Trump White House Seeks New Power Over Agencies

(Bloomberg Opinion) -- One of the great unresolved questions in American law is whether the president can control the decisions of the “independent” agencies, like the Securities and Exchange Commission, the Federal Reserve Board and the Federal Trade Commission.

The Donald Trump administration has just moved in the direction of saying that the answer is yes.

The background was set in 1981, when President Ronald Reagan established the current system, by which the Office of Information and Regulatory Affairs is authorized to review -- and to veto -- the most important federal regulations before they are issued. Reagan decided to allow OIRA to check the rule-making of “executive” agencies, including the Cabinet departments, such as the Environmental Protection Agency, the Department of Transportation and the Department of Health and Human Services.

One of Reagan’s central goals was to increase the role of cost-benefit analysis. He specifically directed OIRA to ensure that agencies proceed only if the benefits of their regulations justify their costs.

Reagan also wanted to increase the White House’s authority over federal regulations. The administrator of OIRA is a presidential appointee, confirmed by the Senate, and the administrator’s office is right across the street from the president’s own. (Within the federal government: Location, location, location.)

What about the independent agencies?

Reagan’s Justice Department advised him that he had the legal authority to require them to submit to the OIRA process. Many people wanted him to exercise that authority, believing that it would improve regulations that have a large impact. Reagan declined on the ground that he did not want a legal or political fight.

Since that time, both Republican and Democratic presidents, including Barack Obama, have thought seriously about whether to assert authority over the independent agencies. But they, too, have declined, partly because the legal issue isn’t simple.

The laws establishing the independent agencies generally allow the president to discharge their members for “inefficiency, neglect of duty, or malfeasance in office.” It’s not clear that those words allow the president to control the agencies’ policy choices. It’s also disputed whether the Constitution – which vests executive power “in a president of the United States” – allows Congress to immunize those policy decisions from the president’s control.

Last week, the Trump administration sidestepped the big questions. Instead it focused on a relatively obscure and pretty technical law, known and loved only by insiders: the Congressional Review Act. 

That law says that before “major” rules can take effect, all agencies must submit them to both houses of Congress, along with a complete copy of the cost-benefit analysis of the rule, if any.” The reason is to allow Congress to review such rules, and to overturn them if it sees fit. (It hardly ever does that, but still.)

A major rule is defined as one that OIRA determines (1) to have an economic effect of $100 million or more; (2) to produce a major increase in costs or prices; or (3) “to have significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete.”

Under the Congressional Review Act, OIRA gets to decide whether a rule is major. Until last week, there was no formal or routine process by which independent agencies were required to submit their rules to the office so as to allow it to make that determination. Now that’s going to change.

That is not all that is going to change. In the new guidance document from the Office of Management and Budget, independent agencies are required to give OIRA advance notice of coming rules, along with an “analysis” that is “sufficient to allow OIRA to determine whether the rule is major.” Importantly, the new guidance document requires independent agencies to comply with longstanding executive-branch principles for producing “regulatory impact analysis,” which is essentially a cost-benefit analysis.

The new guidance also makes it clear that the Trump administration understands the Congressional Review Act to apply not only to formal regulations, but also to “guidance documents, general statements of policy, and interpretive rules.” Every year, independent agencies issue a lot of those.

How big a deal is all this?

OIRA’s role might well turn out to be modest. Under the Congressional Review Act, its only power is to decide whether rules from independent agencies are “major,” so that they have to be submitted to both houses of Congress. The new guidance creates a process to enable OIRA to do what the law requires.

Sure, there might be some significant delays. But if the only question is whether rules have to be submitted, the office won’t have any control over the policy judgments of independent agencies.

There is another possibility. OIRA might dispute the agencies’ analysis of costs and benefits – and conclude, for example, that the costs of a rule are much higher than an agency says, or that the benefits are much lower. OIRA might insist: Unless your analysis makes sense (by our lights), we’re not going to let your regulation get out the door.

That would not quite count as a revolution. But, for better or for worse, it would count as a major increase in OIRA’s authority – and potentially the authority of the White House as well.

Disclosure: I was the administrator of OIRA from 2009 to 2012.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “The Cost-Benefit Revolution” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”

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