Smarter Deregulation

Abstract

Citing high regulatory costs, the Trump administration has taken drastic steps towards administrative deregulation, prioritizing the repeal of existing regulations and discouraging the promulgation of new regulations. Executive directives advancing this deregulatory agenda encourage agencies to subvert the procedural and analytical requirements governing agency action, including reasoned decisionmaking, public participation, and regulatory impact analysis. The administration has directed agencies to prioritize compliance-cost reductions, most concerningly, by excluding public health impacts from regulatory impact analysis altogether. Myopic prioritization of compliance-cost reductions fails to account for the true quantitative and qualitative impacts associated with regulation and represents an unprecedented shift away from a regulatory decisionmaking process long-premised on social welfare maximization. The Trump Administration's policies do not constitute a defensible approach to deregulation. The revocation of a regulation can be desirable in some circumstances, for example, when it becomes inefficient due to technological advancements or changed circumstances. However, a rational and well-reasoned approach to deregulation is both economically preferable and legally mandated. We propose a smarter approach to deregulation by arguing that decisions to rescind existing regulations should be made by leveraging the empirical principles of cost-benefit analysis to prioritize deregulatory efforts towards regulations that are comparatively less costeffective. Under the proposed framework, agencies facing an upper bound on the regulatory costs an administration is willing to incur should compare the cost-effectiveness of similar regulations. Regulations that rank low on this metric are relatively less cost-efficient and therefore are the proper target for deregulatory action intended to achieve compliance cost savings. Conversely, agency action revoking regulations that are comparatively more costeffective is unjustified and will be vulnerable to legal challenges. The proposed approach serves to justify efficient deregulatory action while ensuring well-reasoned and transparent agency decisionmaking. Applying this approach to environmental regulations, which are a main target of recent deregulatory efforts, this paper demonstrates that many of these regulations are comparatively highly cost beneficial. Although environmental regulations account for the largest share of U.S. regulatory costs, they also generate substantial economic and public health benefits by mitigating future harms associated with climate change. Consequently, attempts to roll back these regulations are likely unjustified and violative of legal standards requiring agency action to be well-reasoned, evidence based, and transparent.

Keywords: deregulation, regulatory risk, cost-benefit analysis, administrative law, regulation, agencies, executive power, environmental law, environmental policy, environmental regulation, endangerment finding

JEL Classification: D61, K23, K32, L50, Q51, Q59