What If The Administrative State Cannot Be Reformed?

For the past couple of years I’ve been emphasizing the usefulness of an executive order from President Donald Trump on regulatory “guidance documents” to bridge the gap between the president’s initial flurry of regulatory reform activity, and some hypothetical future congressional configuration that would make further permanent action on regulatory or administrative state streamlining possible.

For context, while president Trump has technically succeeded in the two-for-one regulatory rollback, as covered in the 2019 Ten Thousand Commandments, he has vast regulatory impulses of his own to combat.

Guidance documents are a prominent means of influencing policy, and their misuse has become a bipartisan concern as these can have illegal and unintended regulatory effect, Examples include Obama-era Labor Department guidance documents on independent contracting and franchising/joint employment (see here for more “inventory”).

Legislation to deal with guidance documents has become a part of the policy landscape. The so-called GOOD Act, which stands for “Guidance Out Of Darkness,” has been reintroduced by Sen. Ron Johnson (R-WI), for example.

But a Democratic Congress is unlikely to entertain regulatory reform, and certainly not stoop to working with Trump on it apart from perhaps some half-hearted tweaks accompanying big infrastructure spending. For that reason I have been suggesting a new “iconic” executive order on guidance, since most law is from agencies now, not Congress. In 2018, there were 313 laws passed by Congress and signed by Trump, but 3,368 rules and regulations, not even counting guidance.

By “iconic” I mean one that would have the staying power of Ronald Reagan’s 1981 E.O. 12291 on regulatory review and oversight and (some) cost-benefit analysis. Jim Tozzi of the Center for Regulatory Effectiveness used this apt term to describe the Reagan order.

There are a number of key features or planks I think this sweeping directive needs to include (detailed here; for a shorter version see here). Recently a breakthrough occurred in the form of Acting Office of Management and Budget (OMB) Director Russell Vought’s policy memorandum to all executive and independent agencies reiterating (it is already law, but often ignored) that they must send both “rules” and guidance to Congress and GAO for them to be regarded valid under the Congressional Review Act. This step is important because it gives Congress an opportunity to enact a “resolution of disapproval.

I have long thought and grown increasingly concerned that the classical liberal, conservative and libertarian movements spend too much time playing in a sandbox on the left’s vast administrative state beach, one where the progressives/interventionists set the terms. The task now is to create the body of knowledge and information demonstrating that the coercive administrative state does not and cannot work to safeguard liberty, rather than just try to “reform” it or “study” it. The magnitude of the problems of unaccountability, non-discosure, unmeasurability, and the sheer unfathomable character of the regulatory/interventionist state is partly reflected in this outlinecalled “Rule of Flaw” (I have a short essay about it here).

The grander context in the present era llustrating why a new approach is required is that the administrative state has long since abandoned the institutions of property rights, as most large scale or complex assets in the hands of government at the dawn of the progressive era (airsheds, watersheds, spectrum) remain there and governed politically. (As just one consequence, this will cause chaos and mean mass government surveillance for “smart cities.”). The destructiveness of this has been noted often by Fred L. Smith Jr., the founder of the Competitive Enterprise Institute (my organization, which is 35 years old this year).

Secondly, the administrative state pre-exists all emergent new technologies and services, such that even the Trump Securities and Exchange Commission (SEC) will regulate digital currencies as “securities” if it can (and the list goes on).

The vast gulf between the entrenched administrative state and the classical liberal stance is captured in the latter’s view  (also pointed out by Fred), that large scale capitalism does not merely make the world richer, but fairer, safer, and cleaner – all the things that regulators claim they do. (See “The Morality and Virtues of Capitalism and the Firm: Defending Capitalism in Theory and Practice.”)

Along with a new order on guidance, I have argued that an additional executive order from Trump reaffirming the requirement that the OMB perform an aggregate, not partial, regulatory cost assessment as stipulated under the Regulatory right-to-Know Act. Right now, the OMB looks only at the current year and prior ten years’ (partial) costs and benefits. That means the entire 20^th Century (alas, even earlier) of antitrust, central banking, New Deal, big-spending with regulatory effect, and progressivism and nannyism generally are ignored. Also ignored for good measure is the first decade of the 21^st century.

Such a directive is important not because I think regulatory costs can be calculated, but because I think they cannot be. I want to force open the gaps, to demonstrate we don’t even remotely know what we don’t know, establishing in an official way the inherent unaccountability and unworkability of the administrative state and the need instead for congressional lawmaking to internalize those unknowns.

The aim, therefore, cannot be an ultimately futile “administrative state reform,” which will protect the administrative state; instead restoration of Article I is our real task. What is the liberty movement missing to get that done? We spend much of our time politely asking the left not to dismantle everything the Framers achieved with the Constitution.

Meanwhile, not to defend Republicans and their shortcomings, but the Democratic party is fully prepared, if one triumphs in its primaries, to nominate a socialist for president; meanwhile California is already a one-party state. Societal polarization and an influx of socialist politicians are the dominant realities today, and for socialists, the “validity” of their pet administrative state would not even rise to the level of afterthought. Yet we imagine we are challenging the administrative state in the face of that, somehow.

This disconnect signifies we are enmeshed in a far larger battle for limited government, well being, liberty and “regulation.” How do we best engage once we acknowledge that the Administrative Procedure Act cannot protect these values? It protects itself; it has spawned an entire discipline of — insert the requisite reverent tremble and capitalization — Administrative Law.

Another way of pondering what I’m getting at here: To what extent is it incoherent and tone-deaf to talk about administrative state reform when a socialist is president of the United States?

Originally published at Forbes.

Clyde Wayne Crews

For the past couple of years I’ve been emphasizing the usefulness of an executive order from President Donald Trump on regulatory “guidance documents” to bridge the gap between the president’s initial flurry of regulatory reform activity, and some hypothetical future congressional configuration that would make further permanent action on regulatory or administrative state streamlining possible.