Overregulation cost Americans dearly in forgone economic growth for decades—a loss of 0.8 percent annually according to the Council of Economic Advisers. America is no longer the easiest place to do business as other developed countries deregulate to make their product markets more competitive. Congress and the Trump Administration greatly slowed the federal regulatory momentum and already generate savings with improved rules and processes.

Congressional Republicans and the Trump Administration have made it a priority to improve America’s regulatory apparatus and reverse the previous overregulation. The reform effort includes utilizing the Congressional Review Act, a more deliberative regulatory pace, and adherence to the Administrative Procedures Act. The changes are often overlooked but will benefit the economy for decades to come.

Excessive regulation depresses economic growth: The Council of Economic Advisers (CEA) recently reviewed the economic literature on how regulation affects economic growth. The CEA found that excessive regulation lowered U.S. gross domestic product (GDP) growth by an average of 0.8 percent per year since 1980 and that over the last eight years this “taxation by regulation” increased sharply with around 500 new economically significant rules.

Other countries deregulate: Entrepreneurship, new business formation, job creation, and economic growth all suffered in the United States from a growing mountain of government regulations and mandates, especially as many other countries eased their business sector regulations. Below, JEC’s “Chart of the Week” shows that U.S. companies face more domestic product market regulation than companies in many other developed countries.

In the 115^th Congress, Republicans and the Trump Administration are keenly aware of this problem and took immediate action to contain the growing regulatory burden.

The Obama Administration created seven of the eight largest Federal Registers, which record all the formal regulatory actions of federal agencies in a given year. In the Obama Administration’s waning months, regulatory agencies attempted to rush through so-called “midnight regulations” that could potentially burden the economy with over $150 billion in regulatory costs, according to the American Action Forum. These costs do not include “regulatory dark matter” such as agency guidance documents that are not subject to the regular rulemaking process. Nor do they include the “regulatory accumulation” costs from increasing the volume and complexity of the regulatory code.

Congress takes action: The Congressional Review Act (CRA) gives Congress the power to review and reject a new executive agency rule within 60 session days. Congress only used the CRA once previously to remove an Occupational Safety and Health Administration (OSHA) ergonomics rule issued as a midnight regulation during the Clinton Administration. This year, however, Congress halted 14 rules with over $580 million in regulatory costs. Furthermore, Congress recently signaled its intent to hold independent agencies to the same standards as other executive agencies with a CRA rebuke of the Consumer Financial Protection Bureau’s arbitration rule that could have led to excessive litigation and limited consumer choice. Additionally, the Government Accountability Office (GAO) found that regulatory “guidance documents” qualify as rules for the CRA, a matter that is currently under consideration by the Senate parliamentarian. If the parliamentarian agrees, this would allow Congress more control over the regulatory “dark matter” that agencies issue.

Trump Administration takes action: The CRA is one way to address America’s regulatory burden; executive orders are another. On January 30^th, President Trump issued Executive Order (EO) 13771 titled “Reducing Regulation and Controlling Regulatory Costs.” It requires the administration to use regulatory budget methods to offset new regulation costs by repealing at least two previous regulations for each new one, also known as the “one-in-two-out” rule. The executive order’s design resembles those used in Canada and the United Kingdom. Further, in February, President Trump issued EO 13777 titled “Enforcing the Regulatory Reform Agenda,” which requires executive agencies to appoint a Regulatory Reform Officer who oversees the “one-in-two-out” rule, retrospective review, and proper regulatory planning and analysis.

Cost savings: The American Action Forum calculated that executive regulatory agencies subject to the requirements of EO 13771 achieved annualized savings of $103.2 million from repealing old regulations while adding only $40.9 million in new costs. The large savings from the CRA and EO 13771 still netted a cost reduction of about $150 million even after the American Action Forum added available cost data for new regulations outside EO 13771’s scope.

Dollar costs are only part of the compliance equation. Entrepreneurs spend extensive time filling out forms, applying for permits, waiting for permission, and navigating federal requirements to ensure they comply with the rules. The Administration recognizes this burden, as CEA Chairman Kevin Hassett highlighted in testimony before the Joint Economic Committee:

But the new regulations are incredibly costly. And one think tank in town has estimated that because [the Administration] just slowed new regulations…we have reduced the amount of man-hours spent complying with new regulations this year by more than 6 million man-hours. And I think that gives you an idea of the kind of effects of prudent regulatory reform.

Fewer new high-cost rules: A so-called “major” or “significant” rule generally is one that has a broad reach and an annual economic impact of $100 million or more. The Competitive Enterprise Institute quantified significant rules proposed and finalized historically. From January 20, 2016, to September 30, 2016, President Obama proposed 290 “significant” rules and finalized 274 rules. In the same timeframe this year, President Trump finalized 116 “significant” rules and proposed only 65 new ones, less than a quarter of President Obama’s proposed rules. Even compared to the same period in President Obama’s first year, the number of major rules proposed by the Trump Administration amount to less than a third of the Obama Administration’s proposed rules.

Ending “sue and settle:” Within the regulatory process, interest groups began a practice of suing the Environmental Protection Agency (EPA) for not promulgating a rule they sought. To resolve the suit, the EPA would settle the case behind closed doors, hence the term “sue and settle,” by promising to adopt it without following the regular Administrative Procedures Act rulemaking procedures. In October, EPA Administrator Scott Pruitt started a new process for handling these lawsuits that would bring more transparency and include other interested parties such as the entities subject to regulation, the states, and the public at large.

Work in progress: Regulatory improvements will continue. For additional information and updates, see the JEC’s two-part primer on the federal regulatory process and Congress’ role and subscribe to JEC emails.