Monday, February 6, 2017
This post comments on the method for managing regulation and regulatory costs in the POTUS's Executive Order on Reducing Regulation and Controlling Regulatory Costs.
I begin by acknowledging Anne's great post on the executive order. She explains well in that post the overall scope/content of the order and shares information relevant to its potential impact on business start-ups. She also makes some related observations, including one that prompts the title for her post: "Trumps 2 for 1 Special." In a comment to her post, I noted that I had another analogy in mind. Here it is: closet cleaning and maintenance.
You've no doubt heard that an oft-mentioned rule for thinning out an overly large clothing collection is "one in, one out." Under the rule, for every clothing item that comes in (some limit the rule's application to purchased items, depending on the objectives desired to be served beyond keeping clothing items to a particular number), a clothing item must go out (be donated, sold, or simply tossed). Some have expanded the rule to "one in, two out" or "one in, three out," as needed. The mechanics are the same. The rule requires maintaining a status quo as to the number of items in one's closet and, in doing so, may tend to discourage the acquisition of new items.
Articulated advantages/values of this kind of a rule for wardrobe maintenance include the following:
- simplicity (the rule is easy to understand);
- rigor (the rule instills discipline in the user);
- forced awareness/consciousness (the rule must be thoughtfully addressed in taking action); and
- experimentation encouragement (the rule invites the user to try something new rather than relying on something tried-and-true).
Disadvantages and questions about the rule include those set forth below.
- The rule assumes that it is the number of items that is the problem, not other attributes of them (i.e., age, condition, size, suitability for current lifestyle, etc.).
- Once new items are acquired, the rule assumes that existing ones are no longer needed or are less desirable.
- The rule operates ex post (it assumes the introduction of a new item) rather than ex ante (allowing the root problem to be addressed before the new item is introduced).
- The rule encourages an in/out cycle that incorporates the root of the problem (excess shopping) rather than addressing it.
- Definitional questions require resolution (e.g., what is an item of clothing).
Regulation is significantly more complex than clothing. But let's assume that we all agree that the list of advantages/values set forth above also applies to executive agency rule making. Let's also assume the validity and desirability of the core policy underlying the POTUS's executive order on executive agency rule making, as set forth below (and excerpted from Section 1 of the executive order).
It is the policy of the executive branch to be prudent and financially responsible in the expenditure of funds, from both public and private sources. In addition to the management of the direct expenditure of taxpayer dollars through the budgeting process, it is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.
How do the closet organization disadvantages or questions stack up when applied in the executive agency rule-making context? Here's my "take."
I am not confident that the case has been made that the number of regulations--as opposed to their content--is the problem that needs to be (or is intended to be) addressed. The executive order seems to focus on regulatory cost and does not offer a basis for linking number to cost. (The executive order does address regulatory cost as a separate, related matter, however. I may have more to say on that in another post.) However, assuming the number of regulations is the issue that requires resolution, even a superficial analysis requires that we understand what is meant in the executive order by the term "regulation." My observations on that question are below.
Executive agency regulation is unlikely to stop as a result of the executive order. Each new regulatory adoption will involve a clear but non-trivial tradeoff determination framed by a single, simple question: is this new regulation worth the loss of two existing ones? It is tough to make a qualitative judgment on the value--or lack of value--of a regulation (assuming we can define what one is). For example, a new regulation may benefit some types of businesses or social groups (or aspects of business or society) and detriment others. Beauty--or quality--is in the eye of the beholder. An obvious assumption underlying the judgment under the application of this rule, however, is that current rule makers will enact better rules than prior rule makers.
By waiting until a new regulation is proposed to make an adjustment in existing rules, we delay action to resolve any over-regulation problem that we may have. It seems more sensible and direct to look at truing up existing regulations before introducing new ones. Some who advocate the one-in, one-out rule for clothing management (see, e.g., this post) recommend engaging in this kind of tending and weeding before implementation of the rule. If the number of regulations is too high now, the one-in, one-out rule does nothing to address that.
Along similar lines, by working off the proposal of new regulation, the one-in, one-out rule actually may encourage regulation. Of course, nothing prohibits or restrains executive agencies from revoking regulations outside the operation of this rule. But the rule does not necessarily encourage that process. Agencies could be incentivized to hold onto less desirable rules so that when they want to implement regulation, they have some easily discardable regulations on hand to jettison . . . .
Finally, it seems appropriate to ask what the POTUS actually means by "one new regulation" and "two prior regulations." There are a number of levels on which this definitional question operates. First, there can be a bundling of subject matters in a single regulation. Or, related rules can be separated into different regulations. Also, since deregulatory initiatives are themselves introduced in regulation (e.g., regulations under the JOBS Act), do they count as "regulations?" If the number of regulations truly is the perceived problem to be resolved, I presume they would. The Director of the Office of Management and Budget is charged with implementing the executive order. I assume that these and other questions will be addressed in forthcoming guidance.
Suffice it to say, many questions remain . . . .
Having read Anne's post and written this one, my essential observation is that the Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs is best seen as a signaling device--the POTUS's way of telling those who support him on this issue that he is doing what he promised. As a form of regulation in-and-of itself, the executive creates its own set of costs--as every rule change does. I can only hope that in the end, after all of the guidance on this executive order has issued, any benefits exceed the harms and nothing essential is destroyed in the process.