What's next for oversight and streamlining of federal regulations?
On April 11, 2019, the Office of Management and Budget's (OMB) Acting Director Russell Vought issued a significant policymemorandum to federal agencies called "Guidance on Compliance with the Congressional Review Act." The directive re-affirmed the important principle (sadly not likely the actuality) of "real time" review and consideration by Congress of federal agencies' rules and regulations.
The last memorandum of similar nature was 1999's "Guidance for Implementing the Congressional Review Act," which April's directive supersedes.
The new directive re-asserts the requirement that both executive branch and independent agencies (such as Securities and Exchange Commission, Federal Communications Commission or Federal Reserve) formally submit notice-and-comment rules and sub-regulatory "guidance documents" to both Congress and to the Government Accountability Office (GAO).
The CRA's innovation was expediting fast-track passage of a congressional "resolution of disapproval" for "major" rules, should Congress get up on its hind legs in defense the primacy of its own Article I lawmaking power.
The April OMB update is both a symbolic and real step toward curtailing abuses of the administrative state. While the CRA requirement has always applied (with limited exemptions) to independent agencies, these bodies are not subject to OMB's cost-benefit reviews embodied in such executive orders as Clinton's E.O. 12866 or Trump's E.O. 13,771 (the latter infamous for the "one-in, two-out" and no-net-new-cost requirements).
While independents haven’t been subject to OMB review, they’ve been fairly good sports in publishing their priorities in the twice-yearly Unified Agenda of Federal Regulatory and Deregulatory Actions; so they are not strangers to coordinating with OMB.
The meat of the new order is the more detailed process for major rule determinations. The prior 1999 CRA-compliance guidance merely said, "When an agency sends a rule to Congress and GAO, the agency is to indicate [to OMB] whether the rule is 'major' or not," backed up by loose certification of that by OMB.
In the new more substantive major determination process, federal agencies must still coordinate with OIRA (the Office of Information and Regulatory Affairs within OMB), but guidelines are set forth for analysis OMB will use "to properly classify regulatory actions"regarding a major determination for all final rules. The process laid out (p. 5) involves old-school consultation with OMB, notification of upcoming rules, and the agency's own assessment of major-or-not status, but also applies to independent agencies some well-trod procedures outlined in OMB Circular A-4 that have traditionally bound (but not really) executive branch agencies.
To mitigate the new "burden," there is also a presumption that most rules will not be "major" and provisions for exempting these after due consultation.
If there's a "deep state" showdown on anything with respect to independent agencies, it will be triggered by what's seen on p. 4: "Agencies should not publish a rule -- major or not major -- in the Federal Register, on their websites, or in any other public manner before OIRA has made the major determination and the agency has complied with the requirements of the CRA."
However agencies don’t submit all their rules and guidance to OIRA anyway, and many non-submitted rules are nonetheless "in effect," supposedly (a constitutional crisis in my view); so it is questionable who really is steering the ship at this point in administrative state history, and it will be interesting to say the least (sad to say) whether one is pondering executive or independent agency rules.
It would have been helpful for what Bridget Dooling of George Washington University called OMB's "gambit" if OMB had used the term "significant regulatory action" in addition to "major" in its memo. As it happens, just as the OMB director under E.O. 12291 could declare an action to be major, it appears the OIRA administrator under E.O. 12866 can unilaterally deem a rule a "significant regulatory action. That might not satisfy all, but it could have helped.
While Public Citizen called the new OMB directive a "naked power grab on the part of the Trump administration,” the opposite is the case. The legislature is supposed to make law. The CRA was and remains an affirmation of Congress's primacy in lawmaking. The new OMB guidance primarily aims at reinforcing regulatory agencies’ already mandatory compliance with the Congressional Review Act (CRA).
Indeed, the CRA's legislative history confirms the breadth of the statute's plain text and OMB's oversight of it, and the redundancy of what OMB felt it had to step up and do. Footnoted on p. 3 in the new OMB guidance to agencies, we find:
Certain covered agencies, including many "independent agencies," include their proposed rules in the Unified Regulatory Agenda published by OMB but do not normally submit their final rules to OMB for review. Moreover, interpretative rules and general statements of policy are not normally submitted to OMB for review. Nevertheless, it is the Administrator that must make the major rule determination under this chapter whenever a new rule is issued. The Administrator may request the recommendation of any agency covered by this chapter on whether a proposed rule is a major rule ... but the Administrator is responsible for the ultimate determination. Thus, all agencies or entities covered by this chapter will have to coordinate their rulemaking activity with OIRA so that the Administrator may make the final, major rule determination."
That's from a 1996 Joint Statement for the Record on the CRA by then-Senators Don Nickles (R-Oklahoma), Harry Reid (yes, Harry Reid, D-Nevada), and Ted Stevens (R-Alaska). The Clinton-supported CRA was bipartisan in a way that nothing else is in today's polarized political -- except increased federal spending.
Now, new Trump executive orders on regulation are needed: For more clarity and heft, the White House should build on the guidance issued by OMB with strong new presidential executive orders that bring additional disclosures and oversight metrics to the administrative state.
Executive orders such as Reagan's E.O. Order 12291 governing regulatory review have enjoyed some staying power. New ones focused on guidance, independent agencies, and cost disclosures — with a powerful, compelling and comprehensive management framework — could greatly amplify regulatory oversight especially if they are long-lasting.
