Regulators need to cool off and slow down their rulemakings

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Rep. Harriet Hageman (R-WY) has reintroduced an important bill that would make the administrative rulemaking process fairer for the public. Known as the “Regulatory Cooling Off Act,” the measure aims to slow down the rapid pace of rulemaking recently experienced under the Biden administration.

If passed, Hageman’s bill would be a game-changer, marking the first substantial update to the Administrative Procedure Act (APA) since 1978.

The bill was first introduced during the 118th Congress (2022-2024) as a means to pump the breaks on the rapid pace of administrative rulemakings and regulations. Many federal agencies had pursued a host of extra-statutory regulations that were instituted at a breakneck speed.

This approach was on full display at the Securities and Exchange Commission (SEC) under Chair Gary Gensler’s term. Multiple GOP congressmen and stakeholders were concerned by Gensler’s unprecedented pace and heavy volume of proposed rulemakings.

In terms of finalized rulemakings, data shows that Gensler’s SEC has been on par with prior Chairs. However, when combined with the proposed rulemakings, Gensler has pursued more than 70 rulemakings at a time, exceeding prior chairmen. In September 2023, Gensler had proposed 50 percent more rules than prior Chairs Mary Jo White and Jay Clayton, with 47 rules left outstanding.

While Gensler’s pace for finalizing SEC rules is similar to prior regimes, the number of proposed rules far surpasses what the agency has managed in prior years. To this end, acting SEC Chair Mark Uyeda raised numerous concerns with this trend during a recent House Financial Services hearing. He not only criticized the rapidity of proposed rulemakings, but also the shortening of public response windows.

“When you have multiple rulemakings all at the same time on different subjects that affect the same entities, it’s really hard for them to give us thoughtful feedback on that,” Uyeda noted. “It’s a bit like the saying in construction: measure twice, cut once. We should think about doing the same thing for proposals.”

The SEC has been criticized for shortening the public comment windows from 60 days to 45 days, or from 45 days to 30 days across many rulemakings. On average, commenters had 25 percent less time to respond to 50 percent+ more proposed rules during Gensler’s tenure.

The SEC’s rapid-fire rulemaking also drew criticism from the Office of Inspector General (IG). According to a 2022 IG report, the SEC has grappled with serious workforce attrition. Despite having less personnel, the agency managed to propose more than two rules a month. Some proposals were rushed without even considering existing studies or conducting proper cost-benefit analyses.

The IG’s report cites how the SEC’s agenda grew exponentially during the first years of Gensler’s tenure. “In only the first 8 months of 2022, the SEC proposed 26 new rules, which was more than twice as many new rules as proposed the preceding year and more than it had proposed in each of the previous 5 years,” according to the IG report.

This proliferation in new rulemakings placed a strain on the heads of several SEC divisions, impinging their ability to steward resources and stay grounded to the agency’s mission.

This rise in rulemakings also increased the rate of workforce attrition at the agency. This prompted SEC managers to hastily hire many new personnel that lacked sufficient rulemaking experience. The negative domino effect has raised widespread concerns within the agency, by the IG, and members of Congress. All concerns point to a widespread decline in agency productivity.

“We question whether the SEC has documented all feedback on its proposed rules in relevant comment files as required, including any and all meetings you [Gensler] had with external parties that may have covered rule proposals that were pending at the time,” according to a recent letter issued by several GOP House chairpersons.

To prevent agencies from pursuing such self-destructive and rushed rulemaking, Rep. Hageman’s proposal would extend the time for businesses to comply with proposed rules. It serves to only advantage the agency when members of the public are scrambling to respond to multiple rulemakings simultaneously within an insufficient timeframe.

“The Biden-Harris administration has weaponized outdated regulatory laws to fuel unprecedented growth in the administrative state,” according to Hageman. “This has allowed government bureaucrats to impose regulations on small business owners at an unsustainable pace, burdening small businesses with financial uncertainty and excessive costs.”

By forcing agencies to slow down the rapid pace and volume of rulemakings, aggregate compliance costs will drop as a result. An additional benefit to businesses will be the added transparency they have to anticipate which rules are coming their way, rather than frantically reacting to a blitz of rulemakings.

The new Congress should give serious consideration to adopting the Regulatory Cooling Off Act. Such legislation serves to benefit the public when regulators are forced to slow down their aggressive regulatory agenda and more carefully craft policies.