About That Big Regulatory Rollback ...
(Bloomberg Opinion) -- Rolling back regulations was supposed to be a major priority for President Donald Trump, and members of his administration claim that this rollback is well underway and boosting the economy. “Particularly in 2017, the deregulation started everywhere across the board,” National Economic Council Director Larry Kudlow said in October. “I think that started this push and started the small-business push and the blue-collar hiring.”
Is this true? Well, one piece of evidence that can be (and has been) cited as evidence of an across-the-board regulatory rollback is the annual tally of pages in the Federal Register, the daily publication of government regulations, proposed regulations and other notices. It was recently updated by the Regulatory Studies Center at George Washington University to incorporate 2018:
That was quite the page-count drop in 2017 — the second-biggest ever in percentage terms (after 1947). Part of this precipitousness had to do with the rush of rulemaking in the waning months of President Barack Obama’s second term in 2016, but the 2017 decline was major in any case, bringing the number of pages in the Federal Register back to levels last seen in the early 1990s.
It admittedly does seem a little ridiculous to be measuring regulation by page count. The long-run rise in Federal Register pages may reflect a tendency toward increased wordiness among federal regulators as much as an increased regulatory burden. Still, the above chart does seem to match what we know about the ups and downs of regulatory activity in the U.S.: a sharp rise during World War II followed by a long slowdown, another sharp increase in the 1970s, followed by a slowdown during Ronald Reagan’s presidency, and a more or less steady rise in pages since. Also, a non-page-based measure, the count of “significant” final federal rules maintained by the Office of Information and Regulatory Affairs within the White House Office of Management and Budget, shows a drop-off in 2017, too — an even sharper one than in the page-count chart, in fact.
What both of these charts indicate is that there hasn’t been much in the way of new regulation since Trump took office. This may be economically meaningful (more on that in a moment), but it’s not the same thing as deregulation. The Code of Federal Regulations, the annually updated compendium of government rules, is a better place to see how much regulation there is rather than how much has been added. Its page count rose slightly in 2017 (the 2018 numbers aren’t out yet):
Again, if counting pages in the federal code seems too primitive, the QuantGov project from George Mason University’s Mercatus Center offers an alternative: “a cardinal proxy of the number of regulatory restrictions contained in regulatory text, devised by counting select words and phrases, such as shall or must, that are typically used in legal language to create binding obligations or prohibitions.” It delivers a similar-looking result:
Yet another alternative is the “Regulators’ Budget,” compiled annually by the GW Regulatory Studies Center and the Weidenbaum Center on the Economy, Government, and Public Policy at Washington University in St. Louis, which tracks spending and staffing at regulatory agencies. It shows a flattening of real spending in the 2019 fiscal year (which began last October) after years of increases, but that’s based on projections in the president’s budget that could prove to be wishful thinking. Staffing, meanwhile, has been pretty flat since 2011.
Perhaps it’s still too early in the Trump presidency to be expecting big changes. Right after the president took office in January 2017, the Republican majorities in the House and Senate took advantage of the Congressional Review Act of 1996, which gives Congress 60 legislative days to review and cancel new regulations, to repeal 14 rules (most of them minor) finalized in the waning days of the Obama administration. That was the easy part. Subsequent regulatory decisions have had to go the standard route of formulation, proposal, comment, revision, etc. — the kind of nitty-gritty, process-oriented Washington stuff that Trump has never been keen on.
His administration has been getting more active on this front lately. Here’s the number of pending actions in the White House’s Unified Agenda of Regulatory and Deregulatory Actions (which in this administration are mostly deregulatory actions):
Still, the overall message from the data seems to be that, as my fellow Bloomberg Opinion columnist — and OIRA administrator during Obama’s first term — Cass Sunstein put it last September, “it’s a lot easier to reduce the flow of new regulations than to eliminate those on the books.”
What of the argument that deregulation has been a big boost to the economy since Trump took office, then? The current OIRA administrator, Neomi Rao, released a report late last year claiming that its deregulatory efforts had reduced regulatory costs by $23 billion in fiscal-year 2018, and $33 billion since Trump took office. Those numbers are almost certainly an exaggeration: As Connor Raso pointed out in a Brookings Institution report, they ignore the administration’s own estimates of the economic benefits of some of the rules being delayed or repealed. And even taken at face value, $23 billion amounts to just one-tenth of 1 percent of GDP. If you’re looking for what boosted economic growth in the last fiscal year, the $113 billion increase in the federal deficit brought on by tax cuts and spending increases seems like a far likelier candidate.
Still, the Obama administration in 2016 finalized regulations with annual costs that it estimated at $23 billion. It also estimated annual benefits of $45.3 million from those rules, but in general the costs are front-loaded and the benefits aren’t. Shifting from that regulatory pace to one in which hardly any new regulations are being approved and a few are being repealed seems like it could well have a noticeable macroeconomic impact — possibly bigger than indicated by the dollar amounts, if reduced regulatory uncertainty stimulates hiring and investment. There may be truth to Larry Kudlow’s claims.
Looking forward, though, the picture is muddier. For one thing, regulation isn’t all bad! The air and water of the U.S. are much cleaner than they were a few decades ago, and workplaces much safer, thanks in large part to government-imposed rules. And while there surely is a lot of regulatory kludge (or maybe sludge?) that has developed through the years that could be removed without harm, there’s not much evidence of a systematic effort to do that. Reported Bloomberg BNA’s Cheryl Bolen last week:
Initial guidance directed regulatory reform officers, beginning with their agencies’ fiscal 2019 performance plans, to report on their work, such as how many deregulatory actions were recommended. But a review of the performance plans of four of the most active regulators, such as the Environmental Protection Agency, shows that instead of numbers, charts are often filled in with “No Target Established” or “TBD.”
Instead, the focus of the Trump administration’s deregulatory agenda so far has been on overturning Obama-era regulations that were seen as harming certain industries, particularly those in the business of extracting things from the ground. These deregulatory moves have brought legal challenges. “For the projected long-run savings to materialize, agencies must present careful legal justifications of their decisions to modify or rescind existing rules,” GW Regulatory Studies Center Director Susan Dudley — who was OIRA administrator in the George W. Bush administration — wrote in Forbes in October. “Their track record to date is not encouraging.” In fact, it’s awful: The administration’s deregulatory won-loss record in the courts so far, according to the Institute for Policy Integrity at the New York University School of Law, is 2-29.
This apparent unpreparedness has introduced new uncertainties into the regulatory process, with even the seeming beneficiaries of some proposed changes — such as electric utilities in the case of pollution rules and automakers in the case of fuel-economy standards — pining for a less aggressive approach. Another concern expressed by Raso, a lawyer at the Securities and Exchange Commission who moonlights as a regulatory reform analyst (and seems quite good at it!), is that the Trump team’s many failures in court are establishing precedents that will make it harder for future administrations to deregulate.
Philip Wallach, a senior fellow at the center-right R Street Institute, still thinks the Trump administration will eventually succeed in repealing two major Obama-era environmental regulations, the Clean Power Plan and the Waters of the United States rule, and might get its way on fuel-economy standards. But he doubts it will make much progress on removing “the decades of regulatory build-up before then.” Why not? “My take is that there aren’t private actors with sufficient incentives to drive that kind of deregulation, because existing firms are already compliant and have already baked compliance into their business models,” he wrote in an email. Deregulation, in other words, may have less of a constituency than standing pat.
Plus two more that were adopted by the Consumer Financial Protection Bureau in 2017 while it was still headed by an Obama appointee.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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