President Trump on Monday morning signed an executive order, “Reducing Regulation and Controlling Regulatory Costs.” The order appears to be a gift to the business community, which constantly complains of the burden of compliance with federal requirements. It also appears to vest considerable power in the director of the Office of Management and Budget to throttle federal rulemaking if that’s what the administration wants to do. But it promises no immediate disruption.
The headline elements of the new order are that federal agencies need to target two rules for elimination for every new rule they issue, and that the executive branch will move toward establishing a “regulatory budget” for federal agencies.
While both of those steps might feel foreign to Washington, they’d be pretty familiar in a number of other advanced Western democracies.
The executive order stipulates that, “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notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”
The idea of a one-in, two-out rule for regulations is not a creation of the Trump administration, but is borrowed from other countries that use a similar method to assure that outdated or redundant requirements that impose a burden on people or businesses are actively sought out and eliminated. The United Kingdom, for example, instituted a similar requirement in 2013.
The executive order also contains the building blocks of a regulatory budget. It requires that for the remainder of 2017, the net incremental cost of the regulations federal agencies issue “shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget.” In other words, the cost of the new regulations must be less than the costs of those being eliminated.
In the following years, the OMB director will, on an annual basis “identify to agencies a total amount of incremental costs that will be allowed for each agency in issuing new regulations and repealing regulations for the next 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 Director.” The order adds the warning that the annual budget could effectively be negative, requiring a net reduction in regulatory costs.
Again, this is not uncommon elsewhere. Canada, for example, has had regulatory budgeting in some provincial governments since 2001, and began moving toward it on the federal level with the election of Conservative Prime Minister Stephen Harper in 2006.
The big question now is how the executive order will be implemented, say experts.
“I really think that the devil is in the details on this kind of scheme,” said Philip Wallach, a senior fellow in governance studies at the Brookings Institution.
The bigger challenge of the two main elements of the order will be the regulatory budget, he said. And that will be up to Trump’s OMB director, who is expected to be Rep. Mick Mulvaney.
“How is cost assessed? What, exactly, counts as a regulation for these purposes? This order doesn’t define any of that stuff. It leaves it all for the director of the Office of Management and Budget to figure out.”
To know what the real effect of the order will be, Wallach said, it will be necessary to see how OMB defines many of the key terms in it and how the White House decides to handle exceptions.
“There could be a whole lot of gaping exceptions that make it so this really doesn’t do a whole lot … but that’s just one possibility,” he said.
What the order does do, though, is at least open the door to greater White House control of the regulatory process.
“I think it’s possible that the OMB could use it as a way of trying to exert a lot of control over the various regulatory agencies. We’ll just have to wait and see.