President Obama recently quashed a proposed new EPA ozone standard. Al Gore went so far as to express his disappointment in Obama publicly yesterday, accusing the president of “not “relying on science.” But Perhaps Al Gore should learn to rely more on economics — the proposed ozone standard would have imposed crushing burdens on businesses and cost businesses nearly $90 billion yearly.
On August 23 Obama hailed the completion of his agencies’ plans to reduce regulatory burdens pursuant to his executive order of last January, which the White House claims will save as much as $10 billion over the next five years, largely through reductions in paperwork. The claimed savings are trivial compared to the costs of even a few of the EPA’s many recently adopted or proposed rules.
Congress, is once again, energized to reform the regulatory state. Increasingly blamed for persistent unemployment, regulations have come under renewed scrutiny in Congress, where multiple bills to reform the regulatory state have been introduced. More hearings and action on these reform bills are planned for the fall.
The federal regulatory state has been out of control for decades. Executive and independent agencies, indeed, operate beyond the effective control of the three constitutional branches of government. Presidents of both parties have been surprised by the intractability of the federal agencies, composed of a vast army of career civil servants who are practically impossible to fire. The courts are hesitant to restrain agency action based in valid federal law. And over the last seventy years, Congress has been of two minds—periodically interested in checking selective regulatory excesses but continually enacting laws which delegate key policy decisions to the agencies.
The dimensions of the current administrative beast and the scope of its regulatory progeny elude comprehensive measurement but numbers are indicative. In the 1950s, federal agencies annually filled almost 11,000 pages of the Federal Register. By contrast, the Federal Register for 2010 contained over 80,000 pages. Federal agencies have adopted over 3500 new regulations each of the last three years. According to the “Unified Agenda of Federal Regulatory Actions,” 4,257 new regulations are now in the pipeline. The Code of Federal Regulation occupies 165,000 pages.
A 2009 report from the Small Business Administration concludes that the aggregate cost of “major” federal regulations (i.e., those with costs over $100 million) is over $1.5 trillion per year—more than total revenue from federal income tax. And this trillion-dollar tally derives from the agencies’ invariably modest analysis of the costs of implementation.
Rules proposed or adopted under the Obama administration deter investment and job creation. According to the Federal Energy Regulatory Commission (FERC), just four of the new EPA rules could shutter eight percent of electric generation in the near future. As a result of a single rule adopted in early July, Texas could lose ten percent of existing generation capacity from native Texas lignite coal next year. With the prospect of scarcity pricing driving electric rates sharply higher, why would energy-intensive manufacturing expand?
The good news is that this Congress, with sparse but growing bipartisan support, is trying to restrain the regulatory leviathan. Many of the new bills aimed at regulatory reform appropriately target EPA’s current regulatory binge, which accounts for $23.2 billion of the $26.5 billion in estimated costs of major federal regulations finalized in 2010, according to the Congressional Budget Office. And note that most of the new EPA rules are discretionary or the result of friendly judicial settlements with environmental groups—unlike the hundreds of new rules mandated by Dodd-Frank and ObamaCare.
A sampling of the reform bills’ acronyms-in-search-of-titles catch the mood of this season’s regulatory reform.
*REINS Act—“Regulations from the Executive in Need of Scrutiny Act.” (H.R. 10, S.299)
*TRAIN Act—“Transparency in Regulatory Analysis of Impacts on the Nation Act.” (H.R. 2401)
*CURB Act—“Clearing Unnecessary Regulatory Burdens Act”. (S.602)
*FREEDOM Act—“Freedom from Restrictive Excessive Executive Demands and Onerous Mandates Act.” (S. 1030)
*“Regulatory Responsibility for Our Economy Act.” (S. 358)
*“Unfunded Mandates Accountability Act of 2011.” (S.1189)
*“Regulatory Flexibility Improvements Act.” (H.R. 527)
*“Small Business Regulatory Freedom Act.” (S. 474)
Most of these bills would amend the Administrative Procedures Act to require a more comprehensive analysis of direct and indirect costs of proposed regulations. The bills can’t emphasize jobs enough. The extent of EPA’s oblivion to real world impacts like job loss was amusingly if not pathetically brought to light in a prolonged exchange between a senior EPA official and Representative Cory Gardner at a hearing of the House Energy and Commerce Committee last April. When asked how jobs were affected by a rule that carried compliance cost of $43-$80 billion, EPA Assistant Administrator Mathy Stanislaus was utterly incredulous. Jobs? What do you mean by jobs? After repeatedly choked responses to the same question, Stanislaus mumbled to the effect that EPA likes jobs, but jobs are not our job. Meet the career bureaucrats who make decisions of national consequence.
The reform bills stipulate more vigorous regulatory impact analysis on multiple levels: jobs, energy prices, electric reliability, industry sectors, regional economies, consumers, small business, and U.S. global competitiveness. Several of the bills require a macroeconomic analysis of impacts of more than a dozen EPA rules coming into effect in the next 2-3 years, a group commonly known as the “EPA train wreck.”
Exclusively focused on this train wreck, the TRAIN Act would establish an interagency Cabinet-level committee, chaired by the Secretary of Commerce, to prepare a “Cumulative Analysis of Regulations that Impact Energy and Manufacturing,” with a preliminary report due January 2012. TRAIN wisely tasks the Comptroller General with conducting the analyses instead of EPA. Bureaucracies are masters of subterfuge and creative accounting when measuring the negative impacts and benefits of their regulatory creation. TRAIN’s Cabinet-level committee is vaguely reminiscent of the “God Squad” created in 1978, which had the authority to overrule action under the Endangered Species Act (ESA) when a group of Cabinet secretaries concluded that avoidance of the economic consequences trumped legal protection under the ESA.
