The Bright Future of Executive Order 12866

October 23, 2018

Executive Order 12866 (E.O. 12866) has governed executive branch review of agency rules for 25 years, across two Democratic and two Republican presidencies that included three changes in administrations. Twenty-five years is an eternity for a major White House decision-making process to survive, let alone for a program that was controversial from its inception but has continued without significant changes despite otherwise wrenching transitions in presidential policies and priorities. Indeed, E.O. 12866 has gone further and developed strong public and political support for centralized White House review as an essential tool for presidential management of the administrative state.

The broad acceptance of the White House regulatory review program is a testament to the judgment of the Clinton White House staff, led by Sally Katzen, in conducting painstaking negotiations to define the substantive criteria and review process that the principal rulemaking agencies and major constituency groups found to be intellectually sound, capable of effective implementation, and fair to all parties with a stake in the process. What emerged from these consultations were core principles for regulatory review that have proved their value over time. The order’s provisions include: consensus principles for agency regulations; a fair review process; a requirement that proposed rules should maximize net benefits to society and be based on objective, scientific, and data-driven metrics to provide a consistent, broadly acceptable platform for analyzing their likely effects; and a focus on benefit-cost analysis that takes into account both quantitative and qualitative measures.

Recent actions of the Obama and Trump administrations, taken together, suggest that significant changes to the E.O. 12866 process are unlikely to occur in the near future. The Obama White House found that the order was an effective vehicle for managing a heavy workload of new regulations adopted through executive agency actions to compensate for congressional gridlock. The Trump administration appears to have concluded that it can operate an aggressive deregulatory program by adopting controlling policies in freestanding executive orders—such as those establishing requirements that two old rules be rescinded for each new rule adopted and creating a novel regulatory budget process. Nevertheless, that program is being administered through the time-tested standards and procedures of E.O. 12866 that served Presidents Clinton, Bush, and Obama well. The order struck the right balance between adopting broadly articulated policy principles and preserving substantial flexibility in implementation.

Since 1993, no one has been able to develop substantive principles for regulatory review or analytical and administrative processes that work better than those encapsulated in E.O. 12866. The most surprising feature of the order is that its most important provisions are still state-of-the-art after a quarter century. While substantial debates have occurred over the best way to apply benefit-cost analysis, they have focused on the details of implementation rather than changing the essence of this policy approach. Indeed, in the last quarter century, the Supreme Court has become more comfortable with the use of benefit-cost analysis to determine the legality of agency rules and may be on the verge of concluding that a rule could be found to be arbitrary and capricious, and therefore unlawful, if the agency has not conducted a review of its likely benefits to society and consequences for regulated entities. And in considering whether to adopt a statute that would revise the legal standards that agencies must satisfy in adopting regulations, bills introduced in Congress have considered codifying the E.O. 12866 process rather than requiring significant changes.

All indicators thus suggest that the drafters of E.O. 12866 struck a balance among competing considerations and established an effective management mechanism that successive administrations have found useful for implementing policies different from those of their predecessors. This empirical conclusion is reinforced by the inability of regulatory practitioners, litigators, and academics to develop new criteria and procedures that would constitute an improvement over the current provisions of the order. Accordingly, even if E.O. 12866 is amended from time to time to change some of its implementation details, it is likely that the core principles adopted in 1993 will continue to govern the regulatory review process for the foreseeable future.

* The views expressed are those of the author, offered in his personal capacity, and are not conveyed as the official views of their employer, the federal government, the Regulatory Studies Center, or George Washington University.