Investor’s Business Daily: For Regulatory Reform, Washington Should Start With The Tools They Have

Originally published by Investor Business Daily October 12, 2018.

Regulatory reform is a hot topic nowadays, and no wonder. The size and expense of the federal administrative state are staggering. One study estimates that, in 2015 alone, new federal regulation cost the American economy more than $22 billion.

Thankfully, judicial and statutory reform efforts are underway, as other articles in this series have explained.

But we shouldn’t overlook the existing tools for regulatory reform the president can employ now, such as vigorous enforcement of current regulatory reform laws, as well as exercising his constitutional authority to supervise regulatory agencies.

Congress also has an important role to play. One reform law that has been neglected for many years is the Congressional Review Act (CRA). Passed in 1996, the CRA requires agencies to submit new rules to Congress for review before they take effect. Congress then has 60 days in which, through expedited and filibuster-proof procedures, it can disapprove the rule. Once disapproved, not only is the rule itself outlawed, but also any rule the agency attempts to issue that would be substantially similar to the disapproved rule.

The CRA’s definition of “rule” is broad, applying to virtually all important agency regulations, policies, and guidance documents.

Unfortunately, agency compliance with the Congressional Review Act has been poor, especially prior to the current administration. But the president could easily remedy that lax performance by requiring agencies to submit existing nonconforming rules to Congress. Similarly, the president could order that agencies not enforce unvetted rules pending the administration’s determination of which rules it wants sent to Congress and which it wants revised. Both of these approaches would be consistent with the CRA’s intent.

Protecting Small Business

Another existing law that can help fight back against administrative agency excess is the Regulatory Flexibility Act (RFA). Passed in the early 1980s and substantially amended in 1996, the RFA aims to protect small entities — in particular small businesses — from overreaching regulation.

The RFA requires that, for every proposed regulation subject to formal notice-and-comment procedures, the proposing agency must determine whether the rule would produce a significant economic effect on a substantial number of small entities. If so, the agency then must prepare a regulatory flexibility analysis, which estimates the cost of the proposed rule and suggests less expensive alternatives.

A 2005 study published in the Fordham Urban Law Journal found that the RFA has led to the modification and withdrawal of proposed regulations “because of real-world concerns voiced by small businesses.” But the study noted that agencies sometimes shirk their RFA obligations.

For example, under current agency practice, a rule that would significantly reduce airline traffic to a particular airport would be analyzed only for its impacts to the airlines, not to airport concessions or ground transportation businesses. Yet nothing precludes the president from directing that these impacts also be considered, perhaps as part of a new “best practices” document issued by the White House’s Office of Information and Regulatory Affairs (OIRA).

Besides the RFA, the president and OIRA officials can and should enforce other existing reform laws — such as the Paperwork Reduction Act and Information Quality Act — with new directives and guidance to the regulatory agencies.

Regulatory Reform: Costs Vs. Benefits

In addition to better enforcement of existing laws, ensuring compliance with existing executive orders can help. Since the Reagan administration, agencies proposing significant rules — such as those having an economic impact greater than $100 million — have been required by executive order to prepare a regulatory impact analysis, which is reviewed by OIRA. The analysis must quantify the costs and benefits of the proposed rule, as well as suggest alternatives.

A 2014 Mercatus Center study concluded that, when done correctly, regulatory impact analyses substantially improve the efficiency of regulation and thereby reduce costs. But the study also observed patterns of poor agency analysis. For example, many analyses fail to include meaningful alternatives, or fail to consider a proposed rule’s distributional effects, such as impacts to small businesses. Yet all of these shortcomings can be remedied through more vigorous White House review under current executive orders — for example, by OIRA’s “return” of draft rules to proposing agencies for reconsideration — or by new requirements in an updated executive order.

Reforming the regulatory state is a massive project that must be addressed on all fronts: legislative, executive, and judicial. But reformers should recognize they do not start with a blank slate. Existing law and executive orders provide important tools in the fight to reign in regulatory excess.

Read all installments of PLF’s regulatory reform series published in Investor’s Business Daily:

Part 1: “Taming the Regulatory State: It’s a Constitutional Imperative” by Todd Gaziano
Part 2: “Reining in the Regulatory State: Restoring the Separation of Powers” by Tommy Berry
Part 3: “Only Strong Judicial Review Can Restore Separation of Powers” by Tony Francois
Part 4: “Rule Makers Must Follow the Rules, Too” by Jonathan Wood
Part 5: “For Regulatory Reform, Washington Should Start with the Tools They Have” by Damien Schiff
Part 6: “Congress Must Regulate The Regulators To Restore Accountability” by Anastasia Boden