Milestones in the Evolution - Specialized Research AI at MIT

Milestones in the Evolution
of the Administrative State

Susan E. Dudley

The modern administrative state, as measured by the number of agencies, their
budgets and staffing, and the number of regulations they issue, has grown signifi-
cantly over the last hundred years. This essay reviews the origins of the administra-
tive state and identifies four milestone efforts to hold it accountable to the American
people: passage of the Administrative Procedure Act in 1946, the economic deregu-
lation of the 1970s and 1980s, requirements for ex ante regulatory impact analysis,
and the establishment of White House review. These milestones reflect bipartisan
consensus on appropriate constraints on executive rulemaking, but they have not
succeeded in stemming the debate over the proper role for administrative agencies
and the regulations they issue. New milestones may include judicial interpretations,
legislative actions, and extensions to executive oversight.

C hances are, ten years ago, most readers of this essay would not have been

familiar with the term administrative state. Now it is common in political
discourse. Use of the term on Twitter increased dramatically in early 2017
after President Donald Trump’s former strategist, Stephen Bannon, promised the
“deconstruction of the administrative state,” but its origins go much further back.
According to The Washington Post, Bannon was referring to “the system of tax-
es, regulations and trade pacts that the president says have stymied economic
growth and infringed upon U.S. sovereignty.” In this essay, I use administrative state
to mean the federal agencies that make up the executive branch–such as the De-
partment of Transportation, the Securities Exchange Commission, the Environ-
mental Protection Agency, and the Food and Drug Administration–which, pur-
suant to authority granted from Congress, issue regulations that carry the force of
law. It also includes several “independent” agencies that operate without direct
oversight from the president, although recent Supreme Court cases have raised
questions about how far that independence extends.

There is no question that the size and scope of the administrative state have
grown over the last century. Today, scores of federal agencies issue thousands of
regulations every year. The Code of Federal Regulations contains 242 volumes and

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more than 185,000 pages. That is four times as big as the U.S. Code of Laws passed
by Congress, which contains fewer than 44,000 pages.

Debate over the proper role for these agencies and the regulations they issue
emerged early in the twentieth century and led to different measures aimed at en-
suring they are consistent with the U.S. Constitution and accountable to elected
branches of government and the people. This essay traces the origins of the ad-
ministrative state, identifies several milestone efforts to hold it accountable to the
American people, and suggests what the future may hold.

L aw and public administration scholars often attribute the term administrative

state to Dwight Waldo’s book of that title in 1948, although others point to
earlier use in both the United States and elsewhere.1 By the time Waldo was
writing, debate over the proper role for administrative agencies had been raging for
several decades. While executive agencies and departments are as old as the repub-
lic itself, the scope and reach of the administrative state have expanded over time,
and with them, discussion of its proper role in the U.S. system of government.

Congress created the first modern regulatory agency, the Interstate Commerce
Commission (ICC), in 1887. As a 1977 Senate report put it, “for close to 100 years
Congress chose to exercise the commerce power directly, without the aid of reg-
ulatory agencies. . . . By 1887, Congress saw a need for delegating part of the task of
regulating commerce.”2 The bipartisan, seven-member ICC adjudicated between
railroads and shippers to regulate rates railroads could charge. In the decades that
followed, Congress established a variety of agencies to regulate interstate trade,
water and power, communications, commodity exchanges, and other areas of ac-
tivity. These agencies were often outside of executive departments and structured
to be somewhat independent of presidential control. Their members could only
be dismissed “for cause” (“inefficiency, neglect of duty, or malfeasance in office”)
in contrast to political appointees in executive departments who served “at the
pleasure of the president.”

Federal courts played an important role in drawing boundaries for these agen-
cies’ activities. Recall that the U.S. Constitution grants the legislative branch the
power to pass laws (Article I), it tasks the executive branch with administering
and enforcing those laws (Article II), and it makes the judicial branch responsible
for interpreting the Constitution and statutes (Article III).

Until the early twentieth century, the courts interpreted the separation of pow-
ers implicit in Articles I through III of the Constitution as prohibiting Congress
from delegating its legislative powers to administrative agencies. In 1892, the Su-
preme Court declared: “that Congress cannot delegate legislative power to the
President is a principle universally recognized as vital to the integrity and mainte-
nance of the system of government ordained by the Constitution.”3 This is known
as the nondelegation doctrine.

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Dædalus, the Journal of the American Academy of Arts & SciencesMilestones in the Evolution of the Administrative State

By 1928, the Supreme Court had softened this interpretation of the separation
of powers. It took a different view of the nondelegation doctrine in J. W. Hampton
v. United States, when it found that Congress could delegate legislative power as
long as the statute included an “intelligible principle” to guide executive action.4
That is, the Supreme Court said that delegation is constitutional as long as Con-
gress provides executive agencies with an unambiguous standard to guide rule-
making.