The report required by TRAIN would force Congress and the executive branch to confront the economic impacts of EPA’s current rules. The TRAIN Act does not provide authority to quash regulations, a limitation likely necessary to build bi-partisan support. The bill passed the House Energy and Commerce Committee 33-13 in July.
Senator Pat Roberts’s “Regulatory Responsibility for Our Economy Act” (S. 358) calls the President’s bluff on his Reaganesque executive order to improve regulation. The Roberts bill would codify the Executive Order’s multiple directives to design regulation with the least burdensome requirements necessary to achieve the regulatory objective.
The other bills would also invigorate regulatory analysis but gloss a pivotal problem: how to measure the benefits of regulation. For decades, OMB has given EPA a pass on laughably inflated calculations of “monetized” health benefits. EPA may now acknowledge compliance costs in the several billions but finds benefits to public health in the hundreds of billions: speculative figures for which there is no measured evidence. Until Congress drills down on the benefits EPA asserts, regulatory reform will be impossible. Deconstructing how EPA estimates health benefits also will reveal the hollow science EPA now uses to justify one rule after another with massive compliance costs, in some cases approaching $100 billion.
Alone among the proposed bills, the REINS Act offers a game-changing means of restoring congressional control and accountability within the federal regulatory scheme. The REINS Act simply requires that a major rule of the executive agencies “shall have no force or effect unless a joint resolution [of approval] is enacted into law.” As a matter of constitutional principle, agencies, of course, have no power to act as a co-equal, fourth branch of government beyond the control of Congress. As the Supreme Court explained in Bowen v. Georgetown U. (1988), “It is axiomatic that an administrative agency’s power to promulgate legislative regulation is limited to the authority delegated by Congress.”
If an agency can do only “what Congress has said it can do,” then Congress should always be able to reclaim or modify the regulatory authority that Congress itself has delegated. The REINS Act is carefully constructed to pass constitutional muster and to avoid the ineffectiveness of previous statutes like the Congressional Review Act. The House Republican leadership included the REINS Act in the GOP’s “Pledge to America” and plans to move the bill this fall.
Over the last century, Congress has increasingly relied on broad delegations of regulatory authority to the unelected “experts” at federal agencies. Statutes regularly direct agencies to adopt rules under open-ended policy rubrics such as “in the public interest”, “as far as is practicable,” and to “protect public health.”
Such sweeping grants of lawmaking authority run throughout the major environmental laws and allow EPA to adopt regulation beyond or at odds with the will of Congress. Under statutes forty years old, EPA keeps finding discretionary latitude to expand regulatory scope and to tighten standards, but on the basis of weaker science and with fewer, if even measurable, benefits.
EPA’s Endangerment Finding that carbon dioxide is a pollutant within the legal meaning of the Clean Air Act is a perfect example of an agency acting as an arrogant fourth branch of government. After making the policy finding, EPA rewrote the triggers for regulation written in the black letter terms of the law. With a straight face, EPA determined that the “Tailoring Rule,” perhaps the most far-reaching regulatory act in the history of the Clean Air Act, was a “deregulatory” action exempt from analysis of economic impacts. Congress considered, but on multiple occasions, rejected regulation of CO2.
The judicial system, for the most part, has not helped set the constitutional balance aright. According to Justice Antonin Scalia, the Supreme Court has “almost never felt qualified to second-guess Congress regarding the permissible degree of policy judgment that can be left to those executing or applying the law.”
Critics claim the REINS Act creates an unconstitutional “legislative veto.” But in contrast to the legislative veto struck down by the Supreme Court in INS v. Chadha (1983), the REINS Act requires passage of the resolution of consent in both houses of Congress with presentment to the President for signature or veto. And the REINS Act does not violate the executive branch authority to execute the law because it only concerns agency rulemaking pursuant to delegations of legislative authority.
The power to execute laws is the power to administer and enforce—an authority distinct from an agency’s authority to promulgate and adopt legal rules. REINS does, however, increase the intended constitutional tension between the legislative and executive branches of federal power and just might support greater judicial willingness to restrain agencies acting outside statutory limits.
For a century, the administrative state has steadily grown while congressional control over regulation has receded. Construction of the fourth power has been a bipartisan project. As Steven Hayward notes in the The Age of Reagan: The Fall of the Old Liberal Order: 1964-1980, the progressive ideologues of Woodrow Wilson’s era, bent on solving complex problems by specialized expertise, laid the intellectual foundation of the regulatory state. Expansion of the federal apparatus under the New Deal was largely a civil engineering project. LBJ’s New Society fueled growth of government as a social engineering project. Under Richard Nixon, to whom the greatest growth of the federal regulatory edifice can be attributed, the administrative state took on economic engineering and continues unabated. Under the Nixon administration, eight independent regulatory agencies and eight new executive branch agencies were created. President Nixon created EPA by a bare-bones Executive Order.
In the last several decades, Congress has done little to keep agencies from operating outside the reach of our tri-partite constitutional system. Given the broad latitude Congress has in delegating legislative powers, it is Congress—not the courts—that has the power to check the regulatory state. These questions are no longer the esoteric interest of constitutional scholars but have been articulated by the grass-roots constitutional movement known as the Tea Party. Procedural reform of the rulemaking process can help. Enactment of the REINS Act and strategic amendment of key statutory delegations of legislative authority could restore the Constitution’s guarantees of representation and accountability in the making of our laws.
Kathleen Hartnett White is the Director of the Armstrong Center for Energy & the Environment at the Texas Public Policy Foundation and a former Chairman and Commissioner of the Texas Commission on Environmental Quality.
