A 118th Congress Regulatory Reform Agenda For Rightsizing Washington

It’s all right

to be little-bitty.

— Alan Jackson, “Little Bitty,” Everything I Love, 1996

It ought to be harder to enact bad laws and regulations than to get rid of them.

Joe Biden’s “whole-of-government” (that’s his term) spending and regulatory campaigns encompassing “climate,” “equity,” “competition policy” and more are a worrisome new development in the United States. While understandably preoccupied with a banking crisis and that frightening $31 trillion debt, the 118th Congress must awaken and address surging federal intervention in manufacturing, finance, energy, technology, the environment, small business, family life, and state and local government affairs.

The surge in federal consolidation over the past three years has been extraordinary, yet is Congress’s doing as much as Biden’s. There were were alternatives to the Families First Coronovirus Act, the CARES Act, the American Rescue Plan, the Bipartisan Infrastructure Law, the Inflation Act, and the CHIPS and Science Act. The choice to expand free enterprise rather than grow Washington by trillions of dollars on misbegotten and mis-named mega-legislation was always available, but always ignored.

The alternative approach to maximizing national well being and economic health is federal downsizing: An unprecedented campaign to remove barriers to entrepreneurship, business creation and hiring by shuttering bureaucracies and eliminating laws, rules, programs, federal jobs and contracts; and following all that up with vigilant and relentless regulatory liberalization, privatization and localization of whatever federal functions remain.

Those tasks are especially important to pursue before some new economic shock makes the job more difficult by inducing yet another new round of ill-advised and predatory federal consolidations that put limited government (remember that?) further in the rear-view mirror.

Even before the COVID episode, regulatory reforms that relied on agencies policing themselves within the limited restraints of the Administrative Procedure Act were inadequate. The extraordinary bipartisan expansion of Washington’s purview paired with Biden’s “whole-of-government” mentality has deepened the challenge of dismantling the administrative state further, since shutting down one program or even agency simply means its mission resumes few blocks away under a new roof (look at the various financial bodies engaged in ESG, for example).

Confronting the obsolescence of decades-old statutes as well as unwinding the mistaken new ones is a necessary, fundamental task that requires laying a foundation. Sure, a future executive branch could surpass Trump-era regulatory streamlining, but executive actions are not permanent (alas, unless they expand government). Reform-minded policymakers cannot provide relief with Biden at the helm, but nor can they wait for stars to align. The mid-1990’s biartisan passage of the Unfunded Mandates Act, the Small Business Regulatory Enforcement Fairness Act and the Congressional Review Act happened because of pressure from governors and small businesses. That agitation that may return in the wake of the past years’ top-down (not “bottom up, middle out” as Biden claims) legislative enactments that — while we do not see a trend quite yet — do appear to be affecting state and local priorities as well as disproportionately affecting small business. Congress should be ready at a moment’s notice.

The vision for restoration of economic liberties (and Constitutional order, for that matter) should be sweeping. For example:

(1) Congress should abolish, downsize, slash budgets for and deny appropriations to overly aggressive agencies, sub-agencies and programs, and repeal or amend the enabling statutes that sustain the regulatory enterprise in the first place. Let us underscore this: the primary goal should be the abolition of not just of agencies and rules, but the repeal of laws and enabling statues that have inappropriately cemented federal consolidation in the economy. The Sherman and Clayton antitrust acts and support apparatus, for example, should be repealed. The Federal Trade Commisison and Federal Communications Commission and more should go away in their current forms. Several financial regulatory agencies and even the defense department aggressively pursue regulatory ambitions in areas like climate, all of which requires adult oversight and a reckoning. Federal contracting and procurement — to the tune of hundreds of billions of dollars annually — are the means by which much of the progressive agenda is being forced upon society, so Congress must address those policies as well.

(2) As it stands, we are inclined to conclude that the Office and Management and Budget’s regulatory oversight apparatus, in progressive administrations, protects regulation and the regulatory status quo. The overarching Administrative Procedure Act in today’s setting protects the administrative state and bureaucratic governance rather than the norms of a limited constitutional republic, and so itself needs revisiting (not mere “modernization”).

(3) Most importantly, reforms must end crisis exploitation (the Silicon Valley Bank collapse and intervention was the fourth major economic shock of the 21st Century, not the first). The continued abuses of national emergency declarations must stop and be replaced with sweeping privatization and localization of all federal government functions including increasingly regulatory and infantilizing entitlement spending (go here for bullet-points on the “Abuse-of-Crisis Prevention Act” I think we need).

