President Obama has issued an executive order directing federal agencies to consider the costs and benefits of regulations both new and old.
Obama unveiled his administration’s new approach in an op-ed piece in The Wall Street Journal on Tuesday, writing, “This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth. And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive. It's a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.”
In his article, Obama cited examples such as the Environmental Protection Agency treating saccharin as a dangerous chemical, even though the Food and Drug Administration considers the artificial sweetener safe for consumption. Last month, the EPA eliminated the saccharin rule, in keeping with an approach that Obama said his administration had been following for the past two years, but has now formalized in an executive order.
The executive order requires that when crafting new regulations, federal agencies must consider the costs and benefits, and choose the least burdensome alternative, consistent with the law. According to Office of Management and Budget Director Jack Lew, in a post on the White House blog, the “regulatory process must encourage public participation and an open exchange of views, with an opportunity for the public to comment,” plus “agencies must attempt to coordinate, simplify, and harmonize regulations to reduce costs and promote certainty for businesses and the public.” Not only that, but agencies must consider “low-cost approaches that reduce burdens and maintain flexibility,” and “regulations must be guided by objective scientific evidence.”
This business-friendly approach also requires that “existing regulations must be reviewed to determine that they are still necessary and crafted effectively; if not, they must be modified, streamlined, or repealed.”
All in all, the administration seems to be signaling that it is going to adopt a more corporate-centric point of view, even though Obama implied in his op-ed that the White House has been doing this more or less informally since he took office. However, that has not been the impression amongst many business owners, and the administration has faced stiff opposition from many business groups, including the U.S. Chamber of Commerce, the National Federation of Independent Business, the financial and banking industry, as well as the health insurance lobby.
In the aftermath of the midterm elections in November and the loss of Democratic control in the House, Obama has been taking a page from his predecessor Bill Clinton, and trying to “triangulate” on issues such as business regulation and tax reform. The deal last month on extending the Bush-era tax cuts that Obama struck with Republican congressional leaders was the first sign of a new approach by the administration. Now with Republicans in control of the House and forcing a repeal vote on Obama’s signature accomplishment so far, the health care reform legislation, Obama is indicating that he is willing to play ball, up to a point.
However, this is not likely to result in the wide-ranging rollback of regulation practiced by some recent Republican administrations. Back when the first President Bush was in power, Vice President Dan Quayle oversaw the so-called Council on Competitiveness, which also aimed to block regulations deemed unfriendly by businesses, while stalling and killing many regulatory programs. The second Bush administration also succeeded in exerting more political control from the White House over the agency regulatory process.
While Obama appears to be following the playbook of all three of the preceding administrations to some degree, he could find himself in the uncomfortable position of compromising the legislative victories of his first two years in office if he goes too far with a regulatory overhaul. Many of the laws passed by the Democratic-controlled Congress, including the health care reform law, the financial regulatory reform law, and the Food Safety Act, require more regulation, not less, to make up for the lapses of those same prior administrations.
It will certainly be a peculiar balancing act. One reason why the Dodd-Frank Wall Street Reform Act ultimately won passage after a long battle is that the financial industry actually wanted some certainty in the end about what the regulatory landscape would look like in order to be able to plan ahead. While the battleground for the industry has now moved on to the detailed rule-making by the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the other bodies tasked with devising regulations, the new cost-benefit requirements will add another wrinkle, albeit a decidedly business-friendly one.
Yet Obama will still need to prove that the reforms his administration carries out have enough teeth to forestall another financial crisis, while safeguarding against headline-generating threats to the food supply, dangerous defects in products ranging from automobiles to infant cribs, and life-threatening oil platform explosions and coalmine disasters. All that, while trying to win re-election next year from independents and Democrats alike. In trying too hard to rekindle support from the business community, he risks losing credibility with his base.
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