A Reverse Legacy   Leave a comment

Every president since Jimmy Carter has promised to cut regulation. Carter lied and so did the others. Even President Obama’s early executive orders promising to cut red tape and improve the flow of the regulatory process sounded impressive until six of the seven all-time-high years for federal regulation occurred during his tenure. Obama lied too.

Image result for image of regulatory rollbackWe’ve experienced four decades of nonstop growth in federal regulation. The U.S. Code of Federal Regulations is more than 175,000 pages long, having grown steadily since the 1970s.

Understand that federal regulations aren’t just words on paper. Those 175,000+ pages include more than one million commandments from Washington in the form of restrictive words such as “must,” “cannot,” or “shall.”

Candidate Trump promised to change that and Prresident Trump’s first 100 days give us reason to hope this trend is about to change. President Trump has already issued two executive orders on regulatory reform that informed executive branch agencies that regulatory restrictions on businesses will not be able to keep growing on autopilot. Trump’s hiring freeze will also help lower the rate of new regulations. As research from the Mercatus Center has shown, there is a high correlation between the number of employees at an agency and the number of regulations issued by that agency. President Trump has also taken advantage of the Congressional Review Act, which gives Congress the power to overturn recently finalized regulations through a simple majority vote. He has signed at least 13 such repeals. (By the way, this tool had been successfully used only once in its 20-year history.)  I doubt he’ll be able to keep his lofty promise to cut regulation by 75% or more, but just halting the growth in federal regulations would be a massive achievement.

The president has several methods available to him to accomplish this. Moving into the next phase of his first term, there are three main legislative solutions that President Trump can use to follow through on his promises to cut regulation. These solutions address the accumulation of old regulations, the creation of costly new regulations, and the lack of public participation in the regulatory process.

Get rid of outdated, ineffective regulations.

Both the Regulatory Improvement Act and the SCRUB Act create a “Regulatory Improvement Commission” to come up with a package of older regulations to eliminate that would then go through Congress for an up-or-down vote. Focusing on older regulations would take some of the politics out of regulatory reform, and voting on a large package in this way would limit the ability of established interests to interfere with the process. Because figuring out what regulations to cut requires weighing costs and benefits, addressing regulatory accumulation also requires that proposed federal regulations undergo basic cost-benefit analyses. Currently, most regulations coming from Washington are never subjected to this commonsense test. Don’t believe me. In 2014, only 16 of the 3,500+ rules published in the Federal Register underwent cost analyses. Since 2001, fewer than three out of every 1,000 regulations have had an accompanying cost-benefit analysis. The resulting lack of information creates an incomplete picture of the total regulatory burden on the economy.


Slow the nonstop growth in new, costly regulations.

While a regulatory improvement commission would help lower the economic drag from decades of regulatory accumulation, we really need to reverse the destructive effects that the autopilot nature of federal regulation has on the economy. Federal regulations cost the economy $1.9 trillion each year, which comes out to about $15,000 per U.S. household. The Trump administration could begin to turn the tide by supporting the REINS Act, which would give Congress authorization for voice approval or override within 70 days if a major regulation with more than $100 million in annual economic costs is to take effect. This would invert the current system, under which regulations take effect unless Congress takes the time to stop them. To understand this dynamic, recognize that there have been 29 times more regulations issued by agencies than laws passed by Congress since 2009. The REINS Act has overwhelming support from Republicans, and it has already passed the House. President Trump could have a chance to sign it into law before the year is over.


Infuse unprecedented transparency into the regulatory process.

To further strengthen his opposition to runaway executive-agency powers, President Trump can encourage Congress to consider legislation such as the Regulatory Predictability for Business Growth Act, which was introduced in 2015 but did not pass. This bill would require agency interpretations that are in effect for longer than a year to go through the general notice and comment provisions required under the Administrative Procedure Act. Administrators’ interpretations are meant only to provide guidance for complying with existing regulations, so they are considered exempt from the full regulatory-review process required under the Administrative Procedure Act. Agencies increasingly use blog posts, press conferences, and guidance documents to substantially alter the meaning of existing regulations. Returning agency interpretation to its proper role as guidance rather than lawmaking would help reintroduce public participation and openness into the regulatory process. And, if President Trump is seeking a legacy, this change will last long after he has left office.

Excessive regulation holds back the United States’ economic potential. President Trump appears to understand that dramatic reforms to the regulatory state are required to overcome the sluggish economy he has inherited. Fixing the regulatory system so that it no longer drags on the economy will certainly take longer than 100 days, but President Trump is off to a nice start.


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