I appreciate the opportunity to discuss issues surrounding Removing the Burdens of Government Overreach, and I thank Chairman Arrington, Ranking Member Boyle, and Members of the Budget Committee for the opportunity to testify today.
Members of both major political parties have long recognized that federal regulatory burdens can operate as a hidden tax. But when the administrative state era began, few likely imagined its dense tangle of rules enveloping the economy and society. As a policy concern, regulation merits attention no less than the $31 trillion national debt does, since both spending and regulation are capable of extraordinary transformation of the economy and reallocation of societal resources.1
While we can pinpoint the amounts of the debt and deficit, much regulatory intervention is not captured in the traditional OMB cost benefit assessments. Reasons include the absence of independent agencies like the Federal Trade Commission and the financial bodies, the presence of countless guidance documents, and spending programs like the Inflation Reduction Act and the American Rescue Plan. Echoing the Obama-era “pen and phone,” compounding the increasing opaqueness of the regulatory state is Joe Biden’s “whole-of-government” cross- agency expansion of an array of progressive pursuits including “equity,” “competition policy,” “digital currency” and “climate crisis” (the latter dubbed “existential”2 this month by Senior Advisor Mitch Landrieu, whom Biden has placed in charge of coordinating implementation of the Infrastructure Investment and Jobs Act).
Biden’s re-regulatory movement is an ambitious one, requiring a congressional response. The good bits of Donald Trump’s streamlining of the regulatory process have been ejected entirely. Trump’s flagship was Executive Order 13,771 on “Reducing Regulation and Controlling Regulatory Costs,”3 establishing a one-in, two-out requirement for certain significant regulatory actions. E.O. 13,771 also implemented a rudimentary regulatory budget by directing that the “total incremental cost of all new regulations, including repealed regulations … shall be no greater than zero.” The Trump impulse was to regulate bureaucrats rather than the public, and certain large-scale regulation slowed dramatically (there were exceptions4).
The Biden administration’s “Modernizing Regulatory Review” memorandum and new E.O. 14,0945 of the same name have raised thresholds for what regulatory actions are considered “significant” (from $100 million annually to $200 million) and triggered a rewrite of the Office of Management and Budget “Circular A-4” guidance on “regulatory analysis” that places OIRA in a regulatory advocacy rather than watchdog role.6 Biden’s transformations did not emerge in a vacuum. There was of course “resistance”7 to Trump’s program, but progressivism has been around for a long time. Groups like Public Citizen8 and the Center for Progressive Reform9 disavow negative impacts of regulation on the economy and jobs, as do many pundits.10 We find Ivy League scholars in the Washington Post from the “Constitutional disobedience” school of thought11 ponder dispensing with Congress altogether in favor of a president that both makes and executes laws,12 and elsewhere mulling “giving up on the Constitution.”13 It is in this environment in which courts also tend to defer to agencies’ “expertise.”
This testimony highlights incremental reforms addressing regulatory overreach and how to secure for rulemaking the same disclosure, transparency and accountability demanded of taxing and spending. While regulatory reform is contentious, we know from reforms in the 1990s like the Unfunded Mandates Reform Act and the Small Business Regulatory Enforcement Fairness Act that streamlining sometimes becomes overwhelmingly bipartisan.
What restrains the administrative/regulatory state?
Seemingly no corner of life escapes the federal government’s purview. In Is Administrative Law Unlawful? Philip Hamburger sees the modern administration state as a reemergence of the absolute power practiced by pre-modern kings.14 Writing in Imprimis, Hamburger described the return of monarchical prerogative—the very condition our Constitution was drafted to eliminate:15
[T]he United States Constitution expressly bars the delegation of legislative power. This may sound odd, given that the opposite is so commonly asserted by scholars and so routinely accepted by the courts.…. The Constitution’s very first substantive words are, “All legislative Powers herein granted shall be vested in a Congress of the United States.” The word “all” was not placed there by accident.
The basis of the prevailing rulemaking process is the post-New Deal Administrative Procedure Act (APA) of 1946 (P.L. 79-404) which established the process of public advance notice-and- comment for rulemakings. We often see not laws but proposed and final rule publication in the daily depository known as the Federal Register. While the APA established formal rulemaking processes with quasi-judicial proceedings for significant regulations, these are rarely used.
Instead, APA’s “informal rulemaking” procedure of notice and comment (“Section 553” rulemaking) is most common. But there is wiggle room in the APA. Agencies for “good cause” can bypass notice and comment where “impracticable, unnecessary, or contrary to the public interest.”
