Economy

Trump’s deregulation drive is epic in scale and scope. And yet ...

Finding the patterns

The overall trend in government rulemaking remains relentlessly up – and Trump is stirring controversy by overturning environmental and consumer protections.

President Trump speaks during an event on federal regulations in the Roosevelt Room of the White House on Dec. 14, 2017, in Washington. "Let's cut the red tape, let's set free our dreams," Trump said as he symbolically cut a ribbon on stacks of paper representing the size of the regulatory code.
Evan Vucci/AP
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Three days before new federal regulations required him to install an electronic logging device in his semi, Chuck Paar put his 2012 rig up for sale and started driving his 1997 truck instead.

The truck is so old it isn’t required to have the device, which logs how long a driver stays behind the wheel. Big fleets like the automation, but small trucking companies like Mr. Paar’s in Mount Jewett, Pa. have struggled to use the devices, which became mandatory Dec. 18.

“It’s overregulation; it's overkill,” he says. And although he’s exempt, his drivers are not. This past Tuesday, one of Paar’s best drivers was on his 28th minute of a mandatory half-hour break when he pulled around to a fuel pump so he could get ready to fuel. The electronic device logged the truck as moving.

“On a paper log, you log that as a half hour,” Paar says. But “he had to sit another 30 minutes!”

A year ago, the Trump administration swept into office promising to rid business of regulations that shackle productivity. In its first year, it has made a splash, eliminating the ban on mandatory-arbitration clauses used by banks, repealing “net neutrality” limits on cable companies, and moving to overturn numerous environmental rules – including an announcement Thursday seeking to open more than 90 percent of coastal waters to offshore oil drilling.

Many of the moves are controversial. They pit Trump’s value of raw economic freedom against the view that regulations safeguard people and the environment, delivering much more in benefits to society than they cost. (Better tracking of truck-driver hours, for example, is a response to a very real safety challenge.)

Many policy experts say at least some thinning of bureaucratic underbrush is warranted – and rarely happens. Seen through this lens, there are potential benefits from a deregulatory push, if it’s directed in positive ways.

“It's amazing to see so far this [first] year how much the president has done,” says Patrick McLaughlin, director of the program for economic research on regulation at the Mercatus Center, a free-market-oriented think tank at George Mason University. “The growth rate [in regulation] has certainly slowed under Trump – and it has slowed more than we've seen from other presidents in their first year.”

Already affecting economy?

Moves like the turnabout on internet regulation and climate change have gone sharply against public opinion. The dramatic shift on offshore drilling this week is drawing criticism even from Republicans such as Sen. Marco Rubio of Florida.

Yet the concerted push to remove constraints already appears to have boosted business optimism, which in turn can often increase investment and hiring in the short term.

“Deregulation is probably a major driver of the post-election stock market rally,” economist Gary Shilling wrote in a late-2017 report.

Quantifying the costs and benefits of regulation is inherently difficult. The Mercatus Center has estimated the economy could have grown 0.8 percent faster per year since 1980 if overall regulatory burdens had been held steady since that year. That’s a pretty big deal for an economy that, since the Great Recession, has until recently failed to hit a 3 percent annualized growth rate.

But one Goldman Sachs analysis, looking at opportunities to reduce rules outside the banking sector, figured any added growth from Trump’s efforts will be small – in part because the process of revising or removing rules is slow and can require help from Congress. 

And not all deregulation spurs faster economic growth. After all, in the wake of the 2008 financial crisis, experts widely see prudent financial regulation as a vital underpinning of stable growth. The Goldman Sachs report pointed to the importance of cost/benefit analysis, noting that environmental rules impose the biggest financial burdens but also bring big benefits to society.

Still, there is evidence that smart, streamlined regulation can make a difference.

“We do need regulations, but that doesn't mean regulations can’t adapt with the times,” says Gabe Horwitz, an economic policy expert at Third Way, a center-left think tank in Washington. He says doing such a rethink well “requires people to come off their ideological side,” even if it’s not a fully bipartisan effort.

With bipartisan support, Presidents Jimmy Carter and Ronald Reagan deregulated airlines, trucking, and other industries in the late '70s and early '80s and those industries grew. Under President Clinton, who pushed to reinvent government and eliminate outmoded regulations, the economy boomed.

