Are “Regulatory Budgets” Paying Off? A Year Two Look-Back at Executive Order 13771

Administrative Law & Regulation Practice Group and Regulatory Transparency Project Teleforum

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On January 30, 2017, President Trump signed Executive Order 13771 titled, “Presidential Executive Order on Reducing Regulation and Controlling Regulatory Costs.” In this order, President Trump supplemented the longstanding framework for White House regulatory oversight. In addition to the Office of Information and Regulatory Affairs’ framework for cost-benefit analysis, E.O. 13771 set general requirements for agencies to rescind two new rules for every new one, and it directed agencies not to increase the overall costs that they impose on society — an approach known more generally as “regulatory budgets.”

After two years, how has this new framework fared? To discuss it, the Federalist Society’s Administrative Law Practice Group is pleased to host a teleforum with Jeffrey Harris, who served as OIRA’s Associate Administrator during the implementation of E.O. 13771 and Adam White, Director of the Scalia Law School’s C. Boyden Gray Center for the Study of the Administrative State.

Featuring:

Jeffrey Harris, Partner, Consovoy McCarthy Park

Adam White, Assistant Professor and Director of the Scalia Law School’s C. Boyden Gray Center for the Study of the Administrative State, and Research Fellow at the Hoover Institution

 

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Event Transcript

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Administrative Law & Regulation Practice Group, was recorded on February 4, 2019, during a live teleforum conference call held exclusively for Federalist Society members.          

 

Wesley Hodges:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is "Are 'Regulatory Budgets' Paying Off? A Year Two Look-Back at Executive Order 13771." My name is Wesley Hodges, and I am the Associate Director of Practice Groups at The Federalist Society.

 

As always, please note that all expressions of opinion are those of the experts on today's call.

 

Today we are very fortunate to have with us a pair of two experts. And to start us today is Adam White, who is Assistant Professor and Director of the Scalia Law School's C. Boyden Gray Center for the Study of the Administrative State and a Research Fellow at the Hoover Institution. After our speakers gives their remarks today, we will move to an audience Q&A, so please keep in mind what questions you have for this subject or for one of our speakers. Thank you very much for sharing with us today, Adam. The floor is yours.

 

Prof. Adam White:  Thank you, Wesley, and thank you, everybody, for joining us today. When President Trump took office in January of 2017, one of his very first actions in office was to sign Executive Order 13771, which was titled Reducing Regulation and Controlling Regulatory Costs. Now, for nearly 40 years, the White House has undertaken centralized oversight of executive agency rulemaking through the now well-familiar program administered by the White House Office of Information and Regulatory Affairs, better known as OIRA. And OIRA's main job is overseeing the cost-benefit analysis and an interagency review of major rules arising from Executive Branch agencies.

 

The innovation of Executive Order 13771 was to supplement that process with two new standards. First, the imposition of what's commonly known as a regulatory budget capping an agency's aggregate costs that it imposes on society, and then second, Executive Order 13771 also instituted a standard of that's commonly known as "two out, one in," or the two-for-one rule, which required agencies to eliminate two old rules for every new rule that was promulgated. Almost exactly two years after the signed promulgation of that order, it was signed on January 30, 2017 and appeared in the Federal Register on February 3, 2017.

 

We thought it would be an opportune moment to look back at the administration of that program now, and who better to discuss this with than our friend Jeffrey Harris? Jeff is at Consovoy McCarthy Park, but more importantly for present purposes, he served as Associate Administrator in OIRA during the implementation of Executive Order 13771. And so Jeff, it's a real pleasure and honor to have you here today. Why don't I turn the floor over to you to discuss your observations on the first two years of E.O. 13771, and then we'll have a little question and answer before turning it over for audience questions.

 

Jeffrey White:  Great. Well, thank you to The Federalist Society for having me, and great to be here talking with Adam who's an old friend going back to law school, so looking forward to a good discussion. I should also repeat the disclaimer -- although I was in the government for some of what we'll be discussing, I'm only talking in my own capacity and not on behalf of anyone else. To reiterate the two big features of Executive Order 13771, which Adam mentioned, I think when people think of this, they tend to think of the "one-in, two-out" component, which was, certainly, I think, the piece that got the most press, which says each agency, for every new regulatory action it takes, it must also take two deregulatory actions.

