Wayne Crews is the author of “Ten Thousand Commandments: An Annual Snapshot of the Federal Regulatory State.” He is the Fred L. Smith fellow in regulatory policy at the Competitive Enterprise Institute.
Federal Newswire:
What is regulatory dark matter?
Wayne Crews:
You've got a few dozen laws every year, you've got 3,000-plus rules and regulations that are pouring out of the alphabet soup of regulatory agencies, but on top of that, you have what are called sub-regulatory guidance documents or notices, bulletins, circulars, administrators’ interpretations – all of these forms of guidance and nudging and directive that I took an interest in back in the Obama era.
In the Obama era, he said, "I've got a pen and I've got a phone, and if Congress doesn't act, then I'm going to act." The Competitive Enterprise Institute [said], "Well, let's look at this question of executive branch overreach."
So we did. The FAA guidance documents I've heard alone (are) stacked to the ceiling.
I started thinking, "I can tell how many laws were enacted, I can look at the U.S. code, the code of federal regulations and see the rules that are out there. But nobody knows where to find all these guidance documents. They're not supposed to be binding." So I started to take a look and see where they are, and it turns out you couldn't find them, but there are a lot of them.
Federal Newswire:
Aren’t there a lot of guidance documents because the Administrative Procedure Act deems them important and gives them a thorough vetting process?
Wayne Crews:
There you go. Sometimes rules would come out without putting out a proposed rule, they would simply do an interim final rule.
There are ways of working around the Administrative Procedure Act. We talk about modernizing it and having that protect us. It's part of the answer, but not the whole way and when I noticed this about the sub-regulatory guidance, I took to calling it regulatory dark matter.
I made this analogy: When I was walking over here today, it's a cloudy day. But normally when you're walking and you can see the sun, the moon, the stars, planets. You're still only seeing the tiniest fraction of a percent of the entire universe. I started thinking that there's a little bit of an analogy to that with respect to guidance documents pouring out of the agencies.
In the Obama administration, for example, the Obamacare statute was issued, but then Obama made tweaks to it through IRS guidance documents – not going back to Congress to tweak the law, not going through a notice and comment regulation, but just doing an IRS press release and things of that [nature]... Obama himself did a press release. That was an example that struck me.
Also, some of the heated regulatory debates now, like in the labor department – what's [an independent] contractor? Who is a franchisee? All these things are in rule phases now, but that's only because in the Obama era an administrator's interpretation went out like a press release.
It was the Trump administration that turned those around. The guidance documents percolate from various agencies in that kind of way. Those are prominent ones, but we can talk about the inventory.
Federal Newswire:
Can you explain the differences between the Trump administration's Executive Guidance on interpretation of force of law and regulatory transparency, and the Biden administration’s approach?
Wayne Crews:
The good thing is that when every president comes in, even when it's a Democratic president, they tend to freeze what's in the regulatory pipeline. The problem is, some unfreeze it pretty quickly, they thaw things out and add more to it.
Trump froze what was in the Obama pipeline. Interestingly enough, and transitioning to Biden…imagine all the rules pouring out of agencies at a rate of 3,000 a year.
There's something called the Congressional Review Act [CRA] that was enacted a generation ago in 1996. It was done with small business reform, paperwork reform, regulation reduction. It was very bipartisan. The charge was even led by (Democratic Sen.] Harry Reid of Nevada.
In today's environment of contention over regulation and spending, it's almost impossible to believe. The CRA gave Congress the opportunity to overturn a rule coming out of the agencies.
Now, they'd have to get up on their hind legs and say, "OK, this is a major rule and we're going to overturn it. We've got to pass it in both Houses, president's got [to] sign [it]."
Federal Newswire:
Was this a major rule at the time since it was defined as $100 million?
Wayne Crews:
The $100 million (has) doubled. We got to hit that too. There's so much stuff to this and it's fun to follow. But that ended up being… uniformly very popular; it was like 90 to nothing in the Senate. But the CRA was enacted and by the time Trump got into office, only one rule had been overturned.
Then there were over a dozen during his administration that were rolling back those Obama rules related to dark matter. These were actual rules that were in the pipeline that they had a chance to overturn.
Now, Biden has completely overturned Trump's streamlining.
