Trump signs executive order reining in the bureaucracy

President Trump signed an executive order on Monday that directs all executive branch departments to find two regulations to repeal for every one regulation they impose.

Depending on how the order is interpreted by the departments and agencies, the order could considerably reduce the paperwork burden on American business as well as make it easier for companies to be created and expand their operations.


“This will be the biggest such act that our country has ever seen,” Trump declared moments before signing it in the Oval Office. “There will be regulation, there will be control, but it will be a normalized control where you can open your business and expand your business very easily. And that's what our country has been all about.”

The executive order signing, which fulfills a campaign pledge, comes after the president held a listening session with small-business leaders.

“If you have a regulation you want, No. 1, we’re not gonna approve it because it’s already been approved probably in 17 different forms,” Trump said. “But if we do, the only way you have a chance is we have to knock out two regulations for every new regulation. So if there’s a new regulation, they have to knock out two.”

The president added that “it goes far beyond that.” “We’re cutting regulations massively for small business — and for large business,” he said. “But they're different. But for small business, and that’s what this is about today.”

The executive order calls for agencies to pinpoint “at least two” current regulations to be repealed for each new proposed regulation. And it says the net incremental cost for fiscal 2017 should “be no greater than zero,” meaning the cost of new regulations should be offset by existing rules that will be rescinded.

House Speaker Paul Ryan applauded the order in a statement Monday afternoon, noting that it builds on House Republicans’ “Better Way” agenda and comes as the lower chamber is set to repeal a number of Obama era regulations this week.

“The explosion of federal regulations has hamstrung small business growth and crippled our economy,” he said. “President Trump’s executive order helps bring the nation’s regulatory regime into the 21st century by putting regulators on a budget, and addressing the costs agencies can impose each year.”

Both Democratic and Republican administrations, conservative or liberal, have presided over the massive growth of the federal bureaucracy.  Even in Republican administrations, the growth of regulation has only slowed, not stopped.  Trump's order will seek to actually bring the bureaucracy to heel for the first time.

But the process might be more difficult to implement than it appears:

The order has an exception for national security regulations, whose boundaries are not clear. But if, for example, the Army Corps of Engineers wants to take actions to make pipeline construction easier (in keeping with the spirit of the Jan. 24 presidential memorandum on the Dakota Access Pipeline or the Jan 24 presidential memorandum on the Keystone XL pipeline), under the terms of today’s executive order it can’t do so unless it is able to identify two existing regulations to repeal for every regulation it wants to promulgate. And it doesn’t matter if it can show that its new regulation has benefits that greatly exceed its costs. Furthermore, it doesn’t matter if the two regulations for repeal have benefits that greatly exceed their costs. So a cost-justified regulation would be delayed until the agency found two other regulations for repeal despite their being cost justified. And a delay in a cost-justified regulation is itself an additional cost (an opportunity cost). The costs are everywhere. Beyond the delay, the executive order prohibits adding net new regulations. If you want more regulations from any department (other than those involving national security), this is not the order for you.

The executive order does allow the OMB director to make exceptions, and to tell agencies what “costs” actually means (strikingly, the order nowhere defines the key term “regulatory costs”). So the OMB director will have discretion to reduce the hassles that this executive order creates.

The key here is to avoid cutting regulations simply to cut regulation.  There is an advantage to the cost/benefit approach to regulation that agencies in the past have eschewed.  Forcing the departments to change the very culture of regulation will be just as beneficial as eliminating some red tape.

There will be howls of protest from interest groups when one regulation or another is eliminated.  No doubt we will be told that some regulatory regime is being "gutted" by the repeal of certain rules.  But I have a feeling cabinet secretaries are going to be able to identify burdensome and unnecessary regulations fairly easily – at first. It may get more difficult as the process unfolds, but any cut in the rules and more intelligent rule-making is a revolutionary concept whose time has come.