Warning Signs: How Trump’s Ascendant Regulatory Impulses Could Swamp His Deregulatory Program
President Donald Trump has pruned rules and costs and held down regulatory output with more enthusiasm than other presidents. But on the flipside of Trump’s controversial regulatory savings, Trump sports regulatory impulses of his own that could derail or even eclipse the rollback agenda in 2019 and beyond. Trump’s proclivity for trade restrictions and his ad hoc zeal for antitrust and media regulation (such as swipes at Amazon and the AT&T-Time Warner merger) are well-known, but there are other warning signs (apart from outside opposition and so-called “deep state” #resistance).
On October 17, 2018, the day that the Office of Management and Budget updated the public on the achievements of Trump’s two-for-one regulatory rollback program, the president held an Oval Office meeting on regulations and the economy with several industry-specific workers and cabinet officials.
President Trump said: “We’ve removed more regulations, and we will continue to get rid of regulations.” And then, in a little-noted remark, he said, “I think within a period of about another year, we will have just about everything that we’ve wanted.” On the contrary, there remains work to do on comprehensive regulatory reform. Further, Trump’s own regulatory impulses are a concern, particularly where he prominently agrees with Democrats, such as antitrust and regulatory action against online and traditional media. Below, some of this is surveyed.
Antitrust: The Trump administration has taken steps to cut merger review times overall and to similarly speed up bank merger approvalsvia internal streamlining at the Federal Reserve and Comptroller of the Currency. But on the other hand, president Trump has been explicit about invoking antitrust action against tech and telecom, striking a discordant tone with the rest of the deregulatory agenda. Antitrust is the original sin of the Progressive administrative/regulatory state that Trump set out against, yet as a candidate Trump vowed, “AT&T is buying Time Warner, a deal that we will not approve in my administration…because it is too much concentration of power in the hands of too few…We will look at breaking that deal up and other deals like it.” The Justice Department’s attempt to block the merger failed.
The president has also said that Google, Facebook, and Amazon may be in a “very antitrust situation,” and said he was “in charge” and “looking at it,” in a volatile environment in which some have called for the ultimate punishment, the breakup of such companies. Trump also tweeted that Comcast may be violating antitrust laws, though after mulling it over (itself a regulatory cost), the Justice Department did not investigate the Comcast-NBCUniversal alliance. Having already contemplated record-level fines against alleged Facebook privacy violations, a new Federal Trade Commission “technology task force” will increase scrutiny of acquisitions beyond current practice.
Tolerating and encouraging “competing bigness” would be a more appropriate and consistent Trump-ian regulatory stance on “antitrust situations.”
Speech, social media, and tech regulation: Trump and the left agree on regulation of social media search and speech, though each side has its own reasons. When Trump economic advisor Larry Kudlow was asked in summer 2018 about the administration’s openness to regulating Google search results, he responded, “We’ll let you know….We’re taking a look at it.” Google is a private entity, search results are free speech, and Google cannot censor (only governments can, and ironically regulating search results in the name of preventing censorship would be an example). The entire Internet and all its underlying capabilities remain intact, index-able as ever, unaffected by Google’s existence. Yet Trump has tweeted extensively about social media censorship, and separately had threatened NBC’s broadcast license. Asked at a November 7, 2018 press conference if he would regulate social media companies, Trump acknowledged that, “when you start regulating, a lot of bad things can happen.” Nonetheless he said,
I would do that. Yeah. I would look at that very seriously. I think it’s a serious problem. At the same time, you start getting into speech; that’s a very dangerous problem. That could be the beginning. So it’s very dangerous….But I would certainly talk to the Democrats if they want to do that. And I think they do want to do that.”
Related to concerns about the social media environment, Trump’s regulators have considered a record-high fine against Facebook for alleged privacy violations.
Infrastructure and bipartisan big spending with regulatory effects: Trump has taken significant executive actions to liberalize infrastructure. Ominous, though, is a talk of a potential arrangement with House Speaker Nancy Pelosi (D-CA) of some sort on big infrastructure dollars—at the very time that the U.S. has returned to Obama/Bush-level trillion-dollar deficits (and interest payments headed toward higher-than-defense levels). Too often, the only bipartisanship is in passing big-spending bills. Both parties typically show an inclination toward spending stimulus in the form of infrastructure, when markets should be better empowered. Proposed spending levels call for $1 trillion in direct federal spending, with plenty regulatory set asides and stipulations. Fiscal spending in economic quarters will always have regulatory effects and alters the trajectory of industries engaged in large-scale transactions. Also speaking of large-scale infrastructure and as is well known, Trump has championed the use of eminent domain to build a wall on the southern border. Eminent domain is nothing new but Trump’s variety uniquely invokes the potential use of a “military version” of such power.