In addition to Trump rolling back rules through the CRA, you might recall his whole operation was one in, two out. If you're going to issue a new significant rule, you have to get rid of at least two others. Now, they don't have to be significant, but you have to get rid of at least two, and do it in such a way that we have a kind of zero-based budget. No more adding regulatory costs.
The first day…Biden came in, he issued something called “Modernizing Regulatory Review [MRR]” as a memorandum. Everything that Trump had done – one in, two out, his guidance document portals, protections for the public in terms of guidance documents – all of these things were rolled back by Biden.
Federal Newswire:
Why did so many members of the libertarian movement not give credit to President Trump for what he did on regulatory matters?
Wayne Crews:
It's a mix of a lot of things. I can comfortably say, as one of those small-L libertarians, that I would tend to support neither party.
With that background, I thought the Trump initiative [faced] a lot of resistance…but it wasn't just from the Democrats. You remember election night, 2016, the media, everyone was aghast at the election. Then it was very clear in 2020, and it's even clearer now, that a lot of the mainstream GOP would prefer to have Biden than Trump. So there's a great deal of resistance.
Now, in terms of the credit he got in the first year, for example, he claimed, "Well, we got rid of 22 rules for everyone." Then that kind of trickled down. What I noticed – if you think of resistance coming out of the agencies – you had OIRA, a regulatory review office at OMB, put it that way. That's the only watchdog we've got.
But in that time, you had Naomi Rao and the other heads at OIRA talking about, "Oh, look at this. We've succeeded in doing this regulatory rollback." All of that has completely reversed under Biden.
You'll have folks on one side say, “Well, even under Trump, the debt skyrocketed, right?” So, there's a tendency to say, "Well, he did a lot of regulatory stuff too.” He did AI guidelines that were problematic, bump stocks, things that conservatives were ticked off about, even people on the conservative side ticked off about the CARES Act.
Trump had his regulatory impulses too. When I reviewed these in my annual review, I called them "Swamp Things." I said Trump had these great notions and they were really important. I think the guidance executive order was the most important thing since the CRA in terms of restoring Congressional accountability.
Along with the regulatory review and the one in, two out, and the guidance protections, he did say, "Hey, we need a review of financial regulations to see what we can purge."
Those were important things to do. The reforms that were attempted under him on infrastructure were extremely important if they're done. If those had been able to materialize, it could have been something a lot better than this mix we're getting now of this fusion of business and government that's coming through the Biden infrastructure reforms.
Federal Newswire:
How do large businesses use the power of regulation to drive their competitors, specifically small businesses out of the marketplace?
Wayne Crews:
[Under] the REINS Act, which is a follow-up to the Congressional Review Act, instead of Congress having to get up and disapprove a rule, the rule doesn't go into effect unless Congress says so. Between small and large business, [this] is going to become only a more acute problem because in the wake of the CARES Act, the American Rescue Plan, the infrastructure law, the Inflation Act, the Chips and Science Act… everything from local tap water to space commercialization is being turned into a government business project, a public, private project.
Remember, capitalism is very young as a philosophy, as a way of organizing society. Airsheds, watersheds, spectrum, mineral rights, all these things, anything that was in government hands as public property prior to the Progressive Era largely remains there.
So in the 19th century, not only did we get the American system and the initial national banks, income taxes and all that kind of scheming, we got the administrative state and the FTC, the Fed and income tax. You have government much more entrenched.
There's much more of a tendency now to regulate in silos. Electricity, water, radio, FTC and big businesses can handle that.
There's this notion called rent-seeking. People think big businesses don't like regulation. It turns out they actually can like it a lot.
What really matters is, can they secure the spoils for themselves? If the regulations add costs that can be OK if it adds costs that competitors can't meet, that pushes them out.
That's why, as we talk about getting out of these changes in regulatory disclosure, oversight analysis, accountability, all that, the things that matter are going to be the ones that make sure that small businesses have the best footing.
You can see how screwy all of this is because even now, just a couple of days ago, Biden was [discussing] yet again one of his competition policies.
The last thing the government is interested in is monopolization and control of itself. But he was [advocating] pricing policies on drugs, airlines and hospitality. All of these industries where they're making complaints about pricing and transparency are some of the most heavily regulated industries in society.
