An Administration Takes Sides, by Andrew M. Grossman

by Guest Blogger — Thursday, May 25, 2017

The eccentricities, let’s say, of the current President obscure something very interesting and important that is occurring now in the regulatory system. So I will try, in my seven or so minutes, to describe what’s changed and why it represents the beginning of a serious reimagining—yes, a serious one—of the regulatory process.

As a baseline let’s begin with what’s stayed the same.

In the main, the Trump Administration has acted through executive orders to build upon the regulatory reform efforts of previous administrations, including cost-benefit analysis and centralized review through the Office of Information and Regulatory Affairs, or OIRA. What is remarkable about Trump’s Executive Order 13,777, unwieldily entitled “Presidential Executive Order on Enforcing the Regulatory Reform Agenda,” is the great degree of continuity it represents with the practices of previous administrations, including with the Clinton Administration’s Executive Order 12,866 regarding regulatory planning and review and the Obama Administration’s Executive Order 13,563 regarding retrospective review. In general, it maintains the regulatory review process and central cost-benefit criterion of previous administrations.

It makes two key and modest changes—requiring agency-specific “Regulatory Reform Officers” and establishing agency-specific “Regulatory Reform Task Forces,” both principally intended to identify and excise outdated rules from the corpus of existing regulation. These are modest and thoughtful initiatives aimed at shortcomings in efforts at retrospective review.

Is modesty a good thing? Previous efforts to rationalize the regulatory state through increased Presidential control have had only limited success. Those in favor of increased government protections have come to view OIRA as just another veto-gate where good regulations go to get watered down or die, often for what appear to be “political” reasons—consider, for example, environmentalists’ criticisms the Obama Administration’s delay of tightened air quality standards for ozone in the run-up to the 2012 election.

And, for those skeptical of regulation, OIRA is too often and too easily gamed by willfully misleading cost-benefit accounting, is understaffed and under-resourced to provide meaningful management let alone reform of the regulatory state, and wields only limited influence over the independent agencies. Consider, for example President George W. Bush’s Executive Order 13,422, which required agencies to identify specific market failures justifying regulation, required the appointment of “regulatory policy officers” in each agency, expanded OIRA review, and tightened cost-benefit requirements. Consumer groups at the time called it “radical.” In reality, it was a marginal shift, at most, with marginal results.

And everybody seems to agree that retrospective review has been an almost complete failure, although there is wide disagreement over why exactly it hasn’t worked.

It could be that both sides are right in their complaints and that the regulatory review process has achieved about as much as it possibly can in its current form. In an important sense, that process has been framed in neutral principles, seeking to resolve policy disputes in largely economic terms—for example, the George W. Bush Administration honed in on market failure as a limiting principle for regulation. But economics never fully captures—indeed, it barely captures—what is at stake in so many disputes over regulation and regulatory policy. These are disputes over norms and values and preferences and priorities, not over cost-benefit estimates. At some point, if you want to achieve anything of substance, you’ve got to stop monkeying with numbers and take a side.

And that is what President Trump did in Executive Order 13,771, the “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs.” This executive order is a blunt tool to carry out a blunt agenda: for each new significant rule to go in, two must come out, with no net increase in regulatory costs. But that is the point: genteel regulatory review hasn’t gotten us anywhere, and so let’s just be clear about what we’re trying to achieve rather than dressing it up in the neutral language of utility maximization. Is one-in-two-out arbitrary in certain logical respects? Sure, it arguably could be with respect to particular actions, but it has the virtue of honesty and simplicity. And there is not some other established means, some neutral criterion, by which a President who ran on a platform of deregulation can actually carry it out. This tells everyone where exactly to place the thumb on the scale. It might well work.

This is a distinctly Trumpist regulatory policy. In 2011, for example, President Obama’s regulatory Czar Cass Sunstein declared that we had moved beyond pro- and anti-regulation polarization into rule by experts, where “state-of-the-art techniques for anticipating, cataloguing, and monetizing the consequences of regulation” answer seemingly every major question. I think it is fair to say that this is exactly the kind of mindset that Trump ran against. And it is exactly that kind of mindset that the Trump Administration, in its early days, is repudiating.

That is not to say that the Trump Approach is any less thoughtful. It does address important questions that the “expert” approach has largely ignored, often because of (how ironic!) availability bias—in other words that these questions, although important, can be difficult to address quantitatively. To wit: What if the mass of regulations, separate and apart from any particular regulation, is a brake on economic growth? What if marginal compliance costs with respect to a particular rule fail to account for the total compliance costs of complying with everything? What if the very existence of the enormous corpus of existing regulations is a sap on economic growth and entrepreneurialism, what if it exacerbates incumbent advantage and monopoly, what if it increases economic inequality, and what if it limits the space for state experimentation and restricts individual liberty? No White House, in its official regulatory control initiatives, has ever answered these kinds of questions from a particular point of view, taking a side in this debate. Well, until now.

So what comes next? Adopting an anti-regulatory agenda is likely to be liberating for the Administration, and so expect more executive orders and OIRA guidance concerning agency regulation, particularly after Prof. Neomi Rao is in place as OIRA administrator. A few obvious targets spring to mind: hard-look review of rules that is much less deferential to agency sensitivities than in the past, increased assertions of oversight and control over independent agencies, beefed-up federalism review, greater weight and emphasis on Paperwork Reduction Act compliance by agencies (and that Act provides a good amount of leverage over independent agencies and good channeling features, if the White House and OIRA want to use it), and increased centralization of legal analysis and interpretation.

Agencies increasing regulatory burdens should expect to face tough questioning from OIRA and should not expect to skate by on trust, deference, and blizzards of economic projections. And the targets of potential regulation, including the states and industry, may find in OIRA a more sympathetic ear for their practical concerns and objections.

Even for those who do not share the Administration’s goals, this new approach should provide important evidence on whether and how an administration that moves away from neutral principles in regulation—recognizing that they’re not so neutral in the end—can manage the regulatory state.

Finally, one last word on values. Administrative law, it has been observed, embodies the tension between expertise and accountability, two important values. The two clash every time the White House orders a regulatory parameter dialed down or instructs an agency to strongly consider, or reconsider, a particular approach. The Trumpist approach does not alter that dynamic; the White House will still seek to have its way, as it always has. But it does privilege a third value, one that has too often been given short shrift: honesty. Like it or lump it, there is no mystery about where the Trump Administration stands on regulatory policy, and its early policy-driving executive orders on energy, offshore drilling, and education, among others, are about as transparent as presidential control of the administrative state can possibly be. There is no misdirection, and there is no manipulation of some supposedly expert process. And that is, I think, a real virtue of taking sides.

 

Andrew M. Grossman is a partner in the Washington, D.C. office of Baker & Hostetler LLP and Adjunct Scholar at the Cato Institute. This essay is based on remarks delivered at the American Bar Association’s 2017 Administrative Law and Regulatory Practice Institute.

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