Trump’s America, on the other hand, resents an omnipresent government in their lives, micromanaging small business owners with job-killing regulations and trying to impose weird liberal values on ordinary Americans. Plus, many members of Trump’s America are hurting economically. They are victims of jobs going overseas and the slow economic growth of the Obama administration following the 2008 recession. They cheer any steps which will create jobs and spur economic growth.
Fortunately for Trump’s America, when it comes to repealing regulations and reducing the power of the bureaucracy, the president has delivered “big league,” as he would say. The deregulatory effort led by President Trump is jaw-dropping and historic, and a key reason why the economy boomed in his first year, even before the tax cut was passed.
If you want to understand the truth about America’s comeback in job creation and economic growth, you need to understand how bad the regulatory state had become and the scale of the president’s effort to review and roll back job killing, expensive federal regulations.
A DAUNTING TASK
As soon as President Trump took office, he began his aggressive campaign to cut red tape in Washington.
This is no easy feat. At the end of 2016—just before President Trump was inaugurated—the Code of Federal Regulations (CFR), which includes all final rules published by the government, contained 185,053 pages in 242 bound volumes, including a 1,170-page appendix.1 This figure is up from only 22,877 pages in 1960—a more than 700 percent increase over 56 years.
To put a finer point on it: The Mercatus Center at George Mason University regularly gathers data from the CFR and logs the frequency of phrases and words, including “may not,” “must,” “prohibited,” “required,” and “shall,” in an effort to track the number of restrictive regulations in the code. According to the Center’s research,2 such restrictions increased by 107 percent from 1975 to 2016.
This increase in regulations—and specifically restrictive ones—matters because this huge spike in government controls and rulemaking across American industry is choking out innovation and making it harder for businesses to grow, create jobs, and provide opportunities for Americans. Indeed, there is a place in our society for reasonable regulations. No one wants toxic, lead-laden drinking water. No company in America should be able to exploit child workers. However, when regulations go too far, or are poorly written, they add tremendous costs to U.S. businesses.
For example, the Environmental Protection Agency (EPA) determined in 2015 that dust—what comes off gravel roads or recently tilled fields—was dangerous particulate matter. That is the same pollutant classification it gives coal ash or soot. This meant farmers had to start spending their time and money not on growing crops but mitigating the dust that could potentially come off the natural land.
As another example, on January 19, 2017—days before President Trump was inaugurated—the Department of Energy under President Obama published a rule that required ceiling fans to be more energy efficient. This 62-page rule will do little more than make new ceiling fans more expensive. Republicans have been fighting the Obama administration’s ceiling fan rule since 2013.
Another last-minute Obama rule was an Occupational Safety and Health Administration (OSHA) regulation that put limits on workers’ exposure and handling of beryllium—a lightweight, strong metal used in construction, electronics, and maritime and aeronautical vehicles. If handled improperly over a long period of time, beryllium can cause lung disease and other health issues. However, it can be safely handled with proper protection. Originally, the rule was meant to only cover manufacturers, but OSHA expanded its reach to include construction and maritime industries. Alabama Congressman Bradley Byrne cautioned the added costs of complying with this expansion could endanger the livelihoods of more than 400,000 American workers.3
The cost of these ridiculous regulations adds up. The Competitive Enterprise Institute’s Ten Thousand Commandments 20174 report estimated the economic impact of compliance with federal regulations to be $1.9 trillion a year. That equals half of our federal spending for 2016 and accounts for 10 percent of our gross domestic product (GDP). The cost in taxpayer dollars for the agencies to administer regulations was estimated at $63 billion for 2016.
To express these large numbers in a more relatable way: If the regulatory machine in America were a country, it would be the seventh largest economy in the world—ranking just ahead of Italy but behind India.
Much of this cost increase has built up from regulatory actions taken over the last few decades. Another report by the Mercatus Center found that if the level of U.S. regulation had remained static from 1980 forward, “the economy would have been nearly 25 percent larger by 2012 (i.e., regulatory growth since 1980 cost GDP $4 trillion in 2012, or about $13,000 per [person]).”
Imagine for a moment what it would mean for our country if GDP had been $4 trillion larger in 2012. How quickly would we have climbed out of the 2008 recession—would there have been a recession at all? My bet is had we stayed on the path which President Reagan put us on, we would have avoided many of the economic struggles we’ve faced in the last several decades.
According to the White House Council of Economic Advisors,5 small businesses pay a disproportionate share of the cost of regulations. The White House report estimated the per-employee regulatory compliance costs for small businesses was $11,724 in 2016. Meanwhile, firms with more than 100 employees paid $9,083 per employee. Ninety-nine percent of the employers in our country are small businesses, and small businesses employ almost half of our private-sector workforce. On top of this, small firms create 75 percent of the new jobs in America. When you raise the cost of hiring employees, fewer Americans get jobs. It’s that simple.
