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2 Questions for Trump’s ‘Regulatory Czaritsa’ Nominee

2 Questions for Trump’s ‘Regulatory Czaritsa’ Nominee

Senators must ask Neomi Rao, the radical opponent of regulation President Donald Trump has nominated to head an office charged with reviewing and improving rules, if she will do her duty.

The White House is seen in Washington, May 2017. (AP/Carolyn Kaster)
The White House is seen in Washington, May 2017. (AP/Carolyn Kaster)

In his latest attempt to put corporations before people, President Donald Trump has nominated vocal opponent of regulation Professor Neomi Rao to head the Office of Information and Regulatory Affairs, or OIRA, within the Office of Management and Budget in the Executive Office of the President. OIRA is known as “the most important office in government you’ve never heard of.”

In this position, Rao could wreak havoc on agencies’ ability to protect Americans from threats to their health, safety, and financial security. Under the Reagan administration, OIRA became “the black hole where rules would go and disappear.” That’s why senators must push Rao to explain her views and commit to defending the integrity of the regulatory process.

OIRA’s role in the regulatory process

OIRA was created by the Paperwork Reduction Act of 1980. It coordinates agencies during rule-making and reviews executive agency rules that OIRA or the agency deems “significant” both at the proposed and final stages. When agencies submit rules for review, they must provide the rule’s text; explanations of the need for the rule and how the rule will address that need; and assessments of potential costs and benefits as well as the rule’s consistency with the president’s priorities. OIRA also serves as the federal government’s gatekeeper on data and information collection. For example, collecting information from 10 or more “nonfederal persons” requires OIRA approval—every government form and survey is cleared by this office.

In 2015, OIRA conducted 415 total rule reviews, characteristic of the end of an administration. In high-volume years, that figure is often much higher—OIRA conducted 740 reviews in 2011. In other words, OIRA has hundreds of opportunities to interfere with rule-making each year and could create even more simply by designating more rules as significant and thus subject to extended scrutiny. While OIRA has deadlines for responding to agencies following submission, there is no penalty for tardiness. And when OIRA deems a rule is inadequately justified or conflicts with legislation, presidential priorities, or regulatory principles, OIRA may return the rule to the agency for revision—forcing the agency to revise its submission.

The head of OIRA wields a tremendous amount of power. If confirmed, Rao could use this position to delay rule-making indefinitely, similar to when the office became “the place where regulations go to die” under Reagan. Delays have life-or-death consequences. In 1981, the Reagan administration delayed a rule that would have required mandatory airbags or other automatic safety features in new cars. These safety features were not required until 1989; airbags were not mandatory until 1997. Ultimately, about 4,500 lives could have been saved during each year of delay until airbags became mandatory.

Ask Rao: Will she preserve agencies’ decision-making authority?

The Supreme Court’s nondelegation doctrine, last revisited in 2001, bars Congress from delegating legislative power to agencies. But Congress can—and, of necessity, must—delegate decision-making authority to agencies. The only limit on that prerogative is the mandate to articulate an “intelligible principle” to guide the agency’s actions. The Court has only twice found that a statute did not meet that flexible criterion.

Delegating decision-making authority to agencies to determine how an aim should be accomplished and respond to changing circumstances is critical to developing effective protections. Agency experts tasked with reducing a certain type of polluting emission or tackling a predatory financial product need leeway to come up with the best way to do so. Members of Congress have neither the expertise nor the time to devise detailed solutions to the problems their legislation identifies for amelioration—much less continuously update laws’ fine print to meet evolving challenges.

But Rao believes that Congress shouldn’t be able to delegate decision-making authority to agencies. She claims that the Constitution bars members of Congress from exercising individual or executive power and requires Congress to act “collectively.” According to Rao, Congress should not delegate decision-making authority to agencies because it creates potential for individual members of Congress to influence rule-making by independently interacting with agencies.

