Another round of advice for Congress as it enters the unchartered territory of a Trump Administration comes courtesy of the Competitive Enterprise Institute, a free market, libertarian policy group waging a battle against what it sees as overregulation.
A new report, “Free to Prosper: A Pro-Growth Agenda for the 115th Congress,” released on Dec. 8, provides a lengthy, in-depth wish list of what CEI describes as “specific steps lawmakers can take to reform the unbounded regulatory state. “
Among the critiques detailed in the report is that the White House’s Office of Management and Budget regulatory review process is lacking. Executive branch regulatory review was initially formalized with an Executive Order by President Ronald Reagan’s. Nevertheless, of more than 3,500 rules issued by agencies annually, cost–benefit analyses reviewed by the OMB exist for only about a dozen, with a handful of other rules accompanied by a reviewed cost analysis, CEI says.
The Administrative Procedure Act’s notice-and-comment rulemaking process is similarly “broken” and agencies “routinely fail to issue notices of proposed rulemaking for a substantial portion of their rules, thereby undermining democratic accountability and the public’s opportunity to weigh in on rules affecting them,” CEI says, referencing a 2012 report by the Government Accountability Office.
Other complaints are specific to Congress: it rarely defunds agency actions that overstep an agency’s statutory authority and rarely uses “its most powerful accountability tool,” the Congressional Review Act, to pass resolutions of disapproval of costly or controversial agency rules. To improve regulatory cost accountability, in 1996 Congress passed the CRA, which sets up a 60-day period following agency publication of a regulation during which the rule will not take effect. The pause affords legislators an opportunity to pass a resolution of disapproval to halt the regulation. Apart from the 2001 repeal of a Department of Labor ergonomics rule that CEI says would have put undue burdens on home offices, no CRA vote has resulted in repeal of a final rule.
Among the recommendations in the CEI report, Congress should:
improve regulatory disclosure, transparency, and cost analysis of regulations and guidance;
implement a “Regulatory Report Card” to tally regulatory costs and flows in a user-friendly way;
create a bipartisan Regulatory Reduction Commission and regulatory sunset procedures.
require votes on major and controversial rules—those with estimated annual costs of $100 million or more;
impose a regulatory budget’
insist that agencies adhere to the Administrative Procedure Act’s notice-and-comment rulemaking process; and
introduce resolutions of disapproval under the Congressional Review Act for unpopular or controversial rules.
“Regulations require more transparency and scrutiny, but so do executive orders, agency guidance documents, memoranda, bulletins, and other ‘nonrules’ that duck notice and comment and the central review process that is already inadequately applied to routine rules,” CEI writes. “Thousands of such ‘regulatory dark matter’ documents are issued annually—far more than the number of rules—that amount to off-the-books regulation.
While the Administrative Procedure Act generally requires agencies to follow certain procedures when promulgating rules, the statute’s “good cause” exception permits agencies to forgo notice and comment requirement if “the agency for good cause finds” that compliance would be “impracticable, unnecessary, or contrary to the public interest” and bypass its 30-day publication requirement if good cause exists.
“That leaves agencies with a huge loophole to avoid scrutiny of a wide array of rules,” CEI writes. Recent Examples of Regulatory “Dark Matter” include the Environmental Protection Agency’s Clean Water Act interpretive guidance on “Waters of the United States,” the Securities and Exchange Commission’s interpretive “Commission Guidance Regarding Disclosure Related to Climate Change,” and the Commodity Futures Trading Commission’s “Staff Advisory” guidance on international financial transactions between overseas parties “arranged, negotiated, or executed” by a U.S.-based individual.
Among the recommendations:
apply the Administrative Procedure Act’s notice-and-comment requirement to rules with heightened force;
repeal or amend enabling statutes that sustain a particularly objectionable regulatory enterprise or program; and
subjecting regulatory “dark matter,” alongside ordinary rules, to more intense review by OMB.
Chevron deference, named for the 1984 U.S. Supreme Court ruling in Chevron v. National Resources Defense Council, is the legal doctrine whereby courts generally defer to regulatory agencies’ interpretations of their enabling statutes. When an agency’s statutory interpretation undergoes judicial review, it need only be reasonable to pass legal muster. A court may believe that its own interpretation is a superior reading of the law, but under Chevron deference, it would have to give way to the agency’s construction.
CEI recommends a new approach to this longstanding legal doctrine, calling it “a crucial impetus for the growth of the administrative state.”
“Because of the richness of the English language, it is easy for an agency to engineer ambiguity into virtually any statutory provision,” the report says. “Having thus engendered a textual imprecision, the agency can then advance an expansive interpretation that grants itself greater regulatory authority.” Among the recommendations is to pass the Separation of Powers Restoration Act, which would direct courts to stop giving controlling deference to agency interpretations of their enabling statutes;
In the world of banking and finance, CEI recommends that Congress allow for a new chapter in the bankruptcy code to replace the counterproductive “orderly liquidation authority” under the Dodd-Frank Act; enact legislation to allow financial technology firms (FinTech) to pursue innovation in financial services without having to deal with the regulatory burdens of banks; pass motions expressing its sense that the Consumer Financial Protection Bureau is unconstitutional in its current form; and repeal the Durbin Amendment, which imposes caps on interchange fees for payment cards that have led to fewer financial service offerings for bank customers.
Congress, the report says, should build upon the JOBS Act by expanding the amount that can be raised through equity crowdfunding from $1 million to $5 million, and the contribution level from ordinary investors from $1,000 to $5,000. Legislators should also allow special-purpose acquisition companies, in which lead investors negotiate on behalf of others, to use crowdfunding for ordinary investors. Expanding the “accredited investor” definition beyond the wealth threshold to include those who have proved their sophistication in other ways, such as passing exams for financial advisers and brokers is also on the list, as is stripping the SEC’s power to regulate peer-to-peer loans as securities.
protect cyber-currency from overregulation;
repeal the Department of Labor’s fiduciary rule;
end the Financial Stability Oversight Council’s exemption from the Freedom of Information Act, mandate that its meetings be open to the public, and repeal its power to designate firms as too-big-to-fail “Systemically Important Financial Institutions” under Dodd-Frank;
Phase out federal deposit insurance or, short of that, bring down the maximum insured per deposit from $250,000 to $100,000, the limit that existed for two decades before the financial crisis; and
shift the burden of proof to bank regulatory agencies when processing applications for new bank entrants, requiring those agencies to give specific reasons why a new bank would harm the safety and soundness of the financial system before rejecting its application.