New executive order creates a ‘budget for regulations’

For every new regulation an agency issues, it will have to identify at least two others that it will repeal.

At the same time, any new regulations that an agency finalizes this year will have to have an incremental cost of zero.

These are two of the most significant provisions in President Donald Trump’s latest executive order aimed at reducing the burden of federal regulations.

The President signed the EO Jan. 30, making it his second action trying to rein in the regulatory process. Trump also issued a memo on Jan. 20 freezing the regulatory process pending reviews by new administration officials.

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Mark Sandy, the acting director of the Office of Management and Budget, issued implementation guidance on Jan. 24, postponing the effective dates of proposed regulations for at least 60 days.

The executive order goes even further than the freeze and review.

A senior administration official said during a background briefing with White House reporters that the order is “most significant administrative action in the world of regulatory reform since President [Ronald] Reagan created OIRA [Office of Information and Regulatory Affairs] in 1981.”

The officials say agencies will identify the regulatory targets for proposed elimination under their jurisdiction, and OMB will have the final say.

Asked during the briefing if the public would be able to view or see the bundling of the two regulations being erased by departments through the rulemaking process, together with a new one proposed and bundled with the other two, one official said, “that’s the intention.”

Robert Verchick, president of the Center for Progressive Reform, called Trump’s new order an example of short-sighted regulatory budgeting and a bad idea.

“Trump’s executive order will also prove difficult for agencies to implement. All rules, even deregulatory ones, have to follow a set of procedural steps required by law, and agencies will run into significant hurdles in their rush to deregulate,” he said in a statement. “The president’s action will also spark years of lawsuits, wasting limited resources that should instead be spent effectively enforcing our health, safety, environmental and other laws.”

Under the new order, agencies must publish all planned regulatory actions in its Unified Regulatory Agenda, unless OMB gives them a waiver.

Starting in 2018, agency secretaries and other executives will have to “identify, for each regulation that increases incremental cost, the offsetting regulations, and provide the agency’s best approximation of the total costs or savings associated with each new regulation or repealed regulation.”

Additionally, OMB will give agencies a portion of the total of incremental costs for the government per fiscal year.

“No regulations exceeding the agency’s total incremental cost allowance will be permitted in that fiscal year, unless required by law or approved in writing by the OMB director,” the order stated. “The total incremental cost allowance may allow an increase or require a reduction in total regulatory cost.”

OMB will issue implementation guidance to address everything from processes for standardizing the measurement and estimation of regulatory costs to standards for determining what qualifies as new and offsetting regulations to standards for determining the costs of existing regulations that are considered for elimination.

Sean Spicer, the White House press secretary, said during his daily press briefing that this order is going to slash bureaucratic red tape.

“The cost of all new regulations finalized in fiscal 2017 must be no greater than zero for each agency,” he said. “Beginning in 2018, each agency will have an incremental cost cap set by the director of OMB beyond which they could not issue regulations.”’

OMB also can consider phasing in and updating the requirements as needed.

The administration officials said during the briefing that the order is creating a new management regime and “a strong structural process” to account for the economic costs of federal regulations and to try to offset those costs in 2017, and move beyond the zero-out concept into 2018. The officials described this concept as a budget for regulations.

Rep. Steve Chabot (R-Ohio), chairman of the Small Business Committee, said in a statement that the President’s order is the right approach and a welcome change.

“For too long, America’s 28 million small businesses have been suffering under the weight of over-regulation and today’s action will begin to provide them with some much-needed relief,” he said. “By addressing the burdens small businesses already face and charting a course for cutting down on future red tape, this action helps our small businesses return their focus to creating American jobs for American workers.”

The idea to limit and reduce regulations isn’t new.

President Barack Obama asked agencies in 2011 to develop an approach to do regulatory reviews and decide which rules are no longer needed.

As of March 2015, the Obama administration said its retrospective review process was expected to achieve $20 billion in savings over five years, and was on track to eliminate over 100 million paperwork burden reduction hours.

Congress expressed frustration over the years about OIRA’s slow moving approval process and the costs of regulations.

The Heritage Foundation reported in 2008 and again in 2016 that despite efforts by two presidents, the number and cost of regulations increased.

“The Obama administration is responsible for an unparalleled expansion of the regulatory state, with the imposition of 229 major regulations since 2009 at a cost of $108 billion annually (using the regulatory agencies’ own numbers). The actual costs are far greater, both because costs have not been fully quantified for a significant number of rules, and because many of the worst effects — the loss of freedom and opportunity, for example — are incalculable,” wrote James Gattuso, a senior research fellow in regulatory policy, and Diane Katz, senior research fellow in regulatory policy at Thomas A. Roe Institute for Economic Policy Studies, in the 2016 report.

“The need for reform is urgent,” the report continued. “The White House, Congress, and federal agencies routinely breach legislative and even constitutional boundaries, and increasingly dictate lifestyle choices rather than focusing on public health and safety. Immediate reforms should require legislation to undergo an analysis of regulatory impacts before a floor vote in Congress, and require congressional approval of each major regulation before it can take effect. Sunset deadlines should be set in law for all major rules, and independent agencies should be subject — as are executive branch agencies — to the White House regulatory review process.”

Despite the frustrations with regulations, the Congressional Research Office found in an October 2016 report, obtained by the Federation of American Scientists, that the number of final rules published annually in the Federal Register were fairly steady during the Obama years — ranging from a high of 3,807 in 2011 to a low of 3,410 in 2015. During the administration of President George W. Bush, the number of regulations also were steady — ranging from a high of 4,167 in 2002 to a low of 3,595 in 2007.

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