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How to Rein in Regulatory Dark Matter

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Divisive hot-button issues are distracting public attention from policy reforms that could make everyone better off by expanding the economy. One of these is regulatory reform. It is a huge enough task on its own. But it is made more difficult not just by Twitter and cable news hyperbole, but by a major transparency problem. Many regulatory costs are never accounted for.

Agencies issue all manner of regulatory “dark matter” outside the required rulemaking process—guidance documents, bulletins, circulars, memoranda, administrative interpretations, and more—that are not officially “rules,” but carry regulatory weight. Such guidance covers issues ranging from medical devices to college admissions. Guidance is not supposed to be legally binding, but if your business needs a permit, your choices may be slim.

The long-term fix to this stealth lawmaking must come from Congress. But until then, the President can issue an Executive Order to rein in regulatory dark matter until Congress can make such reform permanent.

There is precedent for such executive action. Presidents Reagan, Clinton, and Obama all issued Executive Orders to increase transparency and ensure that agencies followed better rulemaking procedures.

Early in his term, President Trump issued an executive order capping net regulatory costs and instituting a one-in, two-out policy for new significant regulatory actions. Net regulation has likely not shrunk under Trump, but its growth has noticeably slowed, and those Executive Orders deserve some credit for the current strong economic growth. Reining in excessive guidance would be a solid next step.

An Executive Order can set a positive precedent that Congress can later expand upon and codify. Such an executive order should strengthen disclosure requirements for guidance documents, which aren’t always made public. They should be made available in a single location and a standardized easily searchable format. After all, people can’t comply with regulations they don’t know about. And dark matter is, by nature, very hard to detect.

Agencies are already required to contribute to transparency reporting via the twice-yearly Unified Agenda of Federal Regulatory and Deregulatory Actions for recent and upcoming regulations. The Agenda lists rules that go through the standard rulemaking process, but not guidance documents. An Executive Order should require the Agenda to include guidance and other agency sub-regulatory directives. Each guidance document should also be classified as either “regulatory” or “deregulatory” to make their individual impacts easier to determine. 

As it happens, all regulations, and guidance documents too, are required to be submitted to Congress and the Government Accountability Office per the Congressional Review Act, which gives Congress 60 legislative days to pass a resolution of disapproval to repeal the rule or guidance.  

Worse, certain rules and guidance have not been submitted to Congress for years, and are technically illegal. The Executive Order should deem all such existing guidance documents to be invalid unless the Government Accountability and both chambers of Congress had properly received them in the past, and strictly enforce that requirement for future guidance documents as well.

All federal regulations are publicly cataloged and searchable in the Code of Federal Regulations. Dark matter needs a similar compendium. Agencies have issued more than 13,000 guidance documents since 2007—that we know of. Of those, just 189 were reported to the GAO and Congress, roughly half of 1 percent. Given that such submission is required under the CRA, much of the universe of guidance is unlawful. At the very least, an Executive Order can partially solve the basic transparency and accountability problem.

Federal regulations have costs that rival taxation. In the short term, a well-crafted Executive Order can do a lot of good for public accountability and regulatory relief. If the President wants to continue to brag about a growing economy, an executive action is something he can easily do, and Congress should be eager to share credit.

Originally published at The Hill.