During a White House meeting with business leaders on Monday, President Donald Trump pledged to slash regulations by at least 75 percent.
Activists were positively apoplectic, of course, and media ridicule was swift. But exaggerated as the comment was, the larger point is incontrovertible: The unparalleled expansion of the administrative state is crushing America’s entrepreneurial spirit, productivity, and economic growth.
Monday was not the first time Trump stressed the need to reduce “out of control” regulation. As a candidate, he repeatedly vowed to cut regulation “massively” and “remove the anchor dragging us down.”
And he’s right about that anchor; the need for regulatory reform has never been greater. There is virtually no aspect of our lives over which laws and ordinances do not reign. Congress and federal bureaucrats routinely ignore regulatory costs, exaggerate benefits, and breach legislative and constitutional boundaries.
Independent estimates peg the cost of regulation at more than $2 trillion annually—more than is collected in income taxes each year. In the past eight years alone, the Obama administration issued more than 22,700 rules, which increased annual regulatory costs by more than $120 billion. (And that’s a lowball estimate.)
Combined with the regulatory burdens imposed during the administration of George W. Bush, the annual cost of red tape has increased by at least $200 billion in the past 15 years.
But the problem is not just the number and cost of regulation. It is also the approach.
Conventional wisdom has long held that government controls of industry are the best and only way to protect the public. We now know better. Forty years of command-and-control regimes have led to massive, ineffective, and unaccountable bureaucracies.
Based on fiscal year 2017 budget figures, administering red tape will cost taxpayers nearly $70 billion, an increase of 97 percent since 2000. A big part of the increase is the wages paid to regulators—who now number an all-time high of 279,000.
The bigger the federal government has grown, the more essential political influence has become, leading to corruption in the regulatory realm. All of this has weakened property rights, inhibited innovation, and increased the prices of food, fuel, fiber, and minerals.
States and the private sector can and should play a far greater role. It isn’t necessary—or wise—to allow Washington to control everything. States are better equipped to customize policies for local conditions, and land owners have greater incentives than the government to protect private property. Both groups can act regionally when there are cross-border components to regulatory issues.
A less centralized regime would also mean more direct accountability—taxpayers would have an easier time identifying the officials responsible for environmental policies, and the people making those regulatory decisions would have to live with the consequences. Property owners would be held accountable through common law.
Trump will need all of the means available to him to countermand the injurious policies inflicted on the nation by the Obama administration (with help from Congress) during the past eight years.
For purposes of steering regulatory policy, the president’s authority to appoint the heads of executive branch agencies (under the Appointments Clause of the Constitution) is among the most effective. The president also wields budgetary influence over regulatory agencies, and proposed funding should emphasize regulatory reform over the status quo.
Executive orders represent a direct means by which the president establishes his or her policies (although the president cannot override statutory directives to agencies unless the law expressly grants that power). We hope Trump will waste no time rescinding the numerous orders issued by Obama to sidestep Congress, on labor, immigration, and environmental issues, in particular.
The Trump administration also would do well to review all pending litigation and designate cases for settlement, including challenges to former President Barack Obama’s untenable Clean Power Plan; his radical transgender bathroom directive; and the Environmental Protection Agency’s egregious waters of the U.S. rule, which affects property rights
The ultimate White House influence on rule-making may well be the regulatory review process administered by the Office of Management and Budget.
Specifically, the Office of Management and Budget’s Office of Information and Regulatory Affairs is responsible for reviewing proposed and final regulations; managing agency requests for information collection; and overseeing data quality government-wide. That is real power in an era of regulatory overload.
The Trump administration should replace the existing regime by imposing stricter standards for review, expanding the scope of review, and increasing transparency of the review process.
The end of the Obama administration—perhaps the most regulatory administration in history—greatly improves the outlook for regulatory reform. It matters little whether Trump errs in his rhetoric as long as his actions reshape regulation for the 21st century.