The result is that agencies do the bulk of the lawmaking. There were 247 public laws passed by Congress and signed by the president in calendar year 2022. Meanwhile agencies, implementing laws passed earlier and by earlier Congresses, issued 3,162 rules and regulations—a multiple of 13 rules for every law (compared to 17 and 31 rules for every law in 2020 and 2021 respectively). Legislatures too often fail to control spending, let alone the even less-disciplined tentacles of the regulatory enterprise governed by the APA.
Prior attempts to “Remove Burdens of Government Overreach”
During the late 1970s and early 1980s, concern over regulations’ effects bred inquiries and reforms meant to reinvigorate the economy while stemming that era’s inflationary pressures.16 Agency tendencies to overstate or selectively express benefits was also a concern. Prominent deregulation occurred in trucking, rail, and airlines and in financial services.17 Antitrust enforcement was relaxed and attention was paid to reducing paperwork. Regulatory review processes began with Nixon, were expanded by Ford, and embraced more fully by President Carter. A significant advance was the Reagan Administration’s formalization of the central regulatory review housed at OIRA.
Created by the Paperwork Reduction Act of 1980, OIRA first concentrated on reducing private sector paperwork burdens. OIRA’s authority was expanded by President Reagan’s February 17, 1981 Executive Order 12291 to encompass a larger portion of the regulatory process by requiring that new major executive agency regulations’ benefits outweigh costs where not prohibited by statute (independent agencies, while subject to notice and comment, remain exempt from review to this day). Earlier administrations’ regulatory review efforts, such as ones conducted by the Council on Wage and Price Stability, the Council of Economic Advisers and the interagency Regulatory Analysis Review Group, lacked extensive enforcement powers.18 These earlier bodies could seek regulatory cost analysis if not statutorily prohibited, but could not enforce net-benefit requirements; appeals to the president were possible.19 Net benefit analysis sports problems of its own20 that are being exacerbated by Biden’s transformations, but the act of consciously addressing significant regulation seemed promising at the time. The early and mid-1980s saw declining costs and flows, particularly in economic regulation in contrast to social and environmental regulation.21
Over the years, OIRA review and supplements, like the first President George Bush’s Council on Competitiveness tasked to screen regulations, faced political opposition,22 narrow scope of authority23 and limited resources.24 In 1993, President Bill Clinton replaced Reagan’s E.O. 12291 with E.O. 12866 “Regulatory Planning and Review.” The Clinton approach retained the central regulatory review structure, but “reaffirm[ed] the primacy of Federal agencies in the regulatory decision-making process,” weakening the “central” in central review. The directive also changed the Reagan criterion that benefits “outweigh” costs to a weaker stipulation that benefits “justify” costs. But the order retained requirements that agencies assess costs and benefits of “significant” proposed and final actions, conduct cost benefit analysis of “economically significant” ($100 million-plus), and to assess “reasonably feasible alternatives” for OIRA to review.
When Congress is able to mobilize on regulatory reform, small business burdens and job concerns are often the inspiration. Since 1980, the Regulatory Flexibility Act has directed federal agencies to assess their rules’ effects on small businesses and describe regulatory actions under development “that may have a significant economic impact on a substantial number of small entities.”25 The RFA has (imperfectly) recognized a need to scale federal actions to the size of those expected to comply. A major development during the Clinton years was the Unfunded Mandates Reform Act of 1995 (P.L. 104-4.), driven largely by agitation over rules for which compliance was disrupting states’ own budgetary priorities.26 So popular was UMRA that the Senate version was dubbed “S. 1.” The 1996 Congressional Review Act (CRA) required agencies to submit reports to Congress and the GAO (which maintains a database) on their “major”—roughly $100 million—rules.
The CRA provides Congress a window of 60 legislative days in which to review a major rule and pass a “resolution of disapproval” rejecting it. The CRA, in spirit, is one of the more important recent affirmations of the separation of powers. But despite the issuance of thousands of rules since passage, including many dozens of major ones, only one rule was rejected before the Trump administration: a Labor Department rule on workplace repetitive-motion injuries in early 2001. Trump era rejections of Obama rules and Biden’s use on Trump rules has brought the total to 20. The CRA is undermined by final rules not being properly submitted to the Government Accountability Office and to Congress as required under the law.27 The “Regulations from the Executive In Need of Scrutiny” or REINS Act, which appears most recently in this Spring’s debt limit legislation, would instead require affirmation of major agency regulations before they are effective.
Before Trump, Obama’s January 18, 2011 E.O. 13565 on “Improving Regulation and Regulatory Review” affirmed the Clinton order and articulated a pledge to address unwarranted regulation. Obama achieved a few billion dollars in savings (even ridiculing in the 2013 State of the Union Address a rule that had categorized spilled milk as an “oil”28) though was known more for adding costs. Notably, Obama’s July 11, 2011 E.O. 13579 (“Regulation and Independent Regulatory Agencies”) called upon independent agencies to fall into line on disclosure.29