Shaky Stock Market A Signal Obama Should Reconsider Veto Threat On Red Tape Relief

In his final State of the Union Address, with a sinking stock market as backdrop, President Barack Obama said, “I think there are outdated regulations that need to be changed. There is red tape that needs to be cut.”

Sure you do. Where’s the list?

The red tape taunt came right after the president’s promise to veto a modest new congressional action on regulatory reform that happens to be the only low-hanging fruit as far as economic liberalization is concerned.

Contemporary proposals differ, but the bipartisan Regulatory Review Commission that H.R. 1155 or “SCRUB” (Searching for and Cutting Regulations that are Unnecessarily Burdensome Act) creates would assemble a package of rule reductions. The left of center Progressive Policy Institute endorsed a similar approach to “scraping barnacles.”

SCRUB would further require agencies issuing new rules to offset burdens with reductions elsewhere (“Cut-go”). Obama likes cap-and-trade, but not when it’s government power being capped.

It was Democratic Sen. Mark Warner who proposed one-in, one-out in the Washington Post in 2010, but someone got to him and he stopped talking about it. Still, even far-left NPR fawned over a Canadian version of one-in, one-out in Summer 2015. There’s also a British version. A superior version of one-in, one-out from Sen. Dan Sullivan in his RED Tape Act would constrain agencies’ guidance documents and memoranda, since growing regulatory dark matter like this also surreptitiously constrains the wealth-creating sector.

So while partisan preferences naturally differ, SCRUB’s core elements boast longstanding bipartisan appeal. Conditions couldn’t be more optimal for the president to negotiate before Senate action — if he were serious about red tape.

For context, 2015 just ended with a 80,206-page Federal Register

In calendar year 2015, Congress passed and the president signed just 87 laws, while agencies issued 3,408 rules and regulations.

Obama’s veto threat is dismissive of these private sector burdens; “You didn’t build that” anyway, so no inventory of significant cuts for you.

Recognize the obvious: Obama could care less about cutting red tape since he prefers government management of ordinary private affairs: health care, higher education, energy policy, the Internet, wages, manufacturing hubs and other R&D.

To this worldview, the only red tape is the Constitution, which denies such all-encompassing power by establishing a federalist republic. Obama and his “pen and phone that goes it alone” is willing to cut red tape after all, just not in the way one normally defines it.

So let’s walk through the White House “Statement of Administration Policy” announcing a veto of SCRUB and see how the reasons hold up, particularly given that the stock market seems to be weighing in on the economy as well.

“The Administration is committed to ensuring that regulations are smart and effective, and tailored to further statutory goals in the most cost-effective and efficient manner.”

No such commitment exists to establish cost-minimization procedures across hundreds of disparate agencies. In fact nothing is known about the cost effectiveness of the modern regulatory state, and any evidence we do see is usually months overdue.

The 2015 Draft Report to Congress on the Benefits and Costs of Regulations finally appeared October 16, 2015, months overdue (these normally appear in March). There is still no final edition, and it’s nearly time for the 2016 draft. The draft 2015 edition claims overall benefits of up to $22.8 billion for fiscal year 2014 executive agency rules, but is invalid since only 13 rules had Office of Management and Budget reviewed cost-benefit analyses. The year before that? Seven, and 14 the year before that. Claiming net benefits for the regulatory enterprise based on a handful of rules when thousands exist does not clarify, it obscures. It also fabricates.

Independent agency rules — the hundreds coming from the Dodd-Frank financial law, and sweeping rules like the Federal Communications Commission’s net neutrality order, and so on — aren’t reviewed at all by the Administration, and get aggressively imposed in spite of such concerns.

As for rules being “tailored to further statutory goals,” the president brags of his “pen and phone” and acting without Congress; such a phase can issue from an Executive Office of the President, just not this one.

“The retrospective review of regulations has been an ongoing priority of this Administration. Starting in 2011, the President institutionalized the retrospective review of regulations in Executive Orders 13563 and 13610, requiring agencies to report twice a year on the status of their efforts.