Finally, U.S. regulations have a real impact on American taxpayers as well. The Ten Thousand Commandments 2017 report found that regulatory costs added to food, health care, petroleum, and transportation create what is essentially a hidden tax. On average, this costs U.S. households $14,809 a year. The White House Council noted that this hidden regulatory tax on necessities, which are the most heavily regulated products in our economy, hits lower-income Americans hardest. While higher-income earners may not be harmed when regulations drive up the price of eggs, milk, or gasoline, those who struggle to make ends meet are forced to make tough decisions.
So, the Trump administration’s drive to cut red tape in America is not simply anti-Washington rhetoric. The unchecked growth of federal regulation has kept jobs, prosperity, and the American dream out of reach for many Americans. President Trump understands this perfectly, and this is why he started fighting the regulatory machine as soon as he took office.
His success in this effort has been one of the most important—and underreported—achievements of President Trump’s first year in office.
ONE-IN, TWO-OUT
President Trump’s deregulation effort started in earnest with Executive Order No. 137716—the directive that said for every cost-bearing regulatory action federal agencies proposed, they had to identify two existing ones for removal. The order also instructed agencies that the net cost of their final regulatory actions for Fiscal Year 2017 could not exceed $0—unless the law required otherwise, or the actions had clearance from the White House Office of Management and Budget (OMB) director.
According to the White House Office of Information and Regulatory Affairs (OIRA),7 by July 2017, the Trump administration had withdrawn 469 proposed regulatory actions requested by agencies in Obama’s final months in office. Another 391 Obama-era actions had been reclassified as either long-term or inactive, so the new administration could more carefully review them. At the time, OMB Director Mick Mulvaney said the administration was more than meeting the one-in, two-out directive by eliminating 16 regulatory actions for each one it created. To be clear: Mulvaney was talking broadly about regulatory actions—not final rules. By February 2018, OIRA Director Neomi Rao said at a meeting of the National Space Council that the deregulatio
n ratio was actually 22-to-1.
Deregulation may not seem exciting, but cutting these regulations has a tremendous potential to boost the American economy. The OIRA reported that the number of “economically significant” proposed regulations in the pipeline had dropped to 58—a 50 percent reduction since the fall of 2016. The office defines such regulations as “likely to have an annual effect on the economy of $100 million or more, or adversely affect in a material way” any aspect of the economy. The administration requires agencies to perform more thorough cost benefit analyses for economically significant regulations as well as analyses for other feasible alternatives.
As the White House was working with agencies to cut regulations, the Republican Congress made excellent use of the Congressional Review Act (CRA), which became law as a part of the Contract with America when I was Speaker of the House. We included the CRA in the Contract because we believed a powerful administrative state posed a serious threat to the Republic.
It is Congress’s duty to make law; it is the executive branch’s duty to implement it, both through enforcement and by creating specific regulations that carry out the law’s intent. However, we realized in 1994 that the administrative state had grown so large and left-leaning it could use the regulation issuing process to subvert the will of the people as expressed through elections and the laws passed by Congress. This represented a serious imbalance to the checks and balances set forth by the Constitution of the United States.
The CRA was our solution to this problem. It provides Congress with a 60-day window to expeditiously revoke regulations made by federal agencies. Since these bills require the president’s signature to be enacted, they are most useful for getting rid of regulations made during the final months of a presidency after a new president takes office. In addition to revoking regulations, the CRA makes it impossible for cagey agencies to write similar regulations without an act of Congress.
Today’s Republican Congress, with President Trump’s aid, negated 15 Obama-era regulations with CRA resolutions in the first 60 legislative days of Trump’s term. This was a record. Previously, the CRA had only successfully been used once before, during the George W. Bush administration, to negate an expensive rule requiring companies to revamp their workplaces to make them more ergonomic. This 600-page rule had been made by Bill Clinton’s Labor Department and would have greatly hampered U.S. businesses. Back in 2000, the Heritage Foundation said the rule was “the broadest and most costly workplace regulation ever published.” The foundation estimated it would have cost businesses $4.7 billion a year.8
Similarly, the CRA actions taken by Republicans and the Trump administration during year one will provide immediate economic benefits. Sam Batkins at the American Action Forum (AAF), which has closely tracked the Trump deregulation effort, wrote on May 10, 2017,9 that impact analyses created by federal agencies indicate the repeal of these regulations under the CRA “will save $3.7 billion in total regulatory costs ($1.1 billion annually) and eliminate 4.2 million hours of paperwork.” Batkins wrote that nongovernment estimates were much higher. According to AAF, industry analysis showed repealing the rules would save more than $34.8 billion in costs.
No wonder the economy took off so fast under President Trump and a Republican Congress.
Now, in addition to cutting regulatory actions and revoking rules from previous administrations, federal agencies under Trump are also producing fewer regulations.
The Wall Street Journal10 reported on July 26, 2017, that the Trump administration at the time had proposed the fewest number of rules in 17 years. Furthermore, many of those proposed rules actually overturned previous rules. For example, citing Sofie Miller of George Washington University’s Regulatory Studies Center, the newspaper reported one-third of the EPA’s 66 regulatory actions at the time were rule withdrawals.
