Election Focus Squeezes Trump’s 2-for-1 Rule Order (Corrected)
President Donald Trump is set to deliver a speech Thursday at the White House about his administration’s success in rolling back regulations, a mainstay of his 2016 campaign platform, even as federal agencies this year are planning to issue twice as many expensive new rules as big cuts.
Trump will highlight the administration’s work to improve all Americans’ quality of life through deregulation, White House Deputy Press Secretary Judd Deere said. The Council of Economic Advisers estimates that people in the lowest income brackets would lose more than 15% of their disposable income if a future administration rolled back Trump’s deregulatory actions, he added.
Blasting Obama-era regulations was a winning issue for Trump during the 2016 campaign, and his efforts to revisit the topic in the run-up to the November elections could again pay political dividends, especially with business interests.
Rhetorically, Trump can say he’s decreased the federal government’s regulatory footprint in the aggregate, so long as the calculations include all regulatory moves both major and minor.
Over the last three years, under a formula created by Trump’s Office of Management and Budget, the administration has cut 7.4 rules for every significant regulation it has issued.
Yet the administration’s new regulatory playbook signals a reversal of this trend, if all rules planned for the remainder of the year are realized.
Looking only at the “economically significant” regulations in the playbook, which a 1993 executive order defined as measures ly to have an annual effect on the economy of $100 million or more, agencies this year plan to issue 50 big new rules while cutting just 24, according to an analysis by the George Washington University Regulatory Studies Center.
Trump’s election-year regulatory agenda features big new rules he can tout to conservative voters, as well as a few major rollbacks of labor and employment rules that are sure to appeal to businesses.
But any regulations or cuts issued this late in the president’s term also risk being overturned next year if Democrats in November win the White House and majority control of both chambers of Congress.
“The Trump administration is quickly learning that regulation can be an effective tool for waging the culture war,” said James Goodwin, senior policy analyst at the Center for Progressive Reform.
One of Trump’s biggest deregulatory moves this year could be a proposal the Labor Department plans to release that is expected to lay out a framework for determining when workers can be considered independent contractors rather than employees under the Fair Labor Standards Act.
Businesses have pushed for regulatory action that would draw a clear line between employees and independent contractors because the lack of legal clarity has exposed them to misclassification lawsuits seeking unpaid wages. While the administration has not tipped its hand, a business-friendly proposal would be met with pushback from unions and worker advocates.
“President Trump has made it a priority to eliminate harmful and unnecessary regulations to unleash the American economy,” Deere said. “The combination of the Trump tax cuts and deregulatory actions have laid an incredible foundation for our economic recovery from this pandemic that will benefit American workers across the country.”
The regulatory plan shows more stringent regulation of immigration continues to be a Trump priority.
The Department of Housing and Urban Development, for example, intends to finalize an economically significant regulation in November that would require verification of eligible immigration status for recipients of housing assistance.
The Department of Homeland Security is set to finalize fee increases for U.S.
Citizenship and Immigration Services, and eliminate a requirement that the agency respond to employment authorization applications submitted by asylum applicants within 30 days.
Parts of Trump’s June 22 order to suspend certain temporary work visa categories from entry into the U.S. also found their way into the regulatory agenda.
The White House is aiming to create a merit-based system for non-immigrant workers in specialty occupations, prioritizing visas for individuals who have been offered the highest wages, senior administration officials said on a call with reporters when the proclamation was released. The spring regulatory agenda also includes forthcoming proposals from DHS, to strengthen its H-1B visa classification program for high-skill occupations, and from DOL, to update its process for certifying foreign workers.
Regulatory changes to visa programs require a rational basis, however, and that is a high bar, said attorney Eileen Scofield, who specializes in corporate immigration law at Alston & Bird in Atlanta.
When it comes to certifying foreign workers, the process for employment-based green cards, known as EB-2 and EB-3 visas, generally requires employer sponsors to complete a labor certification, including a good-faith check of the domestic labor market, said Roger Tsai, an immigration partner for Holland & Hart in Denver.
But for H-1B visas, existing rules only require that “H-1B dependent employers” attest to efforts to hire U.S. workers. Companies are placed in that category if they already have a certain percentage of H-1B workers on their payroll. The vast majority of H-1B employers are not required to undertake a good-faith recruitment process, Tsai added.
