War on regulations

Trump's war on regulations is real. But is it working?

A year in, Trump's rule rollback isn't as dramatic as he claims. But a radical experiment is underway.

By DANNY VINIK

In December, standing aside giant stacks of paper representing the morass of federal rules, President Donald Trump literally cut a line of red tape and declared victory in the war on government regulation. His administration, he announced, had repealed 22 regulations for each new rule issued, and cut regulatory costs by $8.1 billion—a headline number for what former White House Chief Strategist Steve Bannon called the “deconstruction of the administrative state.”

But a closer look at that state during Trump’s first year in office reveals a slightly different story. The vast majority of that $8.1 billion in savings came from the repeal of a single federal contracting rule. The dramatic sounding “22-to-1” statistic is an apples-and-oranges comparison, weighing all deregulatory actions against just a small subset of new rules. And much of the deregulation was done not by Trump himself, but with the help of Congress, which used an obscure law early in his term to repeal 14 late-term Obama regulations.

What Trump has actually done is something else: Rather than repealing old rules, he has put a cork in the federal regulatory process, slow-playing rulemaking and in many cases stopping it entirely. According to a POLITICO analysis, the White House’s regulatory office has approved just 156 regulations since Inauguration Day, a huge drop compared with the Obama and Bush administrations: The office approved 510 rules in Barack Obama’s first year. For George W. Bush, it was 445.

Conservatives have celebrated this regulatory slowdown as welcome relief from an overbearing Washington, while liberals worry the government is neglecting its duties as a watchdog. But the numbers in many ways mask the unprecedented nature of what Trump is doing. Over the past year, the White House has laid the groundwork for a radical regulatory experiment across the government, limiting the ability of agencies to issue new rules and installing task forces at each agency to root out outdated ones. Conservatives have long said such a review would turn up numerous rules with huge costs and few benefits; Trump has begun testing that theory, and supporters are confident in the results.

At the heart of the campaign are two committed small-government crusaders, one an academic and the other a Washington tea party pol. The academic is Neomi Rao, who since July has headed the White House’s Office of Information and Regulatory Affairs, which scrutinizes all significant regulations and implements Trump’s executive orders on regulatory reform. Rao, effectively the country’s regulatory czar, is a free-market law professor who was a protégé of Supreme Court Justice Clarence Thomas and has spent years writing research papers and arguing for a smaller government. Her boss, Mick Mulvaney, a former South Carolina congressman, has also railed for years against governmental bloat, and now finds himself in a position to do something about it. In his other job, as acting head of Consumer Financial Protection Bureau, he just submitted a theatrical quarterly budget request of $0.

In an interview, Rao said the administration’s rollbacks are only beginning. "It’s just the first year of the administration,” she said. “Unraveling the biggest rules from the past requires a careful process, all new cost-benefit analysis, all of the rulemaking that needs to take place to unravel a big rule. We will see more, deeper, substantive deregulation in the coming year."

Despite the president’s rhetoric, and that press conference, it’s unlikely the detail-averse Trump has engaged in any serious way with the ultra-wonky world of federal regulation. That leaves plenty of space for Rao, Mulvaney and their colleagues to reshape the government without much interference from the boss—as long as he can tout the results in the end.

Critics of the Trump approach doubt that the agency task forces will find anywhere near the trove of outdated regulations they’re looking for, and say the rulemaking slowdown is less a serious new approach to government than it is a basic failure to govern—one made worse by the administration’s understaffing of many key agency posts.

Still, it may be through his regulatory legacy that Trump leaves his biggest fingerprints on Washington. With the exception of tax reform, Trump’s legislative agenda has stalled on Capitol Hill, and his advisers disagree among themselves on issues ranging from the North American Free Trade Agreement to health care. But they appear to have universally agreed on the need to overhaul the regulatory state, and throughout the president’s first year, they have rolled out a series of executive orders and memos designed to reverse the flow of new rules, beginning on Inauguration Day when Trump imposed a regulatory freeze across the government.

Ten days later, he signed an executive order directing agencies to take two so-called deregulatory actions for each new rule it issued. Less noticed at the time, that order also created a "regulatory budget" for agencies, forcing them to offset the economic costs of any new regulations with costs achieved through the two deregulatory actions. The order left some very large loopholes—it only applied to “significant” regulations where costs exceeded $100 million, and contained exceptions for emergency or statutorily required rules—but the message was clear: Agencies should stop looking to impose new regulations and should focus on whether existing ones were necessary any longer.

IT'S NOT YET clear whether that plan is working out. So far, agencies haven’t found a ton of expensive rules to roll back. Trump claims that he has eliminated 22 regulations for each new one imposed, and delayed or cancelled over 1,500 planned rules, but that claim comes from mixing and matching numbers: The "eliminations" include all 67 deregulatory actions taken by agencies in fiscal 2017, while the count of new rules includes only significant ones that weren't exempt from the original executive order. And of the $8.1 billion in cost savings, nearly $6 billion came from the elimination of Obama’s 2014 executive order raising labor standards for federal contractors, repealed by the GOP Congress in March.

Rao defended the statistic, noting that the United Kingdom used a similar method when it implemented its own two-for-one regulatory policy. "Our policy and practice is transparent," she said. "We decided on this method to give agencies the incentive to reduce regulatory burdens of all sizes. ... The president’s order is changing the culture at agencies, so there is no steady flow of small costly rules. While we are not counting these actions at present, we understand they have been kept to a minimum.”

Other observers were more skeptical. “All the giant numbers that they claim make them the biggest deregulators in history are just a way of saying that they aren’t doing what the Obama administration wanted to do,” said Philip Wallach, a regulatory expert at the R Street Institute. “It’s true, they aren’t. But that’s not that surprising.”

