Biden's Overhaul Effort Should Include the 'Basic Principles' of Regulation, Too

James Goodwin

March 24, 2021

In a little-noticed move on Day One, President Joe Biden issued a memo designed to institute a more progressive process for developing new regulations. Such an effort is essential, given that timely, effective regulations will play a key role in achieving Biden-Harris administration's policy agenda. To succeed, however, it must also tackle the conservative philosophy that guides our government's rulemaking process.

Biden's memo focuses on the mechanics of the rulemaking process, and especially two institutions that heavily influence regulatory decisions: centralized, White House review of proposed rules and economics-focused assessments of them. President Reagan and his successors have issued a string of executive orders to govern these institutions. Biden's memo addresses flaws in the current iteration, Executive Order 12866 (along with some other, related orders). Fixing these flaws is necessary to create a more progressive regulatory system that better protects people and the planet.

A flawed foundation

But 12866's anti-regulatory problems run much deeper than institutional mechanics. Indeed, its entire apparatus is grounded in a neoliberal orthodoxy that casts regulations as dubious in legitimacy and counsels against using them except as a last resort. Attempts to build a new progressive regulatory system on top of this flawed theoretical foundation are doomed.

The neoliberal vision of regulation is distilled in Section 1 of Executive Order 12866, which establishes as its default preference the "alternative of not regulating." When that is not feasible, it directs agencies to design regulations so as to "maximize net benefits."

In the case of rules that are authorized but not required by law, so-called "discretionary rules," it recognizes as legitimate only those that address "material failures of private markets," thereby placing off limits agency efforts to use regulations to promote nonmarket goals, such as human dignity and justice.

In practice, this approach means that agencies' primary concern isn't ensuring that people have clean drinking water or safe workplaces. Rather, it is to ensure regulations don't inhibit maximum economic growth. This denies agencies' moral responsibility to prevent harms like water pollution illnesses and workplace deaths. Instead, agencies strive for an "optimal" number of illnesses and deaths by allowing for some regulations of hazardous industries, but not too much.

How to ensure agencies aren't regulating "too much"? Executive Order 12866 gives clear instructions here, too, directing agencies to identify and assess "available alternatives to direct regulation," including economic incentives. It also calls on agencies to "specify performance objectives, rather than specifying the behavior or manner of compliance that regulated entities must adopt." (Such rules would, for instance, call on industries to reduce their air pollution emissions by a certain percentage, rather than employ a specified reduction technology, which is generally known to achieve a determined amount of reductions. This alternative approach is much easier for industry to game and requires intensive monitoring and enforcement — something agencies do not have the resources for — to be effective.) And above all, it urges each agency to "tailor its regulations to impose the least burden on society."

A misleading view of regulation

Executive Order 12866 certainly inspires a dim view of regulation — precisely the outcome that the architects of neoliberal orthodoxy were after.

If federal regulatory policy remains grounded in this negative vision, the Biden-Harris administration's effort to overhaul the regulatory process will probably not amount to much. While the Biden memo calls for a fuller accounting of "regulatory benefits that are difficult or impossible to quantify," it will make little practical difference if those benefits are still treated as morally equivalent to protecting industry profits. Nor will its aspiration to redesign regulatory analysis "to ensure that regulatory initiatives appropriately benefit and do not inappropriately burden disadvantaged, vulnerable, or marginalized communities" if regulatory initiatives are watered down into meaningless "economic incentives" or vague "performance objectives."

In short, a "more progressive" approach to centralized review or regulatory analysis won't mean much if it is still in the service of minimizing regulations, if not avoiding them altogether.

Unfortunately, Biden's memo doesn't give much hope that the administration intends to scrap the neoliberal foundation undergirding Executive Order 12866. To be sure, it aims to create a new approach to regulatory review that affirmatively promotes regulations that advance key values like racial justice and human dignity. Yet it also "reaffirms the basic principles set forth in" in Executive Order12866 — an apparent reference to its neoliberal vision of regulation.

Indeed, there's not much left to the order if the administration intends to overhaul both its centralized review and regulatory analysis procedures and its statement of philosophy and principles. If both were on the table, then it would make more sense to repeal Executive Order 12866 and start from scratch. (I can understand why the Biden-Harris administration would want to present this overhaul as a continuation of the past, but it doesn't leave them much room to maneuver.)

Still, not all hope is lost. Implementing Biden's memo gives the administration an opportunity to define a positive, progressive vision of regulation. Above all, this vision must boldly champion regulation as an unqualified good. It must explain and re-explain in a clear and compelling manner the instrumental benefits that an effective regulatory system offers our society, such as by providing a powerful vehicle for collective action and democratic self-rule and by serving as a guarantor of broadly shared public values, such as fairness, justice, and equity.

Finally, this vision must directly counter conservative attacks on regulation by promoting the regulatory system as a crucial foundation for a healthy economy, as freedom-enhancing, and as a legitimate part of our constitutional tradition.

Articulating and amplifying such a positive vision is an essential first step toward realizing the kind of progressive regulatory system we need as we build a more just and equitable America. More immediately, it would also help reinforce the Biden-Harris administration's broader efforts to use regulation to advance its policy agenda. Clearly, none of this will be easy, but it will certainly be worth the effort.

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