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Executive Order 13771 

Original Text

Effective Dates
1/30/2017 - Present

Reform Goals
Manage the growing costs of federal regulatory compliance by requiring agencies to cut two rules for every new rule issued, setting a net-zero cap on new regulatory costs imposed in 2017, and imposing a regulatory budget on executive agencies and departments.

Requirements (What of whom?)
For every new regulation proposed, the executive agency proposing the rule must identify two rules to be repealed. Agency heads “are directed” that the total incremental cost of all new regulations (cost of each new regulation -  cost of two repealed regulations) in 2017 shall be no greater than zero. In subsequent fiscal years, the OMB will allot to each agency a “cost allowance” which they may not exceed in promulgating new regulations. 

The head of each agency will submit to the OMB an account of the projected costs/savings of each two-for-one swap before finalizing the new rule. 

Additional guidance on how to enforce the order was also provided in a follow up executive order in February 2017, which establishes a Regulatory Reform Officer (RRO) within each agency to identify rules that 

  1. eliminate jobs, or inhibit job creation;
  2. are outdated, unnecessary, or ineffective;
  3. impose costs that exceed benefits;
  4. create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies;
  5. those regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard for reproducibility

Independent regulatory agencies are exempted.

Oversight for rule compliance
Heavy oversight role given to the Director of the Office of Management and Budget, who is tasked with defining how agencies should define “rule” and “costs”. RRO's must report by May 27th on progress to agency heads, who are in turn accountable to the President (e.g. can be fired by the President for any reason at any time).

Reform “Teeth”
This will depend heavily on how the OMB defines “rule” and “cost”, but imposing a hard metric (“zero net increase”) is a strong enforcement criteria. 

Outcomes
TBD

Commentary
Regulatory budgets are the only known strategy proven to reduce red tape and regulatory compliance burdens. Key international success stories include:

  • British Columbia provincial government
    • Committed to a one-third reduction in rules from 2001-2004 and put a freeze on new rules until 2019.  Achieved total rule reduction of over 47% since 2001. [1] British Columbia went from being one of the worst performing provinces economically before 2001 to one of the best following red tape cuts. [2]
  • Canadian federal government
    • Following the success of British Columbia, passed a “one for one” system in 2012. According to the 2014-2015 progress report, “Since its introduction in 2012–13, the one-for-one rule has resulted in nearly $24 million in administrative burden relief and an estimated 344,000 fewer hours spent annually dealing with regulatory red tape. There has also been a reduction of 20 net regulations.” [3]
  • The Netherlands
    • In 2003, passed the “Dutch Administrative Burden Reduction Programme”, which set and achieved a 25% reduction in regulations from 2003-2008. [4]

A regulatory budget forces regulators to treat private sector compliance costs as a scarce resource. When humans are faced with scarcity, they tend to become more efficient and innovative at making trade-offs to achieve goals. If this most recent executive order is successful in changing agency personnel incentives to carefully manage their allotted “regulatory resource pool”, the American people may finally experience some relief from the growing federal regulatory burden. It should also result in better social outcomes for the existing $2 trillion a year, or roughly 12% of our GDP, that we spend as a country complying with federal regulations.  

References

  1. "Achieving a Modern Regulatory Environment: B.C.’s Regulatory Reform Initiative." Fifth Annual Report | 2015/2016. Link , PDF
  2. Laura Jones. "Cutting Red Tape in Canada: A Regulatory Reform Model for the United States?" Mercatus Research, Mercatus Center at George Mason University, Arlington,
    VA, November 2015. Link
  3. Government of Canada. "The 2014–15 Scorecard Report on Reducing Regulatory Red Tape" Link
  4. Christian Rice. "Lessons From Dutch Regulatory Reform: How The U.S. Could Save $450 billion Per Year" Competitive Enterprise Institute. April 4, 2013. Link