I remembered wondering in 2017 whether the federal government would be larger or smaller after four years of Donald Trump.
We got the answer well before the string of COVID-19 bailout packages, but the debt has now topped $25 trillion and the deficit alone will top $4 trillion, a figure that, incredibly, is higher than all federal outlays as recently as 2015.
While iffy, White House and congressional negotiation on yet another economic stimulus package entails more borrowing and spending on state bailouts, aid to households and infrastructure, plus maybe another tax filing deadline extension and some liability protections. New reports reiterate Trump’s earlier calls for another $1 trillion in infrastructure spending, an approach to stimulus that is highly problematic.
There are steps Congress can take instead to “deregulate to stimulate” the economy and decrease uncertainty, such as a bipartisan regulatory reduction commission. But so far, few such bipartisan impulses are apparent. When free market types urged similar deregulatory campaigns during the 2008 meltdown, they were rebuffed and instead, new regulation was added then.
While there has been some important rollback of regulation in recent weeks, it pales compared to the raw reality of lockdown, and one strains to believe that Congress will take aggressive steps to permanently eject the #NeverNeeded the administration has highlighted in recent months.
In the meantime, President Trump can and should use a meataxe on regulation unilaterally, amplifying earlier executive orders on regulatory review, oversight, streamlining and reduction, such as the notorious one-in, two-out program.
Trump can’t zap major regulatory laws unilaterally, but there are certain modest-to-meataxe steps the administration can still take.
A May Trump executive order on making temporary COVID reductions permanent and outlining fairer enforcement processes, including what has been called a “Regulatory Bill of Rights” is a big example of that. The order has been reinforced by a new directive from Office of Management and Budget Director Russell Vought. A looming summer deadline for agencies to provide a portal to all their guidance documents should be illustrative of where things stand with respect to agencies’ inclination to cooperate on regulatory liberalization.
Here I’ll proivide a quick survey of proposed unilateral actions that president Trump can take. Following that, in a brief survey of my new Ten Thousand Commandments report, my annual series that examines the scope of the federal regulatory state, I’ll cover Trump’s track record on regulations.
What follows are options aimed at addressing the current crisis, but perhaps more, resilience for the next crisis. If you’re inclined, follow the links below (the “One” through “Thirteen”) for a slightly deeper look on each item.
One: Implement a regulatory moratorium. That is, freeze the issuance of new regulations altogether where their pouring forth isn’t mandated by Congress. A separate brief report (“Pen, Phone and Eraser”) I have covers this in additional detail.
Two: Echoing the semi-forgotten (at least by the public) Task Forces Trump set up at the time of the one-in, two-out order, boost regulatory review resources and free market law and economics staff at agencies and at the Office of Information and Regulatory Affairs (OIRA).
Three: Also as the “Pen, Phone and Eraser” analysis urges, further professionalize and systematize review, revision, repeal and sunsetting of regulations. This could be an executive branch version of the still hoped-for congressional reduction commission touted earlier.
Four: Expand the number of rules receiving cost analysis, such as by reducing dollar thresholds that trigger mandatory “Regulatory Impact Analyses” and the like, and scooping up also those that escape the Unfunded Mandates Act.
Five: Scrutinize all agency decrees that affect the public, not just “rules.” Late last year, the Trump administration issued executive orders to rein in the abuse of guidance documents, I’ll be looking deeper, but early indications were that agencies are not following through on compiling the required guidance inventory portal. We will learn soon whether agencies comply with a new July deadline and I have a suspicion a new Executive Order will be needed to tie up loose ends.
Seven: Track and officially disclose how burdens accumulate as specific businesses sectors grow, much like the Mercatus Center tracks with its RegData project.
Eight: Provide detailed annual report cards on regulations. “Measure what is measurable, and make measurable what is not so,” is a quote sometimes attributed to Galileo that he probably never uttered; still, we need numbers quantifying what agencies do.
Nine: Find creative new ways to improve transparency and clarify regulatory impact, such as by designating multiple classes of “major” or “economically significant” rules.
Ten: Account for and report separately on economic, health and safety, environmental, labor, and social engineering regulations. In the process, independent agencies like the Federal Comminications Commission and the Consumer Financial Protection Bureau need more scrutiny and an executive order bringing independent agencies into the cost analysis fold is (depending on how the wind blows) a bipartisan thing.
