President Trump’s executive order on regulatory costs imperils the rest of his regulatory agenda

This morning President Trump issued an executive order entitled “Reducing Regulation and Controlling Regulatory Costs.” It requires that every proposal for agency regulation must also identify two regulations to be repealed, and it has additional hurdles for regulations that entail new incremental costs.

There are other executive orders on OMB review of proposed regulations in light of their costs (including Executive Order 12,866 from 1993, which the new executive order cites), but those executive orders focus on costs and benefits — they allow for approval of regulations when the benefits justify the costs. Under today’s order, by contrast, an agency could not proceed with a regulation with a trivial cost and a much greater benefit unless it identified two other regulations to be repealed. And every regulation has some costs: the money that private parties spend on a lawyer who can tell them what the executive order actually means is a cost, the money spent on implementing the order is a cost, etc. Anyway, the “two for one” requirement would apply even to regulations that somehow have no costs at all.

The order has an exception for national security regulations, whose boundaries are not clear. But if, for example, the Army Corps of Engineers wants to take actions to make pipeline construction easier (in keeping with the spirit of the Jan. 24 presidential memorandum on the Dakota Access Pipeline or the Jan 24 presidential memorandum on the Keystone XL pipeline), under the terms of today’s executive order it can’t do so unless it is able to identify two existing regulations to repeal for every regulation it wants to promulgate. And it doesn’t matter if it can show that its new regulation has benefits that greatly exceed its costs. Furthermore, it doesn’t matter if the two regulations for repeal have benefits that greatly exceed their costs. So a cost-justified regulation would be delayed until the agency found two other regulations for repeal despite their being cost justified. And a delay in a cost-justified regulation is itself an additional cost (an opportunity cost). The costs are everywhere. Beyond the delay, the executive order prohibits adding net new regulations. If you want more regulations from any department (other than those involving national security), this is not the order for you.

The executive order does allow the OMB director to make exceptions, and to tell agencies what “costs” actually means (strikingly, the order nowhere defines the key term “regulatory costs”). So the OMB director will have discretion to reduce the hassles that this executive order creates.

But, at a minimum, this executive order will create confusion and add delays to the implementation of agency agendas. So if you want to throw sand in the gears of Trump’s regulatory agenda, you could do worse than this order. Absent exceptions, it would undermine his regulatory agenda. Even with exceptions, it will impose significant costs (costs, again!) on his agency heads.

[Update: I apologize, as I failed to focus on the national security exception in creating my original examples. The post has been updated.]