Reshaping Regulatory Oversight: Understanding Trump’s Executive Order

A Constitutional Question: The Role of Independent Agencies

On February 18, President Donald Trump signed an executive order that could fundamentally reshape the regulatory landscape in Washington. This order mandates that all federal agencies, including so-called independent agencies, submit their draft regulations for White House review before they can be published in the Federal Register. The move is aimed at aligning all executive branch actions with presidential priorities and securing greater accountability for the American people. While the implications of the order are extremely promising, they also create some new vulnerabilities that need to be carefully considered.

The existence of independent regulatory agencies has long been a source of constitutional controversy. The U.S. Constitution establishes three branches of government—legislative, executive, and judicial. The president, as head of the executive branch, is vested with the duty to “take Care that the Laws be faithfully executed.” Yet, independent agencies such as the Federal Trade Commission, the Federal Communications Commission, and the Securities and Exchange Commission have historically operated outside the direct control of the President. Their independence primarily stems from restrictions on the president’s power to remove their leaders. These agencies exercise vast regulatory authority, issuing rules with profound economic and societal impacts, yet they have not been subjected to the same oversight mechanisms as traditional executive agencies.

This quasi-autonomous status raises fundamental constitutional questions. If the president and vice president are the only executive branch officials accountable to the American people, how can powerful regulatory agencies function without their direct oversight? Supporters of independent agencies argue their independence is needed to shield them from political influence. Critics respond that their independent status undermines democratic principles, effectively creating a fourth branch of government that is answerable to no one. The debate over the constitutional legitimacy of independent agencies has been ongoing for decades, and Trump’s executive order has brought this issue back to the forefront of political discourse.

Executive Order 12866: A Historical Perspective

To understand the significance of Trump’s latest executive order, it’s important to first understand Executive Order 12866, issued by President Bill Clinton in 1993. EO 12866 establishes a regulatory review process and requires executive agencies to assess the economic costs and benefits of their significant regulatory actions. This order empowers the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget to review draft regulations as well as to critique the accompanying economic analysis agencies prepare in support of their regulatory actions. The review process is meant to guarantee that regulations are consistent with presidential priorities and backed by solid economic evidence.

However, independent agencies were exempt from this executive order and, by extension, the economic analysis and OIRA review provisions included in it. Trump’s new executive order dismantles that exemption, bringing independent agencies into the OIRA review process. This change represents a significant shift in how regulatory agencies operate and could have far-reaching implications for the balance of power in Washington.

While some view this as a necessary step to ensure accountability and align regulatory actions with presidential priorities, others worry about the potential consequences of centralizing regulatory oversight. The OIRA review process has been criticized for its potential to politicize regulatory decision-making and for its reliance on flawed economic analyses. These concerns have been amplified by the inclusion of independent agencies, which have historically been insulated from direct political influence.

The Pros: Presidential Authority And Accountability

From a constitutional perspective, Trump’s order is a step toward restoring presidential control over the executive branch. The president has the authority—and the duty—to oversee all executive branch actions, including those of independent agencies. By requiring OIRA review and mandating the creation of a White House Liaison position within each independent agency, the executive order helps guarantee that all regulatory actions align with the president’s policies and priorities.

These changes promote democratic accountability. If voters are dissatisfied with the actions of any federal agency, they can hold the president responsible at the ballot box. This accountability mechanism is undermined when powerful regulatory bodies operate independently of presidential oversight. By bringing independent agencies under the purview of the White House, Trump’s order strengthens the democratic accountability of the executive branch.

Supporters of the order argue that it ensures that all regulatory actions are consistent with the will of the American people, as expressed through their elected representatives. They also argue that it helps to prevent regulatory overreach by ensuring that all agencies are operating within the framework established by the president and Congress. While these arguments have merit, they also raise important questions about the balance of power in the federal government and the role of independent agencies in maintaining a system of checks and balances.

The Cons: Possibly Entrenching Bad Practices

Despite its constitutional merits, the executive order is not without risks. While OIRA review is intended to improve regulatory quality through cost-benefit analysis, the reality is far more complicated. OIRA review has historically not led to high-quality agency economic analyses. In fact, government economic analyses tend to be methodologically flawed in part because of OIRA oversight.

For example, OIRA’s economic analysis guidelines include methodologically unsound principles, such as how to discount future benefits and assign dollar values to human life. These practices skew the outcomes of cost-benefit analyses, leading to regulations that do not capture real-world impacts. By subjecting independent agencies to OIRA review, there is a genuine risk of entrenching these flawed methodologies across all regulatory bodies, not just traditional executive agencies.

Critics of the order argue that it could lead to a decline in the quality of regulatory decision-making by imposing a one-size-fits-all approach to cost-benefit analysis. They also worry that it could politicize the regulatory process, as OIRA is part of the White House and is subject to political influences. These concerns are not unfounded, as there is a long history of political interference in regulatory decision-making during previous administrations.

Technocratic Governance: A Missing Pillar

To evaluate the potential impact of Trump’s executive order, it’s useful to consider three pillars of technocratic governance. These are:

1. Analysis Requirements: Agencies should make decisions based on rigorous, evidence-based analysis.
2. Third-Party Oversight: There must be oversight to ensure the quality of analysis and its alignment with political priorities and values.
3. Judicial Review: Courts should have the authority to review the evidentiary basis of agency regulations, providing a mechanism for public challenges.

Without all three pillars in place, regulatory agencies are unlikely to base their decisions on high-quality evidence, because they will not possess the necessary incentives or the relevant information.

Currently, executive agencies operate with just two of these pillars in place—analysis requirements and third-party oversight in the form of OIRA review—but they lack robust judicial review for economic analysis, because analysis is only required via an executive order. (Judicial review is available in other contexts outside of economic analysis, and some agencies are legally required to consider costs or benefits in specific situations. However, these instances are the exception rather than the norm.) This gap helps explain the poor quality of evidence underlying the vast majority of federal regulations.

Independent agencies, on the other hand, have traditionally lacked all three pillars, which arguably results in even lower-quality evidence. Trump’s order effectively introduces the first and second pillars—analysis requirements and third-party oversight—to independent agencies. However, without the third pillar of judicial review, the quality of economic analysis at independent agencies is unlikely to meet a high standard of quality, just like with the traditional executive agencies.

A Step Forward, But No Miracle Cure

Trump’s executive order represents a major step toward consolidating presidential control over the regulatory state. It addresses long-standing constitutional questions about the legitimacy and accountability of independent agencies. It also introduces a mechanism for aligning all regulatory actions with presidential priorities, reinforcing democratic accountability.

However, the order’s potential to improve the quality of economic analysis that informs agency decisions is limited. OIRA’s track record suggests that it may spread bad analytical practices even as it also improves other aspects of analysis. Without judicial review of economic analysis, there is little incentive for agencies to improve the evidentiary basis for their regulatory decisions.

Regulators are supposed to be experts, but currently there is very little expertise driving their decision making. Policymakers and scholars should watch closely as this new framework is implemented and consider additional reforms to improve the quality and outcomes of federal regulations. While Trump’s executive order is a step in the right direction, it is only one piece of a much larger puzzle. To truly achieve a more accountable and effective regulatory system, further reforms will be necessary.