Critics of the H-1B program say employers have too much leeway to hire foreign workers without ever having to consider the domestic labor market. Lawmakers have introduced proposals to close loopholes in the program, but a legislative overhaul has not been enacted into law.
Deregulation came easily in the administration’s early days, after Trump signed Executive Order 13771 in January 2017 requiring agencies to cut two existing rules for every new significant one issued. Now, the easy targets are gone and there’s a push to regulate not only immigration policies, but also other priorities food stamps and energy conservation.
“The two-for-one is the other way around now on issuing economically significant rules,” said Daniel Perez, senior policy analyst at the GW Regulatory Studies Center and author of the analysis that found the administration’s 2020 plan calls for an average of two new big-ticket regulatory actions for every one major deregulatory move.
At the end of fiscal 2017, the Trump administration said it had made 22 cuts for each significant new rule issued. That ratio declined over the years, and amounted to 4.3 cuts for each big rule issued in fiscal 2019.
The executive order’s terms were set so only a limited number of significant regulations count as a rule, while a vast array of actions, including minor revisions or paperwork reductions, can be considered a rule cut.
Thus the administration can say agencies are still on track to meet the 2-for-1 order this year. The spring agenda lists a total of 3,939 agency actions: 334 of which are classified as regulatory and 677 as deregulatory, with the remaining 2,928 listed as “other” or otherwise exempted from the order, the GW analysis said.
“President Trump continues to oversee the largest deregulation effort in modern history,” Russell Vought, acting director of the White House Office of Management and Budget, said when the agenda was released. OMB didn’t provide additional comment for this story.
The Trump administration clearly had a number of deregulatory actions in mind early in its first term and has completed many of those, according to a separate analysis of the administration’s agenda by Dan Bosch, director of regulatory policy at the conservative-leaning American Action Forum. The “low-hanging fruit” is now gone and additional candidates for cutting red tape are proving difficult to find, Bosch said.
“There is no denying, however, the rise of significant regulatory activity as the administration progresses,” he added.
Among those plans, the Agriculture Department is proposing four significant new rules for the Supplemental Nutrition Assistance Program, formerly known as food stamps. The rules would implement employment and training requirements for recipients, along with provisions for more frequent income reporting and measures to deter retailer fraud and improve data quality.
Also on the list of new economically significant rules, the Energy Department is considering potential changes to energy conservation standards for manufactured housing, residential gas furnaces, and commercial water heaters.
The Labor Department is the only federal agency planning to issue more economically significant deregulatory actions than big new rules, the GW analysis said.
DOL’s upcoming worker classification rule is a natural priority for the agency this year, especially with growing litigation over how to account for gig workers, said Michael Eastman, senior vice president for policy and assistant general counsel at the employer-focused Center for Workplace Compliance.
“Just because of what’s going on in the economy, this whole issue of who’s an employee and who’s an independent contractor is becoming more important every day,” Eastman said.
—With assistance from Ben Penn and Shaun Courtney.
The Measure And Mismeasure Of Rules
Measuring the growth of America’s regulatory burden over the past half century has been a notoriously difficult task, so it is not surprising that measuring a reduction in regulatory burdens is at least as challenging. Those of us who study regulation are often reduced to counting pages, numbers of regulations, regulatory restrictions or on-budget costs of regulating.
Those who market regulatory policy – whichever direction it is going – to the general public can’t afford to be so dull.
Flickr, public domain
President Obama, for example, describing EPA’s plan to start regulating the fuel economy of 18-wheelers, said that it would magically benefit consumers, trucking companies, and the environment. “So it’s not just a win-win, it’s a win-win-win. You’ve got three wins!”
The Federal Trade Commission has a word for this kind of salesmanship: Puffery. They warn consumers to be wary of it, but it is not illegal.
President Trump is certainly no stranger to puffery, and it was on full display last month when he took to the South Lawn of the White House to tout his regulatory reform efforts.
Behind him loomed 2 large pickup trucks, a blue one (facing left) loaded down with large weights, and a red one (facing right, in case the color symbolism was too subtle) over which a large crane labeled “Trump Administration” removed the weights.
He claimed that “no other administration has done anywhere near” as much as his to remove regulatory burdens.