H.R. 1155, the Searching for and Cutting Regulations that are Unnecessarily Burdensome Act, would make the process of retrospective regulatory review less productive.”

Well, words do appear on a government web page about a Retrospective Regulatory Review endeavor, but there’s not a strenuous campaign in practice. A few billion in purported savings over a presidential term is not highly significant compared to the hundreds of billions in regulatory and intervention costs in finance, health, retirement, banking and finance, communications, labor and energy. New rules aggregate at the rate of several dozen a week with directives, guidance documents, circulars and the like appearing on top of them. Retrospective reviews dabble around the edges and don’t confront central command regulation as a phenomenon.

“Further, the bill also would create needless regulatory and legal uncertainty; increase costs for businesses and State, local and tribal governments; and impede common-sense protections for the American public. Accordingly, the Administration strongly opposes House passage of H.R. 1155 in its current form.”

It is the current regulatory environment that creates uncertainty—thousands of rules per year, pen and phone on top of that, and regulatory dark matter besides.

The claim here that regulation relief would “increase costs” can only be understood as another taunt, since no other interpretation makes sense.

We covered the incredible claims of overall cost effectiveness above, which rules out Obama’s “common-sense protections” claim here. Agencies do not have to perform rigid analysis; it is simple to declare that costs and benefits are not monetizable and to barrel ahead with whatever regulation they please.

The notion that “common sense” characterizes the status quo is also belied by grave problems with agencies providing neither adequate public notice of their regulatory plans, nor sufficient opportunity for the public to absorb, react to and influence final regulations.

The Administrative Procedure Act (APA) is broken and agencies fail to even issue a Notice of Proposed Rulemaking for a large portion of their rules, according to the Government Accountability Office. Meanwhile, the reports on major rules that agencies are supposed to send to Congress and to the GAO per the requirements of the Congressional Review Act often don’t happen, according to an Administrative Conference of the United States white paper.

Other legislation passed by the House in the 114th Congress addressed some APA shortcomings. It will not shock anyone that Obama promised a veto there also (as he did for the Keystone pipeline and for defining a 40-hour work week with respect to Obamcare).

“Although outside input and perspective on what rules may be ripe for potential reform or repeal is crucial, retrospective review is most effective when led by the agencies.”

Such review is a smokescreen. Little occurs, little gets cut, nothing is mandatory, no one is accountable, agency budgets and their inventories of regulations go only up, not down. Review is not most effective when led by agencies, in fact they should not get to score their own rules due to inherent self-interest conflict.

“The bill’s creation of a stand-alone commission to review the entire Code of Federal Regulations is likely to produce a haphazard list of rules that, under the procedures in the bill, must be repealed if approved by a joint resolution.”

As distinct from the “haphazard list of rules” that get finalized by any of hundreds of federal agencies each day? Haphazardness is OK, if it serves the goal of government control.

Repeal is certainly the prerogative of Congress. As the military base closure commission experience illustrated, major, intractable problems of eliminating unnecessary chunks of deeply entrenched government require bold steps. And again, a commission (of some type) tops the list of doable bipartisan reform proposals at hand. Obama’s concerns should be addressed by negotiation prior to Senate action, not a veto threat.

“There appears to be no mechanism for making thoughtful and modest modifications to rules to improve their implementation and enforcement, which is often the best course of action for making regulations work better.”

Obama could have and can still make as many such”thoughtful and modest modifications” as he likes, within the rule of law. Where are they? It’s his eighth year.

It is within the reasonable bounds of a commission to make such modifications; and Obama could seek clarification in negotiations.

And with respect to “cut-go” there can be total flexibility in what modifications are made to reduce burdens as new ones are created.

However, what this president does not accept is that if a regulation is not needed, there is no call to make it “work better.” It’s a recurring dilemma: the president simply does not want to eliminate any government controls.

This again points to why we’ve run out of options besides a commission. Its very purpose is to look for unneeded rules to eliminate, not to rationalize keeping them. In a country that adds over 3,000 rules every year, this would be the only mechanism dedicated to repealing rules, yet Obama still wants to keep all of them and add more.

