

Dark matter can take the form of guidance documents, memoranda, notices, circulars, or even press releases indicating a policy change, such as Labor Department designation of independent contractors. Guidance is not supposed to be legally binding on citizens, or even the issuing agency, yet as the Administrative Conference of the United States has detailed, those who are regulated by agencies have reason to feel obliged to comply with the policy content of such pronouncements.

There is a serious lack of transparency and accountability for guidance. The amount of guidance is unknown and defies official attempts to inventory it all. The Office of Management and Budget (OMB) recently attempted to confront the guidance issue — ironically, by issuing a guidance document. The directive reinforces existing requirements for agencies to report and submit both rules and guidance to Congress and the Government Accountability Office for potential disapproval, as required under the Congressional Review Act — a requirement that some agencies have been ignoring.

This is an important development to build upon. Further executive actions should extend existing transparency requirements to independent agencies, which are those below cabinet level. These are currently exempt from OMB regulatory review, yet they produce a lot of rules.

Annual regulatory-agency “report cards,” similar to the ones that we compile in our new report, Ten Thousand Commandments, should be standard procedure, and could be established via executive order. These would contain summary information, such as the amount of both rules and guidance an agency issued during the year (and at what cost), how many of those rules underwent cost-benefit analysis, plans for upcoming rules, and more. The report cards should be in a standardized, easily searchable format and made publicly available in a central location such as OMB’s website.

Another executive order could implement a regulatory cost budget, which would build on early Trump executive orders implementing a one-in, two-out requirement for new regulations and a zero-net-new-costs policy.

Just as the government compiles an annual spending budget, there needs to be greater accountability for rules and the costs they impose. To that end, another executive order should reaffirm the Regulatory Right-to-Know Act’s unfulfilled requirement that the federal government prepare an annual aggregate cost estimate.

Based on various sources, including available government data, we arrive at a ballpark cost figure of $2 trillion annually as a placeholder for federal regulatory compliance and economic drag. At that level, if the regulatory state were its own country, it would be the world’s ninth-largest economy, ranking behind India and ahead of Canada. That’s a cost of more than $14,000 per U.S. household, more than any other expense except housing.

Even with a slowdown in the pace of new rulemaking, agencies still issued 3,368 new regulations in 2018, though this time several hundred were deemed “deregulatory” in nature. Some 3,534 regulations are currently in various stages of the pipeline. These figures do not include “dark matter,” which by its nature is more difficult to quantify or outright non-quantifiable. To give an idea of scale, agencies issued 22,025 “notices” last year.

Congress has shown interest in executive-branch transparency in matters concerning Trump himself. It should extend that interest to regulatory agencies over which President Trump wields power.

For its part, the administration should pursue regulatory transparency and accountability reform to help economic growth continue. Even if President Trump were to become distracted by higher-profile issues, his early regulatory reforms have contributed to the nation’s current healthy economic growth. He should expand on that success and encourage Congress to join in — after all, they’re incumbents, too.

Wayne Crews is the vice president for policy at the Competitive Enterprise Institute and the author of the new 2019 edition of Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State. Ryan Young is a senior fellow at CEI.

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