This is what they mean by a “scorched earth policy.” The new session of Congress, only in session for a few days and ahead of the inauguration of President-elect Donald Trump, is already moving full steam ahead on a slate of legislation that could affect regulators for years to come.
Among the bills that have passed in the House and are on the way to the Senate—and, ultimately, President Trump—is the Regulatory Accountability Act. Sponsored by Rep. Bob Goodlatte (D-Va.), it was passed by a 250-175 vote in the House on Jan.13.
It defines a “major rule” or “major guidance” as those that the Administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget determine are likely to impose an annual cost on the economy of $100 million or more, adjusted annually for inflation. Lacking that monetary threshold, rules with “significant adverse effects on competition, employment, investment, productivity, innovation, or the ability of U.S. enterprises to compete with foreign-based ones” are also covered.
“High-impact rules,” as defined by the bill, are those likely to have an annual cost on the economy of $1 billion or more.
Thresholds established, the bill revises procedures for rulemaking under the Administrative Procedure Act to require that federal agencies confirm their legal authority to propose a given rule; detail “the specific nature and significance” of the problem they seek to address; assess whether existing rules should be amended or rescinded; and consider all reasonable alternatives to a new rule.
Regulators would be held to a strict requirement to publish advance notice of proposed rulemaking involving a major or high-impact rule in the Federal Register and hold a hearing. The bill also specifies the minimum amount of information that must be included in an advance notice of a proposed rulemaking. Among the requirements: publishing plain-language, online summaries of proposed rules.
“After the public has fully contributed its say, agencies must choose the lowest-cost alternative proven to work—achieving the needed benefits, but rejecting unneeded costs,” Goodlatte said in a statement.
The bill also allows immediate judicial review of interim rules issued without compliance with the new notice requirements.
Included in the legislative compendium is the Separation of Powers Restoration Act, which, according to Goodlatte, “wipes out judicial deference to agency interpretations of statutes and regulations.”
“Our courts will no more be rubber stamps for runaway regulatory interpretations that burst the bounds of what Congress truly intended through statutes,” he said.
Since the Supreme Court’s ruling in Chevron U.S.A., Inc. v. Natural Resources Defense Council in 1984, federal courts have routinely deferred to federal regulatory agencies’ interpretations of the statutes passed by Congress. This has emboldened federal bureaucrats to exceed the limits Congress intended to place in the law, a statement from House Republicans says. “SOPRA would “restore the proper separation of powers by requiring federal courts to once again carefully scrutinize agencies’ interpretations and decisions regarding the statutes passed by Congress.”
“This renewed judicial oversight will put regulatory agencies on notice that bureaucrats will no longer receive a judicial rubber stamp on their overreaches,” the bill’s co-signers jointly wrote.
The Small Business Regulatory Flexibility Improvements Act “provides teeth to existing law written to prompt regulatory agencies to tailor flexibility for small businesses into their rules,” Goodlatte added. Another included bill, the REVIEW Act, forces agencies to stay their billion-dollar rules administratively if they are challenged in court.
SEC Regulatory Accountability Act
On Jan 12, the House passed the bipartisan SEC Regulatory Accountability Act, H.R. 78, sponsored by Rep. Ann Wagner (R-Mo.), with a 243-184 vote.
“Our courts will no more be rubber stamps for runaway regulatory interpretations that burst the bounds of what Congress truly intended through statutes.”
Rep. Bob Goodlatte (D-Va.)
This legislation places statutory requirements on Securities and Exchange Commission rulemaking, ensuring that it provides an appropriate cost/benefit analysis to justify the need for the regulation and assess whether there are any available alternatives to rulemaking. Under the statute, the SEC would be prohibited from issuing a rule when it cannot make “a reasoned determination that the benefits of the intended regulation justify the costs of the regulation.”
This bill would amend the Securities Exchange Act of 1934 to direct the Securities and Exchange Commission (SEC), before issuing a regulation under the securities laws, to:
identify the nature and source of the problem that the proposed regulation is designed to address in order to assess whether any new regulation is warranted;
use the SEC Chief Economist to assess the costs and benefits of the intended regulation and adopt it only upon a reasoned determination that its benefits justify the costs;
identify and assess available alternatives that were considered; and
ensure that any regulation is accessible, consistent, written in plain language, and easy to understand.