But where Trump has succeeded, deliberately or not, is in bringing the regulatory system to a near halt. Agencies continue to issue the sort of low-profile, everyday rules that keep the government operating, but big new rules have slowed to a trickle. This has cheered business leaders who were deeply critical of the Obama administration’s regulatory agenda. “The administration early on set an expectation that there wasn’t going to be a continued onslaught of regulations and the approach would be more deregulatory in nature,” said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce. “The combination of creating an expectation and creating responsibility has actually led them to follow through.”

But critics are alarmed at the slowdown, saying that rolling back important Obama-era protections and blocking new ones is already jeopardizing the health and safety of Americans. “If we do see [a major disaster] again, it will be quite tragic,” said Amit Narang, a regulatory expert at Public Citizen. “But it’ll be very easy and legitimate to point to the massive deregulatory agenda as the cause of that disaster. That’s the real danger that this administration is flirting with right now.”

In many ways, experts said, the first year was always going to be the easiest time for Trump to notch a victory. The last several months of Obama's rules were legally vulnerable to the 1994 Congressional Review Act, which lets Congress overturn recent regulations with just a simple majority in the Senate. The GOP Congress repealed 14 Obama-era rules that way, effectively jumpstarting Trump’s deregulatory plans for him. But the CRA can only be used for recent rules, meaning that additional deregulation must now go through the traditional rulemaking procedures. That process requires patience and bureaucratic know-how—two quantities in short supply with a distractible president who has left large numbers of agency leadership posts unfilled.

“Some of the stuff we saw last year was low-hanging fruit,” said Susan Dudley, a former OIRA administrator during the Bush administration who now directs the George Washington University Regulatory Studies Center.

Federal agencies have targeted a long list of Obama-era rules, from the Department of Labor’s increase in the overtime threshold to the Environmental Protection Agency’s Clean Power Plan, which limited emissions of greenhouse gasses. But agencies often aren’t simply repealing these rules; they are repealing and replacing them, planning to issue new, narrower rules that will still impose new restrictions and costs on states and businesses. As agencies write and finalize those rules—and any new rules—they will have to adhere to Trump’s two-for-one order, a potential challenge that regulatory experts aren’t sure how agencies will handle.

“The real question is, supposing new regulations get up to something closer to the familiar pace, what kind of work does the system end up doing?” said Wallach.

In one case in fiscal 2017, a federal agency did exceed its regulatory budget without any apparent penalty. The Department of Energy finalized an energy efficiency rule with over $500 million in economic costs and didn’t issue any deregulatory actions. The agency claimed that the rule was exempt from the order because it was statutorily required, and OIRA didn’t challenge that explanation—a sign, supporters said, that the administration is careful to follow the law and not block new rules that protect America’s health and safety. But it also raises questions about how tightly the administration will enforce its own caps.

The White House projects that in fiscal 2018 it will save nearly $10 billion in economic costs through hundreds of deregulatory actions. Rao admitted that agencies, at times, have struggled to comply with the administration’s new regulatory rules. “It’s been difficult,” she said, “but they are doing a lot of hard work to meet the president’s priorities.”

MUCH OF THE Trump administration’s regulatory strategy in fiscal 2017 was aimed at rolling back Obama-era rules and shutting down the pipeline of new regulations, but observers say the longer-term goal appears to be overhauling the regulatory process itself. Just how that’s supposed to happen, however, has led to some mysteries.

On February 24, Trump signed an executive order instructing agencies to create regulatory reform taskforces that would review existing regulations and recommend keeping them, modifying them or repealing them altogether. Those task forces have come under fire for not adequately disclosing their members and not keeping the public informed on their actions. Transparency has somewhat improved in recent months, though the exact nature of what’s disclosed varies at each agency. Regulatory experts still aren’t sure exactly how much an impact they are having.

“It may just be that the proof of the pudding is in the tasting,” said Wallach. “We’ll either see a bunch of stuff showing up in the Federal Register, or we won’t.”

Then there are bigger reforms that the administration could consider, such as overhauling the 1993 executive order that sets the basic guidelines for federal rulemaking. Experts on both right and left largely support the directive, a big reason why it hasn’t been withdrawn over the past 25 years, but Rao and her team could look to update it. They could also try to expand their control of Washington by forcing independent agencies to send their rules to OIRA for review, as the cabinet agencies must do. This would amount to a significant power grab: Some of the most powerful agencies in Washington are independent, such as the Securities and Exchange Commission, the Federal Communications Commission and the Federal Reserve. During her time as a law professor at George Mason, Rao was a big proponent of institutionalizing greater White House control over the independent agencies, and experts have been watching closely for signs she’ll make moves in that direction.

Rao declined on record to say if she is looking to do so. [UPDATE: After publication, an an OIRA spokesperson said in an email that they are "considering and thinking about changes to oversight of independent agencies. It's no secret. Administrator Rao has publicly stated numerous times."] For now, Rao said in the interview, her mission is to improve the rulemaking process and attempt to cement the administration’s regulatory reforms so they extend beyond Trump’s presidency. “We are trying to do this in a way that is responsible and fair and consistent with the law,” she said. “It takes time. We’re doing it in a way that is consistent with long-standing principles.”

All of this shapes up as a major experiment for conservative regulatory reform policies, testing whether a determined administration can really jumpstart the economy by rolling back expensive, outdated rules, and can persuade agencies to pare back their footprints rather than keep expanding them. Experts on both sides agree that no administration has put as much energy into regulatory reform since at least Ronald Reagan's administration, if not earlier. The question now is whether it will deliver the results that Rao expects, or whether it will send the opposite message: That even the most deregulatory administration in a generation couldn’t find a bunch of expensive rules worth cutting.