Eleven: Just as Einstein’s General Theory recognized gravity and acceleration to be the same thing, we need to better recognize that federal spending is also regulation. The administration should improve assessment and analysis of program transfer costs and recognize deadweight costs of government spending in regulatory reporting. Retirement and health care were government takeovers that became untouchable after a few generations passed, no longer even recognized as the profound regulation that they are. The situation with Obamacare is similar. Big spending is also big regulation, and that can be seen today in the progressive wish-list items attached to COVID spending stimulus like family leave.
Twelve: Regulatory analysis tends to emphasize compliance costs. That needs to be extended so that policy makers acknowledge and minimize the far greater indirect costs of regulations. This is something I address in the new Ten Thousand Commandments.
Thirteen: Trump should formalize official “do not regulate” institutions. Call it the “Office of No.” Here I’m not just talking about more resources for OIRA that I mentioned, or establishing a Congressional Office of Regulatory Analysis, but entities actually formally chartered with an anti-regulatory “bias” to offset the pro-regulatory bias prevailing in the entire rest of the administrative state. The job would be to explain and archive the reasons, in every instance, why not to regulate, and plot a path to phaseout of the agency. There is simply too much abuse of the market failure rationale.
Regulation requires something other than the creation of a bureaucracy. Each of the concerns that agencies purport to “regulate,” whether privacy, financial stability, Internet access, food safety, and so forth, are also forms of wealth and require something apart from the man-made administrative behemoths created by long-dead ideologues and rent-seekers. These do not always work, and they are increasingly abusive yet unaccountable.
The aim of all this unilateral regulatory reform “stimulus” is to not just to streamline now, but to be forward-looking: to prevent agencies from creating new rules in areas where Congress hasn’t explicitly authorized such.
An economy as healthy as possible, one unencumbered by needless regulation, is one that will be more resilient in the face of the next crisis; and with luck, one more resistant to the flash policy of spendulus in which we are now trapped.
Switching gears now, I’ll cover some results of the Trump regulatory era I’ve surveyed in the new Ten Thousand Commandments.
As is well known, the federal government heavily influences society through regulation as well as spending, and my report is an effort to gauge that. The limited cost-benefit analysis currently undertaken by agencies relies largely on agency self-reporting and covers only a fraction of rules.
The 2020 edition of Ten Thousand Commandments contains several elements.
The meat is an overview of ways the Trump administration has stemmed the flow of regulations and rolled back old ones via successful implementation of the “one-in, two-out” campaign. This is offset, though, by such a progam’s inherent limitations, as well as Trump’s own regulatory impulses that undermine his regulatory effort.
The balance of the report is an overview of the scope of the regulatory state, including depictions of its appraised size compared with federal budgetary components and GDP as well as a taxonomy of categories of unmeasured costs of regulation and intervention. I also look at trends in the numbers of rules and regulations, plus survey “regulatory dark matter”—the memoranda, notices, and other sub-regulatory guidance on which agencies will be reporting later this summer.
Let me hit some highlights. First, there are with six prominent ways the Trump administration has streamlined regulation so far:
At the outset, There was delay or withdrawal of nearly 1,600 Obama administration rules in the pipeline.
And naturally, there is agency restraint in initiating large, significant rulemakings.
There was the elimination of 15 rules and one guidance document via the Congressional Review Act.
There was multipronged streamlining of permitting for pipelines, bridges, 5G broadband, rural broadband, and other infrastructure. There’s a new Executive Order on this, too.
Most well known, there is continued success on the presidential requirement that agencies eliminate at least two rules for every one issued.
Perhaps most interesting to me, there is a new executive order requiring the above mentioned portal for agency guidance documents and other sub-regulatory dark matter decrees.
Now comes a “deep state” warning: Looking ahead, Agencies’ stated priorities and plans signal warning signs for Trump’s deregulatory agenda. While “one-in, two-out” goals have been met, the longer-term horizon shows agencies poised to issue substantially more regulatory actions than deregulatory ones as soon as the pressure is off.