Whenever it adopts or amends a major rule, the SEC would be required to state in its adopting release the regulation’s purposes and intended consequences; the post-implementation metrics to measure the regulation’s economic impact; the assessment plan to be used by the chief economist; and any foreseeable unintended or negative consequences.
The legislation also requires the SEC to review its existing regulations every five years to identify any outdated, ineffective, or excessively burdensome regulations. The Commission is then required to modify, streamline, repeal, or even expand regulations based on that review.
The bill “expresses the sense of Congress” that the Public Company Accounting Oversight Board should also follow the requirements.
“Something our regulators should already be doing, this common-sense legislation will help drain the swamp that Washington bureaucrats have built over the past eight years, while better protecting American families from top-down, one-size-fits-all regulations that cost nearly $15,000 for every household,” Wagner said.
REINS Act
On Jan. 5, the House passed H.R. 26, Regulations From the Executive in Need of Scrutiny Act of 2017, also known as the REINS Act. It expands Congressional approval of new, economically significant rules.
A federal agency promulgating a regulation must publish information about it in the Federal Register and include a report to Congress and the Government Accountability Office on the cost-benefit analysis of the rule with an analysis of any jobs added or lost.
SCALING BACK THE SEC
The following is from a Congressional summay of the SEC Regulatory Accountability Act.
This bill amends the Securities Exchange Act of 1934 to direct the Securities and Exchange Commission (SEC), before issuing a regulation under the securities laws, to:
identify the nature and source of the problem that the proposed regulation is designed to address in order to assess whether any new regulation is warranted;
use the SEC Chief Economist to assess the costs and benefits of the intended regulation and adopt it only upon a reasoned determination that its benefits justify the costs;
identify and assess available alternatives that were considered; and
ensure that any regulation is accessible, consistent, written in plain language, and easy to understand.
The SEC shall:
consider the impact of the regulation upon investor choice, market liquidity, and small business; and
explain in its final rule the nature of comments received concerning the proposed rule or rule change as well as its response to those comments.
The SEC shall: (1) review its existing regulations periodically to determine if they are outmoded, ineffective, insufficient, or excessively burdensome; and (2) modify, streamline, expand, or repeal them.
Whenever it adopts or amends a major rule, the SEC shall state in its adopting release the regulation's purposes and intended consequences, the post-implementation quantitative and qualitative metrics to measure the regulation's economic impact, the assessment plan to be used under the supervision of the Chief Economist to assess whether the regulation has achieved those purposes, and any foreseeable unintended or negative consequences.
The assessment plan must: (1) consider the regulation's costs, benefits, and intended and unintended consequences; and (2) specify the data to be collected, the methods for its collection and analysis, and an assessment completion date.
The bill expresses the sense of Congress that the Public Company Accounting Oversight Board should also follow the requirements set forth by this bill.
Source: U.S. House of Representatives
A joint resolution of approval must be enacted within 70 session days or legislative days after the agency proposing a major rule submits its report on such rule to Congress in order for the rule to take effect.
A joint resolution addressing a report classifying a rule as a major rule must be introduced within three legislative days in the House of Representative and three session days in the Senate.
A court may review whether an agency has completed the necessary requirements under this bill for a rule to take effect.
Reactions to the ongoing blizzard of bills are, as would be expected, polarized.
“The REINS Act is an extraordinarily extreme measure that would effectively make it impossible to protect the public by shutting down the entire regulatory system,” a letter to Congressional leaders, signed by the League of Women Voters, says. “Under the bill, no major regulation could take effect unless it is approved by both houses of Congress within a limited period of time. This would effectively amend every existing regulatory statute, including bedrock laws like the Clean Air Act and the Clean Water Act, and neuter them.”
“The regulatory system would return to what it was in the age of the robber barons with no federal agency able to use its technical and scientific expertise to protect the public,” the letter adds. “Either house of Congress could kill any future safeguard simply by failing to act.”
