Among the opportunities presented by Donald Trump’s election is that we may finally witness fundamental reform of America’s administrative state. This is no small thing, for administrative agencies—often called the “fourth branch” of the federal government—have been foisting countless rules on people and companies in lieu of Congress’s own laws, or, too often, in outright defiance of them. Instead of subjecting its policies to the checks and balances of the normal legislative process, the executive branch has been getting its way through the fiat of administrative law. Washington’s regulatory agencies exert a dangerous gravitational pull on our politics.

When Barack Obama and Congress negotiated over proposed greenhouse-gas legislation in 2009, for example, the president knew that he could simply walk away from the discussions and enact his preferred policies via Environmental Protection Agency regulations. Congressional Democrats knew this, too, and were happy to outsource policymaking to the EPA. Similarly with other policy areas: If administrative agencies are ready to do the president’s bidding, what need is there for legislative give-and-take?

Supreme Court Chief Justice John Roberts described the problem acutely in a 2013 dissent in a telecommunications case, criticizing the court’s deferential opinion in favor of the Federal Communications Commission. “The administrative state ‘wields vast power and touches almost every aspect of daily life.’ . . . The Framers could hardly have envisioned today’s ‘vast and varied federal bureaucracy’ and the authority administrative agencies now hold over our economic, social, and political activities. . . . ‘[T]he administrative state with its reams of regulations would leave them rubbing their eyes.’ ”

The Republican-controlled House of Representatives has recently passed several bills to rein in this bureaucratic behemoth, but the measures stalled in the Senate, and, in any event, President Obama would have vetoed them. Now, as the Trump presidency dawns, major reforms may be at hand.

President Obama didn’t invent the regulatory state, of course, but he leveraged it more aggressively than did his predecessors—and he did so in areas of fundamental national importance. Obama’s EPA offers the most striking instance. Pursuant to Obama’s goal of reducing greenhouse-gas emissions, the EPA’s radical “Clean Power Plan” asserted unprecedented federal regulatory authority over states’ energy policies—so unprecedented that the Supreme Court blocked the plan until courts could fully review its legality. Obama’s FCC, in turn, has sought to impose “network neutrality”—a regulation mandating that all broadband Internet service providers treat the information moving through their “pipes” equally, transforming private Internet firms into the equivalent of public utilities, potentially stifling investment in this crucial economic sector—via an “Open Internet Order” that claimed to find immense new government power over media platforms in the 80-year-old Communications Act of 1934 and its 1996 update, the Telecommunications Act.

In other areas, the Obama administration tried to change federal policy not through regulatory action but through regulatory inaction. Regulators adopted a comprehensive policy of nonenforcement of existing immigration laws, though leaving law enforcement with a fig leaf of discretion to depart from this position on a case-by-case basis. (See “Unfaithful Executive,” Winter 2015.) Nor was this an isolated example. Shortly after Obama’s first inaugural, his Energy Department and Nuclear Regulatory Commission tried to kill the Yucca Mountain nuclear repository, despite Congress’s statutes to the contrary, by simply not proceeding with the project. In another instance, after a federal district court barred enforcement of the Interior Department’s moratorium on offshore oil-drilling permits following the Deepwater Horizon disaster, the administration refused to issue new drilling permits—an unstated policy of wholesale inaction dubbed the “permitorium.”

Perhaps the administration’s most controversial regulatory innovation was its effort to make policy through administrative “guidance” documents. Normally, agencies make policy primarily through the process of “notice-and-comment” rule-making, in which an agency publishes a notice about its proposed regulation and gives the public an opportunity to comment on it; the agency then publishes a final version of the rule, after taking into account the public’s views. At its best, this process helps to improve initial proposals; at the least, it preserves some transparency and helps build a record upon which federal courts can conduct judicial review. But when regulators skirt this approach and instead issue “guidance” documents, such procedural protections are vaporized. The most controversial instance of governance-by-guidance: the Obama Education and Justice Departments’ announcement of a new policy requiring schools to allow self-identified transgender students to use the restrooms and locker rooms of their own choosing, and mandating that school staff use the students’ preferred-gender pronouns when addressing them. Instead of formulating this policy through notice-and-comment rule-making (let alone actual legislation), Obama’s agencies simply announced their policy under a type of guidance document known by an Orwellian name: a “Dear Colleague” letter.

The Obama administration agencies energetically used the regulatory process to set national policy on contested social questions, including not only the establishment of transgender rights but also the requirement that religious employers operating social services fund or participate in the provision of abortions or contraceptives, no matter their deeply held beliefs. Meanwhile, to the extent that such policies inspired grassroots opposition, another agency—the Internal Revenue Service—was willing to take extraordinary steps to smother critical voices.

President Obama happily bypassed legislators in all these areas. As he notoriously observed in early 2014, “I’ve got a pen . . . and I can use that pen to sign executive orders and take executive actions and administrative actions that move the ball forward. . . . So one of the things that I’m going to be talking to my Cabinet about is how do we use all the tools available to us, not just legislation, in order to advance a mission that I think unifies all Americans.”

Americans were not unified. And Obama’s policy victories may prove short-lived because he rejected working through the challenges and compromises of legislation. The pen might be powerful, but it remains in the Oval Office. What Obama’s pen gave, Trump’s can take away.

As the Trump administration gets under way, what might we expect it to do—perhaps on its very first day—to dismantle Obama’s far-reaching regulatory program? To the extent that any agency policy was imposed without the traditional notice-and-comment rule-making, a mere stroke of a pen can indeed undo it. President Trump can immediately rescind any of his predecessor’s executive orders and the guidance documents issued by his agencies.

