Holding the Government Accountable

Executive Order is Two Steps Backwards on Regulations

On Monday, President Trump issued an Executive Order on Reducing Regulation and Controlling Regulatory Costs. Several previous administrations have issued Executive Orders addressing how the regulatory process should be implemented and types of analysis that should be conducted. President Trump’s order breaks with the modest process changes implemented by previous administration and instead creates two entirely new and significant requirements for agencies that could bring the already slow process of rulemaking to a grinding halt.

First, the order instructs agencies proposing new regulations to identify two existing regulations for elimination. This “one-in, two-out” approach is predicated on the assumption that we have far too many regulations in the United States. “Unless prohibited by law, whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”

Second, the EO also establishes the use of an entirely new regulatory budgeting system. Agencies are instructed that the total incremental cost of new regulations for this fiscal year “shall be no greater than zero.” Agencies are further directed to offset any new incremental costs associated with new regulations through the elimination of at least two existing regulations.

The EO suffers from vague and undefined language. The Director of the Office of Management and Budget (OMB) is given responsibility for providing agencies guidance on implementing, but no timeframe is listed. It is also unclear on what agencies are supposed to do prior to issuance of the OMB guidance. Incremental costs are a key focus of the regulatory budget, but the term is undefined by the order.

More importantly, the EO completely ignores the benefits of regulations and sees them as nothing but a cost or burden. The order makes no mention of benefits or even net cost, which is the cost after benefits are considered. While regulations certainly cost money to implement, they typically deliver even more significant benefits. By law, every major regulation undergoes a rigorous cost-benefit analysis and only moves forward if it is determined that the benefits outweigh the costs.

OMB also regularly analyzes the total costs and benefits of all regulations, and the benefits always far surpass the costs. A draft 2016 OMB report to Congress estimates that the annual benefits from all major regulations over the last ten years were between $208 billion and $627 billion, while the costs were between $57 billion and $85 billion. Even during Republican administrations, the estimated benefits far exceed the costs. For example, OMB’s 2005 report to Congress estimated that major rules from the previous ten years provided benefits of $69.6 billion to $276.8 billion, while costing between $34.8 billion and $39.4 billion.

The EO also ignores the fact that most regulations are required by law—passed by previous sessions of Congress and signed by the President. To implement these laws, agencies are required to create rules. A new administration’s desire to get rid of regulations does not eliminate the legal requirement for their existence. Congress would need to pass new laws that repeal or modify the earlier laws. Without that step, this EO would overstep the President’s authority.

The order notes that these new requirements apply “unless prohibited by law” and “to the extent permitted by law.” But it is unclear if these caveats would exempt those regulations that are clearly required by law.

Even for regulations not required by law, eliminating them would take considerable time and money. Under administrative law procedures, removing a regulation requires the same steps as creating one—research, analysis, proposal and justification, public notice and comment, response to public comments, and finalization. You can't repeal regulations through the simple stroke of a pen. This process is designed to act as a check on sudden and radical changes in regulatory policy. Regulations should only be created or repealed if a carefully reasoned case for the change can be made and defended.