A lot of the regulatory state makes it so that when there actually is a disruptor – and this is one of the big problems with the new guidelines from Central Review – the industries have already been so heavily regulated. They're already declaring new sectors like artificial intelligence captive.
There's no legislation giving regulators the right to regulate AI, just for example. So they're already being born captive. Big industries who are there now can say, "Well, yeah, we do need some guidelines." That's what you see with artificial intelligence, privacy, etc.
Big companies are in favor of all that. They even favor antitrust, even though it gets turned around and used against them.
Federal Newswire:
What is President Biden’s whole-of-government approach to regulation?
Wayne Crews:
Biden, to me, has taken that to a new level. Everything is more spending, regulation and dependency. That drove Obama, but I think in Biden's case, if you look back at his two State of the Union addresses and the progressive agenda now, [he] does exemplify that. You can see it in everything he does.
His administration, at the time he got rid of the Trump orders, changed the regulatory review function at the White House Office of Management and Budget, which is our only watchdog. He changed that and it kind of decayed over time.
Under Reagan, the Central Review was, "Well, benefits need to exceed costs." Under Clinton, that changed to, "Well, benefits, they don't need to exceed costs, but they need to justify costs."
Now with Biden, that's out altogether, and he just says, "Now we're pursuing net benefits, period." That's what he's done. There are several fronts in which he has articulated what he calls – it's his phrase – a whole-of-government approach. I think he gets it from Tony Blair.
[President Biden] has whole-of-government initiatives in equity, environmental justice, climate crisis, digital currency, long COVID, anywhere where there's an avenue to spend. What we have now is a big fusion of spending and regulation, and he's pushing that forward in a whole-of-government series.
Federal Newswire:
Are you referring to the series of rulemakings coming out of all of the different government departments to use every different agenda?
Wayne Crews:
Yeah. I noticed this initially, but all that has happened over time is I've become even more and more alarmed by it.
We talk about competition; this is collusion among the agencies that, in the private sector, wouldn't be tolerated at all.
ESG is the primary example because what it does is, it even pulls together all of the others. It's bringing in equity, climate stuff.
But what's interesting about that is when Biden would instruct agencies to come forth with their plan on equity or environment or climate. You can go and find on the White House briefing room, where they have these big organized events where you have speakers from across the agencies talking on ESG.
It's not just the executive branch departments and agencies that are engaging. It's the Federal Reserve, it's the CFPB. It's these independent agencies, the ones that are supposed to be, apart from the president, pushing these same agendas.
I'm not a lawyer, but one thing that occurred to me would be very interesting. We [should] challenge regulations on the basis of [what is] arbitrary and capricious for an agency overstepping bounds. What basis might there be for challenging things when you've got agencies colluding on something when there's no statute at all involved?
Federal Newswire:
What is Circular A-4 and how can it be used to game the system for benefit?
Wayne Crews:
One of the things that's interesting about ESG is, it's already the case that agencies like to overstep their bounds whenever they can with their rules or guidance documents or so forth. But we are now in such a [way] – and this was a point that I made in the last edition of my annual review of regulation – the laws that have passed over the last few years are going to tie to Circular A-4 with what it's about to try to do.
The laws that have passed over the past few years are so enormous in terms of their spending that they are hyper-regulatory even before anything gets down to the agency.
When we're talking about infrastructure and the directives in terms of environmental justice schemes and things of that sort, it's already hyper-regulatory.
Then when you think about the fact that the Small Business Administration, which is the one that can in some cases be our big ally, has a big boast on its website that says, "The federal government is the largest purchaser of goods and services in the world."
What is the government spending doing? A big part of it is to contractors, procurement, government employees, state and local, grants and aid. You can go and see the new rules for NASA, GSA and DOD in terms of procurement and acquisitions. They're building all of the ESG stuff into it.
So now, anybody who's a contractor has to be on board with the climate agenda and the equity agenda and so forth. Any small business that might happen to have dealings with the federal government is going to get swept up in this.
A big part of that scheme is to get control, oversight or a nudge in on pension plans across the entire society and require those investments in pension plans to also support ESG. So think about that.
It's not just that there's $2-4 trillion in regulatory costs every year. They're getting hold of the block of wealth in terms of investments and using that to push these agendas too.
