The First Step: Let’s Kill All the Regulations

Romney’s strongest reform proposals would dramatically change regulation in the U.S.

Governor Mitt Romney shares his vision for America’s economic future in Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth. He devotes sixteen of this plan’s 160 pages to a chapter on regulatory reform. Were the proposals within these sixteen pages ever implemented, they would end the regulatory state as we know it.

A basic theme of Romney’s chapter on regulation is that regulatory costs amount to a hidden—but extraordinarily high—tax. To control this tax, Romney’s proposals include getting rid of Obamacare and Dodd-Frank; eliminating regulations “promulgated in pursuit of the Obama administration’s costly and ineffective anti-carbon agenda”; ordering “all federal agencies to initiate repeal of any regulations issued by the Obama administration that unduly burden the economy or job creation”; and more tort reform.

These proposals range from potentially significant to earthshaking, and they raise many legal and policy concerns. Still, they might be regarded as small potatoes compared with two proposals calling for genuinely systemic reform of the operation of the administrative state. If elected, Romney promises:

To impose a “regulatory cap” under which “the rate at which agencies could impose new regulations would be capped at zero. What this means is that if an agency wishes or is required by law to issue a new regulation, it must go through a budget-like process and identify offsetting cost reductions from the existing regulatory burden”; and

To require congressional approval of all “major” rules with an economic impact of more than $100 million. If Congress does not pass legislation to this effect, an agency seeking to promulgate a major rule would be required by a Romney executive order to “invite Congress to vote up or down” on the rule and would be forbidden from putting the rule into effect absent affirmative congressional approval.

The anti-regulatory politics behind these two proposals are rather obvious, but so is their illegality, absent congressional authorization.

Romney’s regulatory cap proposal flows naturally from two ideas: first, that regulatory costs are a kind of tax, and second, that taxes must not go higher. Yet this proposal makes no effort at all to account for the benefits that regulations create. By definition, an agency would help society as a whole by promulgating a new regulation that would create more benefits than costs—regardless of whether the agency could find an old regulation to repeal to “pay” for the new one. One potential response to this point is that it ignores distributive consequences—the benefits of a regulation will likely be borne by one set of parties while the costs are incurred by another set. Regardless of what one might think of this objection, the Romney proposal undermines it by allowing an agency to pay for the costs that a new regulation imposes on one group by repealing old regulations that may have imposed costs on an entirely different group.

The basic legal problem with the regulatory cap is that it imposes a draconian limit on agency rulemaking discretion that Congress has not authorized. To use the administrative law lingo, agencies promulgate legislative rules based on reasoned consideration of the “relevant factors,” which are policy considerations gleaned from agency enabling acts. As a practical matter, the executive branch cannot instantly and cheaply promulgate every rule that might be worth creating, and courts have therefore been careful to emphasize that judicial review of refusals to regulate should be highly deferential. It is up to agencies, not the courts, to weigh the relevant factors and prioritize the use of limited resources. As the Supreme Court stressed in Massachusetts v. EPA, however, an agency’s reasons for refusing to regulate “must conform to the authorizing statute.” In other words, a refusal should have some basis in congressional policy goals. Agency enabling acts do not require agencies to spend the time and resources needed to repeal old, “bad” regulations before promulgating new ones—particularly new ones that we may urgently need to protect public health and safety. A president cannot by fiat impose such an extreme limit on agency discretion—it is simply too far from the policy goals that Congress has embedded in law.

Romney’s idea that Congress should affirmatively approve all major regulations takes its inspiration from the Regulations from the Executive in Need of Scrutiny (REINS) Act, which passed the House by a 241-184 vote in late 2011. The Congressional Review Act (CRA), passed in 1996, provides that major rules cannot go into effect until Congress has had a chance to use streamlined procedures to consider and enact a joint resolution of disapproval, which must undergo presentment to the President to take effect. One can think of the REINS Act as the CRA on steroids insofar as the former provides that a major rule may not take effect until Congress affirmatively approves of it. It shifts the burden of the difficult passage through Congress onto the forces favoring a rule.

To anyone who thinks that the modern administrative state accomplishes vital work, the prospect of the REINS Act becoming law should be terrifying. And there is a non-trivial chance that the REINS Act could become law in 2013. A Romney win would likely go hand-in-hand with Republican majorities in both chambers of Congress—and filibuster reform is in the air.

Even if the REINS Act or a close cousin does not become law, Romney has promised to impose something like it by executive order—forcing agencies to win express congressional approval for any major rule. It is hard to resist the speculation that this executive order will never be issued if the Democrats retain control of the Senate or at least retain the power to block legislation via filibuster.

In any event, such an executive order would suffer from the same basic legal flaw as the regulatory cap. When Congress passed various agency enabling acts, it did not condition the exercise of agency rulemaking authority on full-blown, affirmative approval by both houses of some future Congress. The President cannot impose this major new limitation on agency discretion without fundamentally rewriting an agency’s enabling act, which he cannot do.

It is difficult to know how much of the regulatory agenda in Believe in America one should take seriously. We live in a polity in which two major parties compete for power in a system with, one could argue, too many veto points. This system encourages the parties to push for extreme positions to avoid “negotiating with themselves.” It also reduces any sense of accountability for such positions because the veto points generally keep them from becoming law.

It is just possible, however, that, like the dog that caught the car, Romney may find himself, with the help of a Republican Congress, implementing a regulatory cap and subjecting regulations to something like the REINS Act. The bright side of such an experiment might be that it would enable the American people to learn whether government regulation is, in fact, important.