Trump Dams the Regulatory Flood His executive order should change the bureaucratic incentives. *****
https://www.wsj.com/articles/trump-dams-the-regulatory-flood-1485822874
The Trump Administration is already a jumble of economic contradictions, but the “great” side of the ledger got an important new entry on Monday. President Trump signed an executive order adopting a “two-for-one” regulatory budget that will help accelerate growth and innovation.
The Obama years were a boom era for rule-making, but the truth is that obsolete and onerous rules have been accumulating for decades. In a working paper for George Mason’s Mercatus Center, Bentley Coffey,Patrick McLaughlin and Pietro Peretto estimate that the economy would be about 25% larger if the level of U.S. regulation had stayed constant since 1980. That’s now more than $4 trillion a year, or $13,000 per person.
The Trump order aims to prevent such waste by requiring the agencies to repeal two old rules for every new one they publish. This is in some sense a gimmick, since some regulations are far more significant, costly or distorting of investment choices than others. But the text of the order suggests that for every dollar of new cost imposed on the private economy, each agency will have to find two dollars of burden to relieve.
Democrats are freaking out about poisonous milk and killer toys, though many civilized countries use such budgets to manage the regulatory state and stay competitive. Canada requires every rule that creates another hour of paperwork for business compliance to be offset one for one. The United Kingdom and Australia have harder versions that require the costs of new rules to be offset by deregulation of comparable net value.
The permanent bureaucracy lives to justify its own existence, regardless of which party holds the White House, and rules inevitably beget more rules. Mr. Trump’s order starts to change the institutional incentives.
Under a two-for-one policy, each individual department will need to scrutinize its own books in search of offsets and rules needing modernization, which will make deregulation as high a priority as rule-making. The Environmental Protection Agency can’t poach savings uncovered at, say, the Fish and Wildlife Service. This could lead to more realistic cost-benefit tests, focus the bureaucracy on trade-offs and strengthen regulatory accountability.
Mr. Trump often talked about overregulation in 2016 and the issue may have been decisive in winning over many skeptical Republicans. Leaders of businesses large and small have been howling for relief for years, to no avail from the Obama Administration, or for that matter the George W. Bush Administration.
One key appointment to watch will be Mr. Trump’s choice to run the White House Office of Information and Regulatory Affairs (OIRA), who will be crucial to ensuring that the rollback will work in practice. The White House has failed to appoint a regulatory task force to supervise regulation until the OIRA job is filled, and this means that some agencies will now try to expand their writ while no one is watching. Democrats will try to delay approving a nominee for as long as possible.
Meanwhile, the House this week will begin the job of repealing some of President Obama’s worst regulations. Republicans plan to rescind Mr. Obama’s midnight rules under the Congressional Review Act (CRA) that gives Congress an up-or-down vote on new rules. The House and Senate will vote on joint disapproval resolutions, which need only a majority before they are sent to the President.
On the chopping block is one EPA regulation related to streams that is estimated to threaten up to one-third of the remaining jobs in the coal industry. Another target is a Bureau of Land Management rule designed to undermine oil and gas fracking on federal land. A third is a Securities and Exchange Commission rule that forces U.S. companies to report payments to foreign governments, which can mean disclosing proprietary information that competitors can use against them.
The CRA is a exceptionally powerful reform tool, as our Kimberley Strassel reported last week. Amid the rush to pump out ever more rules, the Obama Administration may have failed to comply with many CRA mandates. The more the Trump Administration works with Congress to codify reform, the more durable the economic progress will be.
The deregulation project that began with Jimmy Carter and gained speed under Ronald Reagan became the bedrock of the 1980s economic boom, but the administrative state gradually reverted to its old habits. If Mr. Trump can break up the Washington central planning that is again misallocating resources, the resulting job creation and new investment would be a great legacy.
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