An executive order signed Jan. 30 by President Donald Trump requiring the elimination of two regulations for each new regulation enacted "is arbitrary, not implementable, and a terrible idea," according to Harvard Law professor Jody Freeman.
"The American dream is back," Trump told small business leaders in announcing the order. Under its provisions, any executive department or agency proposing a new regulation must identify at least two existing regulations to be repealed. Moreover, any new incremental costs associated with new regulations must be offset by cost savings from the eliminated rules.
Trump offered little detail on exactly how the two-for-one reduction in regulations will be enforced, saying instead that the director of the Office of Management and Budget, or OMB, will be issuing additional guidance. The only direct piece of legislation Trump referred to in his meeting with the leaders was the Dodd-Frank Act, the landmark post-financial crisis bill that tried to crack down on Wall Street banks.
In comments on the order, Freeman called Trump's order arbitrary. She noted that while most major public health, consumer protection, workplace safety and other rules cost money, the "enormous social benefits" they produce dramatically outweigh those costs. For instance, the professor said the OMB has found this is the case with most major air pollution rules. But she noted that the executive order does not take into account the net benefits of a rule, just its costs.
Thus, if an agency wants to issue a rule that is expected to have $1 million in regulatory costs, but is expected to have benefits of $1 billion, Freeman said the agency could not issue that regulation unless it agrees to get rid of at least two regulations with at least $1 million in total cost. "And, because OMB's annual reports show that virtually all rules issued in the past 10-15 years have greater benefits than costs (except for a few that were specifically required by Congress), eliminating an existing rule will likely reduce net benefits," Freeman said.
The professor, who served as former President Barack Obama's counselor on energy and climate change, also stressed that existing executive orders signed by other presidents already require "significant" agency rules go through a rigorous cost-benefit analysis overseen by the OMB to ensure their benefits outweigh their costs. Agencies also must look back at older rules and consider whether they are still warranted. Thus, she called Trump's order unnecessary.
In addition, Freeman noted that Trump's order is relatively toothless, because it repeatedly says it will only be implemented "to the extent permitted by law." Thus, rules that are required by statute, such as many of the U.S. EPA's rules, are not subject to the order.
"A president can't order his executive agencies to disobey the law in any event, and if the agencies try to disobey statutes, they will be called to account by affected parties who will file lawsuits challenging their unlawful actions," she wrote.
The professor nevertheless predicted that the OMB will use the order as a "weapon" to "harass agencies" and slow regulation. "Delaying important new rules that are necessary to protect public health and welfare can have severe, even disastrous, consequences: think of tainted food, toxic spills, unavailable medicines, unsafe trains and planes," she warned.
Freeman further warned about the breadth of the Trump order. For instance, she said it appears to also apply to independent agencies, such as FERC and the U.S. Commodity Futures Trading Commission, which have never before been subject to centralized regulatory review. It also appears to extend to guidance documents, policy statements and other informal agency documents meant to alert industry about the direction of agency policy.
Conversely, Adam Brandon, CEO of the conservative and libertarian advocacy group FreedomWorks, one of the successors of another advocacy group founded by brothers David Koch and Charles Koch, praised the Trump order.
"With a cost of nearly $1.9 trillion, regulations are hurting consumers and businesses, leading to anemic economic growth," Brandon stated. "We urge Congress to continue pursuing regulatory reform through the REINS Act and Regulatory Accountability Act to continue this much needed and long overdue effort."
House Majority Leader Kevin McCarthy also released a statement. "Obsessed with the idea that quantity is more important than quality, unaccountable agencies continually increase the regulatory burden on our country without a thought to the tens of thousands of pages of rules that already exist," he said. "The House has focused on rolling back the bureaucracy from day one of the new Congress. Together with Trump's latest actions, we're making Washington rational and accountable to the people again."