The letter was co-signed by the Alaska Wilderness League, Center for Biological Diversity, Clean Water Action, Natural Resources Defense Council, Sierra Club, Southern Environmental Law Center, and others.
Despite its title, the Regulatory Accountability Act “has nothing to do with accountability and is “a more subtle, but equally extreme attack on public protections as the REINS Act,” a similar letter from environmental groups says. “Like REINS it will also make it essentially impossible for federal agencies to implement congressionally required regulations to protect the environment, safety, public health, and our economic system.”
Among those signing the letter were the Alaska Wilderness League, Appalachian Mountain Club, and The Wilderness Society.
Among the objections to the bill is that it undermines existing statutes that require health standards to be based on science alone without consideration of cost. It allows “well-financed special interests to limitlessly delay badly needed safeguards by requiring agencies to perform exhaustive analysis including that of virtually every alternative proposal, including ones thrown in their way to sidetrack the process.”
The bill, made law, would also promote judicial activism “by allowing courts to impose their views on technical matters over those of federal agencies.”
“These and other provisions make clear RAA’s purpose is to destroy, not reform, our whole system of setting reasonable environmental, public health, and other standards,” the letter says.
The attacks also drew in the advocacy group Public Citizen. “The RAA really should be called the Regulatory Paralysis Act since its purpose is to infuse so much delay into the rulemaking process that it comes screeching to a halt,” says President Robert Weissman. “Delay creates the regulatory uncertainty that many business spokespeople denounce and means that lives are needlessly lost, injuries are needlessly suffered, and consumer rip-offs continue.”
Even the American Lung Association is lending its voice to the opposition.
“Simply put, the Regulatory Accountability Act is slow-motion government shutdown,” says National President and CEO Harold Wimmer. “The Regulatory Accountability Act is a broad assault on the ability of federal agencies, including the EPA and FDA, to protect public health.”
More favorable reactions come by way of the Business Roundtable. It gave a big thumbs-up to the Regulatory Accountability Act in a letter to Speaker of the House Paul Ryan and House Minority Leader Nancy Pelosi. The group represents U.S. companies with more than $6 trillion in annual revenues and nearly 15 million employees.
“If companies are unsure about what regulators will require or how to comply with rules, they will be reluctant to commit capital to new or expanded productive investments,” wrote Mark Costa, chairman and CEO of Eastman Chemical Co., chairman of the Business Roundtable’s Committee on Smart Regulation. “By encouraging early engagement with regulated parties and improving the transparency and accountability of the regulatory process, the Act will result in greater certainty for U.S. businesses and thereby accelerate job growth and investment.”
Similar support comes from the National Federation of Independent Business. “This legislation also gives small businesses a greater voice in the rulemaking process by expanding the small business advocacy review panel process to all agencies,” says President and CEO Juanita Duggan.
Currently, the panels only apply to the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Consumer Financial Protection Bureau.
More to come
Also in the wings are a slew of other legislative efforts held over from the last session of Congress. The most notable is the Financial CHOICE Act, a Republican plan “to replace the Dodd-Frank Act and promote economic growth.” The acronym stands for Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs. The bill was sponsored in the 114th Congress by House Financial Services Committee Chairman Jeb Hensarling (R-TX).
This bill, among other things, seeks to: repeal the Volcker Rule; eliminate the Federal Deposit Insurance Corporation’s orderly liquidation authority and establish new provisions regarding financial institution bankruptcy; and repeal the Durbin Amendment (which limits the fees that may be charged to retailers for debit card processing).
Another change: Banks may exempt themselves from some federal and global regulatory standards if they maintain an agreed-upon ratio of capital to total assets.
The bill also removes the Financial Stability Oversight Council’s authority to designate non-bank financial institutions and financial market utilities as “systemically important.” It restructures the Consumer Financial Protection Bureau by replacing its director with a bipartisan commission, subjecting it to the congressional appropriations process, and limiting the Commission’s authority to take action against entities for “abusive” practices.
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