Here are some actions the president can take in his first week in office to kickstart deregulatory efforts.
Trump can start deregulation right away with executive orders.
P resident-elect Donald Trump has vowed to implement the “most aggressive regulatory reduction” effort in the country’s history. Elon Musk, pegged to lead efforts alongside Vivek Ramaswamy at streamlining government, has referred to the accumulation of federal regulations and regulatory agencies as “strangulation by overregulation.”
With over 190,000 pages in the Code of Federal Regulations, the regulatory environment is certainly stifling innovation and growth. Luckily, there are a few actions the president can take in his first week in office to kickstart deregulatory efforts.
Though the volume of regulations is both a cause and symptom of our economic stagnation, reformers should focus on reducing regulatory costs. Total compliance costs and economic effects of federal regulations are estimated to be roughly $2.12 trillion annually, or about 8 percent of GDP. Other estimates suggest that these costs could be in excess of $3 trillion a year.
The Biden administration has added about $1.8 trillion in regulatory costs in less than four years, according to one analysis by the American Action Forum. A large chunk of that came from the EPA’s tailpipe-emissions rule.
Prior analysis has found that regulatory accumulation has reduced the average annual growth rate of the economy by 0.8 percent. The difference between an economy growing at 2.2 percent and an economy growing at 3 percent is substantial when compounded over time.
During the first week, the president could repeal Executive Order (EO) 14094. Signed by President Biden in April 2023, EO 14094 raised the threshold for a “significant regulatory action” from $100 million to $200 million. Regulations classified as significant must undergo additional review by the Office of Information and Regulatory Affairs (OIRA) within the White House, where they are assessed for their economic impact, regulatory burden, and alignment with national priorities.
Repealing EO 14094 would ensure that the prior threshold for significant regulatory action is re-established, strengthening the review process for a broader set of rules.
EO 14094 also revised the social discount rate (SDR) used for cost-benefit analysis of regulations. The Office of Management and Budget (OMB) used to apply two separate rates: 3 percent for consumption-based analyses and 7 percent for investment-related analyses. EO 14094 replaced those with a single and much lower 1.7 percent rate.
By significantly reducing the SDR, the Biden administration raised the present value of benefits from regulation, making more expensive regulations appear more justified. Trump should restore the 3 percent and 7 percent SDRs to more accurately reflect the true cost of regulatory policy going forward.
Trump should reinstate and expand Executive Order 13771, which he issued during his first term. EO 13771 required that for every new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.
This could be further expanded to follow the example of regulatory reform in the U.K. (from 2016 to 2018), which implemented a system of three existing regulations being repealed for every new regulation issued.
This order should also apply the principle of focusing on costs instead of volume. For every new rule implemented, regulations that have net costs which are three times that of the new rule should be repealed. The expanded rule should also be more broadly applied. EO 13771 covered only about 8 percent of federal regulations.
Trump should explore the possibility of mandating sunset provisions for all new regulations. Sunset provisions are automatic expiration dates built into regulations. These provisions would trigger re-evaluation of rules and ensure that the default is that rules go away.
Some states, for example Florida, have already mandated that sunset provisions be built into new regulations. Florida law states that “rules may be renewed through the normal rulemaking process after the sunset period only if it is determined the rule is still necessary.” The president could do something similar for the federal government through an executive order or a presidential memorandum.
As the new administration looks for ways to boost economic abundance and unleash innovation, these options offer a good place to start.