Regulation Benefits Said to Be at Risk Under Trump Order

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By Cheryl Bolen

The uncertainty surrounding President Donald Trump’s one-in, two-out regulatory order has raised significant concerns among public interest and environmental groups about whether vital health and safety protections will be endangered or eliminated.

“They may not be alone,” Sally Katzen, professor at New York University School of Law and senior adviser at the Podesta Group, told Bloomberg BNA.

“Some of [the president’s] business colleagues may not be enthusiastic about an order that will be understood by the people as the government now having to choose between safe food, safe drugs and clean air—pick one, only one,” Katzen said.

Why Regulations Exist

The new executive order requires agencies to both eliminate two regulations for every one issued and completely offset the cost of the new regulation by reducing existing regulatory costs. That policy has raised many questions about how it will work.

Regulatory costs are typically borne by business, and they may object to those costs, Katzen said. The benefits of regulation are enjoyed by society at large, and those benefits are important, she said.

“Whether it be clean water or safe workplaces or fair competition in the marketplace, they’re critically important,” Katzen said. “Many companies wouldn’t do them without the regulations. That’s why we have regulations.”

It is unclear what this order will mean, for example, in terms of the Food and Drug Administration’s approval of labeling new drugs, Katzen said. Are they going to have to yank their approval of other drugs? she asked.

Katzen served as the administrator of the Office of Information and Regulatory Affairs for the first five years of the Clinton administration. OIRA is an office within the White House Office of Management and Budget that reviews all significant agency regulations.

Free Market

In theory, drugmakers could produce whatever they wanted without regulatory approval, Katzen said.

“That could be the outcome of this type of approach,” she said. “But if you bring unsafe or ineffective drugs to the market, you have the potential for another thalidomide.” Thalidomide was used abroad in the 1950s to treat morning sickness, among other uses. But it caused severe birth defects.

Food safety rules are rooted in “The Jungle,” a 1906 novel by Upton Sinclair describing the unsanitary conditions of the meatpacking industry, Katzen said.

Automobiles now have airbags, rollover protection and padded steering wheels because of the 40,000 some deaths a year on the highway, she said.

Reduce Rules by 75 Percent

Trump has said he is seeking a 75 percent reduction in regulation, maybe more. What would that look like?

There might be more lead in the water supply like in Flint, Mich., Katzen said. The river in Cleveland might burn again, or the air in certain areas will look like Beijing’s, or there will be widespread E. coli outbreaks, she said.

“These outcomes would not be cost-free,” Katzen said. “Increases would be needed for medical assistance, whether it’s for asthma or injuries in the workplace or workman’s comp, and the quality of life we have come to enjoy could definitely be adversely affected,” she said.

Hard to Find Regulations to Cut

It is conventional wisdom that there are regulations on the books that could be deleted without a significant impact on anyone, Katzen said.

Presidents since Ronald Reagan have all ordered some form of retrospective review to see what existing regulations could be eliminated, Katzen said.

“It’s been very difficult to unearth those,” she said. “Some have really tried hard and still haven’t produced very much.”

This is in part because, once a regulation is issued, the affected industries implement it with ingenuity, keeping costs to a minimum, Katzen said. Then, once the rules are implemented, weeding them out does not produce very much savings, she said.

Not Either-Or

The benefits of regulation were raised in a conference call on Feb. 9 hosted by the Federalist Society, where former public policy officials discussed the new executive order and its impact.

Susan Dudley, director of the Regulatory Studies Center at George Washington University, said it is important that agencies continue to calculate the benefits of regulations as well as the costs.

“This order shouldn’t replace benefit-cost analysis,” Dudley said. “Instead it adds a budget constraint, and I think agencies would still try to maximize net benefits within that constraint.”

The order does not undermine the ability of the Environmental Protection Agency, for example, to think very much about benefits when it looks at which regulations it wants to introduce and which it might be able to modify, Dudley said.

Same Benefits, Lower Cost

Jitinder Kohli, a former official in the British government and now managing director in Deloitte Consulting LLP’s public sector practice, said that in the U.K., agencies are rightly reluctant to take away protections.

Regulators want to protect the environment and workers, and achieve public good, Kohli said on the conference call.

“But they also find that there are ways to achieve those, and often at lower cost to business,” he said.

The way in which regulations evolve can result in complexity and confusion, Kohli said.

“And making it easier and simpler for people to understand, for businesses to understand, can often maintain those protections whilst minimizing costs,” he said.

U.S. agencies will want to bring in regulations when the benefits justify the costs, and overall, they should want the benefits associated with regulation to be as high as possible, and the costs as low as possible, Kohli said.

To contact the reporter on this story: Cheryl Bolen in Washington at cbolen@bna.com

To contact the editor responsible for this story: Paul Hendrie at pHendrie@bna.com

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