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Article Article June 5th, 2017

Federal focus: regulating the regulations

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Regulation is where a US administration can make a real difference, says @SusanEDudley

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President Trump is far from the first president to target regulations, says @SusanEDudley

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Looking back on existing regulations to understand their costs and benefits is vital

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Let's face it, it's no exaggeration to say that the vast majority of Americans will never have heard of the Office of Information and Regulation Affairs (OIRA). I'm not even sure the majority of the federal workforce will be aware of it - and I'm speaking as a former OIRA employee of several years.

But what OIRA lacks in name recognition, it more than makes up for in influence and importance - both inside and outside of government. OIRA, you see, is responsible for reviewing and coordinating most of the significant regulations coming out of the federal government. It also oversees the collection of information, to ensure that citizens aren't inundated with requests to fill out forms from multiple agencies time and time again.

Susan Dudley, who served as OIRA's administrator under President George W. Bush, says that irrespective of its low profile, OIRA is actually where the action is. "The folks in the west wing of the White House tend to learn early on that regulation is where their administration can make a difference," she says. "You can struggle with getting Congress to pass legislation, but regulations are something the president can start putting his imprint on right away."

A hot button issue

Regulations are often fertile territory for political candidates. They are framed around jobs and growth and are a symbol of people's frustration with government - in the sense that it overregulates and creeps into aspects of everyday life which could have been left well alone. President Trump, for example, was often critical during his campaign of what he described as burdensome regulations, and shortly after taking office he signed executive orders on reducing regulation and controlling regulatory costs. These orders aim to revoke two regulations for every new one put forward, and they place regulatory reform "task forces" within federal agencies.

Donald Trump, though, is not the first president to eye up regulations. "Every president has asked agencies to look at regulations which are in effect and, if needed, clean them up," says Dudley. "I think there has always been a concern about the accumulation of regulation. Presidents Clinton and Reagan and Carter all had that concern. President Trump, though, came into office campaigning on deregulation. He has since signed disapprovals of 14 regulations issued towards the end of the Obama Administration - by using the Congressional Review Act, which had only been used once before to overturn a regulation."

OIRA - which is part of the Office of Management and Budget (OMB) - was set up by President Carter in 1980 and began operations a year later. "It's interesting that the guidelines that govern OIRA's job have stayed remarkably consistent since it was formed," observes Dudley. "Every president has directed agencies and OIRA to make sure that new regulations do more good than harm. Every president has also said we need to look at existing regulations and make sure they are working as intended. And the procedures have been remarkably similar as well."

Where the law ends and regulation begins

Dudley, who among many roles is also the director of the George Washington University Regulatory Studies Center, which she established in 2009 to raise awareness of regulations' effects and improve regulatory policy, believes that many tend not to understand the difference between regulation and legislation. "A regulation once issued does have the force of law, but under our constitution agencies can't regulate unless they have authority delegated to them from Congress," she explains. "Take the 1990 Clean Air Act, for example. Congress passes it and says 'protect public health within an adequate margin of safety'. This delegates a lot of leeway to the Environmental Protection Agency (EPA). So EPA can issue regulations which take thousands of pages of analysis to support, still based on the authority granted them in 1990."

After agencies - such as the EPA - draft a regulation, they have to submit it to OIRA, which checks the regulatory impact analysis and also coordinates with other agencies, including the White House. Dudley says that OIRA wears several hats. "One is what President Obama said is 'providing a dispassionate and analytical second opinion'," she explains. "The second is the coordination with other parts of government - just like other parts of OMB, OIRA's role is to make sure there isn't duplication and overlap. A third hat is that they are part of the executive branch - the Executive Office of the President - so they are working closely with political officials in the White House."

The judicial branch of government also plays a role in regulation. This is because regulations are often litigated in court, and the courts will regularly send them back to the originating agencies to be revised, or will block them entirely - so the courts have a very important role. Dudley cites the example of the 2007 Mass. v EPA decision to illustrate this point. "There, the Supreme Court, in an opinion written by Justice Scalia, said that greenhouse gas emissions are covered by the Clean Air Act," she recalls. "Up until then, EPA said it didn't fit under any section of the Clean Air Act and so they didn't have authority to regulate CO2 or greenhouse gas emissions. And this paved the way for EPA to issue regulations under statutory language written in the 1970s, before people had started to get worried about global warming."

The role of regulations

Although Dudley is relishing her senior role in academia, she remains an active voice in the political and regulatory arena, one that remains widely respected within the machinery of government and on both sides of the aisle. Looking over the current political and regulatory terrain, she observes that regulation is an issue which is not always suited to a political soundbite but understands why it enjoys such prevalence among political candidates.

"I've always thought we needed to look back on existing regulations, not only to understand what their costs were but also the benefits," she says. "After all, on the budget side you have to do this to get the appropriations. The requirement to look back as you look forward is valuable and imposes a budget constraint we have in every other aspect of our lives."

She goes on to say that it is always valuable to keep an eye on the accumulation of regulations, but she has some doubts over the "two for one" approach advocated by the current administration. "The agency benefit-cost analysis is an essential tool we have been using for decades that hasn't slowed the growth in regulations," she says. "Maybe that's because every new regulation really does provide benefits that exceed costs. Each may be good individually, but when they accumulate it's a problem. However, I do think that the regulatory cost offset component of the Executive Order will provide a new incentive to address this issue.”

It should be said that the focus on scale is not brand new. For example, when I was serving at OMB, the Obama administration pursued a "Freeze the Footprint" initiative which meant that if the government was going to acquire new real estate, it had to dispose of an equal-sized facility. The feedback at the time was that it seemed somewhat arbitrary, but there is no doubt that messaging on it was very powerful.

Dudley goes on to agree that when it comes to regulations and impact, there is always scope for improvement. This can include older regulations - where technology has overtaken them - and using regulations to drive a different level of performance management and compliance.

"Another one that is probably related is where the ongoing costs are high - so regulation that has required an investment in very expensive equipment is not a good candidate for reform because you've already made the investment," she points out. "Whereas technology can help address the operating costs of filling out these forms or requiring paperwork when you can do it online in a streamlined way. And another potential area is aligning regulations internationally."

The fluidity of the regulatory world is a testament to their profound and ongoing importance to life in and out of government. While often viewed as something that belongs in the backwaters of government, they are here to stay - and it is incumbent on all of us to ensure that they have the impact their authors intended, both today and tomorrow.


Susan was a guest on the Gov Actually podcast. Check out the full conversation here and subscribe to future episodes on iTunes


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Written by:

Danny Werfel Partner and Managing Director at The Boston Consulting Group, Washington DC
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