This interpretation was tested in the 1930s when the New Deal created nu-
merous new regulatory agencies, including the National Labor Relations Board
(NLRB) and the Securities and Exchange Commission (SEC) and increased the
jurisdiction of existing agencies, such as by giving the Department of Labor ju-
risdiction over wages and work hours. Opponents of the New Deal (those con-
cerned with the expansion of the administrative state) turned to the judicial
branch to constrain agency actions.5 In 1935, in Panama Refining Co. v. Ryan and
A. L. A. Schechter Poultry Corp. v. United States, the Supreme Court invoked the non-
delegation doctrine to invalidate two provisions of the National Industrial Recov-
ery Act.6 The Court found the Act unconstitutional because it provided the pres-
ident (and private industry associations) “virtually unfettered” decision-making
power.7

However, two years later, the landscape changed, and the focus of adminis-
trative reform efforts shifted to Congress. After Roosevelt’s threat to “pack the
court,” the Supreme Court began to approve New Deal programs and agencies,
signaling that New Deal opponents’ “only remaining recourse was in Congress.”8
New Deal opponents were not alone in advocating for reforms. President Roo-
sevelt established the Committee on Administrative Management (known as
the Brownlow Commission) to recommend measures to reorganize the execu-
tive branch. His message to Congress accompanying the Brownlow report raised
concerns over the “chaos of establishments” with “overlapping, duplication, and
contradictory policies,” and concluded:

The plain fact is that the present organization and equipment of the executive branch
of the Government defeats the constitutional intent that there be a single responsi-
ble Chief Executive to coordinate and manage the departments and activities in ac-
cordance with the laws enacted by the Congress. Under these conditions the Govern-
ment cannot be thoroughly effective in working, under popular control, for the com-
mon good.9

The president did succeed in reorganizing the executive, including establishing
the Executive Office of the President, but debate on the proper role of administra-
tive agencies continued. This debate paved the way for the first milestone in con-
straining the administrative state, almost a decade later: passage of the Adminis-
trative Procedure Act.

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150 (3) Summer 2021Susan E. Dudley

T he Administrative Procedure Act (APA) of 1946 followed more than a de-

cade of debate on the question of unconstitutional delegation and reflect-
ed a “fierce compromise” balancing the competing goals of bureaucrat-
ic expertise and legislative accountability.10 Its requirements–that regulations
be grounded in statutory law and an administrative record that includes public
notice- and-comment–continue to guide rulemaking today.

Legal scholar George Shepherd has provided a fascinating account of the
shifting coalitions and aborted efforts at administrative reform between 1937
and 1946.11 Early in that period, the American Bar Association (ABA) supported
legislation that would have created an administrative court to oversee adminis-
trative agencies, especially disfavored New Deal agencies, such as the NLRB, the
Department of Labor’s Wage and Hour Division, and the SEC. Progressive mem-
bers of Congress and the agencies themselves objected to these proposals and, in
response, President Roosevelt established the United States Attorney General’s
Committee on Administrative Procedure in 1939 to study administrative reform
and propose alternative legislation.

In 1940, Congress passed the Walter-Logan bill, with support from the ABA
and conservatives in Congress. President Roosevelt vetoed the bill, which would
have required agencies to present a record of findings supporting decisions and
issue interpretive rules after notice and opportunity for hearings. Perhaps most
important, it would have subjected agency actions to judicial review of jurisdic-
tional questions as well as whether they were supported by substantial evidence.12
The Attorney General’s Committee, composed of distinguished nongovern-
mental lawyers and a small staff, subsequently offered two bills, one drafted by
its majority and another by its minority. The majority’s bill offered small reforms,
codified some existing practices, and would have established an Office of Admin-
istrative Procedure to recommend further changes, as appropriate. The minori-
ty’s bill contained judicial review provisions similar to the Walter-Logan bill and
recommended that agencies first propose rules and receive public comment be-
fore issuing regulation. Congress debated these bills extensively in 1941 but set
them aside after the declaration of war on Japan and Germany that December.

The emergency powers used during the war constrained individual freedom
and, according to the ABA, “illustrated and emphasized the admitted defects of ad-
ministrative justice.”13 However, the war also forced compromise and cooperation.
Shepherd notes that proponents of reform and the administration “sought to avoid
a pitched political battle during war; each side sought to avoid creation of a public
perception that it was willing to impede the war effort for partisan advantage in
other areas.”14 Bills introduced in 1944 attempted to find middle ground between
the administration, agencies, New Deal opponents in Congress, and the ABA.

