President Trump’s Executive Order (E.O.) entitled “Reducing Regulation and Controlling Regulatory Costs” could be one of the most revolutionary changes to the federal regulatory system since President Reagan, but the devil lurks in the details. Businesses should take notice that the implementation of this E.O. will be the key to its success. Its bold moves such as eliminating two regulations for every one, pressures agencies to be accountable for their own rules, but also could cause unintended consequences such as re
The E.O. loosely outlines three main objectives for covered agencies, as follows:
A One in Two Out Rule requiring the eradication of two existing regulations for each new regulation issued;
A Regulatory Cap of the costs of regulations issued each year
A Centralized White House Control over the regulatory budget and the total incremental costs that a rulemaking agency may impose on the private sector.
There is no one-size fits all when it comes to “regulations”, which makes the E.O. challenging to interpret and predict with specificity. The number of final rules published each year is generally in the range of 2,500-4,500, according to the Office of the Federal Register. Rules range from “Major” rules (President Obama’s Clean Power Plan) to “Economically Significant” rules (ones with 100-million-dollar effect on the economy), to routine ones that are statutorily required.
Historically, “Major” rules and “Economically Significant” rules only account for less than 10% of all rules in a given year. The rest falls into memos, guidance documents, bulletins, circulars, and announcements with practical regulatory effect often referred to as regulatory dark matter.
So given that all regulations are not equal, would this E.O. allow agencies trade a “Major” rule for lesser one? And if so how many? Will this administration view rules form a quality or quantity point of view? How will the administrative burdens on businesses be measured? Or will we see just the direct compliance burden on businesses be the litmus test? And finally, how will this administration address the totalitarian cost to society as a guiding approach?
Second issue: “Shall Identify”
The first part of the E.O. is to manage the costs incurred by the private sector to comply with federal regulations. Section 2(a) requires that “whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”
One of the popular criticisms of the E.O. is that it doesn’t go far enough. For example, it could have stated agencies “must” repeal two existing regulations. But we will be paying close attention as to how agencies and the White House with interpret “shall identify”.
Regulatory Capping to Zero
The E.O. requires that the total incremental costs imposed by new regulations finalized by an agency during Fiscal Year 2017 “shall be no greater than zero”, but that will be easier said than done.
The E.O. provides:
During the Presidential budget process, the Director [of OMB] shall identify to agencies a total amount of incremental costs that will be allowed for each agency in issuing new regulations and repealing regulations for the next fiscal year. No regulations exceeding the agency’s total incremental cost allowance will be permitted in that fiscal year, unless required by law or approved in writing by the Director. The total incremental cost allowance may allow an increase or require a reduction in total regulatory cost.
Deregulatory rulemakings is not an overnight process. The E.O. recognizes that agencies must comply with the Administrative Procedure Act (APA) and like many things in the federal government it will ripe with delays, due to the requirement for public notice and comment and of course litigation.
White House Regulatory Budget Setting
This E.O. grants the White House with an unprecedented degree of control over agency regulatory activities, both on the front and back end. In essence, OMB will control the agency financial budgets in front and agency regulatory budgets are tied with its hands behind its back. The E.O. establishes a regulatory budget process that will be run by the Director of OMB in parallel with OMB’s review of agency budget requests for appropriated funds, thus creating a Congressional appropriations-like mechanism.
As with the appropriations process, OMB will determine in close consultation with the White House the appropriate level of the agency’s total incremental cost allowance and pass that “mark” back to the agency for implementation. So some agencies might be caught in between a rock and hard place.
Right now the E.O. lacks the details and requirements to be fully implemented, but just by its presence it is a game changer. Currently agencies and the private sector are providing feedback about its implementation, but this all moving fast. Considering the main focus is to less the burden on businesses, industry should have a seat at the table.
Michael Kennedy specializes in Administrative Law and government advocacy he can be contacted at firstname.lastname@example.org. Website: www.kennedylawpolicy.com