 

And that's obviously an important part of it, but I think in some ways, the regulatory budget could be even more consequential in the long run. And what that said was for Fiscal Year 2017, which is now passed, every agency had to keep its new regulatory costs across the agency at or below zero, which was unprecedented. I mean, there's never before been any direction to an agency even using a comprehensive regulatory budget, much less instructing them to make it negative, which means on the whole, they're lifting more regulatory costs than they're imposing. And I think it's important to think of the way, in thinking about 13771, that these two components work together, so I view the regulatory budget as focusing on bigger picture things. So the budget is going to be saying if an agency is taking actions that are imposing costs on the private sector, it also needs to be thinking about big picture ways to be offsetting that because, again, they got pretty clear direction from the President that we need to be thinking about ways to streamline and reduce regulation instead of increasing them.

 

So I think that's focusing more on your bigger ticket type items, whereas the two-for-one, I think, is also important, but I view that as more of a clean-up function. So this is where agencies are encouraged to do things like clean up old guidance documents, or clean up old information collection requests, or clean up old -- there's so much -- somebody used the term regulatory dark matter of these things that just get out there and accumulate, and the two-for-one, I think, really gives them a powerful incentive not only to slow down the issuance of new things, but to go back in their books and just discard things that aren't working. I think the Education Department, very controversially, has relied on things called "Dear Colleague" letters which are not notice-and-comment rules, there's no formal process, and those have gotten a lot of criticism because a lot of people felt that they were allowing the agency to just make policy very informally without any proper process. And so those are the types of things that are really tailor made for the two-for-one rule.

 

Thinking about where we are two years in, I'll start with addressing how well it's worked, and then we'll talk about some of the challenges and complexities of working through these new policies for the first time. So I'll start by addressing a criticism that some folks, actually on both the right and left, have said about the Trump administration's deregulatory activity. So I think a lot of people on both sides of the aisle have suggested that the two-for-one thing is just sort of a gimmick, or it's just a talking point, and there've been some reports in Bloomberg and elsewhere that suggested that -- they seem to say, "Why is this a big deal?" And they've criticized the administration for saying, "You're just getting rid of little things, and you're not actually making any big structural changes."

 

So starting with the numbers -- in 2018, the administration claimed a net $23 billion in regulatory cost savings, and they're projecting another $18 billion in cost savings in 2019, which those are big and impressive numbers. But I think some critics might say, "Well, those are just a small drop in the bucket in the context of a $20 trillion economy, and so billions are just rounding errors." But my reaction to this line of argument is I think the clear, overarching message from 13771 is just to send an absolutely powerful signal to the private sector that this sort of never ending, one-way ratchet of increasing regulation is over.

 

And I think throughout much or all of the Obama administration, it was just nonstop, ever-changing regulations that were really seeking to remake entire industries. So you had the Clean Power Plan, the Waters of the United States rule, the net neutrality rule, all of the Obamacare implementing regulations, we had the methane rules about fracking, you had the overtime rule about labor policy, and it was really just regulation, after regulation, after regulation. And I think there was a real sense of exhaustion from the private sector of just never knowing what rules they're going to face when they're making investments in long-term plans and just could never have the certainty that this is what the regulatory framework is going to look like. And so, again, I think that wholly apart from anything about nose counting or numbers or anything, the big thing about 13771 is it just sends a pretty clear signal that those days are over. And I do think there were a lot of agencies that literally viewed their mission as just saying, "This is a one-way ratchet, and we define progress in this area as just every single opportunity, just increase, increase, increase, increase."

 

And again, this is unprecedented. One analogy I've used before, I think, for purposes of this sort of H. W. Bush, Clinton, and W. Bush administrations, the Clinton administration was obviously more regulatory, and the Bush administrations were less regulatory, and even deregulatory, but I think they were mostly playing between the 30 and 40-yard lines. But then, I think, the Obama administration went far beyond even the Clinton administration in terms of just the cost and the complexity and just industry after industry after industry that they were really trying to remake in the model that they preferred. And so I think 13771 is sort of the reaction to that, of saying here's the big signal to the private sector that you don't need to worry about that continuing to happen.

 

And I think Director Mulvaney, while he was at the CFPB, had a really good quote about this as he said the Obama administration often viewed their regulatory goal as, quote, "pushing the envelope" of what they can do. And he took a pretty hard line that it's not a regulator's job to push the envelope, it's a regulator's job to follow their statutory authority and to protect consumers and implement the legislation that they oversee, but it's not the roll of a regulator to push the envelope and sort of maximize and sometimes exceed all of their power.

