Today, Center for Progressive Reform board member and University of Texas School of Law professor Thomas O. McGarity will testify at a Hearing hosted by the Senate Judiciary Committee entitled, “Justice Delayed II: the Impact of Nonrule RuleMakiing in Auto Safey and Mental Health.”
McGarity’s testimony can be read in full here.
According to the testimony, some possible solutions to the problems created by nonrule rulemaking include:
Agencies that are conscientiously committed to carrying out their statutory missions will continue to employ informal rulemaking with all of its burdensome accoutrements if they have no other alternative. For example, EPA’s statutes typically require it to use informal rulemaking to fill in the necessary implementation details, and they often specify precise deadlines for EPA action. Its heavy rulemaking output during the past few years is a testament to the ability of a very determined agency to employ even a broken system to achieve important statutory goals. But those efforts consumed scarce resources that are unlikely to be available in such quantities in the future. The agency has on many occasions made policy through less formal devices like guidance documents that are not subject to many of the requirements that afflict informal rulemaking. And it will no doubt continue to do so as the resources available to the agency dwindle.
There are two ways to address the predictable efforts of agencies to avoid the burdens and vicissitudes of informal rulemaking. One approach, much preferred among regulatees, is to extend the reach of centralized review, judicial review, and extra-statutory analytical requirement to less formal policymaking vehicles like policy statements, guidance documents, and interim final rules that are never finalized. For example, both Presidents George W. Bush and Barack Obama took steps to ensure that, during their administrations, OIRA would have an opportunity to review important guidance documents, policy statements, and the like.1
The other approach is to take away the incentive to use rulemaking avoidance devices by relieving the agencies of many of the burdensome aspects of the existing informal rulemaking process. Rather than giving up on informal rulemaking, the agencies and Congress should be attempting to extract it from the morass that currently envelops it.
Greater Oversight of the Real-World Rulemaking Process.
The first thing that Congress can do to fix the broken informal rulemaking model is to step up its oversight of the rulemaking process and of the roles that agency staffs, OIRA desk officers, lobbyists for regulatees and beneficiary groups, think tanks, trade associations, and ordinary citizens play in that process. Congressional oversight of rulemaking should be systemic and not limited to inquiries into particular rulemaking exercises. This subcommittee is taking an important step in the right direction by holding these hearings. It should continue to probe the rulemaking process, perhaps with the aid of the Congressional Research Service and the Government Accountability Office, to build the legislative record necessary to support legislation addressing the failures of the current rulemaking model.
Eliminating Procedural and Analytical Mandates in Statutes.
Some agencies like OSHA believe that their statutes mandate a more formal rulemaking process than the notice-and-comment process envisioned by section 553. Congress could amend those statutes to make its intent clear that formal hearings and other formal procedures are not necessary in particular contexts.
Congress could enact legislation to reduce or eliminate one or more of the many analytical requirements in statutes and executive orders. An agency is most interested in analyzing issues that are directly relevant to the success or failure of the rulemaking initiative in the relevant judicial and political arenas. Eliminating marginally useful analytical requirements would probably not reduce the intensity of the agency’s analysis of the pertinent issues. Since the process of producing analytical paperwork is both time consuming and expensive, the rulemaking process would probably move along more expeditiously after Congress removed unnecessary analytical hurdles.
Since intense analysis of the costs and benefits of proposed and final regulations is more useful in some areas than in others, Congress (and the President) might usefully explore the possibility of reducing or eliminating some aspects of the analytical requirements in some regulatory areas. For example, whether the benefits of analyzing the impact of regulations on small entities are outweighed by the negative impact of such analytical requirements on the flexibility of rulemaking is an open question. Congress might revisit the Regulatory Flexibility Act to form some conclusions as to whether that statute is reducing flexibility, rather than enhancing it.
Finalizing Interim Final Rules.
If interim final rules never have to be finalized, the comments that the agency accepts can be a waste of time and effort. More importantly, the agency never gets the benefit of input from outsiders, a result that is entirely inconsistent with purpose of notice and comment rulemaking. Congress could solve this problem by amending the APA to provide that when an agency issues an interim final rule, it must also issue it as a proposed rule and that the interim final rule automatically expires after three years if the agency does not promulgate a final rule during the interim. Congress has already adopted this approach in the context of “temporary regulations” issued by the Internal Revenue Service.2
Cutting Back on White House Oversight.