Trade restrictions: The president (avowedly “Tariff Man”) blamed some of 2018’s market downturn (much since recovered as of this writing) on Democrats taking the House. However, trade barriers and tariffs issues create direct costs, regulatory uncertainty, and market losses—likely greater than Trump’s regulatory savings. Trade wars do not work because tariffs hurt Americans. In a study of the Trump administration’s trade policy on prices and welfare, London’s Centre for Economic Policy Research found that the “full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018.” Assuming the drag started in December 2018, Trump’s to-date claimed regulatory savings of $31.6 billion will be overtaken within two years. Anecdotes of harm also abound, such as craft distillers lamenting the trade war killing export plans with Europe, or the oddities of reparative payments to farmers damaged by the trade war, which alone rival the dollar savings from regulatory reduction. The fixation on reciprocity in trade deals will increase costs of household-level imports like ecommerce purchases by ejecting de minimis exemptions. Notably the tech sector, including artificial intelligence (AI) innovations, is vulnerable to trade restrictions. For example, Adam Thierer and Jennifer Huddleston Skees note: “the Trump Administration [is pondering] a potentially massive expansion of export restrictions on a wide variety of technologies. More than a dozen different AI or autonomous system technologies appear on the list for consideration.” In a notable fusion of trade restrictions and infrastructure spending, Trump also issued a January 31, 2019 executive order on “Strengthening Buy-American Preferences for Infrastructure Projects.”
Telecommunications: Some in the Trump administration floated a proposal to have a nationalized 5G network. That elicited a letter to the administration in response from U.S. Senators Ted Cruz (R-TX) and Catherine Cortez Masto (D-NV) and new anti-nationalization legislation from them forthcoming in the 116th.
Farm Bill and agriculture: Granted, many policies have moved along with a life of their own apart from Trump, but these deserve to be called out when overly regulatory. The $860 billion farm bill, signed in December 2018, was one. Rep. Justin Amash (R-MI) characterized it well back in May 2018, tweeting that “This farm bill is loaded with corporate welfare and subsidies. It’s a big-government, anti-market swamp creature that puts special interests ahead of the American people. Every conservative should oppose it.” Trump had seen things differently: “[T]he House will vote on a strong Farm Bill, which includes work requirements. We must support our Nation’s great farmers!”
It can also be the case that stealth regulatory measures or requirements can accompany deregulatory ones. University of Pennsylvania law professor Cary Coglianese noted that when the “USDA lifted its import ban on pitahaya fruit,” it also “imposed a regulatory regimen on production sites, calling for work plans, inspections, and various pest management techniques.” USDA also highlights the reality that rules have to go through unimpeded if required by Congress and are as such beyond Trump’s control, such as the proposed bioengineered food disclosure requirement, which according to Henry I. Miller and Drew L. Kershen, “may be the worst regulation,” costing hundreds of millions annually with no benefits. Such complications require outreach with Congress.
Food, drugs, and firearms: FDA reform legislation has expanded access to certain needed medications. While nothing has materialized yet, the Trump administration rattled the pharmaceutical industry with charges that companies were “getting away with murder” and voicing of support on government drug-price negotiation. The administration has, however, introduced a regulatory proposal of questionable legality for pharmaceutical price-listing mandates in television advertisements. With Food and Drug Administration guidance already in the making, even information generated largely by the individual him or herself is not immune from suppression as the FDA intends to regulate health-tracking apps and software as medical devices, and is implementing regulations on vaping/smokeless tobacco (which as an alternative to cigarettes, saves lives). There are indications from the FDA that it may consider costly and unhelpful labeling regulation for non-dairy products that use the term “milk.” The administration also continues to implement Obama-era menu-labeling rules, and is strengthening enforcement of regulation of dietary supplements. Related to other health regulation, new postal regulations on international shipmentsrequire providing identifying information and contents, aimed at addressing the opioid abuse issue. Finally, in a move controversial to his base, Trump also and has moved to ban bump stocks used on semi-automatic weapons.
Subsidies that distort markets: Fiscal spending and preferences can have disregarded regulatory effects, displacing private action and steering. Trump is a devotee of the Export-Import Bank, long regarded a showcase for cronyism and corporate welfare. The Environmental Protection Agency is considering non-neutral subsidies for “talking car” technologies that communicate hazard and other information in an odd bid to implement carbon dioxide emission reduction credits. Trump is also supporter of ethanol subsidies and preferences, warning in campaign mode in October 2018 that Democrats would be anti-ethanol. As a general matter, subsidies or corporate welfare aggravate problems of a president being able to, as Rep. Justin Amash (R-Michigan) put it, “act as a central planner in chief to bribe and coerce companies.”
