Trump’s Latest Executive Order: Scrap Two Regs for the Price of One

Remember how Donald Trump bragged he was going to run the country like a business?

Imagine if before Trump could open a new casino, he was bound by a rule to close two existing casinos, and the costs of the new casino couldn't exceed the cost savings from no longer operating the old ones. Would this make sense as a business strategy? Of course not.

Unless, of course, you were secretly trying to sabotage the business and run it into the ground (and maybe drown it in a bathtub).

Funny then, that Trump would impose that rule on the agencies now working for him. But that's just what he's done. Under Trump's latest executive order (signed Monday, January 30), before a federal agency can issue a new regulation, the agency first has to rescind two pre-existing regulations. And the cost savings from scrapping the two existing regulations has to equal or exceed the costs of the new one.

That's right. It's a kind of backwards, upside-down, two-for-one sale.

The idea that we would measure the effect of a regulation by looking only at its costs is, of course, patently absurd. Regulations, like casinos, have both costs and benefits – benefits like keeping children from being poisoned by lead in their drinking water, or preventing another economic meltdown, or keeping dangerous toxic chemicals off the market. Looking at just the costs without the benefits gives you only half the picture.

What business, in considering whether to make a new investment, would look only at the costs side of the ledger and not the expected revenues? Would one of Trump's companies decide whether to build a new Trump tower by considering just the costs and not the money it would generate?

Despite the overblown rhetoric of the right, in general, federal regulations turn out to be a bargain for the American people. The Office of Management and Budget's annual Report to Congress on the Costs and Benefits of federal regulation regularly show the benefits of federal regulations vastly outweigh the costs. For the decade ending in 2014, for example, costs were pegged at $68 to $103 billion, while benefits came in at least twice that: $261 to $981 billion (and those benefit estimates are likely undervalued for a whole host of reasons, but that's another story).

Some will argue that the costs imposed on businesses by regulations are akin to a tax, and that the kind of "costs-only regulatory budgeting" in Trump's new order is necessary in order to keep these "taxes" within reasonable limits. But the tax analogy is flawed. When a regulation imposes costs on a business by, for example, forcing a power plant to install scrubbers on its smoke stacks to reduce pollution, it's not so much imposing a tax as forcing the business to simply take responsibility for at least some of its actions that impose harms on other people without their consent – people who are getting asthma, bronchitis, and heart disease just from breathing the air. Simply internalizing externalities in this way is not government overreach or the nanny state run amok. It's just a matter of basic fairness and personal responsibility – what we tell our four-year-old children: clean up your own messes.

There are already plenty of checks in place to make sure agencies don't issue overly burdensome regulations. For decades, there has been an executive order in place – through both Democratic and Republican administrations – that requires agencies to show that a new regulation's benefits, justify its costs. There are also a host of other mechanisms in place to keep frivolous or unduly costly regulations off the books. The statute that authorizes an agency to issue regulations in the first place often requires the agency to consider the costs of regulations in one fashion or another. The Administrative Procedure Act requires agencies to publish proposed regulations and consider comments from the public before finalizing them. The Paperwork Reduction Act ensures that new regulations don't impose overly burdensome paperwork requirements on businesses. And the Regulatory Flexibility Act imposes on agencies a special responsibility to account for the impacts that their regulations could have on small businesses.

There are lots of important regulations on federal agencies' to-do lists right now, including a bunch that both Republicans and Democrats agree on. EPA needs to update its 25-year-old regulation on lead in drinking water, for one – to prevent another disaster like the Flint, Michigan, debacle. There's also a bipartisan push to issue new regulations to prevent leaks from natural gas storage sites (like the massive Aliso Canyon leak of a year ago), to ensure the safety of self-driving cars, and to implement the new chemical safety law that passed Congress by overwhelming majorities last spring – just to name a few. Trump's new order promises to hamstring all of these efforts and more.

Of course, that’s exactly the point of the order — to hamstring the regulatory process, and make life more profitable for companies that pollute the air and water, endanger workers with unsafe conditions on the job, manufacture unsafe products, and more. In that way, the two-for-one order is just another in a long line of efforts to dismantle much needed safeguards — and a particularly simple-minded one at that.