For Trump And Icahn, Experts Say Regulatory Reform Should Be More Than a Numbers Game

And Congress needs to help



President-elect Donald Trump has promised to tackle the federal regulatory state and on Thursday appointed billionaire investor Carl Icahn as a sort of anti-regulation czar who will lead the incoming administration's efforts.

On the campaign trail, Trump promised to repeal two federal regulations for every new one added to the books. Icahn, who was previously in the running to be Trump's Treasury Secretary but will instead serve as special adviser, has been a vocal critic of federal regulations—particularly those imposed by the Environmental Protection Agency.

"Cut a lot of this regulation, just cut it out. Its run amuck," Icahn told Bloomberg in an interview last month, as he was advising Trump on cabinet picks. "Let a businessman know that when he builds a factory, builds machinery, when he's going to invest the money, that he's got the government behind him."

In announcing the appointment on Thursday, Trump said Icahn's assistance would be invaluable. Perhaps so, since Icahn will not be paid for the special advisory role within the Trump administration. However, that also means the investor will not have to give up his position as chairman of Icahn Enterprises, which owns stakes in industries including railroads, casinos, hotels, rental car companies, and health care providers. The insider role in the administration was quickly criticized by Democrats who worry that Icahn could use it to benefit his businesses, Politico reported.

If Trump and Icahn want to make meaningful reforms to federal regulatory policy, though, they will need targets that are more specific than repeal-two-for-every-one-added and will have to get Congress to reassert its authority over the federal bureaucracies, policy experts tell Reason.

Chris Koopman, a senior research fellow at the Mercatus Center, applauded Trump's instinct to target regulatory overreach, but said focusing on the number of regulations could miss another dangerous piece of federal regulations: informal regulation that agencies rely on before they go to regulations in the traditional sense.

These informal regulations include things like guidance documents published by federal agencies that offer suggestions—with a wink attached—for how companies should act, and how the Federal Communications Commission mandates certain behavior through so-called "transaction reviews" before approving license transfers. The FCC has used that process to mandate parts of the Obama administration's net neutrality regulations.

Those informal regulations could become even more common if the Trump administration starts hacking away at written rules without focusing on the underlying processes.

"There is a huge problem with the amount of federal regulations that are put out. The intuition here—get rid of the thicket—should be applauded, but that's just the surface of the quagmire here," Koopman said.

To get below the surface, Trump's team could look to the Competitive Enterprise Institute—including regulatory policy guru Clyde Wayne Crews, who coined the apt descriptor "regulatory dark matter" for all those off-the-books regulations—which last week published a new report with five steps the next administration and Congress can take to reform the federal regulatory state.

The first thing the new administration should do is implement a better review process within the White House Office of Management and Budget. In theory, the OMB is supposed to make sure that proposed regulations' benefits outweigh the potential costs, but in reality this process is fraught with problems. Of the approximately 3,500 rules issued by dozens of federal agencies each year, only a few handfuls are subject to cost-benefit analysis.

Beyond that, Congress probably has to get involved.

The CEI report calls for Congress to assert itself by threatening to defund agencies that overstep their statutory authority and to use the Congressional Review Act to bring more accountability to executive branch agencies and commissions. The CRA was passed in 1996 and gives Congress the option of pausing any new regulation for up to 60 days of public scrutiny.

The law has been used sparingly and has only once, in 2001, resulted in the repeal of a federal regulation.

Congress also should reverse a decades-long trend of abdicating responsibilities to the executive branch agencies and over-delegating decision-making processes.

"Congress is poised to make great strides in returning a balance of power to the federal government through reining in the regulatory state," said Kent Lassman, president of CEI, in a statement.

Icahn and Trump have talked a good game about trimming back the federal government's control over individuals and businesses. It's clear that many Americans are in favor of reform—"draining the swamp," as some Trump supporters might put it—and limiting the power of the federal government's alphabet soup of various agencies and commissions.

The first thing Trump should do, Icahn told Bloomberg on Thursday, is "get rid of a number of these, what I consider to be, crazy regulations."

The "crazy" regulations are one thing. Fixing the roots of the problem will take more work.