On Oct. 16, the Trump administration released its fall Unified Agenda, which outlines regulatory agency priorities for the year and provides a list of actions that federal agencies are working on. Historically, the business community pays close attention, but most journalists and the general public do not. That’s all starting to change now, because alongside the Unified Agenda, the Trump administration is releasing critical information related to its experiment in regulatory budgeting.
What is a “regulatory budget?” We all know that regulatory agencies have fiscal budgets — a certain amount of money provided by Congress each year. And nearly all would agree that a cap on agency spending makes sense, because it would be crazy to give regulators license to spend unlimited amounts of taxpayers’ money.
Unfortunately, the regulatory system is just that crazy.
Until recently, there were no caps on how much of the public’s money government agencies could “spend” off-budget through regulation. In theory, they could force us to spend all of our money complying with different rules, regulations, and mandates.
That’s starting to change now that the Trump administration is imposing caps on how much regulatory cost some regulators can impose. Each year, an agency is assigned a specific amount of public money it’s allowed to “spend” on new rules. This allowance is determined by the Office of Information and Regulatory Affairs, or OIRA, a small unit that reviews some of the government’s most significant rulemakings.
In many cases, these caps are negative, in that regulators are being required to find ways to save the public money. The Department of Agriculture, for example, has to find $981 million in regulatory cost savings this fiscal year. Overall, executive agencies and departments have to find about $18 billion in savings this year, which is on top of the $23 billion in cost savings the administration claims it achieved last year.
The new regulatory budgeting system is a much needed step in the right direction, likely delivering some meaningful relief to citizens. But the new system is far from perfect, and already we are seeing areas where it could be improved.
For example, $23 billion in cost savings sounds like a lot, but is it? Some estimates of the total cost of regulation are in the trillions annually. If regulation is slowing economic growth, as many studies find, then $23 billion is a drop in the bucket. Also, most of the burden comes from the 186,000 pages of rules already on the books, but Trump’s new cost caps apply only to new regulations.
Additionally, having OIRA oversee the new budgeting system makes some sense, given the regulatory expertise the office possesses. On the other hand, OIRA only reviews about 8 percent of all federal regulations finalized in any particular year. Many agencies, such as the so-called “independent agencies” like the SEC and the FCC, are exempt from OIRA review, and by extension exempt from the new regulatory budgeting system. Smaller rules that might not have much impact individually, but altogether have a big cumulative impact, are also exempt from OIRA review.
The current regulatory budget isn’t working well for existing rules or for the thousands of regulations promulgated each year that OIRA doesn’t review. Many of these are rules that don’t have credible cost estimates, making it hard to include them in a budget.
If the administration instead relied on a simpler measure than cost, it could create an accounting system for the entire federal regulatory system. Virginia passed bipartisan legislation this year that creates a reporting system to track the overall level of regulation in the state. Agencies are required to start reporting counts of regulatory requirements. Two — the Department of Professional and Occupational Regulation and the Department of Criminal Justice Services — have to achieve a 25 percent reduction. Because Virginia chose a simple measure — counting up regulatory requirements — it can apply its reforms broadly.
Another way to address the limited scope of the new federal regulatory budget would be to put a single individual in charge of regulatory reform across the entire government. For example, former Vice President Al Gore oversaw President Bill Clinton’s Reinventing Government initiative in the 1990s. This effort led to a significant dip in the amount of federal regulation. Perhaps Vice President Mike Pence could play a similar role in the Trump administration.
Trump’s regulatory budget represents real progress. One could even call it historic. But there is much more work to be done. Putting a single individual in charge of reform across the federal government and creating a parallel accounting system to include all new and existing regulations in the budgeting process could do the trick.
James Broughel is a senior research fellow with the Mercatus Center at George Mason University.