 

So my first big takeaway about 13771 -- I think just simply putting the brakes on this constant one-way flow of regulation has been a really almost sort of venerational accomplishment, and I think there are definitely some folks who have taken issue or have had thoughts on both sides of just how much deregulation has been happening, but I think that sort of glosses over what is a really substantial achievement in its own right, which is just, again, putting the brakes on the new regulation.

 

And the second reaction I have to some of these other observations about 13771 is that a lot of the biggest ticket items—so I've already mentioned some, the Clean Power Plan at EPA, the Waters of the United States rule, the CAFE, fuel economy standards, the overtime rule—a lot of these biggest ticket items are still in progress just because the nature of the rules, I think, means -- of course, the agency has to do its research, has to issue a notice of proposed rulemaking, has to take and respond to comments, has to finalize the rule, then, of course, they're inevitably challenged in court. And so a lot of these really big ticket items are still in the pipeline and will hopefully be finished in the next year, or certainly hopefully two.

 

And so something like the CAFE, the fuel economy standards, that's actually a regulation that, even by the standards of the economy, that's hundreds of billions of dollars of compliance costs, depending on the scope of that rule, and about whether the auto industry will have to keep making investments in -- taking efforts to comply with all of these various federal mandates or focus more on selling cars that consumers are demanding. So I think to the extent some have taken issue with some of the numbers or the extent of deregulation, I think there's a really good start, but some of the things that are going to be the most consequential are still in the pipeline.

 

So none of that's to say, of course, that there aren't challenges and complexities in doing this because, of course, there are. So just wanted to quickly walk through some of the things that I think have been open issues about how to implement these new policies and how the administration's addressed it so far. So one of them is when you think about a regulatory budget, for 2017, the regulatory budget for each agency was simply zero. They were merely instructed to not impose more costs than they were lifting, but for 2018 and going forward, the executive order delegated to the OMB director and OIRA the ability to basically find a good methodology to set the caps. And what they came up with, I think, is a pretty neat compromise.

 

The problem with a regulatory budget is, of course, agencies all have different mandates, they all have different degrees of existing regulation, different functions, and so whereas an agency like EPA or the Transportation Department regulates a ton and probably has tons of room to deregulate, others such as the Social Security Administration or some of the financial regulators, some of those just do less regulation and so there's less room for that. So what the administration did is it linked the regulatory budget process to the unified agenda, which is where each agency annually projects the regulations that it'll be addressing over the next year. And in this process, the agency will go to OMB and say, "This is what we're proposing as our regulatory budget for next year." And then they have a back and forth process with OMB where the agency says, "This is what we think is feasible. These are what we think our priorities will be." And then there might be some engagement with OMB, or the White House, or other components of the government, and then OMB ultimately assigns each agency a specific budget.

 

So they're all negative or zero this year, and unsurprisingly, I think, some agencies like EPA, and Interior, and Transportation have pretty large negative numbers, whereas others like DHS, of course, has national security functions where you tend to think less in terms of regulatory or deregulatory. I think a lot of those simply have a zero. So for those types of agencies, they simply need to not be imposing more costs than they're lifting through deregulation, but others are expected to be heading a much stronger negative number. I think the goal is to work with the agency and come up with numbers that are feasible but still are going to be aggressive in giving them something to hopefully accomplish that are a little more aspirational.

 

Another complexity is what counts? So for the purposes of the "one-in, two-out" policy, what counts as a regulatory action? And this has been a source of some of the criticism where the administration was accused of making it mostly about small-bore things, but I think that that's a little bit myopic just because the whole nature of the "one-in, two-out" policy is designed to be cleaning up the books. So I think for purposes of that, what the administration has said is, absolutely, if you repeal a guidance, if you repeal a letter, if you repeal an information collection, pretty much anything the agency does that's removing an obligation from the books, lifting a burden on the private sector, OMB will give the agency credit for that in terms of the "one in, two out."

 

But for purposes of the regulatory budget, it's taken the view that only items for which economic analysis is included will count against the regulatory budget. So I think, for all intents and purposes, what that means is "one in, two out" is really going to be a broader view, and the regulatory budgets are pretty much only going to be final rules that have gone through the notice-and-comment process because those are the types of rules which will always include cost-benefit analysis and economic analysis, and there's generally going to be a little bit more robust analysis there. So that's sort of the balance they've struck in terms of how to implement this and what things count.

