coalition for
regulatory innovation

The U.S. economy is inching along because of the staggering increase in regulations and the persistence of an alphabet soup of bureaucracies arrayed against markets and innovation.

In 2015, 3,400 final rules were published in the Federal Register. These rules, filling up over 81,000 pages, would take 2.6 people a whole year to read, if they read for 40 hours per week every week at a rate of four minutes per page. During the first six months of 2016 alone, over 3,000 rules were published in the Federal Register.

Almost 80 of the rules published in 2015 and 38 in first half of 2016 were “major rules,” which means they would have an annual effect on the economy of $100 million or more; a substantial increase in prices of goods for consumers; and a negative impact on competition, jobs, investment and innovation.

The Obama administration imposed 184 major rules during its first six years – more than twice the number the Bush administration imposed in its first six years.

“Fourth branch” of government?

Regulations are issued either by executive branch agencies or independent regulatory agencies. There are 15 executive branch agencies, the secretaries of which form the Cabinet. These agencies include the State, Treasury, Defense, and Interior Departments.

Independent regulatory agencies – which include the Environmental Protection Agency (EPA), the Federal Communications Commission, the Securities and Exchange Commission, and the Commodity Futures Trading Commission – are not typically bound by the requirements outlined in Executive Order 12866 (more on that below) that executive agencies must meet, including conducting a cost-benefit analysis during the rulemaking process.

That independent agencies are not required to disclose a full accounting of the costs and benefits their rules represents a “continued obstacle to transparency, and it might also have adverse effects on public policy,” as noted by the Office of Management and Budget.

George Washington University Law Professor Jonathan Turley put it well when he said, “Our carefully constructed system of checks and balances is being negated by the rise of a fourth branch, an administrative state of sprawling departments and agencies that govern with increasing autonomy and decreasing transparency.”

How were the procedures for issuing and reviewing regulation established?

Three main bodies of law established the procedures for rulemaking:

The Administrative Procedure Act of 1946 is the legislation that established the process by which federal agencies develop and issue regulations. It requires that federal agencies act within the limits delegated to them, enact regulations that are reasonable and not arbitrary or capricious, and follow specified procedures for the rulemaking process, such as notifying the public and considering public comments before issuing a final rule.

The Executive Order 12866, issued by President Clinton in 1993, further clarified procedures for rulemaking, mandating that agencies can only write rules that are “required by law” and “made necessary by compelling public need.” The Executive Order also developed the enduring practice of conducting cost-benefit analysis during the rulemaking process.

The Executive Order 13563, issued by President Obama in 2011, sought to reduce “redundant, inconsistent, or overlapping” regulations through the practice of retrospective analysis of existing rules that may be “outmoded, ineffective, insufficient, or excessively burdensome.”

What is cost-benefit analysis?

A cost-benefit analysis simply adds up all the costs and benefits associated with a regulation, including those that are non-quantitative and indirect. Controversy often arises over what should be counted on either side of the ledger. For example, a “strong majority” of the benefits of lowering the ozone standard documented by the Environmental Protection Agency would have come from reductions in particulate matter and not from reductions in ozone itself. That means EPA was counting benefits that don’t relate to the merits of the actual rule.

What is Congress’ role during the rulemaking process?

Fundamentally, Congress gives federal agencies the authority to craft and administer the rules necessary to carry out the laws that it writes. As a check on the power of agencies, Congressional oversight committees can hold oversight hearings about the actions of specific agencies, and Congressional appropriations committees can reduce the agencies’ budgets.

For decades, Congress was able to nullify rules written by executive agencies through the commonly used legislative veto, including committee, one-house, and two-house vetoes. But in Immigration and Naturalization Service v. Chadha (1983), the Supreme Court found one-house legislative vetoes to be unconstitutional, thereby making it significantly harder for Congress to reject rules issued by federal agencies.

That said, the Congressional Review Act of 1996 gives Congress 60 days to review, and to overturn, “major” rules issued by federal agencies through a joint resolution of disapproval. This mechanism has only been successfully used once, in response to an Occupational Safety and Health Administration rule regarding an ergonomics program that the Department of Labor estimated would have cost employers $4.2 billion in 1996 dollars.