President Trump’s Jan. 30 executive order got plenty of attention for the provision that would eliminate two regulations for every new one that’s issued. “So if there’s a new regulation, they have to knock out two,” he told reporters when he signed it last month.
But the real power of the measure — if it’s strictly implemented — is a different provision. That provision dictates that “the total cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget.”
Neil Bradley, senior vice president and chief policy officer for the U.S. Chamber of Commerce, said in an interview that it is the net-zero cost formula that “really can have a profound impact. It gives you a new target for when you’re writing regulations.”
It is also unprecedented. In 1981, President Ronald Reagan signed Executive Order 12291, which dictated that when Cabinet agencies submit rules for White House approval, the benefits should exceed the costs. That was in effect until September 1993, when President Bill Clinton issued his own executive order, 12866. That directive instructed OMB’s Office of Information and Regulatory Affairs to focus on economically significant rules — those with at least a $100 million impact — and said that the benefits must justify the costs.
But the new executive order, which was followed by a Feb. 2 OMB guidance document, counts only the costs rather than the benefits of any regulation. Effects such as energy savings, the guidance stated, will not be counted as offsets “in most circumstances.” Neither would the public health benefits of a rule.
Susan Dudley, who headed OIRA under President George W. Bush, said that “will be a big departure.”
“One of the things it will force agencies to allocate more resources to evaluating existing regulations and see what they cost, and what could be eliminated,” added Dudley, who now directs the George Washington University Regulatory Studies Center.
The guidance indicates that agencies cannot rely on a rule’s original cost estimates, as those could be outdated. The order does not apply to regulations concerning “a military, national security, or foreign affairs function” or those related to agencies and their personnel, or any category exempted by the OMB director.
Many business groups are now eyeing rules that might be modified or cut altogether. Rosario Palmieri, the National Manufacturers Association’s vice president for labor, legal and regulatory policy, said “there are critical regulations that protect worker health and safety and the environment.”
Still, “there were discretionary choices made in the past by administrations that they didn’t have to,” he added. “There are plenty of opportunities to eliminate or reduce unnecessary regulations that are imposed” on the private sector.
However, Kathryn Thomson, a partner at Morrison & Foerster LLP who served as the Transportation Department’s general counsel, noted that because the order does not apply to those required by statute, it will limit the kinds of rules the administration can target. Because those are exempted, “the president is actually limiting his ability” to advance “presidential priorities” through regulation.
A lawsuit filed last week by Public Citizen, the Natural Resources Defense Council and the Communications Workers of America argues that the new criteria will block a raft of new regulations from entering into force.
“To repeal two regulations for the purpose of adopting one new one, based solely on a directive to impose zero net costs and without any consideration of benefits, is arbitrary, capricious, an abuse of discretion, and not in accordance with law,” the suit states.
Amit Narang, a regulatory policy advocate at Public Citizen, noted that the guidance allows agencies to use the estimated savings of rules repealed by the Congressional Review Act to offset the cost of new regulations.
“I don’t understand why, because no one is spending money to comply with those rules,” Narang said. “They have not taken effect yet, or are just beginning to take effect.”
White House press secretary Sean Spicer last week dismissed such complaints, saying the lawsuit is based on “speculation on what may or may not happen in the future.”
What exemptions Trump’s OMB director might grant to the executive order remain unknown. His nominee, Rep. Mick Mulvaney (R-S.C.), could be confirmed and take up his post as soon as this week.
Trump, however, has already delivered his assessment of the executive order’s effect: It’s “a big one,” he told reporters as he inked his name on it.