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How a New President Can Roll Back Bureaucracy, Part 1: Freeze Regulations Temporarily

In today’s economy, talk about regulatory liberalization has become a bit more bipartisan. For example, the “Ideas Menu” from the political advocacy group No Labels reveals bipartisan support for: a “rule-in, rule-out” approach to regulations; sunsetting, or letting rules expire unless consciously reinstated; reviewing and reducing the existing body of rules (presumably via a “Regulatory Improvement Commission”); and letting states rather than the federal government call the shots where appropriate.

While it’s no surprise that a campaigning Donald Trump promised to “cut regulations massively,” it’s also the case that Hillary Clinton promised “new national initiatives to cut red tape at every level.” Even the idea of a regulatory cost budget, highlighted in a new working paper from the House Budget Committee and a policy statement accompanying the 2017 budget resolution, first gained official prominence in President Jimmy Carter’s 1980 Economic Report of the President.

To be sure, the current administration’s “pen and phone” brought issues of unilateral executive power expansion to the forefront. But the flipside is a future White House that reduces the scope of government, within the rule of law. This series will walk through a series of options for a new president. Here’s the first.

1. Freeze Regulations Temporarily

A moratorium on regulations may be, as the economists like to say, necessary but not sufficient.

Agencies issue some 3,500 rules and regulations each year, and when a new president takes office he inherits a torrent moving through the pipeline. Presidents sometimes like to take a breather to reflect on what’s in motion, assess conformity with priorities, and decide what should be continued or halted.

For example in 2009, President Obama’s chief of staff’s very first action was to announce a freeze of pending George W. Bush rules as part of the first 100 days initiative. The first President George H. W. Bush waited much longer, but he initiated a 90-day regulatory moratorium on January 28, 1992, a mid-term election year. Most recently, in his speech at the Detroit Economic Club, candidate Donald Trump proposed a moratorium.

Rulemaking has never been appreciably reduced by moratoria, so either Trump or Clinton might learn from the past to achieve better results. Agencies like to build not shed turf, so they need incentives better than to be asked to describe what they’ve done badly. Bush’s prior lookbacks saved only a few billion, and while the Federal Register dipped, it quickly rebounded, despite the poles of enthusiasm and controversy over the moratorium. (Consider: in 1990 and 1991, mid-year June 15 page counts were 24,546 and 27,887, respectively. Yet the stubborn Register was up to 26,766 pages on June 15, 1992, and reached its then-fourth-highest level ever by year-end.)

Rules often implement statutory requirements and can’t (normally) be changed by executive waivers or moratoria (although Internal Revenue Service waivers occurred with respect to implementation of the Patient Protection and Affordable Care Act). Much regulation is mandated by legislation (the Dodd-Frank financial law is a prime example) rather than being impelled by agency discretion. This reality will go a long way toward neutralizing any moratorium for an executive not working closely with Congress. Among other exemptions in the Bush version were “regulations that respond to emergencies such as situations that pose an imminent danger to human health or safety.”

Still further, removing regulations from the rulebooks requires public notice and comment procedures, just like creating a new rules does. Moratorium-exempt deregulation-oriented regulations to “foster economic growth” also would have added (and will add) to Federal Register volume.

It became apparent that George H. W. Bush’s three-month campaign was less time than needed to fully examine the fruits of an intense, thorough audit. Agencies reckoned that savings of $15-$20 billion per year would materialize, although such claims are unclear. So Bush extended the moratorium an additional 120 days on April 28, 1992, and then for the remainder of his term during his Republican presidential nomination acceptance speech on August 20, 1992. The effort ended with President Bill Clinton’s arrival.

So the executive branch’s ability to curb regulation unilaterally even when it goes so far as to freeze new rules appears limited. Still, especially given that President Obama expanded the state unilaterally, more analysis is needed to discover what is achievable within legal bounds. 

The lesson of failure is not “don’t try.” Past moratoria had to fail given the nature of the regulatory enterprise. The new president should have the Office of Management and Budget issue a report detailing all the reasons why, to illustrate how regulation truly operates on autopilot, and the rarity of housecleaning. Such a report could become part of the public record by which posterity adjusts the systemic only-upward trajectory of regulation with better tools than pre-handicapped moratoria.

A creative new initiative can build upon the best of the Bush, Obama and related moratoria, raise the level of intensity, and freeze regulation longer for a more thorough, unrushed audit to authorize reduction of the existing body of rules,. Public comment can be sought, data gathered, reports generated, and so forth. Igniting some bureaucratic enthusiasm and creativity can produce useful information to bolster more substantive reforms—such as stipulating that for each new rule, an equivalent burden within or outside the agency should be eliminated. Doing the latter would amount to a status quo “regulatory budget” or freeze for the duration of the review. As noted, the House of Representatives is prioritizing the idea of a regulatory budget, something a moratorium could help inform.

My colleague Ryan Young described how a moratorium is “trumped” by the need for rediscovery of the separation of powers, and highlighted existing legislation to achieve that. No matter how well a moratorium works, if it does at all, other more stringent institutional checks on regulatory output will be needed. At the least, a moratorium can provide a hiatus to review the regulatory enterprise and tee up subsequent deeper reforms needed to accomplish regulatory liberalization.