Debating Trump's Regulatory 'Twofer'

At the end of January, President Trump rolled out a two-for-one Executive Order 13771 (EO), “Reducing Regulation and Controlling Regulatory Costs.”

The EO claims a twofold purpose: eliminate two existing regulations for each newly enacted regulation and keep total incremental costs of all new and repealed regulations in fiscal year 2017 less than zero dollars.

Reduce federal regulations and cut costs?

Sounds great!

Who can’t get behind efficiency and economy in the regulatory state — especially in today’s oil and gas industry, where every bit of profit makes a difference?

Well, the devil is in the details.

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At the end of January, President Trump rolled out a two-for-one Executive Order 13771 (EO), “Reducing Regulation and Controlling Regulatory Costs.”

The EO claims a twofold purpose: eliminate two existing regulations for each newly enacted regulation and keep total incremental costs of all new and repealed regulations in fiscal year 2017 less than zero dollars.

Reduce federal regulations and cut costs?

Sounds great!

Who can’t get behind efficiency and economy in the regulatory state — especially in today’s oil and gas industry, where every bit of profit makes a difference?

Well, the devil is in the details.

Point-Counterpoint

The idea was immediately dubbed by some as “ridiculous.”

Public Citizen Inc. promptly filed a lawsuit against Donald Trump (Case No. 1:17-ev-00253, United States District Court for the District of Columbia) challenging the EO as facially arbitrary, capricious and an abuse of discretion.

Others highly favored the EO.

Fourteen States filed an amici curiae brief in the lawsuit supporting the EO, pointing out that numerous presidents, Democratic and Republican alike, issued executive orders seeking to reduce the number of federal regulations and the overall regulatory burden. Proponents maintain the notion of eliminating one or more existing regulations for each new regulation in order to reduce costs is nothing new. The Netherlands, Canada, Australia and the United Kingdom have all previously enacted similar policies. The UK currently has a three-for-one policy.

In counterpoint, the Union of Concerned Scientists filed another amicus brief in support of Public Citizen Inc. and challenging the EO.

One paragraph from the brief pretty much summarizes their argument:

“It is important to note, as Executive Order 13771 acknowledges, that agencies are already required, where not prohibited by law, to ensure that the benefits of regulations exceed their costs. Thus, the only impact of the Executive Order is to prohibit agencies from promulgating regulations whose benefits exceed their costs, unless they eliminate two other regulations whose benefits also exceed their costs. This is the definition of unreasoned decision-making. It is also a thumb in the eye of Congress, which enacted public health and environmental statutes in order to benefit the public.”

Opponents argue the EO is not about regulatory reform, but a transparent attempt to halt environmental regulation in its tracks without regard to the benefit those regulations provide. This order is a cost-only analysis — by definition, an approach that ignores the public benefits of the underlying statutes. Thus, the “savings clause” cannot save the EO, because there is nothing left to save.

Proponents extol the EO’s savings clause that says no existing regulations can be repealed where prohibited by law. Therefore, regulations expressly required by law without the consideration of costs cannot be repealed pursuant to the EO. Opponents provide a brief regulatory law primer: Existing regulations are established law!

The details of the EO are still vague.

The reduction of regulation is tied to controlling costs, and excludes many regulations, including: those concerning “a military, national security, or foreign affairs function of the United States;” regulations related to an agency’s organization, management or personnel; or “other category of regulations exempted by the Director.”

Unanswered Questions

In a working paper, “Implementing a Two-for-One Regulatory Requirement in the U.S.” (Dec. 7, 2016), by Marcus Peacock, a research professor at George Washington University’s Regulatory Studies Center, Peacock states that the EO’s approach raises a number of issues, including:

  • The definition of a “new” regulation
  • How to measure offsets
  • Regulatory workload
  • Enforcement challenges
  • Survivability in future administrations

Certainly the two-for-one policy presents administrative and procedural challenges.

There is the sticky problem of estimating costs, as the EO is intended to address total opportunity costs (opportunities foregone by society as a whole: workers, businesses, consumers, households, etc.), and not simply business compliance costs. In addition, the repeal of existing regulations must be done in accordance with the Administrative Procedures Act, which itself can be time consuming and costly.

Some speculate that regulation reduction might result in regulations that are longer and more complex. The more elements attached to a proposed regulation, the less likely it is to succeed in the review process and come out as law. Consider regulations in the context of aerodynamics: smooth of purpose, efficient in flight, and they will eventually become law. If the engineers start attaching all sorts of external elements, weight and drag will slow flight and the craft is more apt to crash.

A smaller, more efficient regulatory state is a laudable goal. This EO, like many others in this administration, has already resulted in less efficiency and more litigation. We’ll have to wait and see how this EO holds up after court scrutiny.