Regulation

The (Sensible) Fine Print on Trump's Regulation Order

A document helps show why a pause in the flow of federal rules makes sense.

There's more to it.

Photographer: Andrew Harrer -- Pool/Getty Images

The first weeks of the Trump administration have not exactly been characterized by an excess of regular order. So there’s special reason to applaud a document it released last week that helps to make sense of one of the president's controversial actions -- an unprecedented executive order limiting regulation.

The order itself, requiring agencies to eliminate two regulations whenever they issue a new one, produced applause, confusion and alarm when it was announced on Jan. 30.

The good news is that the highly professional "interim guidance document" that quietly followed the order three days later answers numerous open questions about it, and does so quite sensibly and in just a few pages. (Guidance documents are used to resolve ambiguities in executive orders.) 

1. Do the executive order’s requirements apply to the independent regulatory agencies? Answer: No.

Since the 1980s, Republican and Democratic presidents have declined to try to control the regulatory decisions of the so-called “independent agencies” (such as the Federal Communications Commission, the Federal Reserve Board, and the Securities and Exchange Commission). A key reason is legal: It is not clear that the president has legal authority to exercise that control, since the heads of these agencies do not serve at the president's pleasure.

To its credit, the Trump administration followed the usual practice and announced that its executive order does not apply to independent agencies. If they want to follow the “one in, two out” idea, they’re welcome to do so -- but it’s really up to them.

2. Do the order’s requirements apply to the routine regulatory activities of the federal government? Answer: No.

For decades, the White House has reviewed “significant" regulatory actions, which it defines as those with an economic impact of at least $100 million per year or that raise novel issues of law and policy. It does not scrutinize routine regulations, which often impose low or no costs, nor does it review those that offer clarifications or technical amendments. The executive branch often issues 500-700 significant regulations annually -- and thousands of routine ones.

If Trump's executive order applied to routine regulations, it would create havoc, because it would deter necessary action that usually does not much burden anyone. The guidance document exempts them -- an excellent call.

3. Do the order’s requirements apply to regulations that implement spending programs? Answer: No.

Those who are concerned about excessive regulation focus on rules that require the private sector to incur big costs -- for example, by reducing air pollution. But many rules are necessary to carry out federal spending requirements, as, for example, under the Medicare and Medicaid programs.

Last week’s guidance document makes it clear that the executive order does not apply to rules that implement spending programs -- unless they also impose significant costs on the private sector. That’s consistent with the fundamental goal of “one in, two out.”

4. Do the order’s requirements apply to regulations that respond to emergencies? Answer: No.

Some regulations are needed to deal with imminent threats to public safety or health, as in the case of an outbreak of food-borne illness. The guidance document makes it clear that in the case of emergencies involving critical health, safety or financial matters, or for some other compelling reason, agencies may apply for a White House waiver and act immediately.

5. Do the order’s requirements apply to regulations that are mandated by law? Answer: A qualified no.

Some regulations are discretionary; under the law, the executive branch gets to decide whether to issue them. Other regulations are mandatory in the sense Congress requires the executive branch to issue them by a specific date.

If the “one in, two out” requirement applied to mandatory regulations, some agencies would be in a tough spot. It might be challenging for them to identify “two out,” yet Congress has directed them to go forward. Crucially, the guidance document allows agencies to proceed with regulations in order to comply with legal deadlines "even if they are not able to identify offsetting regulatory actions by the time of issuance.”

On all five questions, the guidance document makes the right call. But in at least two ways, it could have been even better.

First, it might have directed agencies to invite the public to make evidence-based arguments about which regulations to eliminate. Second, it might have emphasized the special importance of the analysis of costs and benefits -- and of eliminating regulations that have costs far in excess of benefits.

It’s also true that the whole idea of “one in, two out” has a gimmicky quality. The simpler approach would be to ensure that any new regulations really are justified, while also carefully scrutinizing old regulations and eliminating those that are unjustified.

But context matters. In its last few years, the Obama administration was hardly reluctant to issue new regulations, and after considerable regulatory activity, it makes sense to take a relative pause in 2017. The “one in, two out” policy could be an effective way both to enforce that pause and to press agencies to remove regulations that are taking an excessive toll on the economy, on small businesses and on individuals.

The broader point is that the policy could be carried out in a way that would remove essential safeguards, create chaos in government and violate the law --  or instead in a way that is sober, knowledgeable and professional. With last week’s interim guidance document, the Trump administration took a welcome, and quite major, step in the latter direction.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Cass R Sunstein at csunstein1@bloomberg.net

    To contact the editor responsible for this story:
    Katy Roberts at kroberts29@bloomberg.net

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