Measuring President Trump’s Regulatory Reform Agenda: The 2-for-1 Rule, by Roncevert Ganan Almond

by Guest Blogger — Wednesday, Nov. 22, 2017

Almost immediately following his entry into the Oval Office, President Donald J. Trump initiated an aggressive regulatory reform agenda intended to downsize the imprint and reduce the influence of the Federal government. Through a series of executive orders, supported by guidance from the Office of Management and Budget (OMB), and his proposed budget to Congress, the President has attempted to change the calculus and methodology underlying the federal regulatory process. As noted in an article I co-authored with my colleagues Marina O’Brien and Andy Orr for the Yale Journal of Regulation Bulletin, Mr. Trump’s governing legacy may hinge on the scope and effectiveness of his nascent program of administrative regime change.

The centerpiece of Trump’s effort is Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs, requiring that “for every one new regulation issued, at least two prior regulations be identified for elimination.” EO 13771 only applies to “significant regulatory action” as defined by Executive Order 12866, Regulatory Planning and Review, generally meaning “having an annual effect on the economy of $100 million or more.”

Under the so-called “2-for-1 Rule,” the incremental costs of all new regulations for Fiscal Year 2017 must be no greater than zero, unless the regulation is required by law, or, consistent with advice provided in writing by the Director of the OMB. Agencies are expected to meet this new requirement by offsetting any incremental costs from new regulations with the supposed savings gained from eliminating two existing regulations.

As set forth in the table below and based on data from the Federal Register, during the first 100 days of the Trump era, only 19 rules and 16 proposed rules have referenced EO 13771 (which includes the 2-for-1 Rule) as part of the regulatory impact analysis. Only a single proposed rule from the U.S. Department of Health and Human Services even acknowledged that EO 13771 may apply, stating that the, “implications of this rule’s costs and costs savings will be further considered in the context of our compliance with Executive Order 13771.” Other rulemakings referencing EO 13771 identified exceptions or reasons why the 2-for-1 Rule did not apply. Within the first 100 days of the Trump administration, no Federal agency had actually applied the offset required by the 2-for-1 Rule.

TABLE 1: FIRST 100 DAYS – IMPACT OF “2 FOR 1” RULE

Referral to EO 13771

  RULES

ISSUED

PROPOSED

RULES

Total Number: 19 16
Agency, Department: 13 or 68.4%
Coast Guard/DHS
11 or 68.75%
Coast Guard/DHS
Justification: Not a significant regulatory action under EO 12866, thus EO 13771 is not applicable. 16 13
Justification: Even if significant regulatory action, the rule does not impose costs that trigger requirements of EO 13771. 2 2
Justification: Military or defense function and, therefore, EO 13771 is not applicable. 1 0
Potential application: Implications of the rule’s costs and cost savings will be further considered in the context of compliance with EO 13771. 0 1

One reason that the 2-for-1 Rule has had a limited impact is that agencies have reacted cautiously with respect to implementation of EO 13771. The Trump administration’s need to issue interim guidance from OMB’s Office of Information and Regulatory Affairs (OIRA) and then supplemental guidance demonstrates a tacit recognition that a transition period is required for interpretation and implementation of the 2-for-1 Rule. To assist agencies, the OMB has even recommended that agencies request ideas from the public on deregulatory actions to pursue under EO 13771.

For instance, on October 2, 2017, the U.S. Department of Transportation (DOT), via a Notification of Regulatory Review, invited the public to provide written input on existing rules and other agency actions that are good candidates for repeal, replacement, suspension, or modification, without compromising safety. To support the public, the DOT identified examples of “economically significant rulemakings” from the past few years. Initially, the comment period was to end by November 1, 2017, but after several requests to extend the time for comments, the department extended the deadline to December 1, 2017. As of November 21, 2017, there were 2346 comments listed on the regulations.gov website. In an another example, when Vice-President Pence convened the first meeting of the revived National Space Council on October 5, 2017, he and OMB Director Mick Mulvaney made a public solicitation for deregulatory actions to launch the U.S. commercial space industry. Among the discussion of returning to the Moon, Mr, Pence expressly requested that Transportation Secretary Elaine Chao and Commerce Secretary Wilbur Ross, along with the OMB Director, to conduct a “full review of our regulatory framework for commercial space enterprise.”

