Implementing a Two-for-One Regulatory Requirement in the U.S.

Trump
by Marcus Peacock, Distinguished Research Professor
December 06, 2016

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Abstract

President-elect Trump committed to “a requirement that for every new federal regulation, two existing regulations need to be eliminated” or what could be called a “two-for-one” requirement. The implementation of such a regulatory “pay as you go” process raises a number of issues including: what constitutes a “new regulation”; how offsets should be measured; estimating and managing additional analytic and administrative workload; enforcement; and how to increase the likelihood such a policy survives the next presidential transition. This working paper presents the advantages and disadvantages of various options for implementing a two-for-one policy, and also discusses the role of regulatory benefits estimates in such a system.

Introduction

President-elect Trump has committed to “a requirement that for every new federal regulation, two existing regulations need to be eliminated”[1] or what could be called a “two-for-one” requirement. This Working Paper addresses implementation issues regarding this policy by examining its scope; what to measure; workload; durability; and the role of regulatory benefits.

The idea of offsetting new regulations by removing old regulations, also called regulatory “pay as you go” or PAYGO,[2] has the potential to provide “more regulatory balance” to the constant “churn of new red tape” and “help simplify or eliminate outdated rules and procedures.”[3] Similar requirements have been adopted by Canada, the United Kingdom and Australia.

It is important to recognize these other countries adopted regulatory PAYGO schemes as only one element of broader regulatory initiatives that include, for example, specific regulatory reduction targets, stronger ex ante and ex post benefit-cost reviews, and/or improved inventories of existing regulations. Except for discussing target setting, this Working Paper does not address other potential elements of a broader regulatory initiative.[4] It would be important for the Trump administration to consider its overall goal(s) regarding federal regulations and how two-for-one may fit into a larger effort.

That said, some of the regulatory PAYGO topics covered in this paper would also be relevant for other potential regulatory reforms. For instance, a majority in the U.S. House of Representatives has already endorsed the consideration of a number regulatory budgeting and reform proposals which would entail, for instance, determining the proper measurement of regulatory cost and identifying organizations that might provide independent cost estimates.[5]

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[1]    Donald Trump, “Donald Trump’s Contract with the American Voter,” p. 1, https://assets.donaldjtrump.com/_landings/contract/O-TRU-102316-Contractv02.pdf

[2]    Senator Mark R. Warner, “To revive the economy, pull back the red tape,” Washington Post, December 13, 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/12/12/AR2010121202639.html

[3]   Mark R. Warner, “Regulatory PAYGO,” at http://www.warner.senate.gov/public/index.cfm/regulatory-paygo

[4]   For instance, it also does not address questions that are beyond the administration’s control, such as placing regulatory cost caps in new legislation.

[5]   See section 605(b) of H. Con. Res. 125, 114th Congress (2016), http://budget.house.gov/uploadedfiles/fy2017_legislative_text.pdf