Federal Newswire:
With the massive growth of the regulatory state since the 1990s and many segments of the government more focused on benefits over cost, how do you see us moving forward?
Wayne Crews:
I do a little working paper called “Tip of the Costberg,” and I like to compile these sorts of things. Even 20 years ago or more, they were over a trillion dollars.
It occurred to me one day… if they think governments are better at running the economy anyway, it would be impossible for them to regard any incremental regulation as having a cost.
Because if the government running it completely is a benefit, it logically wouldn't make any sense for a regulation to have costs. That means it may be the case that if that transformation is completely happening in OIRA, OIRA would need to be replaced. Because you cannot have a body that's the watchdog, that's [also] one of the promoters and pursuers of a regulatory state.
I did file comments on Circular A-4 on regulatory review. It basically tells agencies, “Here's how you do a cost-benefit analysis, here's what you include, here's what you leave out, here's how you discount things.” I thought, ["How do you] discount an imaginary number?"
As technology advances, as wealth increases, the case for market failure in a particular given sector should decrease. The agency expertise would constantly be looking for ways to say, "OK, we can now privatize this governance."
Your choice is always competitive discipline or political discipline. Often, competitive discipline is going to be better because it's not just an agency setting a floor, it's upstream suppliers, it's all these array of forces.
Federal Newswire:
How much does the regulatory state cost the American economy and businesses?
Wayne Crews:
It's tremendous. In a lot of ways, I've thought that we have never grasped the cost of regulation and its impact. I testified a few years ago in the House Budget Committee on the notion of a regulatory budget. I supported the notion of a regulatory-cost budget. I didn't want net benefits to be brought in the equation for all the things we're talking about.
The way I was looking at the world was, Congress already knew the benefits before it enacted [them] and they should simply decide how much of the proportion of GDP you think is appropriate. You can never measure it perfectly, but what do you think is appropriate to spend on health and safety or on these other purported benefits? Then set a budget constraint for that.
I'd mentioned, even a generation ago, costs were a trillion dollars. But we know they were a lot more because the regulatory costs didn't include central banking. All of these big programs didn't include the government steering the economy, it's just little particular rules.
Federal Newswire:
Does direct regulatory costs fail to measure lost productivity?
Wayne Crews:
There were figures on lost costs like that in terms of compliance and having to pay employees to shuffle paperwork and sometimes even house government employees in your building to do this. You're talking cost in tens and tens of billions of dollars.
Federal Newswire:
Do you recall when the EPA wanted to mandate quarterly rules training on lead and home renovation and the amount of lost hours this would have resulted in? Wouldn't a simple no-net loss of time pledge cover this?
Wayne Crews:
That is an excellent idea. [The] Small Business Advocacy is the other watchdog apart from OIRA. I would say that if we get attention to regulatory reform again, SBA would be the one to take into account this notion of time.
Always keep that on the burner ready to release. I thought something similar with respect to Trump's one in, two out. Maybe rather than getting rid of numbers of rules, dollars or something, time is equally good because we can measure [it].”
We're going to have to have new metrics like that. There are a number of things that we can discuss in terms of climbing out of this. But I think the notion of, if you can't measure dollars adequately, doing time is going to end up being something really important.
Federal Newswire:
Where does OIRA go from here?
Wayne Crews:
Well, that's the problem. It was a similar issue with EPA flipping between administrators. You can't govern like that. It's not even regulation.
Congress needs to stop this.
OIRA has to come out with its final draft of Circular A-4. That's what's in process. They're bringing in peer reviewers to look at this thing. I think that gives us a window to get Congress to notice what's going on and to maybe look at it.
In the meantime, there's already some great legislation, but I think it needs to be built upon.
As changes occur in society and we become wealthier, [we need to say] "Here's how we farm this back out to the state and local governments, back to individuals, and here's how we unwind." You could call it an office of unwinding or something.
We're in the flow now. You can have OIRA do what it's doing, [but] I think it's going to be a bad result. I think Congress needs to stop it, but there needs to be a recognition that just because you call something regulation, you're probably not regulating.
I joke sometimes that all tainted meat was approved by the USDA. So just because you set that floor doesn't mean you're actually [doing something positive].