When compared to executive orders of similar scope and effect, like EO 12866, agencies have demonstrated an inconsistent approach to EO 13771. For example, there are variations in agency determinations whether a rulemaking is a “significant regulatory action” with respect to EO 13771 versus EO 12866. In Trump’s first 100 days, following issuance of EO 13371, from January 30 to April 29, 2017, 383 rules (of the total 682) and 191 proposed rules (of the total 349) reference EO 12866 – suggesting that an agency determination was made as to whether the rulemaking involved “significant regulatory action.” In comparison, the total rulemaking that explicitly apply EO 13771 – 19 rules and 16 proposed rules – is less than 5% of the rules and 10% of the proposed rules that reference EO 12866. This disparity exists even though EO 13771 relies upon the same “significant regulatory action” threshold as set forth in EO 12866. Put differently, if agencies are invoking EO 12866, then they should also be considering EO 13771.

Even at the stroke of a pen, presidential orders cannot simply change the course of the administrative state. In recognition of this fact, the President Trump is attempting to establish a new enforcement framework – led by embedded watchdogs at the agencies, regulatory reform officers and tasks forces – to ensure implementation of his deregulatory agenda. However, the Trump administration has lagged far behind his predecessors, particularly Democratic Presidents Obama and Clinton, in terms of nominations and Senate confirmation of key officials responsible for setting agency policies.

President Trump’s executive orders should also be understood within a tradition of presidential initiatives that have attempted to reform the federal regulatory process, such as President Ronald Reagan’s Executive Order 12291, Federal Regulation, and President Clinton’s EO 12866. Given the party affiliation of White House occupant, the pendulum has swung between concentrating regulatory power within OMB and OIRA or allowing greater discretion for rulemaking at the federal agencies. What is unique about President Trump’s addition to this tradition is the use of a strict offset rulemaking formula, the layering of new political and bureaucratic controls, and the employment of ungarnished rhetoric, all of which seek to disempower the agencies’ regulatory authority.

The small impact of EO 13771 within the first 100 days does not mean that President Trump’s regulatory reform agenda has not materially changed regulatory activity within the federal bureaucracy. The “regulatory freeze” at the start of the Trump presidency resulted in the delay of dozens of regulations by one count. There have also been numerous federal regulations that have been revoked or delayed or subject to suspended enforcement. When compared to President Barack Obama’s first 100 days, President Trump’s administration has engaged in 25% less rulemaking. At least by this measure, covering a brief 100-day timeframe, President Trump has made progress toward reducing the government’s regulatory activity.

The more recent record indicates that the President Trump’s deregulatory initiatives are gaining traction. As noted in Table 2 and explained below, when measured in subsequent 100 day periods, we witness an increasing reference to EO 13771, a measure of the impact of the 2-for-1 Rule, even as this portion of overall rulemaking remains small. These results are based on the use of the advanced search function on the Federal Register website.

During the second 100 days, from April 30 to August 7, 2017, the number of citations to EO 13771 increased significantly. Federal agency rulemaking referencing EO 13771 during this period included 105 rules and 88 proposed rules – an increase of 453% and 450%, respectively, when compared to the first 100 days. In the second 100 days, however, agencies have continued to struggle with applying a coherent approach to EO 13771 in comparison to EO 12866 when undertaking the “significant regulatory action” analysis. Federal agencies expressly applied EO 12866 in 576 rules and 337 proposed rules. In other words, in the second 100 days of the Trump era, federal agencies were more likely to reference EO 12866 than EO 13771 by nearly a factor of five. Inertia appears to still be a powerful force even with a president determined to re-shape the administrative state.

