The Nickel Report

This week President Donald Trump issued an executive order (EO) making good on vows to reduce regulations coming out of Washington. The Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs sets two objectives — first, to eliminate two old regulations for every new one promulgated and, second, to impose a cap on the economic costs of regulations each year.

The main headline stemming from this EO is “one-in, two-out.” Agencies must identify two regulations to repeal for every one promulgated. Depending on how it is implemented, this could be one of the most significant changes ever to the trajectory and scope of Washington’s involvement in Americans’ lives. However, there are some keys to note about this provision. Agencies are required to “identify” two regulations to be repealed, but they are not explicitly directed to repeal them. Second, in conjunction with the director of the Office of Management and Budget (OMB), agencies will have to determine what constitutes a “regulation.” Federal rulemaking can include dozens of pages and hundreds of specific requirements. Does the entire package constitute one regulation, or is each provision a separate regulation, or could the answer be somewhere in between? One small provision in a large rulemaking could impose millions in costs.

This is where the second prong of the EO becomes important. This prong requires an annual budget for how much regulations can cost the economy. For the 2017 fiscal year, the regulatory cost budget is zero. Therefore, in order for any agency to promulgate a new regulation that has incremental costs associated with it, it must offset those costs by repealing regulations of equal or greater cost. The regulatory budget for future years will be set by the director of the OMB, and could be a negative figure, thus requiring an overall reduction in total regulatory costs. Future budgets will also be set by agency, meaning that each agency will have to live within its own budget, with some potentially allowed to grow incremental costs of regulation and others required to cut incremental costs.

Note that there may be exceptions to the above provisions. For example, the EO specifies that “No regulations exceeding the agency’s total incremental cost allowance will be permitted in that fiscal year, unless required by law or approved in writing by the [OMB] Director.” [Emphasis added]. Several other parts of the rule provide for exceptions where federal law would limit its operation.

The OMB director is required to issue guidance on how to further implement the EO. The guidance will explore many key issues, including whether an agency can offset costs of new regulation with repeal of old regulations from a different agency. President Trump’s pick to lead the OMB, Rep. Mick Mulvaney, awaits Senate confirmation.