Let’s Be Real About Trump’s First Year in Regulation

Ask nearly anyone to name President Donald J. Trump’s most significant domestic policy accomplishments. They will likely cite tax legislation and regulatory reform. The first of these was indeed a big policy, one that shifts tax brackets, changes and cuts deductions, and adds an estimated $1.5 trillion to the national deficit over the next ten years. The second of these is, well, not so much. To hear President Trump talk, though, you would think the nation’s rule book has been put on a crash diet. At a White House press event in December, President Trump stood between two piles of papers on the floor: one towering stack supposedly represented regulation today; another tiny stack signified the level of regulation in 1960. He declared that “we’re getting back below the 1960-level, and we’ll be there fairly quickly.” Just last week in Davos, President Trump also bragged that his Administration has “undertaken the most extensively regulatory reduction ever conceived” and that “we have cut 22 burdensome regulations for every one new rule.” He said his reforms have served to “unleash jobs and growth.” Without a doubt, the President has succeeded in convincing others that his Administration has lifted many regulatory burdens. In an editorial entitled “The Great Rules Rollback,” the Wall Street Journal opined that, even taking the tax legislation into account, “perhaps the most significant change brought by the first year of the Trump Presidency has been … reining in and rolling back the regulatory state.” To read the prolific legal scholar, Richard Epstein, writing recently in Newsweek, the job market has been “booming” this past year “and much of the credit goes to the Trump administration and, specifically, Neomi Rao, the head of the Office of Information and Regulatory Affairs, who has taken the lead in chopping through the regulatory morass that for too long has strangled labor markets.” But how much change has the Trump Administration’s regulatory initiative really achieved? In terms of the economy, if the Administration’s regulatory agenda has been responsible for recent trends, then let us take a closer look at the data. Business investment did rise in 2017, but that growth has yet to reach levels seen during 2014 and 2015. For workers, their hourly wages have hardly changed at all. And as much as President Trump wants to proclaim that “we’re scrapping and … getting rid of the job-killing regulations,” the number of new jobs added to the economy was lower in 2017 than in any of the previous six years. These results actually should not be all that surprising. Regulation’s impact on macroeconomic forces is much less clear than the political rhetoric makes it seem. Empirical studies on regulation and employment generally show at most modest effects. But even if rolling back regulations could drive economic growth and reduce unemployment, far fewer regulatory obligations have been lifted during the past year than most people assume or have been led to believe. In 2017, federal regulatory agencies issued 3,222 new rule documents, according to the Office of Federal Register. That is only slightly below the 3,449 that issued during the first year of the Obama Administration. Even the size of the federal government’s regulatory agenda, which tracks overall ongoing rulemaking work, has remained roughly the same as in 2016. The Trump Administration’s main impact on regulation can be seen in the pipeline for new “significant” rules. This designation generally applies to regulations that rise above a threshold of economic significance—an impact of $100 million per year— although other rules presenting major budgetary implications or potential controversy can be treated as significant too. The White House Office of Information and Regulatory Affairs (OIRA) reviews all significant rules—and it subjects the economically significant ones to careful benefit-cost scrutiny. During the first years of George W. Bush’s and Barack Obama’s Administrations, OIRA reviewed a little over 200 significant rules nearing completion (218 and 225 rules, respectively). By contrast, President Trump’s OIRA reviewed only 73 rules at that same final stage. According to a statement OIRA released this past December, executive branch agencies in the Trump Administration eventually finalized only three economically significant rules through the end of the 2017 fiscal year. This slowdown in the development of new economically significant rules is real, but it does nothing to lessen industry’s existing regulatory burdens. It does not, in other words, constitute any “rollback,” “scrapping,” or “reduction” in the voluminous Code of Federal Regulations sitting on library shelves today—nor does it lessen that code’s associated costs to business. The President says that “for every one new regulation we have eliminated 22 — 22 — that’s a big difference.” This 22-to-1 ratio is based on an OIRA report indicating that the Trump Administration undertook 67 “deregulatory actions” during the same time period that it issued three new economically significant rules. But are these 67 deregulatory actions also economically significant—or “burdensome,” as the President put it—so that a ratio might provide some meaningful information? Most of them are not. By way of reference, the fall 2017 release of the federal regulatory agenda provides data on a roughly overlapping, comparable group of deregulatory actions completed since the previous data release. Only 8 percent of these actions were economically significant. Another 27 percent were deemed significant enough to warrant OIRA review, but not due to economic impacts exceeding the $100 million mark. Notably, two-thirds were classified as non-significant, administrative, or routine. This is so for many of the 67 deregulatory actions on OIRA’s list. One of these actions by the National Highway Traffic Safety Administration, for example, came along with the clear statement that it “will have no significant effect on the national economy.” In another example, the U.S. Department of Agriculture (USDA) in 2017 lifted an import restriction on pitahaya fruit from Ecuador, a deregulatory action that it “determined to be not significant.” Even in the unlikely event that lifting the import ban would lead all the Ecuadoran pitahaya exports to send their produce to the United States, those exports only amount to 1.4 percent of the total domestic production of pitahaya fruit here in the United States, according to USDA. Moreover, at