Two for None: The Chilling Effect of Executive Order 13771 on Beneficial Rulemaking

By Joseph Condon*

On January 30, 2017, President Donald J. Trump signed Executive Order (EO) 13771, “Reducing Regulation and Controlling Regulatory Costs,” often described as the “two-for-one” rule for regulations.[1] EO 13771 requires that, whenever an agency proposes a new regulation, they also identify at least two other regulations to eliminate.[2] More significantly, EO 13771 introduces the concept of a regulatory “budget,” which seeks to cap the net social costs of new regulations.[3] By only considering costs and ignoring benefits of rules, EO 13771 places significant limits on the ability of federal agencies to protect the health, safety, and financial interests of the public.

For nearly forty years, the federal government has assessed the economic impact of proposed rules when developing and enacting new regulations. [4] Today, federal agencies publish regulatory analyses estimating the monetized costs to society and benefits to society of proposed rules.[5] For a Federal rule to be promulgated, its estimated benefits must justify its estimated costs.[6]  Recent presidential administrations (including the Obama administration) have sought to ease administrative burden by examining existing rules to identify those that are no longer cost-beneficial.[7] Other countries have adopted similar policies to address what is perceived as bureaucracy that harms or limits businesses.[8] Supporters of these types of reforms have argued that the sheer volume of regulations has a stifling effect on American businesses and that there are many outdated, inefficient rules on the books that could be eliminated.[9]

EO 13771 is remarkable in its failure to consider the benefits of regulations. EO 13771 is solely concerned with the costs of implementing new regulations, discounting any and all value from regulatory activity. Regulations are intended to provide benefit calculated in saved lives, in reduced pollution, and in consumer savings.[10] For instance, a 2011 study on the impact of the Clean Air Act projected that the rules and regulations associated with its implementation will cost $65 billion between 1990 and 2020.[11] The total benefit over the same period, however, was estimated at around $1.9 trillion.[12] The “costs” of regulations are not just paperwork or inspections, either. Regulations are intended to correct market failures and costs often represent the internalization of a cost on a business or actor that would otherwise be borne by the public.[13] EO 13771 encourages agencies to eliminate regulations without concern for the societal benefit, and without concern for the intent of Congress in granting regulatory authority to that agency.

EO 13771 does not cover every regulation. Only economically significant regulatory actions from non-independent agencies are affected, as defined by EO 12866.[14] EO 13771 also exempts new regulatory actions that are statutorily required, that are substantially transfers (such as social insurance programs or Pell grants) or deal solely with internal proceedings, and that deal primarily with foreign affairs or national security.[15] The White House Office of Management and Budget (OMB) director can also grant exemptions at his discretion.[16]

For the 2017 fiscal year, during which the EO was signed and which ended on September 30, 2017, the net cost of new regulations for each agency was to be $0, meaning any new significant regulatory actions needed to have its costs fully offset by deregulation.[17] For FY18 and beyond, the OMB director is to provide each agency with a ‘budget’ for regulatory costs. Such budgets are yet to be announced.[18]

Assessing the impact of the EO thus far is challenging. The Trump administration has promulgated relatively few rules, which could be a result of the typical quiet period for rulemaking at the start of an administration, the ideological lean of the agency heads in the Trump administration, or this EO. Tellingly, there have only been two completed rulemakings (both issued by Center for Medicare and Medicaid Services) that require offset under 13771.[19] While both actions noted that they required compliance with 13771, neither final rule actually identified which deregulatory actions accompanied them, and neither rule accounted for their offset.[20] There have been many more final rules specifically indicated as deregulatory actions under EO 13771, suggesting that the order is encouraging agencies to eliminate rules they identify as unnecessary.[21]

Looking forward, however, this order significantly limits the implementation of acts of Congress. Under previous administrations, the White House already had significant authority to slow or stop a rulemaking that it felt was not cost-beneficial.[22] Under 13771, OMB has significantly more power to slow or stop new regulations, even if they are cost-beneficial. Logically, it does not follow that an old regulation is suddenly not necessary because a new regulation has been proposed. In general, the regulatory budgeting of EO 13771 encourages agencies to prioritize the costs to regulated industries over the societal benefits intended by the drafters of the agencies’ authorizing legislation.

Like many of the Trump administration’s executive orders, EO 13771 is the subject of ongoing litigation. Public Citizen, Inc., Natural Resources Defense Council, and Communications Workers of America, AFL-CIO are seeking an injunction prohibiting compliance with the EO and associated guidance and a declaration that the EO is unconstitutional.[23] They argue that the executive order violates the Administrative Procedures Act (among other laws) and is unconstitutional on several grounds, including as a violation of separation of powers and as a violation of the duty of the President to “take Care that the Laws be faithfully executed.”[24]

Statutes enacted by Congress direct federal agencies to issue rules to protect the health and safety of Americans and their environment. Through EO 13771, the Trump administration has placed a significant limitation on the ability of federal agencies to follow the law and actively regulate, and has encouraged the elimination of regulations without regard to the societal benefit they provide. As long as 13771 is in place, agencies will be hamstrung in their ability to protect the public.