If Rao got her way and courts enforced this extreme version of the nondelegation doctrine, Congress’ job would be impossible, with legislators being forced to guess at (and agree on) the best means of achieving each policy goal. Agencies, too, would be rendered useless. Even worse, where Congress failed to specify its intentions adequately, agencies would be unable to move forward with regulation and enforcement as they would lack the authority to fill in the gaps.

Ask Rao: Will she honor independent agencies’ autonomy?

Rao would like to force independent agencies to submit rules for OIRA review. At present, OIRA does not review rules from independent agencies—that is, federal government bodies that are not directly under the president. These bodies, starting with the nation’s first federal regulatory agencies—the Interstate Commerce Commission, founded in 1887, and the Federal Trade Commission, or FTC, founded in 1914—are created by Congress to carry out functions free of political influence.

Extending OIRA review to independent agencies’ rules would contravene congressional intent. Independent agencies’ status as such derives from Congress; independence is indicated by how legislation structures the agency, as a matter of explicit designation in the governing statute, or both. Independence is especially critical for financial regulators, made independent largely because of long-standing concerns about special interest influence in the banking system threatening financial stability.

Rather than being subject to executive control and OIRA review, with the accompanying threat of partisanship, these agencies are typically directed by a board or commission whose members are appointed for lengthy terms at staggered intervals. Or, if they have a single director—as the Social Security Administration, Federal Housing Finance Agency, Office of the Comptroller of the Currency, and Consumer Financial Protection Bureau do—his or her term extends longer than the president’s four-year term. This appointment scheme is meant to ensure that no one administration exclusively controls an independent agency.

Independent agency officials direct rule-making subject to congressional and judicial, rather than executive, review. The Administrative Procedures Act dictates rule-making procedures and requirements for public participation, and final rules are subject to evaluation under the Congressional Review Act, which gives Congress the power to strike them. Like all agency rules, independent agency rules are also subject to review by the courts.

As a further safeguard of independence, Congress generally specifies that the president cannot remove independent agencies’ commissioners or directors except for cause. Conditions for removal may include, for example, inefficiency, neglect of duty, or malfeasance in office, as upheld by the Supreme Court in Humphrey’s Executor v. United States, a 1935 case involving the firing of an FTC commissioner under President Franklin Roosevelt on policy grounds. Of course, Rao opposes these integral limits on political interference with independent agencies too.

While Rao wouldn’t be able to change the grounds for removing an agency head or commissioner as OIRA director, her argument that the president should be able to fire these officials at will is another indication of her commitment to attacking independent agencies’ independence—as well as bad policy. There are currently an unusually high number of unfilled positions within the administration and the appointment process has been remarkably lengthy. Making it easier to remove more officials on political grounds would only exacerbate the inefficiencies created by these vacancies.

Rao’s radical views signal trouble. Rao wants to bring agencies designed to operate with a minimum of political influence under the control of the executive branch at a time when their independence may be the most critical: during a historically conflict-of-interest-ridden administration. It would only be a matter of time before special interests could block financial regulators from drafting rules that could affect their bottom line. For example, given that Trump is indebted to more than 150 financial institutions, Americans would have good reason to be concerned new rules would be drafted with these firms in mind.

The Senate should protect OIRA

Ted Gayer of the Brookings Institution, who served on George W. Bush’s Council of Economic Advisers and in his Department of the Treasury, has described OIRA as “the mediator” and “the referee” for agencies. Cass Sunstein, former OIRA administrator under President Barack Obama, notes that “a central function of OIRA is to operate as a guardian of a well-functioning administrative process.”

Given the unprecedented conflicts of interest in this White House, confirming someone committed to disempowering agencies and expanding the president’s powers to gut regulations is precisely the wrong approach at exactly the wrong time. The White House and Congress have already begun attacking protections vital to health, safety, and financial security. Empowering Rao would vastly accelerate this administration’s agenda of attacking safeguards critical to Americans in everyday life.

Rebecca Buckwalter-Poza is a fellow at the Center for American Progress. Joe Valenti is the director of consumer finance at the Center.

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Rebecca Buckwalter-Poza


Joe Valenti

Director, Consumer Finance