the same time that the USDA lifted its import ban on pitahaya fruit, it imposed a regulatory regimen on production sites, calling for work plans, inspections, and various pest management techniques. This illustrates how even actions classified as “deregulatory” can still be accompanied by new requirements. Although by law an agency must go through the process of issuing a new deregulatory “rule” to repeal or modify an existing “regulatory” rule, 10 of the 67 deregulatory actions on OIRA’s list appear not even to be rules in the technical sense, as indicated by their lack of a regulatory identification number which agencies use when they use the rulemaking process. According to a review issued by the George Washington University Regulatory Studies Center, other examples from OIRA’s list of 67 “deregulatory actions are extensions or delays of compliance dates, or withdrawals of proposed rules for which society has not yet borne any costs.” A Bloomberg report noted that, much like with the pitahaya fruit example, other purported deregulatory actions on OIRA’s list “strain the definition of lessening the burden of regulation or were relatively inconsequential.” That report also indicated that, as was also true of the pitahaya fruit import repeal, “almost a third” of the listed deregulatory actions “actually were begun under earlier presidents,” such as President Obama. One could say that the Trump Administration’s 22-to-1 claim is tantamount to an apples-to-oranges comparison. But maybe it is not too much of an exaggeration to say that Administration officials are removing 22 Peter Rabbit books from the regulators’ shelves for every one War and Peace they add. To be fair, some of the 67 deregulatory actions are, as noted, economically significant. Moreover, OIRA’s list does not include every instance of an existing rule being repealed during the past year. For example, out of the 15 rules that Congress repealed using the Congressional Review Act (CRA) during 2017, only seven made OIRA’s list of 67. Of those not on the list, three rules had been issued by independent agencies that do not fall under OIRA’s purview, while four involved executive agency rules deemed not economically significant. However they are counted, the rules repealed under the CRA had only recently been adopted—almost all of them at the very end of the Obama Administration—and some had yet officially to take legal effect before they were repealed. Although these repeals have consequences, it is difficult to see how repealing these rules did anything to lift existing burdens from industry—especially when some of these rules were not even economically significant. An agency that falls outside of OIRA’s regulatory purview—the Federal Communications Commission (FCC)—issued the most salient regulatory rollback of President Trump’s first year: the repeal of the Obama-era “open internet” or “net neutrality” rule. That repeal did not make OIRA’s “67 list.” But even if it had, it is reasonable to wonder whether any meaningful economic effects from this very recent action could have yet occurred. Although the repeal vote took place late last year, the FCC only released its official order in early January 2018—an order that has yet even to be published in the Federal Register. Moreover, the repeal order is now being challenged in court, and some states are taking steps to promote net neutrality. Although the FCC has trumpeted its repeal as a step toward “restoring Internet freedom,” liberty has apparently yet to be fully refurbished. Finally, what are we to make of the President’s claim that, “within our first 11 months, we cancelled or delayed over 1,500 planned regulatory actions — more than any previous President by far”? Here the President is not referring to existing rules that have been rolled back, but rather to potential future rules that agencies have announced publicly, in a government-wide regulatory agenda, that they are in the process of developing. OIRA has elaborated that, of the potential rules affected, 635 were withdrawn outright, while 244 were reclassified as “inactive” and 700 were added to a “long term” action list. This sounds substantial—perhaps even unprecedented. But the removal of planned regulations from the government’s unified regulatory agenda is actually nothing new. It happens to varying degrees in the wake of every presidential transition, and sometimes even when Congress changes party control. For example, in her empirical study of rulemaking “transitions,” scholar Anne Joseph O’Connell reports that, in 1995, under President Clinton, agencies withdrew around 700 planned rules from the agenda. Later, in 2002, under President Bush, over 500 were withdrawn. In the last regulatory agenda to be released during the Obama Administration, federal agencies listed 3,319 distinct regulatory efforts underway at all stages of development. One would be forgiven for thinking that the Trump Administration must have cut this list in half. But the Administration’s data from its most recent release in the fall of 2017 shows 3,209 distinct efforts at various stages. The Trump Administration will, of course, point to about 540 of these listed efforts (or 17 percent) as being deregulatory in nature–a number that also can be gleaned from the fall 2017 data release. Of course, the bulk of these deregulatory actions are also classified as non-significant. And just as with pitahaya fruit imports, not all of these deregulatory efforts will eliminate regulation entirely. We also must be careful about making comparisons. Yes, 17 percent of the Trump Administration’s current agenda has been classified as deregulatory, but it appears that no previous administration ever made a distinction in the agenda between regulatory and deregulatory actions. Yet we do know that every other administration in modern times has engaged in considerable deregulatory efforts—even the Obama Administration. Perhaps some of President Trump’s supporters will find these facts surprising. But they are consistent with the reality of rulemaking. In a single year the regulatory rule book simply cannot be changed dramatically enough to make a palpable dent in the obligations imposed on industry. Even after another year, we may still not see dramatic overall change toward moving the nation’s rule book closer to the size it was in 1960, especially as the Administration’s most significant deregulatory moves will surely prompt litigation, which in turn may only further delay any meaningful reduction in existing regulatory obligations