The Executive Order To Make Deregulation Permanent

The White House Office of Management and Budget’s new Streamlining the Review of Regulatory Actions memorandum signals a preferential stance toward deregulation, urging agencies to quantify and document deregulatory gains just as rigorously as they do rule costs.

It’s an important enough shift to need amplification, clarification and extension in a new Trump Executive Order—one that overhauls how White House regulatory review is conducted and, ideally, precludes most new regulation altogether.

The current tentpole, the Clinton-era Executive Order 12866 (“Regulatory Planning and Review”) replaced the Reagan convention that benefits of regulation should “outweigh” costs with the weaker stipulation that benefits merely “justify” new burdens.

Granted, Trump has already issued 212 executive orders along with numerous proclamations and memoranda, many targeting regulation in general or in specific sectors. Yet Congress has not codified any of Trump’s regulatory streamlining efforts.

The new Streamlining directive accelerates agency and OMB review timetables to address the “ossification” of the rulemaking process—something acknowledged by both left and right. More entrepreneurially, it lays out an agenda for operationalizing the Administrative Procedure Act’s “good cause” exemption to eliminate certain “facially unlawful” rules without public comment based on recent Supreme Court jurisprudence. That’s a novel use in need of judicial testing (detailed here).

But the memo’s closing section on Developing Better Deregulatory Records articulates a semi-philosophical shift toward making deregulation a permanent operational mode. It’s skeletal, and will be ditched at the first opportunity if the White House changes hands, but it could carry far greater weight if fleshed out in a new executive order rewriting E.O. 12866. Ideally, Congress would codify the approach, not just for streamlining existing rules but for preemptive contemplation before any new rulemaking.

Bringing Agencies to Heel

Agencies have rarely met a regulation they disliked, and their incentives align with expanding “net benefits” largely without limit. Criticism of the new directive captures that protective stance. The Streamlining memorandum is “propaganda” according to Public Citizen, that “rests on the irrational proposition that all deregulation is good for America,” claiming it tells agencies to do the administration’s bidding by repealing “safeguards regardless of their benefits to consumers, workers, the economy and the environment.”

Agencies have been resisting such “bidding” since Trump’s first streamlining order, however. “To date,” the OMB memo vexedly notes, “agencies do not appear to be fully maximizing their energy in carrying out these directives.”

Benefits of Deregulation As A Policy Anchor

What the Streamlining memo reintroduces—with a vigor perhaps not seen since the long-forgotten Bush 1.0 Regulatory Program of the U.S. Government—is recognition of the benefits of deregulation in increasing “the scope of private freedom.”

Appealing to agencies to make OMB “your partner in the deregulation agenda,” the memo correctly observes that “deregulation will leave more individuals and firms free to pursue their own self-defined interests, unfettered.” So too will avoiding unnecessary regulation in the first place.

“Quantifying” The Benefits Of Deregulation

Deregulation itself produces real and sometimes “measurable” public benefits—freedom, innovation and prosperity—that deserve analytical weight and credit. The memorandum urges agencies to quantify and document these gains as rigorously as they assess regulatory costs. “Indeed, meaningful compliance with Section 3 of EO 14192 [Unleashing Prosperity Through Deregulation] necessitates agencies engaging in cost-benefit quantification, as that EO requires a quantitative netting of regulatory vs. deregulatory rules.”

Some of this over-reliance on quantification can backfire, however. The reality is that the vast sweep of regulatory costs remains unfathomed and unmeasured, and rules are often justified on qualitative or arbitrary grounds—terrain where pro-regulatory forces excel and Team Deregulation struggles.

“Aggregated Impacts”

The memorandum’s emphasis on the “Private-Conduct Liberty Benefits” of deregulation—such as “freedom of choice in the marketplace”—is paired with recognition of the compounded damage from the decades-long accumulation of rules, and of the consumer and societal benefits of unwinding them.

Codifying Streamlining

Near its conclusion on the importance of building fact-based deregulatory records, the memorandum notes the prevalence of “uncertainty” and observes that, “Whenever agencies can see that the predictions of costs and benefits it made when it once stood at the door to new regulation have not been borne out by experience,” a powerful case for deregulation emerges.

As the year’s end approaches, it’s worth recalling that this was when the first Trump administration would announce progress on the one-in, two-out deregulatory agenda—now a one-in, ten-out program.

There is much more that can be done quickly for Trump to advance this deregulatory agenda and make it permanent. At root in the clash over regulation vs. deregulation is a conflict of visions over the proper size and scope of government and its legitimate role in society; over separation of powers; over executive overreach; and even over the fundamental relation of the individual to the state.

In this sense, the OMB memo omits more than it contains, leaving the more complete agenda to be articulated and acted upon.

A Broader Deregulatory Blueprint

The administrative state remains nearly monolithic in its affirmation of an ever-expanding regulatory apparatus, its disregard for measuring and disclosing costs, its indifference to political or administrative failure (while quick to claim “market failure”), and its neglect of extending property rights and classical liberal institutions to complex modern problems. Under those faulty premises, what agencies practice is not regulation at all—but intervention for its own sake. The edifice needs to be dismantled.

The fundamental failure of the administrative state, even as it returns to work post-“shutdown,” is that rather than seeing regulation as a costly last resort, it defaults to centralized planning, displaces private sector competitive disciplines and imposes costly politicized and utilitarian “net-benefits.”

The Streamlining memo alone cannot override the administrative state’s nature. And Trump, for his part, harbors his own “swampy” impulses—price controls, partial nationalizations—that tend to escape the scrutiny the memo embodies.

To make deregulation permanent, economic and social governance must be transferred away from today’s dominant administrative institutions toward competitive ones. Reaffirmation of federalism and restoration of powers to states is also necessary (another lesson of the shutdown).

The Streamlining memo gives the wheel of reform an aggressive new spin, but additional components—including a governing Trump executive order to replace E.O. 12866 and congressional action on regulatory streamlining—are essential next steps.

Elements of such an agenda could include:

• Prioritize the termination of agencies and their enabling statutes
• Abolish private aid and end the practice of public/private partnerships that entwine business and government
• Reassert compliance with existing laws on regulatory oversight that are routinely ignored, such as the Regulatory Flexibility Act, the Unfunded Mandates Act and requirements such as that for an aggregate regulatory cost estimate
• Acknowledge political and administrative failure as more likely than “market failure” (as Competitive Enterprise Institute founder Fred L. Smith Jr. put it, often the problem is not market failure but “the failure to have markets.”)
• Replace “net benefit” analysis with regulatory cost budgeting
• Account for differential effects on small versus large businesses
• Limit guidance documents and build disclosure portals for sub-regulatory actions, since much recent legislation—like the infrastructure law and the CHIPS Act—can operate through such “regulatory dark matter.” (The “Guidance Out Of Darkness (GOOD Act) would codify such portals.)

The Streamlining memo marks a significant step toward getting agencies to internalize the pursuit of deregulation. Trump should now issue an executive order that builds on this foundation and makes deregulation a standing principle of governance, not just a temporary policy, with at least the staying power of the Clinton-era directive.

Regulation renovation can then be made complete when Congress picks up the tools the Constitution left lying about the yard.