During the third 100 days, from August 8, 2017 to November 16, 2017, the number of citations to the 2-for1 Rule increased compared to the second 100 days. However, the increase between the first 100 and second 100 days, was nowhere near the increase in numbers between the first and the second 100 days, as explained above. Specifically, federal agency rulemaking referencing EO 13771 during the third 100 day period included 180 rules and 94 proposed rules – an increase of approximately 71% and 7%, respectively, when compared to the second 100 days. In comparison, during this same period, federal agencies expressly applied EO 12866 in 948 rules and 274 proposed rules. While federal agencies were more likely to reference EO 12866 than EO 13771, agencies did so by a factor of three-and-a-half as compared to the preceding 100 day period when the ratio was by nearly a factor of five.

Over the course of the first 300 days of the Trump administration, the numbers indicate that overtime the Federal agencies began more consistently, if still sparingly, invoking EO 13771, perhaps becoming more accustomed to the new rulemaking landscape. In addition, the installation of regulatory reform officers, often high-level political appointees, and workings of the regulatory reform task forces may also explain the increasing reference to EO 13771. A disconnect continues with the application of EO 13771 and 12866, but the difference is decreasing.

More significantly perhaps, in each of the 100 day periods, and during the first 300 days overall, the number of federal rulemaking activities actually “deemed significant” (specifically “Deemed Significant Under EO 12866” (DS) in the Federal Register advanced search function) remained a tiny fraction of the actual universe of regulatory activity. In other words, proposed rules or rules actually having an “annual effect on the economy of $100 million or more” have been the exception, not the rule. Indeed, during its public notice soliciting candidates for deregulatory action, the DOT identified a list of only 20 rules that qualified as “economically significant rulemakings” during a period stretching back to 2008. Since EO 13771 only applies to “significant regulatory action” as defined under EO 12866, President Trump’s 2-for-1 Rule may only actually impact a small, even if weighty, subset of the entirety of federal rulemaking.

TABLE 2: 100 DAY PERIODS

Federal Rulemaking Comparison

 

1nd 100 Days EO 13771 EO 13771 (DS) EO 12866 EO 12866 (DS) Total Published Total Published (DS)
Rule 19 1 383 7 682 46
Proposed Rule 16 2 191 4 349 25
Total 35 3 574 13 1031 71

 

2nd 100 Days EO 13771 EO 13771 (DS) EO 12866 EO 12866 (DS) Total Published Total Published (DS)
Rule 105 9 576 17 949 53
Proposed Rule 88 10 337 15 565 29
Total 193 19 913 32 1514 82

 

3rd 100 Days EO 13771 EO 13771 (DS) EO 12866 EO 12866 (DS) Total Published Total Published (DS)
Rule 180 13 666 17 987 25
Proposed Rule 94 7 282 7 539 20
Total 274 20 948 24 1526 45

As my colleagues and I note in Bulletin, further analysis, over time, is required to determine the long-term impact and effectiveness of President Trump’s regulatory reform agenda and the 2-for-1 Rule. Indeed, compiling numbers from the Federal Register only tells a partial story. Assumptions in the data could prove incorrect or incomplete. Beyond a quantitative analysis, we must also discern how measures like the 2-for-1 Rule and Trump’s new political controls impact the role, authority, and mission of federal agencies, which have traditionally been afforded a degree of autonomy and deference based on their technical expertise, meritocratic norms, and professional standards. A number of appointed agency heads have been vocally hostile to the agencies they now control. And the President’s budget calls for wholesale elimination of certain agencies. A culmination of these factors could create tension between longstanding career civil servants and new political appointees. As the President’s regulatory reform agenda unfurls, we may see internal agency appeals to Congress, particular relevant committees of jurisdiction, for support. One key question to be answered is whether President Trump has the political capital to sustain the bold change he seeks. This query may be the most important of all.

Roncevert (Ronce) Ganan Almond is a Partner at The Wicks Group, PLLC

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