Ready for Midnight Rule Regulations? You Better Be!
The number of election year midnight regulations imposed during lame-duck periods typically doubles. And that is especially true when a rival party is assuming the White House.
The midnight rules are the so-called regulations created by the executive branch of an outgoing President’s administration, between the November election and the January inauguration.
But throw in the “Cinderella effect” and “status quo bias” and things can get pretty messy in the world of regulatory actions.
So, why should you be paying close attention?
“To some extent, midnight rule-making is inevitable,” said Sherzod Abdukadirov, a Mercatus Center Regulatory Studies Program research fellow.
But election-year partisan politics are not the sole catalyst behind midnight rule-making. Agency chiefs attempting to tidy up loose ends before they leave office are another factor he says.
Both that “Cinderella Effect” – where appointees seek to leave their mark – and the “status quo bias,” a general post-election pause where not much initially changes, are also significant contributors to midnight regulatory activity.
“There is a natural inclination after the election to finish (regulations) quickly,” said Rosario Palmieri, vice president for Labor, Legal and Regulatory Policy at the National Association of Manufacturers (NAM).
“Even in a friendly transition, if an appointee doesn’t trust the next administration, they will push their programs forward.”
“In many cases, finalization of rules has been on hold for a year to 18 months,” Abdukadirov said, “so it’s not unusual for there to be a last-minute emphasis on getting these stalled rules finalized.”
While bureaucrats clear their dockets in the Cinderella Effect, effort to solidify their regulatory legacies, the status quo bias makes “trying to undermine (midnight regulations) excessively difficult,” Palmieri said.
Many expect this to unfold during the Obama Administration’s final three months, considering it has already imposed a record number of regulations, eclipsing a 79-year record in 2015 for annual regulatory output.
If all pending rules are finalized it could set another annual record in 2016 – particularly if a Republican president is elected in November.
“There has been a steady drip of regulations from this administration for the last six years,” said William Kovacs, U.S. Chamber of Commerce senior vice president for Environment, Technology & Regulatory Affairs.
“We’ve had midnight regulations, two in the morning regulations, noon regulations and 5 p.m. regulations.”
NO DETERRENT TO ‘MIDNIGHT RULE-MAKING
According to the Heritage Foundation, there were 82,035 pages of pending regulations posted in the Federal Register in 2015. That’s the most in a single year since 1936 when President Franklin D. Roosevelt pushed his “New Deal” through a reluctant Congress via extensive use of executive orders, administrative rule-making, and regulatory caveats.
That compendium of complex, often contradictory data and commentary created 3,408 new regulations in 2015 – 39 times the 87 bills approved by Congress in the same year – and affecting everything from residential dishwashers to privately owned drones, to global corporations.
Last December, President Obama’s Office of Information and Regulatory Affairs (OIRA) Administrator, Howard Shelanski, vowed not to unload a “big package of surprise regulations” after November’s elections. President George Bush’s Chief of Staff Joshua Bolten issued a similar pledge in 2008, ordering all 60-plus federal agencies to cease rule-making by Nov. 1, just days before the election that ushered President Obama into office.
Shelanski did not issue a deadline. But to ensure proposals meet the 1996 Congressional Review Act’s (CRA) 60 “session days” review requirement, regulatory actions had to be filed by May 17 to satisfy that standard before the new administration is sworn in on January 20, 2017.
During this 60 session day period, Congress can kill a regulation with a simple, filibuster-immune majority vote. For rules issued after mid-May, the CRA gives the succeeding Congress and administration an expedited opportunity to rescind them through a “resolution of disapproval.”
Enacting a “resolution of disapproval,” however, is exceedingly difficult. It must be passed by both houses and signed by the president, or by securing a two-thirds majority in both houses to overcome a presidential veto. According to the Congressional Research Service, federal agencies issued more than 60,000 regulations between 1996 and 2015 while Congress used a “resolution of disapproval” only once to overturn a regulation — in 2001, when the newly seated Bush Administration rescinded a Clinton ergonomics rule.
Despite Shelanski’s pledge not to uncork a “big package of surprise regulations” on a lame-duck Congress, there’s little deterrent not to engage in “midnight rule-making” and, as history shows, vows to avoid the practice have rarely restrained departing administrations’ regulatory impulses, including the Bush Administration in 2008.
“They were not successful” in fulfilling Bolten’s pledge, Abdukadirov said. “There was still a surge” in midnight regulations, including 36 “major” rules primarily designed to impede anticipated Obama Administration environmental initiatives.
American Action Forum (AAF) Director of Regulatory Policy, Sam Batkins, expects the same regulatory rush if Republicans win the White House in November.
“In 2012, there was not much of a turnover, so there wasn’t much ‘midnight regulation.’ In 2000 and 2008, it was a different story,” he said, noting Obama’s Chief of Staff Rahm Emanuel issued a phone edict from the inaugural ball suspending all un-finalized regulatory action. “That could play out as well if there is a change in parties.”
Last May, the White House’s Office of Management and Budget released its “Unified Agenda of Federal Regulatory and Deregulatory Actions,” which listed 3,260 regulations in the rule-making process.
The first six months of 2016 have been “very active,” Kovacs said, joking, “There aren’t going to be a lot of regulations left” to finalize during the lame-duck period.
“It does seem a lot of significant rules were targeting finalization” within the 60 session day time frame and “before the traditional midnight period,” Palmieri said, noting many are set to be finalized by September.
But that doesn’t mean rule making will slacken afterwards. “What can I tell you right now? I can tell you there absolutely will be rules finalized in November, December and January,” he said.
