Midnight regulations, Shmidnight shmegulations

Cross-posted from CPRBlog

by James Goodwin

In case you didn’t get the memo:  President Obama is entering the last year of his final term in office, so now we’re all supposed to be panicking over a dreaded phenomenon known as “midnight regulations.”  According to legend, midnight rulemaking takes place when outgoing administrations rush out a bunch of regulations during their last few days in order to burnish their legacy or make concrete several of their policy priorities in ways that would be difficult for a successor—presumably from a different party—to undo.  The legend further holds that because the rules are “rushed,” they are somehow of inferior quality.

Over the last few days, several antiregulatory commentators have issued dire warnings about midnight regulations(see here and here), and even the House Science Committee went to the trouble of holding a hearing on the subject just the other day.

Scared yet?  Well, you shouldn’t be.

While “midnight regulations” might make for a good political talking point, there simply is no reason to believe that a rule released at the end of an administration is worse than those that are released at any other point.  In fact, the administration could have been working on such rules for as long as seven years, which, according to the logic of the midnight regulation alarmists, would suggest that the quality of the rules is even better.  After all, if the underlying assumption is that longer rulemakings make for better rules, then many of these last rules could very well be the best of the administration.

Still, the assumption about the supposed relationship between lengthy rulemakings and rule quality is false.  The fact is every rule moves through the regulatory pipeline at its own rate, and the timing of its eventual emergence from the end of the pipeline has to do with a lot of complex and countervailing factors that are unrelated to meeting some arbitrary deadline before the end of an administration.

More to the point, agency administrators face strong incentives not to release a rule before it is truly ready.  If they do, then there is a high likelihood that the rule will be successfully challenged on judicial review.  All of the resources that the agency expended will have been wasted if the rule is struck down.

But all of this talk about alleged concerns regarding rule quality is actually beside the point.  Just take a close look at the arguments that the midnight regulation alarmists raise.  You’ll see that their real concern is about ensuring that individual rules are subjected to extensive cost-benefit analysis (purportedly to maximize the rule’s net benefits) and lengthy review by the White House Office of Information and Regulatory Affairs (OIRA).  Anti-regulatory advocates assume—and they hope others will, too—that cost-benefit analysis and OIRA review leads to “better” rules, but that is not the case in reality.  Instead, these institutions lead inexorably to less protective rules and needless delay.  While such results may match the policy preferences of corporate interests and their ideological allies, they are highly inconsistent with public’s interest in seeing that agencies carry out their statutory mission in a timely and effective manner.

In short, the debate over midnight regulations appears to be less about improving regulatory quality, and more about ensuring that certain fundamentally antiregulatory components of the rulemaking process—namely, cost-benefit analysis and OIRA review—are afforded every opportunity to achieve the antiregulatory ends that some would desire.

Similarly, it’s hard to ignore the convenient politics of the midnight regulations myth.  Republicans have made it abundantly clear that they will oppose everything that the Obama Administration attempts to accomplish during its time in office.  In the midnight regulations myth, they find a new excuse to categorically reject every regulation the Obama Administration seeks to finalize during its eighth and final year in office.  It allows them to deny the very legitimacy of every regulatory action the President takes this year with the effect of truncating his eight-year administration to just seven years.

Elections have consequences, though.  (Republicans are fond of repeating this statement, but only when they happen to win.)  One of those consequences is that, under the U.S. Constitution, President Obama gets eight years—not seven—to pursue the agenda he was elected to pursue—including through the establishment of regulations.  As long as those regulations are supported by the administrative record and relevant statutory authority, they are no less legitimate simply because they are finalized in the eighth year as opposed to any of the first seven.

The unfortunate part, though, is that the Obama Administration has itself bought into the midnight regulation myth. In December, OIRA Administrator Howard Shelanski sent out a memo to all agency heads, instructing them, in effect, to avoid midnight regulations.

In some ways, Administrator Shelanski’s motivations for issuing this memo are understandable.  First, the instruction to agencies to avoid issuing final regulations at the very end of the term is clearly aimed at insulating these rules from being blocked by a Congressional Review Act resolution of disapproval after the Obama’s term has completed.  (In the event that the Republican Party can grab control of both the White House and both chambers of Congress in the next election, the Congressional Review Act would afford the opportunity to reject some of the last rules that the Obama Administration has issued.)  While real, that threat is likely overblown.  After sweeping into the White House, the George W. Bush Administration, working with Republican majorities in both chambers of Congress, only used the Congressional Review Act on one rule—the Occupational Safety and Health Administration’s (OSHA) ergonomics rule.  There were several other controversial rules that could have been rejected using these same procedures, but it appears that this was not a high priority for Party leadership at the time.  If this scenario repeats itself in the next election, it seems just as unlikely that Republicans will expend a lot of resources rejecting rules they disfavor.

Second, as the head of OIRA and the President’s lead supervisor of agency cost-benefit analyses, it makes sense that Administrator Shelanski would want to protect his prerogatives to conduct centralized review of agency rules and fiddle around with agency cost-benefit analyses.  In other words, the memo seems to be more about validating his position than it is about ensuring the quality of agency rules.  After all, as noted above, OIRA review and cost-benefit analysis rarely accomplishes anything beyond delays and weaker protections.

In the end, Administrator Shelanski’s memo is just the latest instance of the Obama Administration’s ongoing series of self-defeating blunders on regulatory policy.  It gives the midnight regulation myth unwarranted credence by adopting and reinforcing the myth’s supposed logic.  Far worse than that, though, the memo buys into the negative frame of regulation that conservatives and special interests have been pushing for several decades now.  Buried within the midnight regulation myth is the implication that regulation is at best a necessary evil that must be minimized if it is to be tolerated at all.

A far better approach would have been for Administrator Shelanski to issue a memo that adopted a positive vision of regulation—one that closely aligns with the positive role of government that Candidate Obama championed and that President Obama has nodded toward intermittently ever since.  For example, the memo should have started by acknowledging all of the good that has been accomplished through the Obama Administration’s aggressive use of regulatory authority to address unacceptable harms to people and the environment.  The memo then should have urged the agency heads to use their eighth and final year as an opportunity to redouble their efforts and build upon the successes they have already achieved.  It should have closed by assuring them that the Administration would provide all of the support at its disposal to ensure that any important rules still in the pipeline will be done right and on time.

This alternative memo from Shelanski would not only reinforce the positive vision of the regulatory system; it would also affirm the successes of the Obama Administration.  That kind of a memo would have offered a much better road forward by comparison; I am now left wondering why it was left untraveled.