Worse, some administrative state expansions are of Trump’s own creation. President Trump’s regulatory streamlining is being offset, and I fear outweighed, by his own favorable comments and actions toward regulatory intervention. These are covered beginniong on p. 15’s “Swamp Things” section in the new Ten Thousand Commandments, but these areas include:
- Antitrust intervention;
- Financial regulation;
- Hospital and pharmaceutical price transparency mandates and price controls;
- Speech and social media regulation, including a new executive order ;
- Digital taxes;
- Bipartisan large-scale infrastructure spending with regulatory effects;
- Trade restrictions;
- Farming and agriculture interventions and other subsidies with regulatory effect;
- Telecommunications regulation, including for 5G infrastructure;
- Personal liberties incursions, like health-tracking, vaping, supplements, and firearms regulation;
- New welfare and labor regulations like job training and a new family leave program; and
- Especially worrisome to me given my concerns about regulatory dark matter are industrial policy and market socialist funding mechanisms in scientific research, artificial intelligence, and a Space Force.
Economic intervention in the wake of COVID-19 is of grave concern now too. In the next edition of the Commandments report, there will necessarily be mention of the Federal Reserve now dominating the exension of credit in the United States.
Now, as I’ve often described, I regard the tabulation of regulatory costs by third parties as inherently subjective, even impossible. Still, we need something. Given the limited available material and the federal government’s neglect of an annual regulatory cost estimate—my report employs a placeholder for regulatory compliance and intervention of $1.9 trillion annually for purposes of context and comparison with federal spending and other metrics. Costs of intervention are not limited to that, though, and I explain the disregarded in some detail.
For comparative purposes, $2 trillion of regulatory intervention is equivalent to over 40 percent of the level of federal spending, and amounts to 9 percent of U.S. GDP, which stood at around $21 trillion in 2019. In COVID 2020, who knows where GDP will land.
When regulatory costs are combined with federal outlays, the federal share of the entire economy reaches 30 percent (state and local spending and regulation would add to that).
If it were a country, U.S. regulation would be the world’s eighth-largest economy (not counting the U.S. itself), ranking behind Italy and ahead of Brazil.
Consider too that federal individual and corporate income tax receipts combined happened to total $1.9 trillion in 2019, so the regulatory hidden “tax” is their equivalent.
Regulatory costs even rival corporate pretax profits of $2.1 trillion.
If one assumed that all costs of federal regulation and intervention flowed down to households, U.S. households would “pay” over $14,000 annually on average in a regulatory hidden tax. The regulatory “tax” exceeds every item in the budget except housing.
So you can see what I mean about deregulating to free up wealth and stimulate.
On the numbers of regulations, since it’s always fun to count, 2019 ended with 2,964 final rules in the Federal Register, which was the lowest count since records began being kept in the 1970s, and is the only sub-3,000 tally ever (In the 1990s and early 2000s, rule counts regularly exceeded 4,000 annually).
During calendar year 2019, while agencies issued those 2,964 rules, Congress enacted 105 laws. Therefore, federal agencies issued 28 rules for every law enacted by Congress. I like to call this the “Unconstitutionality Index”—the ratio of regulations issued by agencies to laws passed by Congress and signed by the president. The Index highlights the entrenched delegation of lawmaking power to unelected agency officials.
And it probably goes without saying that Federal Register page counts are far below Obama’s, whch had been the highest in history. The Federal Register is thinner even though Trump’s rollbacks of rules also necessarily add to rather than subtract from the Register. Remember, in the Twilight Zone of the administrative state, you cannot get rid of a regulation, you can only replace it with a new one.
I lamented at the beginning that the federal government is larger rather than smaller under Trump. Excess regulation remains largely driven by the longstanding delegation by Congress of its lawmaking power to executive branch regulatory agencies. Addressing that situation will require the restoration of Congress’ duties under Article I of the Constitution, rather than “mere” administrative law reforms. Congressional votes on agency rules before they become binding would be one such goal.
Obviously, one-in, two-out will be overturned by any Democratic president in 2021 or 2025. Even apart from the current economic troubles, this necessitates new Trump orders not just to tie up loose ends, but to to cement a deregulatory legacy much like Reagan’s Executive Order 12291 did for him. That is, if Trump wants a deregulatory legacy.
This essay is based on an amalgam of two speeches delivered to the Center for Strategic Tax Reform and the Heritage Foundation.