Yet none of those leaders managed to shrink the number of federal rules over the course of an entire administration, says Mr. McLaughlin.

Scale of Trump's push

At a press event last month, the president highlighted his achievements so far, claiming to have canceled or delayed more than 1,500 planned regulatory actions in his first 11 months in office. He also showed off a stack of 20,000 pages, representing the pages of federal regulations in 1960, and another stack of 185,000 pages, representing the pages of federal rules today.

“We’re getting back below the 1960 level and we’ll be there fairly quickly,” he said.

Some of this is hyperbole, says Philip Wallach, an expert on governance most recently at the Brookings Institution, which has created a Trump deregulation tracker. For example: The claim of 1,500 rules canceled or delayed includes initiatives that were merely planned by the Obama administration. Likewise, the idea of shrinking the federal rulebook to the level of 1960 is fanciful. The departments of Energy and Education, the Environmental Protection Agency (EPA), and the Occupational Safety and Health Administration didn’t even exist back then.

Nevertheless, “a lot of what’s happening [in deregulation] in the Trump administration would look the same under a Ted Cruz administration or a Marco Rubio administration,” Mr. Wallach says. Trump exaggerations aside, “my bigger sense is that they are serious about doing bigger, deeper, impactful work.”

For example: The administration is setting up teams in each federal agency to review rules with an eye toward cutting those that are outdated or counterproductive. And although it’s criticized as arbitrary, a policy to eliminate two older rules for every new one nudges agencies to actually carry out such reviews. Trump also is working on speeding up the permitting process for new infrastructure projects, such as highways and his proposed border wall.

Just the promise of a slowdown in regulations has buoyed business groups. The Business Roundtable’s survey of CEOs last month found their optimism for sales, investment, and hiring outlook at a five-year high and regulatory cost concerns at a six-year low.

Risks to the environment

However, watchdog groups warn about the negative consequences, especially in the environmental arena. For example: Trump has drawn sharp criticism for moving to kill President Obama’s Clean Power Plan, a major effort to respond to climate change with a roughly 30 percent cut in power plant emissions.

Repealing the CPP will “allow people to continue to live with dirty air and dirty land,” says Bill Price, field organizing manager for the Sierra Club in West Virginia, referring to the prospect of continued mining and use of coal.

Local industry groups applaud the repeal. “EPA's proposed rule repealing the CPP is another initiative by Administrator [Scott] Pruitt to prevent job-killing, onerous rules from going into effect,” says Chris Hamilton, senior vice president of the West Virginia Coal Association. Nationwide, the coal industry has added a modest 1,200 jobs since Trump took office.

Another area of concern is the push to loosen financial regulation passed after the financial crisis. Many experts on the left and right say the Dodd-Frank financial reforms could use some revision or streamlining. But businesses aren’t for simply jettisoning regulations, says John Arensmeyer, founder of Small Business Majority, a nationwide employer group advocating for policies to help small firms. “Small businesses recognize that you need rules of the road to run the economy.”

Not easy to ditch regulations en masse

Whatever the merits and demerits of Trump’s aspirations, history suggests a hard road ahead in pruning regulations. Some of the early steps involved low-hanging fruit, such as Obama executive orders that are relatively easy to reverse. To reverse rules based on laws already passed by Congress, the administration will have to go through the same arduous process as getting a regulation approved, says Susan Dudley, director of the Regulatory Studies Center at George Washington University and former head of the Office of Information and Regulatory Affairs during the George W. Bush administration. That means more time and great care. “If they’re not careful, the courts will overturn their actions.”

Another challenge will be solving a Trump paradox. On the one hand, eager to keep government employment down, he has been slow to fill political positions in agencies. On the other, getting buy-in from the bureaucracy will require a full complement of administrators who can implement his deregulation ideas, Ms. Dudley says.

Paar, the Pennsylvania trucker, says he’s doubtful the administration will repeal the electronic device legislation passed by the Bush administration. “I have written President Trump. I've called,” he says. But “I'm not optimistic that Secretary [of Transportation Elaine] Chao or President Trump are going to make any changes.”

Mark Trumbull and David Sloan of the Monitor's staff contributed to this article from Washington.

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