Perspective is key; rampant and intolerable over-delegation to regulators is now the secondary concern; that is, “mere” Administrative State reform cannot limit government when the legislature itself is in dogged pursuit of progressive transformations via legislation, and aspirating it all with recurrent debt limit increases.

But again, the 118 Congress can, should and must lay groundwork for a systematic abolition campaign for statutes, agencies and rules. All but forgotten is that a few years back, Congress talked of abolishing departments like Energy, Commerce and Education; that’s the mindset to build upon, but for real this time. Lesser moves and even some restraint can be achieved with supervisory hearings, such as sessions inquiring into OMB’s Office of Information and Regulatory Affairs and its role in the pursuit of Biden’s regulatory “modernization”).

Other oversight should prioritize discouraging a White House rewrite weakening OMB’s “Circular A-4″ guidance on preparing Regulatory Impact Analyses. Already, RIAs should have an asterisk and disclaimer statement affirming bias or exaggeration of regulatory benefits, since disclosure regarding the likes of the presence of unfunded mandates and on “significance” is suspect and unaudited.

Hearings also should address the phenomenon of what Christopher DeMuth and Michael Greve have dubbed “agencies of independent means,” whereby some agencies insulate themselves from Congress’ fiscal constraints via imposition of fines and fees, effectively creating their own autonomous budgets and agendas. Hearings can also learn from regulatory modernization initiatives in states, such as those of Virginia Governor Glenn Youngkin and the state’s Office of Regulatory Management to impose regulatory cuts, expedite permitting, and expand regulatory cost analysis.

Alongside hearings aimed at disclosure and accountability, Congress can take a page from Biden and act “unilaterally,” but in this case not being dictatorial but simply taking action to enforce the regulatory controls now illegally ignored. These include OMB’s neglect of the aggregate and annual cost-benefit reports required by Regulatory Right-to-Know Act, and the incomplete submission of rules and sub-regulatory guidance documents to Congress and the Government Accountability Office as required by the Congressional Review Act. While legislation to require documentation of the reporting of covered rules to both GAO and to Congress (for example in the Federal Register, or more thorough presentation in the House and Senate Communications in the Congressional Record) would be optimal, a committee or even one congressional office could call out rules agencies neglected to report. Congress could also trumpet the years-long delays in the Information Collection Budget.

Congress often relies on “must-pass” appropriations and reauthorizations to push through some initiatives, while major stand-alone legislation it does pass—like the Affordable Care Act and Dodd-Frank financial reform law—can spawn thousands of pages of regulations. Last but not least on unlateral actions, therefore, Congress can deny appropriations for carrying out regulatory programs. That is, Congress can use the power normally exploited for expansion to streamline instead. The ultimate lever is the debt ceiling, among the last of institutions capable of forcing downsizing. The gap here is those nettlesome self-funding bureaus.

Preparing new legislation is the top priority despite the absence of prospects (unless unfunded mandates reemerge as a forcing issue) for a Biden signature. Congress has already reintroduced several foundational bills to restore some democratic accountability over unelected agency rule, some of which have been waiting in the wings for more than two decades.

The flagship here is legislation requiring that Congress address over-delegation by voting to approve major regulations before they can bind the public. This concept was embodied in the mid-1990s “Congressional Responsibility Act” proposal, which would have “Prohibit[ed] a regulation from taking effect before the enactment of a bill comprised solely of the text of the regulation.”

A version of this proposal now goes by the less-descriptive name REINS Act (Regulations from the Executive In Need of Scrutiny, H.R. 277/S. 184), which has been reintroduced in the 118^th Congress by Rep. Kat Cammack (R-Florida) and Sen. Rand Paul (R-Kentucky). This law would ensure that Congress bears direct responsibility for explicit regulatory costs as well as for the indirect and unfathomable costs comprising the bulk of the administrative state. Granted, some regulations’ gross benefits exceed gross costs under the utilitarian parameters of guidance like OMB Circular A-4; but for the most part neither net benefits nor actual costs are quantified for individual rules and certainly not for federal intervention in the aggregate. Whether tabulated or unanimous consent votes occur, and whether rules get approved alone or in bundles, what matters is that members of Congress are on record for or against every costly, noteworthy or controversial regulation.

Another significant measure introduced in the 118^th Congress is the “Article I Regulatory Budget Act.” It would amend the Congressional Budget Act and the Regulatory Flexibility Act to enlist multiple offices (White House, the Congressional Budget Office, Government Accountability Office, Bureau of Economic Analysis) in the determination of and capping of costs of regulations and guidance documents, significant and allegedly non-significant alike, individually and in the aggregate. This would help bring regulatory costs above-board, just like (well, sort of like) tax receipts and outlays. Another key bill, the “All Economic Regulations Are Transparent (ALERT) Act,” would require monthly pre-notifications on upcoming regulations, require disclosure of where regulations fit within cost tiers, and certify whether or not OMB reviewed a rule. Both the foregoing bills are sponsored in the House by Rep Bob Good (R-Virginia).