If Obama wanted “thoughtful and modest modifications,” why hasn’t he used his pen and phone to at least propose such? Because his stridency is reserved for the government growth agenda. If some rules are eminently modifiable, presumably the administration already compiled a list of them based on this very pronouncement as well as the State of the Union acknowledgement of red tape. But such a list is not in the existing retrospective review, nor is it in the OMB Report to Congress on regulatory costs, nor is it in the Unified Agenda of Federal Regulatory and Deregulatory actions.

“Moreover, the bill’s “cut-go” approach is problematic: it would interfere with the ability of agencies to issue regulations that are essential for the protection of public health, safety, and the environment.”

The administration doesn’t know if such “essential for protection” rules are ever issued, because cost-benefit analysis happens for less than one percent of rules. The administration and agencies regulate as an end in itself; SCRUB exposes that, hence the oppostion.

Obama often proclaims that “other industrialized countries except America” do such-and-so, health care, gun control, whatever.

Note this admiration is only for their expansion of power over citizens; he does not admire Canada and Great Britain for their “cut-go” campaigns.

“The Administration recognizes that the applicability of ‘cut-go’ in H.R. 1155 is narrower than in other bills being considered in the Congress.”

Here the administration acknowledges it will not consider even the most modest reform with both bi-partisan support and demonstrated international implementation. It is not as if cut-go fundamentally challenges regulatory philosophies or campaigns.

“Nonetheless, it is essential that agencies have the flexibility to promptly issue new, vital rules.”

If certain heretofore non-existing rules are “vital,” Congress has the “flexibility to promptly” pass them, not unelected agencies. Besides, our regulatory process as such is not calibrated to recognize what is “vital” since little is known about cost-effectiveness.

Agencies and the White House don’t get to unilaterally make up their own benefits whether for individual regulations, or for the entire regulatory enterprise

“This ability should not be constrained by a Commission’s recommendation, or Congressional approval of a list of repealable rules.”

Here is what I meant about the administration seeing the Constitution as the real red tape. The Constitution gives Congress the power to make law (“All legislative Powers herein granted shall be vested in a Congress of the United States.”).

The president’s stance instead embodies the non-democratic political philosophy that unelected agencies, and not the elected representatives of the public, should have the final say on what law is to exist. He is actually saying agencies should not answer to the Congress that (catastrophically, we now see) created them in the first place.

Those making laws should be the people who we elect; not unelected, untouchable bureaucrats. If we had a watchdog mainstream media, it could investigate deeply why the president believes the opposite when his veto is issued.

“While retrospective review is an Administration priority and an essential tool to relieve unnecessary regulatory burden,…”

Yet when one looks for that prioritization and for retrospective review’s use as an “essential tool” or for a list of “unnecessary regulatory burdens’ that have been repealed, one finds little.

“….it is important that retrospective review efforts not unnecessarily constrain an agency’s ability to provide a timely response to critical public health or safety issues, or constrain its ability to implement new statutory provisions.”

This is ground trod before; “critical” matters, especially critical matters, should get an up or down vote by Congress. This should be obvious; the denial of it exposes the desire to expand the state outside constitutional constraints. If statute already allows action, nothing in SCRUB halts it.

“For these reasons, the Administration strongly opposes H.R. 1155 in its current form. If the President were presented with the current version of H.R. 1155, his senior advisors would recommend that he veto the bill.”

The shortcomings of the APA — the public can hardly participate if there aren’t even notices of proposed rulemakings– and the misrepresentations about regulatory net benefits are grave problems.

Many have had their fill of executive overreach, lies, arrogance and an expanding regulatory state. If Obama does not negotiate and work with the Congress on some version of SCRUB, his veto should be secured as soon as possible, and members of his party put on record in veto override vote.

Simultaneously, Congress should codify Obama’s own executive orders on regulatory review and see if he will veto himself.

Originally posted to Forbes.