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Congress Better Fix 'Regulatory Dark Matter'

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In pursuit of job creation and economic growth, Congress is debating several red tape reforms with elevated but still insufficient focus.

In the wake of its “Waters of the United States” rule, the Environmental Protection Agency just this week issued a 600-page rule on Greenhouse Gas Emissions and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles. Republicans object, but all such are made possible by Congress’ perpetual delegation of lawmaking power to agencies.

As I write this, the 2015 Federal Register has topped 40,000 pages, and contains 1,658 rules year-to-date.

Congressional reforms under consideration include automatic sunsetting of rules, versions of a base-closure style regulatory reduction commission (something bi-partisan for a change), and regulatory budgets.

Most worthwhile would be mandatory congressional votes and a presidential signature for the largest of each year’s 3,500-plus rules and regulations; that is, treat regulations like normal laws, since they are, after all, laws.

With thousands of agency proclamations annually, it was never enough for so-called “significant” or “major” rules to receive White House Office of Management and Budget review. That’s the primary foot on the brake, and it’s weak.

Meanwhile, regulatory dark matter is gaining ground on the readily observable. Congress needs to scrutinize all agency decrees that affect the public, not just official rules.

“Sub rosa” regulation has been an issue for decades. In 1989′s Regulation and the Reagan Era: Politics, Bureaucracy and the Public Interest, Robert A Rogowski explained:

Regulatory bureaucracies are able to accomplish their goals outside the realm of formal rulemaking….An impressive underground regulatory infrastructure thrives on investigations, inquiries, threatened legal actions, and negotiated settlements. … Many of the most questionable regulatory actions are imposed in this way, most of which escape the scrutiny of the public, Congress, and even the regulatory watchdogs in the executive branch.

Even if formal notice and comment and OMB rule review were optimized, they can never suffice. “Undocumented regulation” like presidential and agency memoranda, guidance documents, bulletins, notices and press releases may enact policy with legal effect. Rule interpretations may be expressed by agencies, and regulated parties pressured to comply, without an actual formal regulation or an appreciation of costs.

Such proclamations obviously skirt the constitutional lawmaking process, but evade even the lesser published notice-and-comment requirements of the Administrative Procedure Act (APA) and subsequent OMB review.

A July 2012 U.S. House of Representatives Committee on Oversight and Government Reform expressed concern over guidance documents (“non-legislative” rules), but three years have passed and nothing was done:

Guidance documents, while not legally binding or technically enforceable, are supposed to be issued only to clarify regulations already on the books. However… they are increasingly used to effect policy changes, and they often are as effective as regulations in changing behavior due to the weight agencies and the courts give them. Accordingly, job creators feel forced to comply.

John Graham and James Broughel propose options such as reinstating a George W. Bush requirement to prepare analysis for guidance documents, explicitly labeling them as nonbinding, and requiring formal notice and comment for significant ones.

The APA also allows agencies a so-called “good cause” exemption from the requirement to provide the public with a warning, a notice of upcoming rulemaking. Thus it will be unsurprising to learn that the Government Accountability Office appeared in 2012 to announce:

Agencies did not publish a notice of proposed rulemaking (NPRM), enabling the public to comment on a proposed rule, for about 35 percent of major rules and about 44 percent of nonmajor rules published during 2003 through 2010.

Like agency notice-and-comment rules, sometimes guidance is upheld by courts, sometimes not, when it does more than merely interpret.

Notable examples of guidance include the Federal Trade Commission’s guidance on disclosure of paid search engine results, and President Barack Obama’s waivers of Patient Protection and Affordable Care Act elements. It seems no one has conducted a systematic study of the total quantity of agency guidance but it may be that guidance document volume dwarfs that of rulemaking (Raso 2010), which may not be surprising when no one can even say with authority how many agencies exist.

As noted above, this is not new: A 1992 Duke Law Journal article noted that “Federal Aviation Administration rules are two inches thick while corresponding guidance totals forty feet; similarly, IRS rules consume a foot of space while supporting guidance documents total over twenty feet.” It is hard to argue against the conclusion by Mary Whisner that “the body of guidance documents (or nonlegislative rules) is growing, both in volume and in importance.”

All potentially significant decrees by agencies need scrutiny, not just “rules.” It is most assuredly the case that agencies will attempt to strategically adapt to the new scrutiny and skirt review, by such means as informal provision of information to a regulated party regarding an agency expectations, as Stuart Shapiro has explained. (“Nice business you got there, shame if something were to happen to it.”) But a highly engaged executive and Congress can draw attention to and highlight regulatory dark matter and sub-rosa regulatory activity.

New administrative constraints could lead to many unforeseen measures by agencies to escape oversight, effectiveness of which could depend “significantly on how easy it is for OIRA [OMB's Office of Information and Regulatory Affairs] to detect avoidance, and for OIRA, the courts, and others to respond” (Mendelson, Nina A. and Wiener 2014). Agencies can also raise the costs of presidential review of what they do, “self-insulating” their decisions with “variations in policymaking form, cost-benefit analysis quality, timing strategies, and institutional coalition-building (Nou 2013).”

It will become increasingly clear that the delegation of legislative power from the elected to the unelected is at the root of many of these concerns, so answers exist.