 

Another complexity here -- here's another one. Some rules, of course, and this is an issue with cost-benefit analysis more generally, some rules are just not amenable to a hard cost-benefit analysis. So think, for example, of a rule that promotes broad protection of conscience rights for religious groups. That rule might impose costs on businesses or hospitals that might need to comply with this, but the benefits are going to be more intangible because it's going to be protecting religious liberty, which is, of course, a critical constitutional concern, but it's not something you can do in dollars and cents. And so that gets a little more complicated, very complicated, in fact, of how you would fit those into the 13771 framework.

 

And I think in terms of things like that, there hasn't really been a hard-and-fast rule. I think the way something like that would generally be treated is if there's something that we know has real benefits that advances the administration's priorities but happens to impose costs, I think that's something that the OMB director has the power to and probably would exempt from the 13771 rule. So if a religious liberty promoting rule served important constitutional functions but also imposed some costs, I think what the director of OMB could say is, "Well, we're not going to hold this against you in terms of your regulatory budget or your 'one in, two out' because we recognize that this is promoting important administration priorities."

 

And then, the last thing I'll just briefly address before taking some questions is another complexity is what happens if a rule is required by statute? So a really interesting case study is a rule from the Agriculture Department that just came out about genetically modified food. So what happened is Vermont, in the early 2000s, started attempting to regulate genetically modified food, which when you think about the ability of one tiny state to get into regulation of food labeling could have catastrophic implications for sort of the whole supply chain across the country if every food company needs Vermont-specific standards. And then imagine if 25 states had similar standards and all of them had different and overlapping requirements. It would be completely unworkable.

 

And so Congress preempted state-level labeling regulation pertaining to genetically modified foods, but the compromise was in exchange for that, the Agriculture Department had to promulgate a national federal standard about this. And I think the Agriculture Department has been pretty candid that this rule has no benefits for consumers. I think in terms of market research and things, first of all, there's never been any suggestion that genetically modified food is actually less safe than other food. And even if there were some difference, consumers almost certainly don't read these labels. And so the Agriculture Department said, "Well, we acknowledge that this rule has no benefits for consumers and is going to impose costs, but we're stuck because Congress is who told us to do this."

 

And so I think the balance that was struck, and this is written up in the final rule which I think came out in November or December, what it does is the rule accounts for the costs, but it also views the benefits of avoiding all of the state regulation. So the agency made an attempt to say if Vermont and other states had followed a similar approach, there would have been X dollars in costs, but now those are avoided regulatory costs because the same statute that forced the USDA to do this rule also preempted those other rules. So I think that's a good, creative way to say we acknowledge that the agency was boxed in by statute, and so we're not going to hold that against you, and we're going to recognize the bigger picture of a statute that also requires -- of a statute that both preempts state law and requires the agency to do this standard.

 

So I'll stop there. Those are just a few of the many complexities that have come up, but again, I think the biggest takeaway for me from 13771 from two years in is I think it's just really changed a lot of the culture and the mindset in these agencies even just in terms of agenda setting and just making them think the one-way ratchet is over, and now they have to be thinking not only in terms of how are we going to keep ratcheting up our regulations, but how are we going to be trying to streamline, and ideally, even cut things back? So it really is a pretty substantial culture shift compared to how things have been done in the past.

 

Prof. Adam White:  Well, thanks, Jeff. As we said, we'll have some audience questions. Let me just ask a couple of questions quickly as folks think about what they'd like to ask. First, just on the general impact of this executive order -- as you said, it affects the mindset of the culture within the agencies as they go about their work of promulgating new regulations. But I kind of have to wonder -- President Trump would have been a regulatory reformer or deregulatory President regardless of his executive order. He made very clear where he stood on these thing when he was campaigning, and I don't doubt that even in the absence of this order, he would have appointed [inaudible 21:30] and others who are energetic in a deregulatory or regulatory reform approach. So how much of what you described really is from this order? What difference might we have seen in absence of this order?

 

Jeffrey Harris:  Yes, that's a great question. So like every executive order -- and I should also mention, this executive order was challenged in court but ultimately upheld by the district court in D.C., actually by an Obama appointee, Judge Moss, I believe. And like every executive order, it can only be implemented in accordance with law. So like every executive order, it does not carry the force of law per se, but it does carry the imprimatur of the President. So I think if the Energy Department were going to roll back energy efficiency standards for dryers, they could not point to the order and say, "Well, we're not really sure about this regulation, but because we have to be meeting our cost caps and rolling back regs, we're going to do that."

 

So that's sort of what they can't do because the APA and each agency's organic statute give considerations, and virtually all, thankfully, of those considerations can include some consideration of cost, but for the executive order on its own cannot force the agencies to do something that would otherwise violate the law. And in fact, this is one of the key reasons why the court upheld it because they said, the court said, of course, if an agency is doing something for an impermissible reason, that might be arbitrary and capricious.

