President Trump’s role as Administrator-in-Chief saw him exercise refreshing discipline over the growth of federal regulation. The past year has seen a sudden reduction in the flow of new regulation and the President’s deregulatory agenda has put his administration on track to steadily reduce regulatory costs. Decisive action upon assuming office has effectively checked the seemingly inexorable rise of the regulatory state.
Shortly after his inauguration, President Trump issued Executive Order 13771, pledging to repeal two regulations for every new regulation introduced, in addition to controlling the cost of regulation through the budget process. The “one-in, two-out” commitment was married with a constraint on the ability of agency heads to increase net regulatory costs in fiscal year 2017.
The President’s directive also introduces regulatory budgeting. As part of the budget process, the Director of the Office of Management and Budget (OMB) must outline to agencies the total amount of incremental costs they will be permitted to introduce through regulatory action in the coming year. These changes implemented strong frameworks for rule-making that have set agencies on a clear deregulatory path.
The Office of Information and Regulatory Affairs (OIRA) last Thursday issued a status report on performance against these new requirements. The first eight months of the Trump Administration saw agencies remove 22 regulations for every new regulation introduced, consisting of 67 deregulatory actions against 3 new regulatory actions. In total, the present value of the regulatory costs that were removed is an estimated $8.1 billion.
Regulatory cost caps for the 24 departments and agencies in the coming financial year have the goal of long-run savings of $9.8 billion in total. The Department of Interior ($2.8 billion), Department of Labor ($2.0 billion), Department of Energy ($1.1 billion) and Department of Defense ($1.0 billion) have the largest regulatory cost saving objectives.
The Administration’s biannual Unified Agenda of Regulatory and Deregulatory Actions, also released last Thursday, reported that 1,579 regulatory actions were withdrawn or delayed over the past year. In 2018 agencies anticipate three deregulatory actions for each new regulatory intervention.
Only Presidents Reagan and Clinton were able at any point in their presidencies to significantly reverse the number of federal regulations, though these efforts were insufficient to offset the total accumulation of red tape throughout their terms. If President Trump’s regulatory trajectory were to be maintained, he would appear to be on course to best the efforts of the last six presidents and achieve a halt in regulatory encroachment that is unprecedented in the modern era.
While difficult to quantify, the importance of regulatory stability for achieving stronger growth should not be dismissed. An uncertain regulatory environment has the effect of diminishing business confidence and adding to project risk. Trump’s effort to restrain the administrative state has fed a rise in business sentiment. The resulting reduction in business risk premiums will fuel stronger investment across the economy and buoy growth.
Even the President’s detractors have acknowledged that his first eleven months in office have seen a structural shift in the growth of regulation, from relentless expansion to slow trickle. Turning off the spigot of new regulation has demonstrated President Trump’s willingness to act decisively to arrest the march of red tape.
Interrupting the flow of new regulation is a necessary first step in a deregulatory program that will need to be maintained for an extended period in order to make inroads into the broader stock of regulation. Regulatory caps establish much-needed discipline for agencies and keep the pressure on to continue to realize reductions in the regulatory burden.
Rolling back the regulatory state may be an exercise that needs to run for a generation but a President has finally demonstrated the mettle to at least begin the task and should be commended for his actions.
Burchell Wilson is a contributor to E21.
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