President Trump’s first 10 months in office have been light on legislative achievements, but they have featured a parade of regulatory rollbacks. At the start of this month, Trump signed the latest major salvo of his offensive into law. This one, repealing a regulation promulgated by the Consumer Financial Protection Bureau (CFPB), wiped away one of the signature new financial protections from the Obama administration. Upon hearing news of the rule’s repeal, Sen. Elizabeth Warren (D-Mass.) called Trump’s deregulatory action a “giant wet kiss to Wall Street.”
Trump and congressional Republicans have been steadily pushing deregulation behind the scenes, orchestrating the deepest rollbacks since the 1980s. This deregulatory vision has been easier to enact without a public uproar than signature agenda items, such as repealing the Affordable Care Act.
Republicans on Capitol Hill have employed a device called the Congressional Review Act to repeal 14 regulations from the Obama era (including the CFPB’s). From the White House, Trump has used executive power to further deregulation, ordering federal agencies to begin dismantling policies, from net neutrality to the Clean Power Plan. Moreover, administrators such as Rex Tillerson and Scott Pruitt have shown that Cabinet secretaries have independent power to gut the machinery of their own agencies.
Little can be done to reverse what Republicans have eliminated legislatively as long as they control Congress. But a significant roadblock still exists in the GOP’s free-market agenda: the enduring power of the administrative state itself.
The rollbacks being ordered via executive action require more than presidential decrees and signing ceremonies. To become concrete policy, they require a deep understanding of the procedures and safeguards ingrained in the administrative state that Trump has pledged to “deconstruct.” But the rules Americans built for government bureaucracy over the 20th century are now an obstacle to its swift deconstruction. In this way, the very red tape Trump wants to cut could end up thwarting his deregulatory agenda.
Since the early 20th century, lawmakers have expanded the federal bureaucracy tremendously, creating agencies to develop regulations that affect almost every facet of economic life, from limiting air pollution to preventing deceptive advertising to ensuring fair hiring practices.
But the red tape that controls this bureaucratic apparatus — which Americans know far less about — comes from a law called the 1946 Administrative Procedure Act (APA), which Congress passed in the wake of the New Deal. After the explosion of “alphabet” agencies in the 1930s, pressure mounted for a uniform code of procedure that would add regularity, ensure fairness and outline comprehensive standards for the administrative state. Eventually, Congress passed the APA, which created a system of rules for the regulatory process and which mandated that courts enforce those rules in judicial review. The basic idea of the act was to prevent unrestrained or “arbitrary” uses of bureaucratic power — an idea the courts would elaborate upon over time.
In the 1980s, this layer of tape came back to bite the Reagan administration when it was beginning its deregulatory push. Having referred to agencies as “four-letter words” on the campaign trail — and having declared in his first inaugural address that “government is the problem” — Ronald Reagan quickly established a “Task Force on Regulatory Relief” to go after the administrative state with a machete.
High on the task force’s “hit list” were new safety rules issued by the National Highway and Traffic Safety Administration. Congress had created the NHTSA in 1970 after a group of activists led by Ralph Nader published “Unsafe at Any Speed,” a muckraking account of the auto industry and the safety hazards of motor vehicles. “Nader’s Raiders,” as they were called, gradually built support for a new agency tasked with improving auto safety and reducing driving fatalities.
By the late 1970s, however, the political winds supporting such regulations had shifted. Americans were more worried about inflation, which had been hurting people’s wallets since the start of the decade, than about motor safety. Because economists blamed inflation in part on new regulatory burdens — and because Americans were more cynical about government generally — deregulation became an increasingly popular policy idea.
In 1981, in tandem with Reagan’s deregulation task force, a new crop of NHTSA administrators announced a monumental shift in policy. The agency announced it would be eliminating one of its landmark rules from the 1970s — a rule mandating the installation of air bags — that car companies had long complained was too costly.
But in this effort to rescind its own regulation, NHTSA bumped up against the layer of procedures and safeguards ingrained in the administrative state. A coalition of insurance companies immediately sued NHTSA, arguing that the agency, by failing to provide a “reasoned” justification for scrapping the air bag rule, had acted arbitrarily in violation of the APA. In 1983, in a case called Motor Vehicle Manufacturers v. State Farm, the issue reached the Supreme Court, setting up one of the first big tests for deregulation in U.S. history.
In an opinion written by Justice Byron White, the court struck down the NHTSA’s shift in policy and delivered a rebuke to Reagan’s deregulatory agenda. Eager to slash regulations, the NHTSA’s new leaders failed standards of administrative procedure outlined in the APA, White said. In particular, they failed to provide reasoned explanations and sufficient evidence for scrapping the air bag rule. In the process of repealing it, the agency had falsely assumed that broad public support was sufficient justification for deregulation.
An agency’s decision to deregulate, White added, would be held to the same legal standard as a decision to issue a new regulation. In other words, the Reagan administration needed to master the process of regulation to deconstruct it. Just because a new crop of leaders felt contempt for the administrative state didn’t meant they could disregard the myriad rules governing the administrative process.
Since 1983, judges have built upon the logic of the State Farm case and created new safeguards (within a field called administrative law) that limit agencies’ ability to change course after an election.
And in 2017, federal agencies are doing nothing if not attempting to dramatically change course. At the president’s direction, officials across the bureaucracy are ushering in a new era of deconstruction within the executive branch.
Some of their actions (such as Scott Pruitt’s recent purge of Environmental Protection Agency scientists) are difficult to stop and can take effect right away. But others — such as Trump’s various executive actions — represent only the first step of a complex process, a process which includes hearings, notice, public comment, multiple draft proposals and, eventually, judicial review.
Whether presidents like it or not, these bureaucratic hurdles are recurrent obstacles to their policy agendas. As Trump may soon find out, federal agencies are not equipped to move at breakneck speeds or in response to a flurry of tweets. They must follow the elaborate system of rules and procedures Americans layered onto the administrative state over the 20th century.
Those rules have thwarted some of the more legally competent administrations in U.S. history. In a battle between red tape and the Trump administration, the smart money is on red tape.