The Midterm Election Results Should Inspire A New Trump Executive Order On Federal Regulations

As part of its economic reform agenda, the Trump administration  emphasized cutting red tape. It reaffirmed Office of Management and Budget (OMB) cost-benefit review of significant agency rules and regulations, and implemented new regulatory “budgeting” requirements to freeze costs for the whole regulatory enterprise.

The primary vehicle for this was Trump’s Executive Order 13771, “Reducing Regulation and Controlling Regulatory Costs.” This order established the well-known one-in/two-out policy for implementing new rules, and implemented a freeze/reduction on net costs for new regulation.

Trump also set up regulatory reform task forces to identify “outdated, unnecessary, or ineffective” regulations, those with costs greater than benefits, and those that inhibit jobs and job creation. He also launched an executive branch reorganization plan that OMB Director Mick Mulvaney headed (a move that still has potential synergies with regulatory reform).

The 115th Congress, however, was unable to supplement these Trump moves with regulatory streamlining legislation; measures to strengthen oversight like the House-passed Regulatory Accountability Act (RAA) never got through the Senate and will not assuming no unexpected lame-duck dislodge.

While the 2018 midterm election increased the Republican majority in the Senate, the 116th Congress, in which Democrats will control the House, make measures like a strong-form RAA a non-starter barring the unforeseen.

So what next for Trump on the regulatory liberalization front, then? 

In addition to Congress’s laws (a few dozen a year) and agency rules and regulations that are subjected to the  Administrative Procedure Act’s public notice-and-comment procedures (some 3,000-plus a year), agencies issue thousands of sub-regulatory “guidance documents” that are not supposed to be binding on the public.  These appear in various forms: memoranda, bulletins, notices, administrative interpretations, and so on. Unsurprisingly, the public is sometimes reluctant to “disobey,” as the Administrative Conference of the United States explains.

As it happens, the Trump White House’s moves on regulation reinforced OMB review of “significant guidance documents,” as specified a decade before in the George W. Bush administration’s 2007 “Final Bulletin for Agency Good Guidance Practices.” Guidance can even be employed in the two-for-one process, but there is much more potential for public policy reforms here.

While guidance and interpretative rules and other such “regulatory dark matter” are not subject to the APA’s public consultation requirement, they are subject to the Congressional Review Act’s (CRA) requirement to submit to the Government Accountability Office and to both houses of Congress, so that Congress might choose to enact a “resolution of disapproval.”

As it turns out, this requirement is largely ignored.

Many observers have called for Congress to act on regulatory streamlining; now, that’s less likely, outside of some changes that could be attached to a potential bipartisan package on infrastructure.

A non-legislative option in the meantime is for the president should supplement the administrative actions already taken, and issue a brand new executive order to greatly strengthen review and control of sub-regulatory guidance. This is needed, because much of the new, frontier sectors of the economy are particularly vulnerable to inappropriate rule-by-guidance.

A new order, discussed here in “A Partial Eclipse of the Administrative State: A Case for an Executive Order to Rein in Guidance Documents and Other ‘Regulatory Dark Matter’,” should incorporate longevity lessons from President Ronald Reagan’s E.O. 12291; this landmark directive first formalized OMB regulatory analysis and review of notice-and-comment rules, a process that largely remains in effect.

While presidents can eliminate predecessors’ executive orders, those addressing regulation have enjoyed some staying power. A new order focused on guidance—with a powerful management framework that is compelling and comprehensive—could greatly amplify executive oversight of agencies.

Moreover, since revoking or easing guidance does not require going through the notice-and-comment process as revoking a rule does, the streamlining enabled and encouraged via a new executive order may become more important to the administration’s overall regulatory liberalization goals as the E.O. 13,771 two-for-one low-hanging fruit is picked.

Here are features that an executive order on agency guidance documents and interpretative should include (For details, see the paper).

Plank 1: Reaffirm and put the hammer down on already “official” but not-fully-enforced procedures for guidance document oversight;

Plank 2: Improve disclosure of specific guidance on a centralized location, and publish detailed summary statistics for all agencies;

Plank 3: Incorporate guidance into the twice-yearly Regulatory Plan and Unified Agenda for Federal Regulatory and Deregulatory Actions

Plank 4: Designate all guidance as “Regulatory” or “Deregulatory”;

Plank 5: Modify the CRA reporting template to clearly designate guidance, not merely rule types as is current practice;

Plank 6: Future Guidance—Affirm that future agency guidance is null unless submitted to GAO and to both houses of Congress;

Plank 7: Past Guidance—Affirm that prior improperly issued guidance will not be regarded as in effect unless agencies formally back up and submit it;

Plank 8: Secure a comprehensive compendium of all validly issued guidance (a “regulatory dark matter” version of the Code of Federal Regulations). Anything not on the list is invalid;

Plank 9: Go beyond the mere CRA submission process for guidance and disallow guidance that does not secure outright congressional approval (as opposed to “approval” by not disapproving it);

Plank 10: Ban the initiation of certain federal agency guidance, especially in frontier/technology sectors;

Plank 11: Require public notice and comment procedures for guidance;

Plank 12: Liberally deem guidance “significant” and escalate formal OMB review of it (along with OMB review of independent agency rules that are now exempt).

The dampening of prospects for congressional action on the regulatory front does not mean there is not plenty that can be done anyway. While the presidential “pen and phone” can expand the state, they can also, within proper bounds of rule of law, also limit it.

Guidance overreach has been noted by the Democratic side, too, in recent years. It’s optimistic given today’s political environment, but may be the case that guidance documents offer one bit of bipartisanship on limited administrative law reform.

Originally published at Forbes.