The sheer number of pending regulatory actions in the pipeline “is what we are concerned with,” Palmieri said. That crush is reducing opportunity for “a full analysis” by those on both sides of an issue to ascertain potential costs and impacts before they go into effect.
“We question the urgency,” he said. “There is a rush to regulate in a way that’s unnecessarily costly, poorly designed, without thoughtful interagency review. The economic analysis that is the underpinning of any regulatory review gets papered over.”
“If you have so many coming through the pipeline at the same time, they don’t get the necessary review,” Abdukadirov adds. “The more volume with the same resources, something is going to slide, overwhelming the checks-and-balances of the regulatory process.
Regulations that surface in the lame-duck period historically “tend to have less quality analysis and may not provide the benefit for the cost,” he continued. “There is a certain weakening of the cost-and-benefit analysis in the last moments of the transition.”
“I generally think everybody should be concerned with governing with your hair on fire,” Batkins said, predicting “a rash of proposals” will be submitted in November, reviewed in December, and “arrive in January” before the new administration is sworn in. “Signals have been given, no question,” he said.
Batkins said “interim final rules” initially imposed as stopgaps, can be formally finalized within 30 days.
“Our biggest fear is there will be a lot of rule-making with very little public oversight,” he said, noting a 10-page regulation can be accompanied by “thousands of pages” of data that can take a team of technical experts at least 60 days to absorb.
Kovacs said the frenetic pace can allow regulators to camouflage rule-making, noting that not all regulations “come down in the form of full regulatory disclosure.”
Some come in guidelines, administrative revisions and rule amendments.
“But if it acts like a rule and quacks like a rule, it is a rule,” he said.
Financial Services Institute executive vice president & general counsel David Bellaire echoed those concerns.
“It is critical that appropriate administrative procedures are followed to allow for adequate notice and comment periods for any proposed regulation,” he said. “This ensures all concerned parties’ voices are heard, unintended consequences are avoided, and that the administration gets the regulation right.”
TOP TARGET: ENVIRONMENTAL REGS
Abdukadirov anticipates a midnight regulatory “surge across the board,” with environmental rule making particularly accelerated if the Republican nominee wins in November.
“There will be a push to finish up environmental regulations. They have a lot of them on the plate,” he said, noting this is not unusual because environmental regulations are the largest sphere of regulation, and engender the “biggest portion of cost-and-benefit analysis.”
“Environmental regulations are historically most vulnerable to midnight regulation,” Batkins said. He notes final fracking rules are still being determined, and proposed greenhouse regulations within the Department of Transportation’s Public Transportation Agency Safety Plan could affect everything from ceiling fans to furnaces, dehumidifiers, and the trucking industry with emissions rules.
Kovacs said because the U.S. Chamber of Commerce has such a vast and diverse constituency, any regulation that affects commerce and industry is an advocacy issue. Among regulations the Chamber is spearheading is opposition to the Environmental Protection Agency’s (EPA) “Waters of the U.S.” (WOTUS) rule, which would affect “everyone with water on their property,” and new EPA ground-level ozone rules, which would “affect members in 90 countries.”
U.S. Chamber of Commerce Senior Manager of Media Relations, Megan Van Etten, said the organization is also concerned with “Part 2” of Department of Labor’s “persuader” regulation within the Labor-Management Reporting and Disclosure Act (LMRDA, and a bevy of rules being issued by the Occupational Safety and Health Administration (OSHA).
Palmieri said NAM has similar concerns with LMRDA, as well as issues with new OSHA crystalline silica exposure rules, and the Federal Drug Administration’s (FDA) new nutrition label rules for packaged foods.
Ironically, an advocacy group that may not be too concerned about a midnight regulatory onslaught are gun-owners’ rights organizations, despite President Obama’s fervent support for gun control regulation and the fact that he’s issued 34 firearms-related executive actions since 2013.
“I don’t think anybody is going to try to do a midnight deal relating to firearms,” Second Amendment Foundation (SAF) Communications Director Dave Workman said. “It would be political suicide. Any bill or regulations that come after the election will be D-O-A.”
SHINING THE MIDNIGHT LIGHT
The key to derailing the midnight regulatory freight train is tracking the rule-making process in motion, before the clock strikes the proverbial 12.
That way you can ensure your members are on alert to contact their Congressional representatives, and are aware of a contested rule’s potential impacts on them as individuals, or as members of trade groups, associations, industries or nonprofits.
Kovacs said the U.S. Chamber of Commerce routinely builds or joins coalitions to “keep all the industries involved” in its advocacy campaigns.
The Chamber issues email alerts several times a day informing members “this is going on right now or this is going to happen,” he said. “We have to play our game every day. It’s a constant drumbeat, whether it is midnight or not.”
Workman said the SAF and its affiliated advocacy arm, the Citizens Committee for the Right to Keep and Bear Arms, issues press releases and other statements via the PR Newswire “two, three times a week.”
But SAF’s primary tool is “email blasts” and direct mail campaigns directed at the 650,000 members in its “support network,” he said.
“We get hundreds of thousands in responses,” Workman said. “We’re pretty well organized and it really doesn’t take much to fire up gun-owners.”
Palmieri said ultimately the best midnight regulation advocacy campaign, while focused on a specific pending rule, should target the entire flawed process.
“There is a tendency to push something in this time frame usually because it is painful in the light of day,” he said. “Our belief is that good rule-making should stand on its own in the light of day. If you can’t do it in an election year, you probably shouldn’t do it at all. Sunlight and transparency lead to better regulations.”
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