Executive Order 12866 Is Basically Dead, and the Trump Administration Basically Killed It

by James Goodwin

October 01, 2018

Sunday marked the 25th anniversary of the issuance of Executive Order 12866, but it was hardly a happy occasion. For all intents and purposes, though, the order, which governs the process by which federal agencies develop regulations under the supervision of the White House Office of Information and Regulatory Affairs (OIRA), is dead. Despite all the glowing praise over the years and all the exaltations of its supposed durability, its health had been in decline for several years. It was just a matter of time before something like the Trump administration came along and put the final nail in its coffin. 

The precise date of Executive Order 12866's demise was January 30, 2017. On that day, recently inaugurated President Donald Trump issued what was in effect its death warrant, Executive Order 13771

According to its defenders, Executive Order 12866 was all about promoting better regulation, and it was endowed with several features ostensibly aimed at advancing that goal. Most significant among these were the provisions calling for centralized review at OIRA and for measuring regulations against the yardstick of "cost-benefit analysis" – features that were inherited from its forebear, Executive Order 12291

Metaphorically speaking, cost-benefit analysis and OIRA's centralized review were Executive Order 12866's heart and lungs. They were vital to everything it was designed to accomplish. The effect of Executive Order 13771 was to impair their functioning so badly that it seems no defibrillator, and no amount of CPR (ahem!), could revive them. 

Executive Order 13771 was created to serve a prime directive that is fundamentally at odds with that of Executive Order 12866. Whereas the older order sought to promote better regulations – at least on paper – Executive Order 13771's provisions are all oriented toward achieving the goal of less regulation. Its heart and lungs are a regulatory budget (an annual cap on the total new regulatory costs that agencies can impose) and a regulatory pay-go system (the mandate that every new regulatory action must be offset by new deregulatory actions). 

The fundamental incongruity between the two orders boiled down to their respective treatment of regulatory benefits. Regulatory benefits were at least nominally essential to Executive Order 12866's design, but they were like kryptonite to Executive Order 13771. For Executive Order 13771's regulatory budget and pay-go programs to work as intended, these considerations had to be completely eliminated from the decision-making process. 

On the one hand, its regulatory pay-go system involves little more than rote counting: At least two existing regulations, no matter how good, must be eliminated for each new regulation, no matter how bad. All that matters in the end is that we are left with one less total regulation than we had before. Consideration of regulatory benefits has no role to play, because if it did, it would undoubtedly reveal the intrinsic foolishness of this whole enterprise. 

On the other hand, the operation of Executive Order 13771's regulatory budget requires an exclusive focus on regulatory costs. The imposition of new regulatory costs must be offset by the elimination of existing ones to whatever extent is required by the particular budget that applies. Thus, any concomitant benefits that the regulations produce are by definition irrelevant. 

With Executive Order 12866, however, consideration of regulatory benefits played a starring role – or at least they were supposed to appear to play a starring role. The order directed agencies to ensure that their regulations produced benefits that would "justify" their costs. And its empowerment of OIRA to conduct centralized review of many agencies' regulations was one of the ways it sought to ensure this directive was being followed. Among other things, OIRA officials were supposed to ensure that regulatory benefits were properly accounted for in an agency's cost-benefit analysis and to ensure that net benefits were being maximized, even if that meant changing a rule to make its protections stronger and more costly. 

That, at least, was the theory. In practice, the implementation of Executive Order 12866 did not always live up to these ideals. There were plenty of times that regulatory benefits were ignored or left on the table in order to advance a political agenda of weaker or fewer regulations. Even during the order's prime, cost-benefit analysis was more often used as a post hoc rationalization for regulatory decisions made through other, often highly politicized or otherwise arbitrary means. Likewise, the actual practice of OIRA review was hardly as pure as the winter snow. But how it could be? After all, Executive Order 12866 assigned to OIRA the task of advancing two often incompatible goals through these reviews: promoting better regulations and advancing the president's political priorities. 

Of course, President Trump technically never revoked Executive Order 12866, and his OIRA even issued a memo explicitly instructing agencies to continue following the order's provisions in carrying out Executive Order 13771. But these moves make little practical difference. The fact is there is no way the Trump administration's Executive Order 13771-compelled rollbacks can survive anything approaching an honest application of cost-benefit analysis. In many cases, Trump administration agencies have resorted to thoroughly cooking the books to create the impression that the rollbacks passed a cost-benefit test. In others, the limits of book-cooking were reached, and the exercise of cost-benefit analysis – however sordid or transactional – was dispensed with entirely

Meanwhile, Executive Order 12866's OIRA review process has been reduced to a farce. Sloppy rules and analyses pass through as if on a conveyor belt, and even the most complex rules emerge after just a few days of review, in sharp contrast to the months- and years-long delays genuinely protective rules suffered at OIRA's hands in the past. To the extent that OIRA is having any impact on rulemaking in this administration, it is to make sure that the cold quotas of Executive Order 13771 are being met, rather to serve as quality control on regulations. 

In short, the aggressive implementation of Executive Order13771 has reduced Executive Order 12866 to little more than a dead letter. Or maybe it's better to think of Executive Order 13771 as a kind of virus that has invaded Executive Order 12866 and commandeered its key implementing provisions – including OIRA review and cost-benefit analysis – to serve as political cover for its own harmful ends. 

Looking back, the demise of Executive Order 12866 should have been easy to predict. So many of its provisions – including many of its much-ballyhooed accountability and transparency "innovations" – seem to have gone by the wayside in recent years, or were never really implemented from the start. All those provisions calling for the disclosure of documents and communications arising from OIRA reviews? Followed episodically at best. And those "Return," Prompt," and "Review" letters Executive Order 12866 authorizes the OIRA administrator to issue? We haven't seen any of those in years

What of the order's supposed commitment to "reaffirm the primacy of Federal agencies in the regulatory decision-making process"? Episodes such as the last-minute rejection of EPA's 2011 ozone standard update by Obama "regulatory czar" Cass Sunstein shows how seriously that command was taken

And what the heck is a "Regulatory Working Group" anyway? 

The good news is that the demise of Executive Order 12866 is nothing to weep over. During the course of its lifetime, it did more harm than good. In fact, it would be better still if the order was officially discarded, rather than carrying on with this sad charade pretending that it's still alive. Perhaps then we might be freer to move in a more productive direction under a future, presumably more enlightened presidential administration. 

Given the recent celebrations over Executive Order 12866's 25th anniversary, this declaration of its death may seem like quite a shock. But, to borrow a phrase, it seems that reports of it continued viability have been greatly exaggerated.

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Also from James Goodwin

James Goodwin, J.D., M.P.P., is a Senior Policy Analyst with the Center for Progressive Reform. He joined CPR in May of 2008.

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