Regulatory Improvements to Ensure Process Certainty: Ten Impactful Ideas

Executive Summary

The American Council for Capital Formation’s Center for Policy Research (ACCF-CPR) has for decades been involved with improving the regulatory process. To foster a continued bipartisan dialogue on regulatory issues, ACCF-CPR has convened numerous discussions on improving the framework for developing solutions that result in more efficacious regulations while protecting the health, welfare, environment, and economic stability of the public. This paper is a result of a November 16, 2016 bipartisan roundtable discussion identifying ten specific issues and beginning the dialogue on finding solutions.

    1. Increase Public Transparency: An open and transparent regulatory process requires early participation by the public. However, many times the public learns of a proposed regulation after a policy decision has been set, and sometimes after it has already become finalized. Later public input is not as effective because once an administrative decision to regulate is made, the process starts moving in that direction, and the sheer inertia of that process often makes it difficult to alter course and near impossible to stop. One bipartisan idea is to require agencies to use advanced notices of proposed rulemaking (ANPRM) in all “economically significant” rules. This added requirement would not unnecessarily delay agency action when one looks at the whole process. Having input earlier in the process helps agencies determine the best course of action, adds uniformity to the process, and could reduce the likelihood of legal challenge to the final rule.
    2. Clarify Guidance Documents: Guidance documents are “interpretive rules” and “general statements of policy” of agencies to assist in administering their responsibilities and inform the public. However, unlike a regulation that must go through the “notice and comment” process, guidance documents are issued at the discretion of the individual agency, and yet some still have the same effect as a regulation because of the inferred discretion given to agencies by Congress and upheld in the courts. If guidance documents are going to be enforceable on the regulated community and public, Congress should require that they go through the same notice and comment period as are required of regulations.
    3. Ensure a Rigorous and Consistent Cost-Benefit Analysis: Cost-benefit analysis is a vital tool in a regulatory analysis to objectively evaluate the costs and benefits of an agency action. Opponents of its use claim it does not adequately account for intangibles, such as societal welfare. In response, more factors were included in the analysis, though that led to concerns that certain factors carried either too much or too little weight, depending on the policy positions of the administration. Some of the concerns were addressed when the Office of Management and Budget (OMB) issued a guidance, which clarified and assisted agencies in conducting a cost-benefit analysis and required agencies to: 1) explain the “need” for the rule; 2) evaluate the alternatives, including no action; and 3) analyze the costs and benefits. To ensure consistency, Congress should consider codifying and expanding OMB guidance, so that all agencies are held accountable not only for their actions, but also for their analysis. Congress should also mandate that regulators contemplate whether the proposed agency action will “do more good than harm.” If the answer is in the affirmative, then the process should move forward; if it’s in the negative, then the process should be put on hold until a better approach is developed. Allowing judicial review of the analysis would also bring additional accountability to the process.
    4. Expand Retrospective Review of Ineffective Regulations: The regulatory system has accumulated thousands of regulations and guidance documents over the years and has often been referred to as the “fourth branch of government.” The problem with “regulatory accumulation” is that the layering of multiple, seemingly unrelated, regulations on top of each other can harm the economy. There are several ways to address regulatory accumulation. One such way is for Congress to require retrospective review of all significant rules, with the assistance of OMB, which would coincide with previous executive orders that instructed agencies to retrospectively review their regulations for applicability of purpose. Another option would be to establish a congressionally sanctioned bipartisan review committee that would review old regulations periodically and submit their findings to Congress for action. A more recent option is the executive order that requires agencies to remove the economic equivalent of two regulations for every new one that is finalized.
    5. Require Congressional Approval for “High-Impact” Rules: Congress has for years been contemplating ways to be more involved in the promulgation of economically significant regulations. The Congressional Review Act was a previous attempt at this, though its practice is limited to a particular political scenario. Congress is considering requiring overt approval before certain “high impact” rules are finalized. While some claim that Congress is too political and not objective enough to make such significant decisions, others argue that elected officials are exactly who should be making such decisions. Another argument against Congress getting involved at this level is that they lack the technical capacity to make such informed decisions. However, Congress certainly could put together a commission of some type that could handle the detailed analysis involved. In addition, if congressional involvement were limited to “high impact” rules, the number of rules evaluated would be substantially less than the total number of rules promulgated each year. While there may be some constitutional questions as to its use, requiring Congress and the President to agree on these types of rules before they are finalized is worthy of discussion.
