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President Trump Imposes Regulatory Cap and Cost Allowance Requirements on Executive Agencies

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Commentary by Bob Zwirb

President Donald J. Trump issued an Executive Order that (i) imposes a "total incremental cost allowance" on each executive agency, and (ii) requires two federal regulations to be rescinded for every new regulation implemented. The Executive Order is intended to place a ceiling on the cost of regulations and reduce overall levels of regulation.

The Executive Order established that "[u]nless prohibited by law, whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed." The Executive Order requires any incremental costs associated with new regulations to be offset by the elimination of existing costs associated with at least two prior regulations. The Executive Order directed agency heads to ensure that the "total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget."

The Executive Order mandated that each agency head's regulatory plans for fiscal year 2018 and beyond must (i) identify each regulation that increases incremental costs, and (ii) provide that agency's "best approximation of the total costs or savings associated with each new or repealed regulation." The Executive Order noted that these requirements do not apply to regulations issued with respect to (i) military, national security and foreign affairs, (ii) agency organization, management or personnel, or (iii) any other category of regulations exempted by the Director of the Office of Management and Budget.

Commentary

The Executive Order appears to apply only to executive branch departments and agencies, not to independent agencies such as the SEC, the FTC, FERC or the CFTC. For an analysis of the "two-for-one" regulatory repeal requirement, otherwise known as the regulatory "pay-as-you-go" concept, see the following paper by George Washington University Regulatory Studies Center Research Professor Marcus Peacock: "Implementing a Two-for-One Regulatory Requirement in the U.S.," which was published in December 2016.

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