Covid-19, Regulatory Recalibration, and Learning for the Long Run

(Originally posted at the Yale Journal on Regulation’s “Notice and Comment” blog.)

Yesterday the White House issued a new executive order titled “Executive Order on Regulatory Relief to Support Economic Recovery.” It is intended, most immediately and obviously, to amplify the economic recovery so sorely needed amid the Covid-19 crisis. But President Trump’s order could have significant long-term effects, because it contains what we can think of as “pilot projects” or “case studies” for broader and more fundamental administrative reforms.

[Update: the order has been published as E.O. 13924.]

The executive order’s immediate impact is to align agency regulatory programs with the current economic relief and stimulus efforts being undertaken by Congress, the Trump Administration, and the Federal Reserve. It announces a broad policy that all agencies “should address this economic emergency by rescinding, modifying, waiving, or providing exemptions from regulations and other requirements that may inhibit economic recovery,” subject to the requirements of applicable laws and other key considerations. And in the substantive provisions implementing that broad policy, President Trump’s order focuses significantly on the need for agencies to temporarily recalibrate their enforcement and adjudication activities for the sake of short-term economic relief and stimulus.

This strikes me as precisely the right approach for aligning regulatory policy with Congress’s fiscal stimulus. Given the broad discretion that regulatory statutes often leave to agencies, and the broad enforcement discretion that agencies retain (as emphasized in Heckler v. Chaney), the temporary recalibration of enforcement discretion, combined with good guidance from agencies, can be the quickest way to provide temporary but significant regulatory relief.

There are limits to this approach, of course — especially the limits that prevent an agency from using nominal assertions of enforcement discretion or guidance to circumvent obligatory rulemaking processes. But this executive order does not test those limits; rather, it strikes a good balance: ordering agencies to look for situations where enforcement recalibration is necessary and appropriate, but leaving genuine discretion in the hands of the agencies.

Now, let’s consider the longer term implications. Specifically, we should take note of the several ways in which this executive order could serve as a “pilot project” for broader reforms of the administrative state.

First, as already noted, this order brings the White House into closer contact with the enforcement/adjudication side of agency policymaking. For the first four decades of modern “presidential administration,” the White House has focused predominantly on rulemaking, not enforcement and adjudication. That initial prioritization was sensible for several reasons, but the distinction between rulemaking and enforcement/adjudication created peculiar systemic incentives and biases in an administrative state where — as the Court recognized long ago — agencies can make policy both through rulemaking and adjudication. Years later, even as the Trump Administration significantly expanded the use of executive orders to drive the substance of agency policymaking, the Administration still largely avoided using executive orders to drive policy in the enforcement-adjudication context. This new executive order takes a step in the direction of reforming this artificial asymmetry: embracing the Supreme Court’s principle that rulemaking and enforcement/adjudication are two sides of the same administrative coin, it follows that principle to its logical conclusion in the limited context of the Covid-19 recovery, ordering agencies to align not just their rulemaking activities with the Covid-19 response and recovery, but also their enforcement/adjudication activities.

Second, and relatedly, the new executive order takes broader concerns of administrative due-process and attempts to apply them in the specific and temporary context of Covid-19 economic relief and stimulus. Last year, in Executive Order 13892 (“Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication”), President Trump announced general principles for improving liberty-minded due process protections for administrative enforcement and adjudication. In January, OMB followed it up with a January 2020 Federal Register notice identifying specific ways to promote due process and constitutional liberty in agency enforcement and adjudication, and inviting public comment. Yesterday’s executive order specifically codifies several broad due-process principles for agency enforcement and adjudication, and directs agencies to implement them as they deem appropriate in their broader efforts to recalibrate regulatory enforcement in the Covid-19 economic recovery.

(I note in passing that this focus on expanding due-process protections for individual liberty and property highlights an important constitutional asymmetry in at least one aspect of modern administrative law. While the Supreme Court long ago warned that presidential micromanagement of individual agency adjudications might unconstitutionally “affect interests of individuals,” this concern does not cut equally in both regulatory and deregulatory directions. A president’s attempt to deprive people of liberty or property through agency adjudication raises constitutional problems that are not implicated by a president’s efforts to preserve liberty and property. This means that there is greater constitutional space for presidents to intervene on the side of regulatory relief than regulatory burden, though subject perhaps to particular statutory limits.)

Third, yesterday’s executive order contains a pilot project for retrospective review of preexisting agency regulations. It directs all agencies to “review any regulatory standards that they have temporarily rescinded, suspended, modified, or waived during the public health emergency” and their other Covid-related regulatory recalibrations, and determine which of those reforms, if any, should be “made permanent.” Surely agencies would already be learning from their respective experiences during the Covid-19 crisis, but given the competing demands on agencies’ time, resources, and attention, an executive order is a good and useful way to help ensure that agencies will actually take care to learn from this brutal experience. And in so doing, this specific exercise in retrospective review should help serve as a case study from which regulatory reformers and modernizers can learn how best to build a more permanent framework for systematic and ongoing retrospective review of regulations.

Finally, yesterday’s order is a significant pilot project for extending White House regulatory oversight to the traditionally “independent” agencies that have long enjoyed a special exemption from White House regulatory oversight. The order’s directives apply to all “agencies,” and the order expressly defines “agency” (via 44 U.S.C. § 3502) as including “any independent regulatory agency.” Independent agencies’ compliance (or not) with this order could help to inform broader reforms to the perennial question of whether Executive Order 12866 and other framework orders should be reformed or eliminated in the broader project of regulatory modernization.

Necessity is the mother of invention. And it will be interesting to see how the immediate necessities of America’s Covid-19 public health response and the related economic relief and stimulus help to invent regulatory reforms and modernizations worth instituting more broadly and permanently.

Adam J. White directs George Mason University’s C. Boyden Gray Center for the Study of the Administrative State, and is a resident scholar at the American Enterprise Institute.