Cutting Government Regulations

In the name of making our federal government more efficient, President-elect Trump has announced his intention to resume his previous efforts to rescind numerous federal regulations. He intends to begin with those that restrict the activities and profitability of business enterprises. Not only does Trump want to abolish numerous federal regulations; in some cases he wants to wholly eliminate the administrative agencies that devise, interpret and enforce those regulations. Trump’s determination to cut business regulations is what undoubtedly has drawn Elon Musk and Vivek Ramaswamy into his orbit; and they have willingly accepted his request to chart the course for the nation to return to an era of small government when businesses were not constrained by the federal government. You might think of it as resurrecting America’s Gilded Age when business titans were able to underpay their workers and overcharge their customers.

The Gilded Age, which began in 1870, was a period when it was accepted that the government’s involvement in the conduct of private businesses should be limited to protecting their property. The problem is that those who manage business enterprises owe their total loyalty to their stockholders and have no obligation to protect the interests of those whom they employ or those who purchase the goods and/or services they generate. While such protections could be achieved by simply having the government own all businesses that interact with the public, that solution raises more problems than it cures. As I have previously observed, there is nothing that private enterprise can do that governments cannot do more inefficiently. That’s because governments are obliged to act in the best interests of all of their citizens.

A corollary to that observation, however, is that there are many activities which benefit the public that private businesses won’t perform unless compelled to do so. The obvious solution is for governments to adopt laws and regulations to insure that business enterprises act in ways not detrimental to the interestsof the public and for governments to perform those functions that private enterprises won’t or are Ill-equipped to perform.

The cut-throat business practices that characterized the Gilded Age eventually led to the collapse of the U.S. economy and to the Great Depression. It took a determined FranklinRoosevelt, ably assisted by Frances Perkins, his Secretary of Labor, to put Americans back to work and to begin to nurse the nation’s economy back to health. This was achieved through the implementation FDR’s “New Deal”, a combination of business regulations and government-operated social welfare programs. The nation’s economic revival achieved during FDR’s administration validated the proposition that a free market economy, which encourages innovation and efficiency, can both survive and thrive while being subject to government oversight.

While the Congress is capable of recognizing inimical business practices, it lacks the expertise to fashion rules and regulations that would both prevent that conduct and at the same time not stifle business initiative. This prompted FDR to request Congress to establish literally scores of administrative agencies with specialized expertise to address those actions deemed to be harmful to the public interest. This collection of independent agencies (sometimes collectively referred to as “the administrative state”) was vested with the power to fashion rules and regulations governing privately owned businesses as well as the power adjudicate issues arising under the regulations that they promulgated and to enforce their determinations.

Administrative agencies have two distinct advantages. First, unlike the Congress, they can be staffed with persons possessing a high level of understanding regarding the subject matters they are asked to regulate. This is critical because business practices constantly evolve and the regulatory scheme must be sufficiently flexible to accommodate those changes. In the absence of a regulatory agency, the Congress would need to enact new legislation each time there is a change in the way a regulated industry operates. Stated simply, there are not enough hours in a day or days in a year for Congress to address all of the issues that would arise.

​ Secondly, administrative agencies also play an important secondary role in that they are called upon to serve as the first line of enforcement of the rules which they promulgate. Thus, their role goes well beyond mere rulemaking and requires them to also function in both an executive and judicial capacity. Thus, even if the Congress were to acquire the necessary expertise to allow it to perform the rule-making tasks, it would be forced to usurp the functions which the Constitution has vested in the executive and judicial branches of the government. The use of administrative agencies navigates around that problem.

The very notion that Congress can delegate its regulatory powers initially was not well-received by the business community or by the justices of the U.S. Supreme Court. After FDR threatened to expand the number justices serving on the Court and to fill those seats with jurists of his own choosing, the Court’s incumbent justices came to recognize the wisdom of creating specialized agencies with the expertise needed to fashion workable rules and regulations. By contrast, businesses affected by administrative actions were not enamored with the thought of having their activities regulated by independent agencies over which they would have little control. Unlike the Congress that is subject to external influence, administrative agencies are largely shielded from pressure by those whom they regulate.

The years following World War II brought the most robust economic growth our nation has ever experienced. This was due to three factors. Most importantly, the U.S. was the only developed nation whose industrial capacity had not been devastated by the war. Quite the contrary, it had grown rapidly to meet the needs of fighting the war and helping those nations devastated by it. Secondly, the role of women had changed, with many women joining the nation’s workforce thereby increasing the nation’s productive capacity. Lastly, the social welfare programs started by FDR’s administration had not only grown in number and power, but had more evenly spread the nation’s wealth. That had the effect of expanding the buying power existing within the nation which even today is responsible for more than 65% of the nation’s GDP.

In the years between the end of World War II and 1981, the number of administrative agencies continued to increase to meet the needs of the nation’s rapidly expanding and more diverse economy. The nation’s economic growth, however, began to decline in or around 1980. That was largely because the world’s remaining developed nations had recovered from the war and were starting to compete with U.S. manufacturers, many of which had grown complacent and had not bothered to continue to innovate their product lines or their manufacturing processes. This increased competition caused the profit margins of U.S. businesses to shrink. The problems encountered by U.S. manufacturers were made more acute because their new competitors enjoyed lower labor costs.