When you combine Congress’s CRA efforts with final regulatory actions made by the Trump administration, AAF11 found in another analysis from October 3, 2017, that by the end of Fiscal Year 2017 there had been 26 final rules repealed and only five enacted since President Trump took office.
That is remarkable. By comparison, the Weekly Standard12 noted on October 30, 2017, that over the last two decades, the federal government has added 13,000 new regulations annually. Under President Trump, “the increase in regulatory restrictions… has been near to zero.”
Federal regulations are expensive. Rand Paul points out a number of burdensome, expensive, and overreaching regulations in his book Government Bullies, in which he describes how federal regulations have invaded virtually every aspect of our lives from determining the size, shape, and efficiency of our toilets to dictating the type of light bulb Americans can purchase.
EPA regulations cost us about 5 percent of our more than $15 trillion GDP in 2012, according to Paul.
These are just a few examples. The regulatory regime in the United States has grown at an astonishing rate for decades. Even with President Trump’s significant deregulatory efforts, the American regulatory system is still gigantic. I suspect cutting red tape will be a constant effort throughout his presidency.
Despite this huge challenge, President Trump and his cabinet members have been diligent in their effort to shrink the federal government and to shield Americans from damaging, costly regulations. The White House has seen success in virtually every sector.
ENERGY AND ENVIRONMENT
Some of the most controversial, expensive regulations the government has imposed in recent years have been environmental rules—many of which target the energy sector. Some of these rules have proved tough to dismantle; however, President Trump and Republicans are making progress.
Obama’s so-called Clean Power Plan is perhaps the best example of overreaching environmental regulation. In the plan, the Obama White House attempted to regulate coal-fired power plants out of existence by setting new standards for the emission of greenhouse gases, such as carbon dioxide.
While Obama was in office, the massive regulatory effort faced numerous legal challenges with mixed results. Federal courts ruled that the EPA did have authority to regulate greenhouse gases. However, in June 2014, the U.S. Supreme Court said the Obama EPA had overstepped its bounds by attempting to rewrite part of the Clean Air Act. Only Congress has the authority to change law. On February 9, 2016, the high court ruled 5–4 to stay the Clean Power Plan until all the current legal challenges for and against the plan were settled.
Once President Trump took office, he directed the EPA to perform a comprehensive review of the Clean Power Plan, and on October 16, 2017, EPA Administrator Scott Pruitt announced a proposal to rescind the rule.
Trump is also seeking to do away with another controversial rule known as the Waters of the United States rule. Through this rule, the Obama administration sought to redefine what waters the EPA and the U.S. Army Corps of Engineers had the authority to regulate under the Clean Water Act. Specifically, Obama’s White House sought to expand the definition of “navigable waterways” to an absurd degree in an effort to increase its regulatory power.
U.S. Senator Lamar Alexander, the Republican who leads the Senate Energy and Water Development Appropriations Subcommittee, has vehemently opposed this rule since its proposal, saying it gives federal authorities the ability to regulate mud puddles that form on a farmer’s pasture.
Imagine for a second that Hillary Clinton had won and her administration had the power to regulate mud puddles.
Fortunately, American farmers were spared this nightmare. After one month in office, President Trump, on February 28, 2017,13 ordered the EPA and the U.S. Army Corps of Engineers to reevaluate the rule. In July 2017, the administration proposed to rescind the rule and replace it with regulations which had applied earlier.
While working to cut red tape at the EPA, the Trump administration has also ended a destructive practice known as “sue and settle,” which has cost taxpayers billions and allowed special interest groups and past EPA regulators to conspire to skirt t
he normal process by which Americans can offer feedback on how proposed regulations would affect them.
Under a normal procedure, an environmental group or concerned citizen makes a complaint. The EPA then takes time to investigate the alleged violation, seek public comment, and transparently form a regulation or enforcement action to correct the issue—if one existed at all.
Under “sue and settle,” however, an environmental group would sue the EPA for allegedly failing to do its job. The case might be over a potentially polluted waterway, a city’s air quality, or a construction project that allegedly harmed the environment.
Since Obama’s EPA was in league with the far-left environmental activists, it wouldn’t fight the charge in court or dispute whether it was responsible for the underlying violation. Instead, it would agree to a settlement with the group and craft what is called a consent decree. These decrees would allow the court to dictate regulatory action—permitting the EPA to bypass the normal regulatory process, including public comment, as a backdoor way of imposing environmental regulations on businesses and states. In the end, the group bringing the case would get what it wanted, leaving the American people out of the process entirely, except for being stuck with the legal cost of the litigation.
The AAF studied a database of economically significant EPA rules14 from 2005 to 2016, which included judicial deadlines, the hallmark of a sue-and-settle rule. The Forum found 23 regulations that fit the sue-and-settle profile. In total, these litigated regulations cost taxpayers $67.9 billion.
On October 16, 2017, Administrator Pruitt wrote a directive aimed at ending the sue-and-settle practice. Going forward, lawsuits against the EPA will be posted online within 15 days of being received by the EPA. Pruitt also ordered EPA staff to notify states and industries that would be affected by the suit and to get input from the public through hearings or comments before settling lawsuits or entering consent decrees.
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