 

But I think that the executive order itself is just -- aspirational is too weak of a word, but it is a directive from the President that these are my priorities, and this is how I want them implemented, and these are the steps I want you to follow. And so I think it does matter -- I mean, as between a fairly specific directive from the President to the heads of his agencies, or not having that, I do think it changes the tone of the conversation, and I don't think -- I mean, I know there was never anything similar in the W. Bush administration or the H. W. Bush administration, and I think in the Reagan administration even, cost-benefit analysis was still sort of a new thing. And so yeah, so I think it is aspirational. It does not carry the force of law, but I do think when this is one of the President's -- literally, one of the first things the President signed on some of the first days in office, I do think that sets the tone of just how agencies are thinking about this.

 

And I will say I think the fact that this is now being incorporated into the unified agenda process, which I mentioned briefly -- so the unified agenda, once a year every agency has to tell the public what they're planning to do in the next year in terms of regulation, and then they also have longer lists. They can say, "This is sort of the next year, and these are some things we're probably not going to get to this year, but we might get to over the next few years." And so I think it's really powerful in that in putting together their unified agenda and thinking, "These are what we want our priorities to be," I do think there's very much a sense that they really have to be thinking, "Well, in the event we need to be doing something regulatory, just as a matter of agenda setting, we need to also be thinking about things we can streamline or cut back on." And I think that agenda-setting function is probably every bit as important as the pure bean-counting analysis of where we are with the two-for-one, or where we are with the regulatory budget.

 

Prof. Adam White:  That all makes sense to me, and full disclosure, I'm a [inaudible 25:11] of this executive order. I think it definitely was a good step in the direction that you painted. When I am debating with executive order with friends who disagree with its propriety or its utility, oftentimes the main criticism I hear is that agencies should always be focused on cost-benefit analysis, or benefit-cost analysis, not just on cost analysis; that anytime a rule's benefits outweigh its costs, it's by definition a good thing, and that it's a mistake for agencies to look exclusively at cost in this analysis, even this analysis separate from the usual cost-benefit analysis. Having simply cost analysis improperly excludes half of what the government should be thinking about, which is how can we benefit society in what we do? So how do you go about thinking about that and thinking through that in the context of this order? What does this add in addition to just what we'd get in cost-benefit analysis, and why are we excluding benefits from it?

 

Jeffrey Harris:  No, that's a really good question. So I think -- a couple observations. I think, just as an empirical matter, the benefit side of cost-benefit analysis is always vastly more complicated than the cost side. And even costs will often depend on assumptions, or imputations, or -- there's nothing ever ironclad. These are all just good faith, best possible estimates. But I think especially some of the benefit side things in some of the Obama-era rules, I think it was really on the benefit side where if you come up with some notion of hundreds of billions of dollars of benefits based on some pretty implausible assumptions, all of a sudden, you can be justifying these very costly rules.

 

And so, of course, Executive Order 12866 still requires the agency to look at cost and benefit, so the 13771 side is just one piece of it. And in terms of 12866 and in terms of EPA, of course, most or all of the relevant statutes would allow or require the agency to look at both costs and benefits, but I think 13771 reflected a different judgement of "the regulatory costs, period, have gotten so exorbitant over the last eight years" that that's going to be the focus of that particular order.

 

And I think a really good example of this is if you look at some of the documents EPA has put out on the Clean Power Plan, there was something called the social cost of carbon that the previous administration used to justify some of these very, very expensive greenhouse gas rules. And I think EPA explained why a lot of the assumptions underlying those things were just completely -- just went a little too far in assuming too much. For example, I think many of these measures would look at global effects and not just effects in the United States, whereas this administration said we're going to be looking at the domestic costs and benefits because that's a more appropriate way to assume this. So I think the benefit side can often be much more sensitive to -- even small changes and assumptions can have massive changes in how you tally up the benefit side.

 

Prof. Adam White:  And on the benefit side, I always like pointing listeners and readers to a paper by our colleague at The Federalist Society's Administrative Law Practice Group. Susan Dudley, the former OIRA administrator, had a great paper a few years ago in the journal Business Economics. It was called "Perpetuating Puffery: An Analysis of the Composition of OMB's Reported Benefits of Regulation." And she really walks through, as somebody experienced at OIRA, walks through the ways in which agencies' own sort of self-interested benefit calculations do tend to track -- their errors tend to be in one direction rather than the other. And so I highly recommend it. Well, maybe this is a good point at which, Wesley, you should open the floor to audience questions.