The primary objection to OIRA review of rulemaking is that OIRA’s input often goes beyond comments on the agency’s analysis to demands that the agency change the substance of the rules. Unidentified White House officials can use the OIRA review process to advance policies that run counter to the agencies’ statutes. Agencies are understandably reluctant to cede decisionmaking authority to OIRA, and Congress should be equally concerned about the White House’s de facto exercise of unconstrained power over the agencies’ implementation of congressional goals. Much of what motivates the agencies to attempt to circumvent the rulemaking process is the prospect dealing with the acrimonious and time-consuming process of OIRA review.
Abuse of the OIRA review process can be limited and its accountability enhanced by increasing its transparency. OIRA review is not governed by the Administrative Procedure Act, and the transparency of that review process has waxed and waned over the years. OIRA review remains far from transparent, because the rules of engagement with agencies are often ignored in practice. Moreover, the content of conversations between outside lobbyists and White House and OIRA officials concerning particular rulemaking initiatives are not generally disclosed. Still another round of conversations between industry and interest group representatives and government officials can take place after the rule is challenged in court, as the parties negotiate about the content of the regulations as part of an overall effort to settle the litigation. These negotiations are not bound by any rules or procedures, and the contents of the discussions are rarely disclosed voluntarily.
OIRA review will be much less intrusive if the contents of OIRA-agency communications and communications between outside interests and OIRA or other White House officials regarding particular rulemaking initiatives are spread on the public record for all to see. When OIRA staffers know that the time consumed in the review process and the extent to which they attempt to substitute their policy preferences for those of the appointed agency heads and Congress will become publicly available, they may be less likely to use the review process as a vehicle for affecting substantive agency policy.
A Softer Judicial Look at the Substance of Rules.
Reducing the intensity of substantive judicial review would probably enhance rulemaking flexibility, but it would also leave more room for administrative arbitrariness. We are therefore left with a delicate balance between the increased accountability afforded by judicial review and the risk of overly intrusive judicial interventions as courts strive to perfect an inherently imperfect process through the “hard look” doctrine. I have suggested that a better metaphor for this evaluative function may be that of the “pass-fail prof” who must determine whether a research paper on a topic about which he is vaguely familiar meets the minimum standards for passable work. His disagreement with the paper’s conclusions will certainly not cause him to flunk the student. Even a poor analysis will not cause the paper to fail, if the analysis is at least plausible. A check of the citations may reveal that the student could have found more sources or that he may have mischaracterized one of the cited sources, and still the paper may pass. Only where there is an inexcusable gap in the analysis, an obvious misquote, or evidence of intellectual dishonesty will the pass-fail prof put an “F” on the paper and send the student back to try again. When the courts engage in substantive judicial review, they should, like the pass-fail prof, see their role as that of screening out bad decisions, rather than ensuring that agencies reach the “best” decisions.
Congress might think about enacting legislation designed to signal to the courts its intention that they reduce the intensity of judicial review of informal rulemaking. It could, for example, amend the APA to change the scope of review for informal rulemaking. That being said, it is hard to imagine words that could specify less intensive review than the words “arbitrary and capricious.” At the end of the day, the scope of rulemaking review may be an issue that is best worked out by the courts with the aid of outside criticism from administrative law scholars.
In my view, the venerable informal rulemaking process established by section 553 of the Administrative Procedure Act is broken. This committee is in an ideal position to begin the lengthy process of repairing this broken, but extremely valuable policymaking tool. I applaud the members of the committee for their willingness to initiate an ongoing dialogue on the virtues and limitations of informal rulemaking as a vehicle for implementing federal regulatory statutes.
1 See Executive Order 13422, 3 C.F.R. 191 (2007) (extending OIRA review to “significant” guidance documents, which it generally defined to include guidance documents that would have an annual economic effect of $100 million or more or some other large economic or policy effect); Memorandum from Peter Orszag, Director, White House Office of Management and Budget, to the Heads and Acting Heads of Executive Departments and Agencies (Mar. 4, 2009), available at http://www.whitehouse.gov/sites/default/files/omb/assets/memoranda_fy2009/m09-13.pdf (clarifying that even though President Obama had revoked Executive Order 13422, significant guidance documents would still remain the subject of OIRA review during the Obama Administration).
2 26 U.S.C. § 7805(e).