Internet tax: The Internet sales tax was upheld in South Dakota v. Wayfair.The Competitive Enterprise Institute’s Jessica Melugin wrote about that decision, observed that “[the] Supreme Court reversed fifty years of precedent by allowing states to collect sales taxes from businesses located completely outside that states’ borders.” While by no means Trump’s doing, the president had seemed to favor an Internet tax, perversely seeing it as a shot at Amazon, despite the company being one of the online sales tax’s most high-profile proponents.
Finance: An interesting development in contrast with reducing burdens on consumer financial matters is that, notes without congressional authority, the Securities and Exchange Commission] is claiming jurisdiction by labeling digital currency products as ‘securities’” in a bid to claim jurisdiction over them, saddling their developers with new red tape. In addition, new Treasury regulations on foreign equity stakes in U.S. biotech would subject them to greater review.
Industrial policy or market socialist mechanisms:Overabundance of taxpayer funding of scientific and technology research is incompatible with a future of optimally and lightly regulated science and technology specifically, and with limited government generally. Addressing infrastructure and other broad initiatives in the February 5, 2019 State of the Union address, however, the president called for legislation “including investments in the cutting edge industries of the future,” and proclaimed, “This is not an option, this is a necessity.”
A probable showcase for this is Trump’s February 11, 2019 executive order on “Maintaining American Leadership on Artificial Intelligence. Executive orders are not legislation, but they can influence policy, and this one promotes “sustained investment in AI R&D in collaboration with industry, academia” and others, engages federally collected data in AI endeavors, among other centrally coordinated moves. The order prioritizes AI at the federal level in a way that would heavily influence private activities: “Actions shall be implemented by agencies that conduct foundational AI R&D, develop and deploy applications of AI technologies, provide educational grants, and regulate and provide guidance for applications of AI technologies.”
While this is concerning enough already, it occurs in an environment in which much AI research at the federal level happens in the Department of Defense. The Pentagon, the day after Trump’s AI executive order, released its own AI strategy ominously subtitled “Harnessing AI to Advance Our Security and Prosperity,” describing use, plans, and ethical standards in deployment. Alas, when it comes to robotics and military, Isaac Asimov’s famous fictional but influential Three Laws of Robotics (devised to protect humans) are programmed out, not in. This fusion of government and private AI deployment will grow as a concern. Where one tech player’s motto had been “Don’t Be Evil,” a fitting one now for the sector as a whole is “Don’t be Government.” We cannot foresee how future presidents will regard such easy government/private alliances. Legitimization of them at the top in this manner may it harder for real liberalization and voluntary-sector dominance in the future. Already, the looming establishment of a “Space Force” is a development related to these sentiments; commercial space activities have barely taken root beyond NASA contractors and partners. Making the (likely AI-driven) force a sixth branch of the armed forces is bound to alter freedoms, commercial space activities, and serve as a gravitational field heavily influencing technology investment itself.
Welfare regulations: While there is no constitutional authority for federal government involvement in job training, a “national strategy for training and retraining workers for high-demand industries” is in play. In addition, the “nationwide paid family leave” plan Trump announced (during the S0TU) he intends to include in his budget has already been taken up by legislators on both sides of the aisle, surely in due course to be expanded beyond government employees.
The foregoing comprises an incomplete catalog of active policy implementations with regulatory heft that run counter to the administration’s point-of-the-spear deregulatory campaign. Rules and regulations individually matter, but the overall structure of the market, business environment, and prospects for economic growth are also heavily influenced by overarching government policy, even under Trump. Large-scale federal initiatives can morph over time into something unintended or unforeseen—especially if the nuclear option on the filibuster comes to pass in a democratic administration. The conventional administrative state and big-spending appropriations framework together exert a considerable double-barreled force. Trump cannot and has not stopped it all, and he has added and is adding his own pro-regulatory elements to the landscape. Alongside, given rocketing federal spending, it is worth keeping in mind that regulation is the least disciplined part of the federal apparatus, and to never forget that spending has regulatory effects.
Congress has not passed comprehensive regulatory liberalization in nearly a quarter century. Deregulation under E.O. 13771 (the famous one-in, two out directive) will become harder as low-hanging, quick-to-rid regulations are exhausted. The pertinent question is whether any executive branch regulatory liberalization can be maintained over time given the administrative state’s barriers to any reform at all. When all is said and done, the administrative state cannot be said to have fundamentally changed under Trump. While agencies like FCC, EPA, and CFPB are led by pro-liberalization appointees, and executive agencies operate under instruction from OMB Director Mick Mulvaney that deregulation is their “highest priority,” the permanent bureaucracies as such are likely biding time. Without congressional action, much of the Trump streamlining phenomenon will be transitory; particularly so if he backs off from that streamlining or sends mixed signals.
Originally published at Forbes.