 

Wesley Hodges:  Of course. Thank you both so much. It does look like we do have one question out of the queue, so let's go ahead and move to our first caller, then.

 

Caller 1:  Thank you for really an excellent, great presentation. I've really enjoyed it and got a lot out of it. I have two questions. One is is there a threshold dollar minimum of $100 million or something like that, and if so, how can we eliminate it for the benefit of the mom-and-pop enterprises that don't rise to visibility when you have big numbers like $100 million? Maybe that seems a small number by some, but for small businesses, it could be big. And the second question -- what are the costs, or how would they be calculated, the costs of eroding structural federalism; that is, things like separation of powers, enumerated powers, etc.? Is there any way to take those into account?

 

Jeffrey Harris:  Thank you. Those are both great questions. So on the first one, I think the $100 million comes into play in two areas. So one is for purposes of the Congressional Review Act, it's one of the thresholds to be considered a major rule which would then be sent to Congress for its approval or disapproval under the Congressional Review Act. And the second place it comes into play is for triggering OIRA formal scrutiny. So OIRA reviews significant rules which are defined in part as a rule that might be over $100 million of impact.

 

But what I would say is, and I think this actually partially will answer your separate question too, so at least with respect to the OIRA review, they not only have authority to review economically significant rules, but also rules -- I don't have the specific language offhand, but it says rules that would have a significant -- some sort of other significant impact on the administration's priorities or on -- it's basically, and I apologize, I don't have the specific phrase, but it's sort of a catch-all that says if it's something that's likely to significantly impact the President's priorities, OIRA can pull it in and review it, even if it's not at the $100 million threshold.

 

So I think in terms of federalism or separation of powers, I think that's exactly where those sorts of things would come in. So OMB or OIRA could say if an agency's going to do something that would affect federalism interests, or that would affect religious liberty, or that would affect separation of powers, even if it doesn't get to $100 million -- so think about something that would have to do with administrative law judges. That might not affect $100 million of economic activity, but it, of course, as we know from the Supreme Court, raises all sorts of separation-of-powers issues. So that would be the sort of thing that could then be pulled in, and then OIRA would review it, the White House Counsel's Office would review it, DOJ would review it, and they'd run this administration-wide policy process to make sure that the thing being issued will reflect the administration's priorities. So that's a very good question. At least for purposes of when something gets reviewed to ensure that it meets the administration's priorities, it's not just $100 million, but it can also be things that are important for non-monetary reasons as well.

 

Caller 1:  Okay. Well, thank you very much. And as kind of a follow-up, is there going -- I guess Naomi Rao, whom I've followed, seems to be a great intellectual leadership in this area and practical leadership, nominated to the D.C. Circuit, is that a clear likely yes confirmation soon?

 

Prof. Adam White:  I guess we're the lawyers, not the politicos. The hearing is coming up very soon, I think maybe tomorrow. No confirmation is ever guaranteed. Of course, the new rules in the Senate in the aftermath of Senator Reid eliminating the filibuster for judicial nominations, it only takes a majority vote. Now, there's definitely more than a majority of Republicans, and it's not hard to imagine Republican senators supporting her confirmation.

 

Wesley Hodges:  We do have another question in the queue. Here's our second caller.

 

Kent Huntington:  Good afternoon, gentlemen. Thanks you for your work. Kent Huntington, Huntington Solutions, calling you. I have a question as to where you have an agency that isn't regulating under the Administrative Procedures Act, case in point being the FTC using adjudications instead of rulemakings to govern the cybersecurity sphere. What can be done, and what do you think will be done in light of the Eleventh Circuit's decision in LabMD recently?

 

Prof. Adam White:  Jeff, just to clarify, I can't recall off the top of my head. Does 13771 apply to independent agencies like the FTC? And if not, let's take just the broader step, or the step backward, so the more general question of how does this approach affect agency policymaking through vehicles other than rulemaking? Most famously, agency adjudication that enforced [inaudible 34:19]?   