He offered as evidence 1) his “revolutionary” mandate to remove two regulations for every new one introduced, 2) cost savings to American families, and 3) removal of regulation on the books.
The public should be alert to the puffery in these claims, but at the same time recognize that they do hold some truth.
Exceeded 2-for-1 Mandate
For example, it’s true that his requirement that for every new regulation, agencies must identify two regulations to eliminate is a significant change in practice, though calling it “revolutionary” may be an overstatement.
Academics and policy makers going back to Jimmy Carter have discussed the concept of a “regulatory budget,” and other countries, including the United Kingdom and Canada have implemented similar regulatory offset requirements.
Trump said his agencies have exceeded the 2-for-1 requirement and “permanently” removed eight regulations for every one introduced. Beware of the puffery in how these ratios are calculated.
When tallying up new rules, agencies are only required to count “significant” regulatory actions, but when counting regulations that are terminated, they can include all deregulatory actions, whether they are significant or not. So, the 8-to-1 ratio compares apples to oranges.
When comparing significant deregulatory actions to significant regulatory actions, the ratio is closer to 2.6-to-1; it is more than the 2-for-1 promise but not quite as dramatic.
There’s also puffery in calling all those deregulatory actions “permanent” since a) some of them merely extended compliance dates, b) others are being successfully contested in court, and c) a future president could reverse Trump’s actions, albeit slowly.
Savings for Americans
He claims “Our historic regulatory relief is providing the average American household an extra $3,100 every single year. And we’re going up from that number.
” It is true that Trump’s agencies have removed some regulations and chosen not to pursue others, so he can legitimately claim to have reduced regulatory costs below what they would have been had those regulations fully taken effect.
However, the $3,100 figure comes from a Council of Economic Advisors’ analysis that does not claim it as an immediate cost saving.
CEA estimates that “after 5 to 10 years, the [Trump administration’s] approach to Federal regulation will have raised real incomes by $3,100 per household per year by increasing choice, productivity, and competition.
” So, the administration’s economists are projecting an eventual $3,100 increase in incomes, not a $3,100 reduction in costs that’s already here.
The president’s assertion that his is “the most dramatic regulatory relief campaign in American history by far” ignores the economic deregulation of the 1970s and 1980s.
Presidents Carter and Reagan oversaw dramatic reductions in regulation of rail, trucking, energy and airlines. With support from congress and the courts, they succeeded in abolishing whole agencies that had outlived their usefulness.
Because they had bipartisan support and unleashed visible welfare-enhancing innovation, those actions have had lasting effects.
Removed more regulations than Obama added?
In his speech, the president said, “the previous administration added over 16,000 pages of heavy-handed regulations to the Federal Register,” while his administration removed 25,000 pages.
The Code of Federal Regulations (CFR), not the Federal Register, compiles the text of all the rules in effect; this claim about adding or removing pages only makes sense in that context of the stock of regulation.
The daily Federal Register publishes new regulatory & deregulatory actions, along with preambles, orders, and other federal notices. It is used as a proxy measure of the flow of new regulations, as opposed to the stock.
(Note that regulatory and deregulatory actions both add to the flow of pages in the Federal Register, whereas deregulatory actions are ly to subtract pages only in the CFR.)
During the Obama administration (2009-2016), the stock (measured by the CFR) did indeed grow by 16,616 pages, as the speech suggested. But during the first 3 Trump years (2016-2019), the CFR stock declined by only 2,225 pages, not 25,000.
Trump’s figures seem to come from comparing the difference in Federal Register pages in the last year of the Obama administration with the last year of the George W.
Bush administration and with 2019 but taking the difference between those snapshots of the flow of regulation in 2 years tells us nothing about the change in the stock of regulation.
It doesn’t even tell us much about the change in the flow of regulation over the two time periods.
A more truthful (and meaningful) claim would compare the 16,616 CFR pages added under Obama to the 2,225 CFR pages subtracted under Trump.
Another truthful claim would be that the Trump administration has pursued new regulations at a slower pace than predecessors, which arguably has given small businesses more confidence to invest, hire, and grow. Those statistics don’t sound as dramatic, though.
As the elections approach, we should expect to see more puffery regarding the candidates’ promises and records. Let the buyer beware.