The response of U.S. businesses was two-fold: they attacked the highly organized U.S. labor movement in an effort to reduce their own labor costs and they sought to attack government regulations which also placed them at a competitive disadvantage. Coming to their rescue was the Republican Party which had long been the champion of big business and the enemy of organized labor. It was Ronald Reagan and his call for “small government” who won their support along with the presidency.

There’s no question that the plethora of federal regulations created since FRD initiated his New Deal increased the operating costs and reduced the profitability of American businesses. As such, they were functioning as engines for transferring wealth from business enterprises (and their owners) who were bearing the costs of compliance with those regulations to working class Americans who were benefiting from having safer and healthier workplaces and environments. For example, regulations promulgated by the NLRB had helped assure the rights of workers to unionize which increased the labor costs of large businesses; OSHA regulations required businesses to expend monies to create safe working environments for their employees; regulations established by the EPA required them to dispose of their waste in ways that did not contaminate the environment; FDA regulations required drug companies to undertake massive testing of new drugs to assure their safety before they could be marketed; FDIC regulations required financial institutions to pay for insurance protecting customer assets held by them; and regulations issued by the Consumer Financial Protection Bureau prevented financial institutions from undertaking numerous practices which adversely affected their borrowers.

The first step in reigning in the administrative state was the passage of the Administrative Procedures Act in 1946. That Act required administrative agencies to act carefully in establishing rules and regulations and empowered the courts to strike those mandates deemed to be “arbitrary and capricious.” In the wake of the APA’s enactment, it became  the basis of numerous court challenges to administrative rules and regulations. While those efforts slowed the adoption of new rules and regulations, they did little to stop their growth or their application.

With the election of Ronald Reagan in 1980 came renewed efforts to roll back the administrative state. Reagan vilified “big government”  and took actions that reduced the popularity and power of organized labor. Although business enterprises and their owners had been urging their representatives in the Congress to repeal laws and regulations which they found inimical to their operations, such efforts were only occasionally successful. This was largely because the Senate’s filibuster rule required a supermajority vote for passage.

Nor were the courts particularly helpful in overturning laws regulating business activities because the U.S. Constitution expressly granted the Congress the power to regulate interstate commerce and memories of what had led to the Great Depression were still fresh in the minds of most jurists. Indicative of the courts’ antipathy to attacks on the administrative state was the Supreme Court’s 1984 decision In Chevron U.S.A., Inc. v. Natural Resource Defense Council, Inc. in which it ruled that “reasonable” determinations by federal agencies as to the scope of their authority were to be given deference when reviewed by a federal court.

For the next 40 years the Court’s ruling in the Chevron case stood in the way of attacks on the regulations promulgated by the nation’s administrative agencies. The first erosion of that doctrine came in the Supreme Court’s 2000 decision in FDA v. Brown & Williams Tobacco Corp. in which it held that federal agencies have no authority to issues rules with respect to “major questions” unless specifically authorized to do so by the Congress. The “major question doctrine,” a total invention of the Court, was based upon the presumption that the Congress should not be able delegate its rule-making authority with respect to matters with far-reaching implications without expressly doing so.

While reasonable on its face, this doctrine ignores the fact that Congress frequently does not fully understand how the problems it perceives can best be addressed. Moreover, in many cases, industry practices change creating new problems with the same inimical effects. Thus, the “major question doctrine” effectively requires Congress to pass supplemental legislation before the administrative agency can continue to perform the mission that Congress had previously delegated to it.

With the election of Donald Trump in 2016 came the appointments of three new justices of the Supreme Court, each groomed and recommended by the conservative Federalist Society. That paved the way for the Court’s 2024 decision in Loper Bright Enterprises v. Raimondo in which it reversed its ruling in the Chevron case, opening the way to a multitude of attacks on the rulings of administrative agencies. The Loper decision, coupled with a growing practice of conservative groups to channel to their attacks on administrative agencies to U.S. District Court judges with conservative leanings, is rapidly altering the landscape of administrative law, making it easier for business enterprises to escape government regulations they deem restrictive to their operations and profitability.

It's important to understand that the battle to dismantle the administrative state also takes place on another level through “Executive Orders” which are presidential declarations purporting to interpret legislative actions and how they can best be implemented. Such orders are based upon Article II of the Constitution vesting in the President the power to implement the nation’s laws. Executive orders date back to George Washington’s administration and recent presidents have been issuing literally hundreds every year. In many cases an executive order issued by one president will be rescinded by his successor, only to be reinstated by a subsequent president.

Executive orders relating to environmental issues have been a particularly fertile area for such activities. Democratic presidents have issued scores of executive orders aimed at protecting or restoring the nation’s environment and many of these have been rescinded by a subsequent Republican president. Asserting that climate change is a hoax, Donald Trump in his first term is reported to have rescinded roughly 100 of his predecessors’ environmental executive orders.

We are now about to experience a new wave of attacks on business regulations as the newly-elected Trump administration, utilizing the plans laid out in Project 2025, is now setting out to eliminate entire administrative agencies in the name of enhancing “governmental efficiency.” Rest assured that this effort has precious little to do with making our federal government more efficient or even enhancing the nation’s economic growth. This effort is strictly intended to block the transfers of wealth from those at the top of the income and wealth scales to working class Americans that started in the New Deal through the use of the administrative agencies.