The Office of Management and Budget (OMB) recently released a guidance document on the subject of President Trump’s January 30, 2017 executive order, EO 13771, titled “Reducing Regulation and Controlling Regulatory Cost.”  That executive order garnered a great deal of attention with its bold but simplistic decree that “[u]nless prohibited by law, whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.”  OMB’s guidance provides some insight into how that ambitious deregulatory agenda might operate in practice.  Not surprisingly, a closer look at EO 13711 and OMB’s guidance reveals that a significant rollback of the regulatory state is not likely imminent.  Instead, the regulation may push agencies to search out and eliminate minor, archaic regulations that remain on the books but have little or no effect on the regulated community.

EO 13771 requires that any incremental costs associated with a new regulatory action shall be offset by the elimination of existing costs associated with at least two prior regulations.  Although this language appears to require a net reduction in regulatory impacts, OMB has interpreted it in a way that will almost certainly not.

OMB’s guidance provides that “[i]n general, executive departments or agencies may comply with those requirements by issuing two EO 13771 deregulatory actions…for each EO 13771 regulatory action.”  Regulatory actions and deregulatory actions, however, are not two equal sides of the same coin.  Regulatory actions are only “significant regulatory actions as defined in Section 3(f) of EO 12866…” and significant guidance documents.  EO 12866 significant regulatory actions are those that have an annual effect on the economy of over $100 million or have other substantial impacts.  While only significant regulatory actions need to be offset, the “deregulatory actions” that they may be offset by need not be “significant.”

The impact of the requirement that any “new incremental costs associated with new regulation” be offset by the elimination of existing costs is also weakened by OMB’s guidance.  “Incremental costs” are not simply the costs of compliance for the regulated community.  Rather, “total incremental costs” are the sum of all costs minus all “cost savings.” As the guidance recognizes,  “[t}here are several types of impacts that…could be reasonably categorized as either benefits or costs, with the only difference being the sign (positive or negative) on the estimates.”  In other words, in many situations agencies may simply categorize the benefits of the regulatory action as “negative costs” and thereby internally reduce a regulation’s “new incremental costs.” Although the guidance says “agencies should conform to the accounting conventions they have followed in past analyses” when accounting for costs and benefits, an increased labeling of regulatory benefits as “negative costs” may be an appealing way for agencies to work around EO 13771.

Taken together, these two components of the guidance suggest we should expect to see few if any major regulations undone, even as new significant regulatory actions are promulgated.

The requirement that significant regulatory action be tied to some sort of deregulatory action may send agencies looking into the archives to see what outdated, insignificant regulations can come off the books.  There is value to that.  But do not expect EO 13771 to spur the deconstruction of the administrative state the administration has promised.