Pareto Policy Solutions, LLC

advancing innovation through smart regulation

Pareto Policy Solutions, LLC is a policy analysis and advocacy firm committed to advancing sustainability through “smart” regulation: regulation that rewards, and does not penalize, superior performance.  Often, such actions leverage advances in science and technology and make the regulatory program itself more effective as well as more efficient.

Regulatory Reform in the 114th Congress

Republicans tend not to like federal regulation very much.  And they really do not like Obama Administration regulations, of which the most significant have and continue to be in the areas of health care, finance, and energy/environment. 

Most certainly, Republicans in the next Congress will draft legislation to reverse some (or all) regulations under the Affordable Care Act, under Dodd-Frank, and under the President’s Climate Action Plan (e.g., EPA’s Clean Power Plan).  Successful repeal is unlikely, as it is difficult to see how any legislative effort could overcome a Presidential veto.

But what about reform of the regulatory process itself? 

Regulatory reform is one issue that is likely to see much Congressional attention.  And it is likely the President will get his veto pen out—or will he? 

To figure this out, let’s take a look at the reforms currently under discussion in Congress, as these are likely to be re-introduced in some form in 2015.

--Identify and Eliminate Outdated Regulations.  The House and Senate have introduced legislation by which a bipartisan-appointed commission would recommend regulations to be eliminated. 

--Require Cost-Benefit Analysis for New Regulations.  Several bills in each chamber propose to require cost-benefit analysis for major regulations proposed by all federal agencies. In addition, several bills would prescribe how benefit-cost analysis should be done, drawing on language from current executive orders on regulatory review.

--Limit Judicial Deference to Agencies.  Legislation has also been introduced to limit the significant deference that courts give to regulatory agencies in interpretation of the law.  A more thorough review of the regulatory record by judges would no doubt lessen agency overreach.

--Require Congressional Approval of New Regulations.  Republicans in the House have approved legislation to require both the House and Senate to affirmatively approve a major regulation before it could be issued.  The idea is to ensure that agencies do not abuse the discretion granted to them by Congress.

Regulatory reform proposals, such as these, impact the power between the three branches of government, and that is why reform is such a tricky matter to navigate.  No President wants to cede the power of the executive branch to the other two branches of government.  Congress needs to tread carefully here or risk a veto that is likely to be sustained.

As the Republican-controlled Congress pushes regulatory reform measures, the President is likely to react by bolstering his own reform initiatives, of which there are three.

First, the President has established a process by which federal regulatory agencies identify outdated regulations in need of change.  This retrospective review effort is totally under the control of each agency; critics see the effort as window dressing with little substantive effect.

Second, the President has tasked his agencies to harmonize regulations between the United States and other countries to facilitate trade; these ongoing discussions continue with little breakthrough.

Finally, the President has established a pilot program to streamline the federal permit process for major infrastructure projects (e.g., bridges, highways, solar power plants, etc.). To date, a few dozen projects have been speeded up, yet thousands remain untouched by this initiative.

All in all, the President’s actions to date have been modest.  Indeed, the President’s own Jobs Council—which folded its tent in January 2013—recommended additional steps in these areas—steps that could be accomplished with or without legislation.

The ball is now in the Republican’s court.  When regulatory reform proposals start moving in 2015, do not be surprised if the President responds with some reform of his own and focused on reinvigorating one or more of his ongoing initiatives. The greater the threat of enactment by Congress, the more likely the President will be to take action to reform the regulatory process.

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