Since revoking or easing guidance does not require going through the notice-and-comment process like revoking a rule does, perhaps the most new mileage could be gained first from an executive order on guidance that amplifies the OMB directive from Vought, affirming it but doing still more. Taking this step could become more important to the administration's overall regulatory liberalization goals as the E.O. 13,771 "two-for-one" low-hanging fruit is picked.
Here are features that an executive order (or series of orders) on agency guidance documents and interpretative rules should include. (for more, see the report "A Partial Eclipse of the Administrative State: A Case for an Executive Order to Rein in Guidance Documents and other 'Regulatory Dark Matter'"):
Plank 1: Reaffirm and put the hammer down on already “official” but not-fully-enforced procedures for guidance document oversight and disclosure, such as the 2007 Office of Management and Budget memo from then-Director Rob Portman on “Good Guidance Principles”;
Plank 2: Improve disclosure of specific guidance documents individually and by category at a centralized location, and publish detailed summary statistics for all agencies;
Plank 3: Incorporate guidance into the twice-yearly Regulatory Plan and Unified Agenda for Federal Regulatory and Deregulatory Actions.
Plank 4: Designate all guidance as “Regulatory” or “Deregulatory.” An innovation of the Trump adminstration likely to outlast his presidency has been to classify regulations in the twice yearly Unified Agenda rules database as regulatory or deregulatory (if someone strikes that commonsense requirement in the future, we need to know precisely who). This needs to be extended to guidance documents.
Plank 5: Modify the CRA reporting template from 1999, which ought to have been talked about and updated in the Vought memo but was not, to clearly designate the major or non-major status or significance of guidance, not merely rule types as is current practice. This is also the appropriate place for OIRA to incorporate the major-rule show-and-tell. New OIRA acting administrator Paul Ray might even ease the burdens on that office, agencies and Congress by updating the template.
Plank 6: Future Guidance—Affirm that future agency guidance is null unless submitted to GAO and to both houses of Congress; this is in part and presumably accomplished by the OMB memo, but clarity and, as noted, heft, would be helpful.
Plank 7: Past Guidance—Affirm that prior improperly issued guidance will not be regarded as in effect unless agencies formally shift to reverse, back up and submit it (as they were supposed to have done already); This issue has recently been brought to the forefront by guidance from the Consumer Financial Protection Bureau.
Plank 8: Secure a comprehensive compendium of all validly issued guidance (a "regulatory dark matter" version of the Code of Federal Regulations). Anything not on the list is...invalid;
Plank 9: Go beyond the mere CRA submission process for guidance as portrayed in the new OMB directive and disallow guidance that does not secure outright congressional approval (as opposed to "approval" by not disapproving it);
Plank 10: Ban initiation of certain federal agency guidance, especially in frontier/tech sectors; This is undermined by an apparent toward rule by guidance documents in recent Trump orders on AI (Artificial Intelligence) research and space commercialization, so bears watching closely given the ramifications and the right and wrong ways of using guidance at the regulatory frontier (the need for the right kind of "soft law" rather than "soft despotism," as Jennifer Huddleston of the Mercatus Center frames it);
Plank 11: Require public notice and comment procedures for certain guidance;
Plank 12: Liberally deem guidance “significant” and escalate formal OMB review of it (along with OMB review of independent agency rules that are now exempt).
It is rare to see an executive branch yield power back to another branch of government, and such an order (or series of them) would establish an important legacy for the administrative state and the regulatory process itself, reaffirming constitutional principle rather than the aforementioned derogatory "power grab."
There are at least two other executive orders needed to establish a longer-term path for regulatory liberalization . We noted that independent agencies are subject to the CRA but not required to submit rules for OMB review. There is bipartisan support and recognition of the idea that independent agencies may properly be reviewed by OMB, and the president should test that with a new executive order.
Another executive order needed at this stage is one reiterating the Regulatory Right-to-Know Act's requirement that OMB prepare an aggregate estimate of the costs of regulation, not the partial one-year and ten-year look-backs it now provides (in belated fashion -- the last report sports fiscal year 2016 data) that leave out the entire 20th Century, progressive era and earlier inroads like antitrust, national banking and "internal improvements." I say this in full insistence that regulatory costs cannot actually be calculated (if they could, we could all be central planners). Rather, the administrative state exists and compels, yet is unmeasured, and we need to demonstrate and reckon with the inability of agencies to assess its true scope, in order to make Congress take back its authority over lawmaking.
To reiterative: we cannot know all the costs of regulation; they cannot be determined externally, despite the machinery devoted to that issue. But when elected representatives are answerable for those costs by having to approve regulations (one of these days), the costs and benefits of regulations that are rarely determined now can be somewhat internalized.
Therefore, an executive order reaffirming the requirement for an aggregate cost estimate will demonstrate the extent to which we don't know what we don't know (I refer to this circumstance as the "invalidity of all regulatory cost estimates and the need to compile them anyway"), and the urgency of and rightness of Congress, not the unelected, acting as lawmaker.
So the new OMB "Guidance on Compliance with the Congressional Review Act" is kind of a big deal. It takes major steps of its own, and it helps point the way toward other ones that advance our liberties and rights under limited, constitutional government.
Originally published at Forbes.