For policies that went through notice-and-comment rule-making—these included the EPA’s Clean Power Plan and the FCC’s Open Internet Order—the Trump administration can kick off reform through executive orders, directing the agencies to change their regulations and setting parameters for doing so (within whatever limits Congress has already set by statute). And the administration can take steps to delay enforcement of existing policies while new ones are proposed and finalized. This will take time, though.

This first step could be the least important. Because purely regulatory action is reversible by a succeeding administration, truly long-lasting reform will require President Trump to work with Congress to change the statutes that the Obama agencies relied on to justify their regulatory ambitions.

For at least a century, Congress has enacted laws, written in dangerously vague language, that vest federal agencies with immense power. If President Trump wants significantly to shift federal energy policy for the long haul—which will be necessary to signal to firms that the policy environment will be sufficiently stable to justify capital investment—he’ll need, for instance, to get lawmakers to amend the Clean Air Act to prohibit future Clean Power Plans. If he wants to keep future regulators away from the Internet, he’ll have to encourage Congress to amend the Communications Act of 1934 and the Telecommunications Act of 1996. And if he wants to prevent the IRS from harassing conservative organizations and religious institutions, he’ll have to get legislators to write protections more clearly into the relevant statutes.

Reforming those statutes is only one-third of the legislative task, however. The next part involves the procedural laws that govern agencies, such as the Administrative Procedure Act of 1946. Seventy years after its passage, agencies have proved all too willing to circumvent or minimize the procedural requirements that Congress imposed to promote transparency and public participation in regulation-making. While the 1946 Congress passed the act in light of the administrative state as it existed at the end of World War II, today’s regulatory state is far more expansive. Accordingly, lawmakers should consider enacting the “REINS Act,” a law, passed by the most recent House of Representatives, denying agencies the power to finalize the most burdensome regulatory programs without first securing congressional approval. Congress should also adopt the “Regulatory Accountability Act,” another law passed by the House, which gives the public greater participatory rights in agency rule-making and requires agencies to analyze the costs and benefits of consequences of potential new regulations.

Critics sometimes assert that, if Congress does put into place new procedural requirements on rule-making, the bureaucrats will just evade them by making policy via other means, such as guidance documents or—on a case-by-case basis—through the agencies’ quasi-judicial “adjudications.” The solution to this problem is to give agencies the right incentive to go through the rule-making process. Perhaps the best such incentive is the availability of judicial deference to agencies’ own legal interpretations. Currently, federal courts give significant deference to agency interpretations of statutes (known as “Chevron deference”) and regulations (known as “Auer deference”). Some foes of the administrative state, including Supreme Court Justice Clarence Thomas, have called for total abolition of such legal deference. And in the last Congress, the House passed the Separation of Powers Restoration Act, which would prohibit courts from deferring to agency legal interpretation. Yet if the goal is better, more accountable, administrative agencies, Congress could instead tie a continuation of some form of court deference to the agencies’ acquiescence to better, more transparent, procedures.

The third category of statutes in need of reform—after the ones that delegate regulatory power to agencies and establish their procedures—are those that erect the agencies in the first place. President Obama’s landmark legislation—the Dodd-Frank Act, regulating finance and Obamacare—created entire new agencies with unprecedented independence from the executive and legislative branches.

Dodd-Frank’s Consumer Financial Protection Bureau, for example, is under the control of a director who enjoys a measure of statutory independence from the president and total budgetary independence from Congress (the CFPB relies for funding not on congressional appropriations but on an annual entitlement to hundreds of millions of dollars from the Federal Reserve). To pare back the administrative state meaningfully, the Trump administration must encourage legislators to reform or overturn these major Obama laws, making the agencies, if they survive, fully accountable to both president and Congress—and to the courts as well.

Most agencies’ major rule-makings get reviewed by the Office of Information and Regulatory Affairs, a small but consequential section of the Office of Management and Budget. Chronically underfunded and understaffed, the OIRA is ill-prepared to oversee the agencies’ sprawling activities. It should be reformed so that it can conduct its work more systematically and proactively. And the OIRA should have the authority to review nominally independent agencies, such as the FCC and the CFPB, currently exempt from its oversight. President Trump could achieve this reform through executive action.

Finally, President Trump can exert a significant and sustained influence on the reach of the administrative state through his judicial appointments. Supreme Court nominations traditionally re-litigate the most recent public-policy disputes. For instance, Justice Samuel Alito’s confirmation hearings focused disproportionately on presidential power in the war on terror. If the pattern holds, Trump’s first nominee will be grilled on the administrative state and executive power. And this nominee will be seeking to replace one of the most significant administrative law theorists in the Court’s history, Antonin Scalia. In this and other appointments, President Trump and his advisors in the Justice Department’s Office of Legal Policy should keep the future of the administrative state front and center in their deliberations.

The Trump administration must confront a fundamental question: What should be the nature and purpose of administrative agencies in the twenty-first century? The contemporary regulatory state is defined largely by Franklin Delano Roosevelt’s New Deal, Lyndon B. Johnson’s Great Society, and Ronald Reagan’s revolution in White House regulatory oversight. We’re long overdue to return to questions of first principles, and the Trump administration suddenly has an opportunity to do so. Administrative agencies play a much more important role than they did two centuries ago, when the Constitution’s framers first envisioned them and the original Congress created them. Now we must think deeply about what powers to vest in them, what limits to place upon them, and what ends they should pursue.

Photo: President Obama and his Democratic allies in Congress have been happy to outsource policymaking to agencies such as the EPA. (JOHN GREIM/LIGHTROCKET/GETTY IMAGES)


City Journal is a publication of the Manhattan Institute for Policy Research (MI), a leading free-market think tank. Are you interested in supporting the magazine? As a 501(c)(3) nonprofit, donations in support of MI and City Journal are fully tax-deductible as provided by law (EIN #13-2912529).

Further Reading

Up Next