    6. Improve Oversight of the Agencies: Congress has the constitutional authority to both create laws and conduct oversight of their implementation. The goal of the oversight process is to weed out waste, abuse, and fraud and subsequently make legislative modifications where necessary to further the intent of Congress. Congress has numerous tools to conduct a robust oversight agenda, though the effectiveness of some has been reduced. Congress should work in a bipartisan manner with the administration to clarify, advise, and support their efforts to administer the law. The executive branch also has a major role in oversight. Through a fully funded and staffed Office of Information and Regulatory Affairs (OIRA) within OMB, the administration should expand the centralized review of all significant regulations proposed. Having an expanded centralized process would result in better collaboration between various agencies and increase efficiencies in the process.
    7. Define the Courts’ Role for Judicial Review: The balance between congressional intent and the faithful execution of statutes has been at times contentious. However, the arbiter of that balance has historically been the judiciary. Congress passed the Administrative Procedure Act (APA) in 1946 to bring uniformity to the regulatory process, and establish guidelines for an expanding regulatory state at the time. The APA explicitly made clear Congress’ intent to confer to the courts judicial review of agency action. Historically, the courts looked at all the circumstances surrounding a case, including justification for an agency action. This was typically the process until the seminal 1984 Chevron case. There the Supreme Court attempted to simplify the process by creating a two-part test. The test was that: 1) if the text of the statute is clear, it must be followed; 2) if, however, it is unclear deference is given to agency action over other factors. Critics have claimed that, as a result of Chevron, the courts have delegated their constitutional role in determining what that law is to the agencies.  Recent Supreme Court decisions have created “exceptions” to Chevron, and may be a sign that the court is reasserting its authority to determine what the law is. The appointment of Supreme Court Justice Neil Gorsuch, a known critic of the Chevron decision, may well lead the Supreme Court to reevaluate its role in judicial review. However, Congress should also contemplate instructing the courts to dispense with Chevron deference and return to an analysis that looks at all relevant factors before determining what that law means.
    8. Enforce Statutes and Hold Agencies Accountable: One of the main deficiencies in the regulatory process has been a lack of a meaningful enforcement mechanism with which to ensure congressional intent. While most of these problems could be addressed through executive action, many times Congress, an administration, and the courts do not agree on the implementation of certain statutes. The Regulatory Flexibility Act was enacted as a safeguard for small businesses before an agency finalized a rule. Unfortunately, agencies only evaluate direct impacts on small business and at times disregard indirect impacts. Moreover, the courts have deferred to agencies’ interpretation of the law to the detriment of small business. As a result, Congress should require agencies to calculate indirect impacts. The Information Quality Act was enacted, and later clarified through OMB guidance documents, to ensure “quality, objectivity, utility, and integrity” in the information that agencies used in promulgating regulations. Agencies should have to show how they arrived at a certain conclusion based on the information used. To hold agencies accountable for the information they use, one idea is to create a private right of action. Another is to require that agencies use diverse advisory panels with independent peer reviewers.  The Unfunded Mandates Reform Act was a congressional response to a growing concern that an increasing amount of legislation mandated action, but did not provide the requisite funding for its implementation to the states, local municipalities, and the private sector. While the law affords some enforcement mechanisms with regard to pending legislation that would prevent its passage, no such protection is afforded to pending regulations. Congress must determine whether this law is being properly implemented as intended and, if not, it should re-evaluate whether judicial review should apply to the substantive aspects of the requirements.
    9. Consolidate and Expedite the Permit and Approval Process: There is bipartisan agreement that there are lengthy delays in the permitting process. These delays have unnecessarily increased costs to many infrastructure and building projects. President Obama and Congress attempted to address the problem with Title 41 (Federal Permitting Improvement) of the FAST Act of 2015. However, since its passage, there are still concerns that delays in the process are unnecessarily impeding projects. President Trump issued Executive Order 13766 in an attempt to address these delays by putting time limits on environmental reviews, and mandating a “one federal decision policy,” to facilitate better coordination between the federal agencies. Under this policy, a lead agency will prioritize making permit decisions in 90 days, and be given a two-year window to process all environmental reviews. Congress also has a vital role in clarifying existing legislation; enacting new legislation to expedite the process where necessary; and, when warranted, grant waivers to certain statutory requirements for permit approval.
    10. Extend Presidential Regulatory Oversight to Independent Agencies: Congress created independent agencies with certain protections from political or executive branch influence. However, oversight of these agencies is still a necessary function of government. The APA affords some protection from abuses of discretion by the agencies as it applies to all agencies. However, independent agencies have been excluded under recent executive orders, which in many cases gives guidance on best practices and adds certainty to the regulatory process. While Congress has some oversight options, including requiring reports and appearance of agency heads before the appropriate committee, this limited oversight is considered by some to be lacking. To conduct effective oversight, independent agencies should be required to justify and be held accountable for their regulations. While it may not be appropriate for all executive orders to apply to independent agencies, there are certainly some that should be to ensure certainty in the process. Congress should evaluate relevant executive orders and OMB guidance documents that have best practices and contemplate their applicability to independent agencies.