*Joseph Condon is a Junior Editor at MJEAL. He can be reached at jdcondon@umich.edu.


The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.

[1] Exec. Order No. 13771, 82 Fed. Reg. 9339 (Jan. 30, 2017).

[2] Id.

[3] Id. at § 3(d).

[4] The Federal government began assessing the economic impact of regulations during the Ford Administration. Exec. Order No. 11821, 39 Fed. Reg. 41501 November 27, 1974. Language requiring an assessment of a regulations’ benefits and costs was added in 1981. Exec. Order No. 12291, 46 Fed. Reg. 13193 (Feb. 17, 1981).

[5] See Office of Mgmt. & Budget, Circular A-4 (Sept. 17, 2003), https://www.whitehouse.gov/omb/circulars_a004_a-4.

[6] Exec. Order No. 12866, 58 Fed. Reg. 190 (Oct. 18, 1993).

[7] See, e.g., Exec. Order No. 13563, 76 Fed. Reg. 3821 (Jan. 18, 2011).

[8] See, e.g., Backgrounder – Legislating the One-for-One Rule, Gov’t of Canada (May 22, 2015), https://www.canada.ca/en/treasury-board-secretariat/services/federal-regulatory-management/backgrounder-legislating-one-for-one-rule.html.

[9] See Patrick A. McLaughlin et. al., Comprehensive Regulatory Reform, Mercatus Center (2017), https://www.mercatus.org/system/files/mclaughlin-comprehensive-regulatory-reform-primer-v1.pdf.

[10] See Office of Mgmt. & Budget, Economic Analysis of Federal Regulations Under Executive Order 12866 (January 11, 1996), https://www.whitehouse.gov/omb/inforeg_riaguide

[11] United States Environmental Protection Agency, Office of Air and Radiation, The Benefits and Costs of the Clean Air Act from 1990 to 2020, at 21 (March 2011), https://www.epa.gov/sites/production/files/2015-07/documents/summaryreport.pdf.

[12] Id.

[13] See id.

[14] Office of Mgmt. & Budget, M-17-21 Memorandum for Regulatory Policy Officers at Executive Departments and Agencies and Managing and Executive Directors of Certain Agencies and Commissions (April 5, 2017), https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17-21-OMB.pdf

[15] Id.

[16] Supra note 1.

[17] Id.

[18] Id.

[19] See Medicare Program; Hospital Inpatient Prospective Payment Systems for Acute Care Hospitals and the Long-Term Care Hospital Prospective Payment System and Policy Changes and Fiscal Year 2018 Rates; Quality Reporting Requirements for Specific Providers; Medicare and Medicaid Electronic Health Record (EHR) Incentive Program Requirements for Eligible Hospitals, Critical Access Hospitals, and Eligible Professionals; Provider-Based Status of Indian Health Service and Tribal Facilities and Organizations; Costs Reporting and Provider Requirements; Agreement Termination Notices, 82 Fed. Reg. 37990-01 (Aug. 14, 2017) (to be codified at 42 CFR Parts 405, 412, 413, 414, 416, 486, 488, 489, and 495); Medicare Program; Prospective Payment System and Consolidated Billing for Skilled Nursing Facilities for FY 2018, SNF Value-Based Purchasing Program, SNF Quality Reporting Program, Survey Team Composition, and Correction of the Performance Period for the NHSN HCP Influenza Vaccination Immunization Reporting Measure in the ESRD QIP for PY 2020, 82 Fed. Reg. 36530-01 (Aug. 4, 2017) (to be codified at 42 C.F.R. Parts 409, 411, 413, 424, and 488).

[20] Id.

[21] See, e.g., Elimination of Regulations Implementing Community Trade Adjustment Assistance Program, 82 Fed. Reg. 48760-01 (Oct. 20, 2017) (to be codified at 13 C.F.R. Part 313);

Stage 5 Airplane Noise Standards, 82 FR 46123-01 (Oct. 10, 2017) (to be codified at 14 C.F.R. Parts 36 and 91).

[22] In 2011, President Obama and then-OMB director Cass Sunstein returned a completed rule to EPA for reconsideration. Letter from Cass R. Sunstein, Director, OMB, to Lisa Jackson, Administrator, EPA (Sept. 2, 2011), https://obamawhitehouse.archives.gov/sites/default/files/ozone_national_ambient_air_quality_standards_letter.pdf

[23] First Amended Complaint for Declaratory and Injunctive Relief, Public Citizen v. Trump, No. 17-253 (D.D.C. April 21`, 2017), 2017 WL 4508636.

[24] Id.

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