 

Jeffrey Harris:  Another really good question. So I'll take that in sort of two parts. The executive order does not, on its face, apply to independent agencies. Now, they still are subject to the unified agenda process, so they do need to comply with giving the public notice of what they're planning to do and sort of identifying what their priorities are over the next year or couple years. Many of the independent agencies have engaged in much better practices, so I think the FCC under Chairman Pai has really shored up its economic analysis. I think former-Acting Director Mulvaney has done some terrific things at the CFPB. I think he has really instilled much more of an economically based approach to a lot of the CFPB rulemaking. So no, this President hasn't directly ordered them to do anything, but I do think there's a little bit of a race to the top where even the independent agencies realize the importance of this regulatory reform -- of regulatory reform issues to the administration and so are implementing best practices on their own, even apart from the executive order.

 

And on adjudications, I have less insight into that. I think there's -- for good reason, of course, the White House OMB side does not get involved in the litigation of any specific matters, certainly not any enforcement actions because there's always been a separation between sort of political type stuff, and policy type stuff, and then enforcement action than what we've seen on the other side of the wall. So I don't have as much insight into that. I know that this is an issue that's near and dear to Don McGahn's heart, who was the White House Counsel for most of the first administration. And although they didn't get involved in specific adjudications, I know Don felt very strongly and has spoken extensively about sort of best practices for adjudication, so just at a high level of saying this is how we ensure due process. This is how we ensure that there isn't overreaching.

 

I think there have been a few DOJ memos that have been put out also about the use of guidance documents in adjudications, and really encouraging agencies not to be relying on anything other than statues and regulations in bringing enforcement actions. And so although, again, there's no ability of OMB, or OIRA, or the White House to be saying, "This is how I want this enforcement action run," they can certainly still promote best practices to help ensure due process. And I think there's pretty widespread agreement that agency adjudication and enforcement has gotten a little bit out of control and, I think, are trying at a high level that adopts some best practices to reign that in.

 

Kent Huntington:  Just a quick follow-up. I'm focused in on the FTC because their structure was ripped down by the Eleventh Circuit in the LabMD case last June. But the agency itself is still pursuing independent legal authority. Is there any way to rip that away from them because, usually, if you had DOJ involved, you would have the White House somewhat involved, or you would have at least the Attorney General involved. But in these cases, with the FTC having the independent legal litigating authority, they're out there on their own, still litigating cases like D-Link, which is going to trial in I believe next spring out in San Francisco.

 

Prof. Adam White:  This is Adam. I do know that much of the FTC's independent litigating authority, like for similar agencies, is actually a creature of statute. The FTC Act authorizes the commission to represent itself in various kinds of cases, and so my guess is that [inaudible 38:10] the FTC out of the independent [inaudible 38:12] authority category would require an act of Congress.

 

Kent Huntington:  I think that's a good idea. Okay. Thank you, guys.

 

Wesley Hodges:  Next caller, you're up.

 

Caller 3:  Yeah, I was just looking at the NRDC case that sought to stay this, and I noticed that it was dismissed on the grounds of lack of ripeness and standing. And then they came forward last April with ten additional complaints showing that they had ripe claims and that they had standing. And my question's really a practical one, and I haven't looked through the file, but did they come up with real, live people who said, "Because of this executive order, I've been personally harmed in some way," and can you give us an example of what kind of personal harm comes from a lack of regulation?

 

Jeffrey Harris:  That's a great question. And I haven't followed the ins and outs of all of it recently, but I think it would just be very, very hard to claim that any particular rule -- because I think the administration would fully agree that every regulation or deregulatory action must always stand on its own two feet. And so even if something is taken under the umbrella of 13771, no one disputes that it has to comply with the agency statute, that it has to be justified by the record, that it has to be not arbitrary and capricious. And so I think -- and I haven't seen these latest declarations from the NRDC, but it think it would be very hard, if not impossible for someone to claim somehow that 13771 uniquely imposed any specific harm on them, which would essentially have to mean the agency wasn't going to do the regulation unless -- but for 13771, which I don't -- I'm certainly not aware of anything like that that's out there.

 

And I do remember that the first opinion dismissing the case, I guess without prejudice, seemed to be pretty skeptical of whether anyone would be able to bring these claims. So I'm not sure what they've replead, but based on how I read the initial opinion, I think it would be really hard for someone to show that they personally were injured in a concrete and tangible way by 13771 because that's just not how the executive order works. Any deregulatory action always has to be justified for reasons wholly apart from those.

 

Caller 3:  Okay, thanks. Well, maybe I'll pull it up on PACER and see what they came up with, but thank you very much.

 

Wesley Hodges:  Thank you, caller. We still have one question in the queue. Here's our next caller.

 

John Shu:  Hello, this is John Shu in California. Thank you very much for your presentation. I actually have two questions, if you please. Number one, this is all well and good, and it's a big step, but what happens when we have an administration in the future that isn't so concerned about reining the administrative state, or might even be concerned about expanding the administrative state?