Other critical bills include the “Regulatory Accountability Act” to deeply enhance agency rulemaking processes (which has also been reintroduced), and the “Small Business Regulatory Flexibility Improvements Act.”

Agencies often use sub-regulatory guidance documents to influence policy. The “GOOD Act” (which stands for “Guidance Out of Darkness”) would publicize and discipline with portal-style disclosure the sub-regulatory guidance documents that might otherwise be used improperly to effect change without being presented for notice and comment. There exists no Code of Federal Regulations-style repository for guidance, and we must be skeptical that all regulation finds its way into the Federal Register. Adding an official “Guidance Document Portal” to accompany the CFR and the U.S. Code would provide a more faithful portrayal of the federal government’s reach, plus further the cause of setting up the additional restraints necessary to confront excesses of the progressive agenda.

Expected also in the 118th Congress is the straightforward “Guidance Clarity Act” to require guidance documents to attest to their non-binding nature, as well as unfunded mandates reforms boosting transparency and accountability. Legislation establishing a “Regulatory Reduction Commission” or task force for routine rule review and purging (a process derived from the Base Closure and Realignment Commission) is likely, a recent proposal being Sen. Mike Lee’s (R-Utah) LIBERATE Act in the 117^th Congress. Legislation requiring sunsetting of rules, and the codification of elements of Trump’s executive order policies (such as “one-in, two-out”) on regulations, guidance and memoranda is also in play. Subjecting independent agencies to the regulatory review from which they are now exempt has enjoyed bipartisan support.

Legislation with more modest goals can still be very helpful at facilitating more fundamental reforms, such as a Report Card (more on that here). Systemizing the confusing regulatory nomenclature (“major,” “significant,” “economically significant”) can help, as can limiting agencies to what they have announced in the Unified Agenda, and better distinguishing in the Agenda and Federal Register between rules that are regulatory vs. those intended to be deregulatory. Reconciling record-keeping across various government databases such as direct mapping between the Unified Agenda, GAO and Federal Register (as well as within the Federal Register’s own internal databases that sometimes fail to match up) would boost disclosure, too. Before Biden eliminated Trump’s guidance document portals, reporting of guidance was never incorporated the Federal Register but could have been, for example.

Apart from general regulatory reforms, bills have been introduced to allow states to regulate energy extraction operations on the federal lands within their own borders; to reform the Endangered Species Act; to prevent an FCC reinstatement of the Fairness Doctrine; to ban COVID-19 vaccination requirements; to require concealed carry reciprocity across states; and to remove certain rifles and guns from the regulatory definition of “firearm.”

While the foregoing do address foundational “deconstruction of the administrative state,” some permanent mechanism for government eating itself or downsizing needs to be automatized. Political failure rather than market failure is the most pertinent policy concern of the day. Rather than providing expertise, bureaucracies prevent the emergence of it, especially in the wake of laws like the “innovation” and infrastructure spending that displace market processes altogether. Chartering an “Office of No” to replace or at least supplement the OMB’s Office of Information and Regulatory Affairs is needed to make the case against new and existing regulations and to facilitate ongoing sunsetting and streamlining.

If Congress does not act, states could step in. The Constitution’s Article V, of course, provides for states to check federal power. Many state legislators in recent years have indicated support for the Regulation Freedom Amendment, which reads, in its entirety: “Whenever one quarter of the members of the U.S. House or the U.S. Senate transmit to the president their written declaration of opposition to a proposed federal regulation, it shall require a majority vote of the House and Senate to adopt that regulation.” That amounts to an impelled version of the REINS Act for the rule in question.

Maybe, just maybe, the federal government should not be trying to do everything under the Sun. When Congress ensures transparency and disclosure and assumes responsibility for the growth of the regulatory state, the resulting system will be one that is fairer and more accountable to voters. But even that may not be enough. Congress is responsible for the fiscal budget, yet deficits remain the norm, and similar gaps may plague any future regulatory “budget.” The more fundamental concern of today is Congress’ own arrogation of power to itself, a phenomenon sharply escalated since 2020. The greater questions are over, not merely the role and legitimacy of the administrative state, but the proper scope of federal power as such. Protecting a constitutional republic calls for laws against laws, which in the Biden era calls for more than administrative state reform.

(For more on 118th Congress options, see the Competitive Enterprise Institute’s Free to Prosper: A Pro-Growth Agenda for the 118th Congress.)