 

And then the second question I have is has there ever been a situation where you have two agencies that have cross-lapping jurisdiction, say the FTC and the DOJ on anti-trust, or the SEC and one of the banking regulator's comptroller on some issue where they don't agree on which two need to be rescinded or what the result of the cost-benefit analysis actually is?

 

Prof. Adam White:  Jeff, try to picture yourself in a dystopian future where regulations are increasing rather than decreasing. [Laughter]

 

Jeffrey Harris:  Yeah, so unfortunately, the good news is the basic principles of cost-benefit analysis, which date back to really, sometimes, the Ford/Nixon/Carter administrations, and then really pretty significantly in the Reagan administration -- 12866, which is currently sort of the founding document of a lot of cost-benefit analysis and that, that is a Clinton-era executive order. And so the Obama administration did not rescind that even though there's great stuff in 12866. I mean, it says agencies should only regulate when they're required by law, or when there's a compelling public need, or when there's a market failure. It says agencies should always be looking at alternatives. It says agencies should always be thinking about whether other government regulations have caused the problems that give rise to the need for new regulation.

 

So the good news is those basic principles have persisted. The bad news is for people who are critical of the Obama administration, there might be a sense of who cares if they left 12866 on the books if they're going around doing things like the Clean Power Plan, and the net neutrality regulation, and the overtime regulation, and all of these extremely costly regulations which often have questionable benefits. I think the basic framework may prevail, although with this sort of new populism among a lot of folks on the left, maybe it won't, and they'll just say, "No, we look at benefits and not costs." I think in light of cases like Michigan v. EPA and a lot of the Supreme Court's jurisprudence and the interpretation of EPA's organic statutes, I think it would be hard for either an administration or a specific agency to all of a sudden start taking the position that cost is irrelevant.

 

I guess that's sort of unsatisfying. I mean, I hate to say it. A democratic administration would probably rescind 13771 on their first day in office. I think it's great. I think it's done a lot of good things, but the broader framework of cost-benefit analysis has sort of hung on in bipartisan form, although, again, with varying degrees of compliance with it. But I think the explicit cost-lifting deregulatory premise probably is going to depend on who the occupant of the White House is, which I guess is probably how it should be in a republican form of government.

 

And then your second question is the easier one, I think. There are lots of rules that are multiple agency. The CAFE one is the biggest one, the fuel economy standards, which is a joint EPA/Transportation Department rule. The Waters of the United States rule is a joint rule of EPA and the Army Corps of Engineers. And they usually find some way to amicably divide the credit, which I think is usually 50/50, or if it's a really lopsided allocation of responsibility, they'll find some way to do that with the help of the OMB director, but definitely a situation that comes up all the time and it is built into the 13771 calculus.

 

Wesley Hodges:  Excellent. Well, thank you so much, John, for your questions. Seeing no immediate questions, you still have time if you want to, I turn the mic back to Adam and Jeff. Do you have any further commentary for us?

 

Prof. Adam White:  Well, this is Adam. I don't. I do want to thank Jeff for taking the time to offer these insights. I know a lot of us on the outside, both in private practice and in academia, were intrigued by the promulgation of this order, trying to understand what exactly it would mean in practice. And now with the advantage of the benefit of two years behind us, I really appreciate Jeff taking the time to offer his perspective on how things have actually played out so far.

 

Jeffrey Harris:  Thank you. And I express my thanks as well to The Federalist Society for having me and to Adam and the panelists for leading some great questions. And the last thing I'll say is I think it's a really interesting time for administrative law. I think, as I said earlier, I think a lot of this stuff, like the Super Bowl yesterday and the Clinton and Bush administrations, was kind of between the 30 or 40-yard line, but I think we did have a really sharp swing in the Obama administration. And so now you've got this administration which is still in the courts and still trying to sort of undo some of this Obama stuff but also move with an affirmative agenda. So I don't think we've seen the pendulum swing this much, certainly in the last several decades, and so I think it's a really interesting time for administrative law continuing to develop by the day. I appreciate everyone joining the conversation, and I really enjoyed it, too.

 

Wesley Hodges:  Wonderful. Well, Adam and Jeff, on behalf of The Federalist Society, I'd like to thank you for the benefit of your valuable time and expertise today. We welcome all listener feedback by email at info@fedsoc.org. Thank you all for joining us for this call. We are now adjourned.

 

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