These efforts reached fruition on June 11, 1946, when President Truman signed
the Administrative Procedure Act into law. It established procedures an agency

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Dædalus, the Journal of the American Academy of Arts & SciencesMilestones in the Evolution of the Administrative State

must follow to promulgate binding rules and regulations within the area delegat-
ed to it by statute. Agencies must provide public notice of all rules and provide an
opportunity for public comment. Final rules are subject to judicial review to de-
termine whether they are “arbitrary, capricious, an abuse of discretion, or other-
wise not in accordance with law,” among other things. For administrative adjudi-
cations, in which the enabling statute calls for public hearings on the record, deci-
sions must be based on substantial evidence. As long as executive branch agencies
act within the rulemaking authority delegated to them by Congress, and follow
the procedures in the APA, recent courts have not found it unconstitutional for
them to write and enforce regulations. According to Shepherd:

The landmark Administrative Procedure Act of 1946 and its history are central to the
United States’ economic and political development. The APA was the bill of rights for
the new regulatory state. In a new era of expanded government, it defined the relation-
ship between government and governed. The APA’s impact has been profound and
durable and represents the country’s decision to permit extensive government, but to
avoid dictatorship and central planning. The APA permitted the continued growth of
the regulatory state that exists today.15

Though there are indications that the tide may be turning, as discussed below,
the Supreme Court has not overturned legislation or regulation on nondelegation
grounds since the 1930s. Indeed, in 1989, the Supreme Court found that “in our in-
creasingly complex society, replete with ever changing and more technical prob-
lems, Congress simply cannot do its job absent an ability to delegate power under
broad general directives.”16

Congress has supplemented the APA through legislation tailored to specif-
ic programs and passed government-wide procedural laws (such as the Freedom
of Information Act of 1966 and the Government in the Sunshine Act of 1976).
However, the APA, one of the most important pieces of legislation ever enacted
in the United States, has guided executive branch rulemaking without significant
amendment for seventy-five years.

E conomic deregulation offered the second milestone. The administrative

agencies formed during the New Deal and earlier generally issued “eco-
nomic regulations” governing economic activities of particular industries
using controls such as price ceilings or floors, quantity restrictions, and service
conditions. These regulations were justified as necessary to protect consumers
from the exercise of producers’ market power, or to protect the industry from
“destructive competition.”

Most of these agencies were established as independent commissions to avoid
political influence, but were they serving the public interest? Scholars in the fields
of economics, antitrust, and law found that regulatory agencies such as the ICC,

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150 (3) Summer 2021Susan E. Dudley

the Civil Aeronautics Board (CAB), and the Federal Communications Commis-
sion (FCC) seemed to get “captured” by the industries they regulated.17 They ar-
gued that regulation of private sector prices, entry, and exit tended to keep prices
higher than necessary, to the benefit of regulated industries, and at the expense of
consumers.18

Policy entrepreneurs at think tanks (especially the Brookings Institution and
American Enterprise Institute), officials in the Ford, Carter, and Reagan adminis-
trations, and legislators in Congress brought these observations and academic in-
sights to the policy realm. They linked regulatory impacts to the problem of infla-
tion by showing that eliminating economic regulations and fostering competition
would lead to reduced prices.19

The CAB, established in 1938, illustrates both the structure and authorities of
these administrative commissions and the evolution of public opinion and pol-
icy with respect to them. The CAB board comprised five members; the president
designated one to be chairman, and not more than three could be of the same po-
litical party. Congress tasked the CAB with reviewing and approving routes and
rates for air travel that are “in the public interest and in accord with public con-
venience and necessity.” Administrative law judges would hold public hearings
on rates, with disputes being resolved by the board. According to a contemporary
case study:

Under its rate-setting philosophy, the CAB totally prevented price competition. All
airlines charged the same fares for the same flights. When one raised prices, all fol-
lowed suit. The market was further limited by the Board’s consistent refusal to allow
new competition into the arena. In the name of protectionism, the last thing the Board
felt “in the public interest” was more competition, so all certificates for entry were
denied.20

In response to concerns about regulatory impacts, President Gerald Ford called
for “a joint effort by the Congress, the executive branch, and the private sector to
identify and eliminate existing Federal rules and regulations that increase costs to
the consumer without any good reason in today’s economic climate.”21

At about the same time, Senator Ted Kennedy, chair of the Senate Judiciary
Subcommittee on Administrative Practice and Procedure, engaged then Harvard
Law Professor Stephen Breyer to help guide the subcommittee’s activities. Brey-
er’s background was in economic regulation and administrative law, so he steered
the subcommittee toward a “long-range systematic study of economic regula-
tion” through a series of hearings beginning with the CAB. Breyer argued it would
be possible to “line up a group of political forces all in favor [of deregulation]
ranging from Senator Thurmond and the administration, and all the traditional
laissez-faire Republicans, on the one hand, and over to Ralph Nader and the con-
sumer Democrats on the other.”22 He was right.

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Bipartisan efforts across all three branches of government eventually led to the
abolition of whole agencies such as the CAB and the ICC, and removal of unneces-
sary regulation in several previously regulated industries, with resulting improve-
ments in innovation and consumer welfare.23

The transportation and telecommunications deregulation that took place in
the 1970s and 1980s lowered consumer prices and increased choices. By 1993, the
deregulated industries (trucking, rail, air, and telecommunications) produced ef-
ficiency improvements equivalent to a 7–9 percent increase in GDP.24 Competi-
tive markets have not just reallocated resources but generated tens of billions of
dollars per year in benefits for consumers and society as a whole, in addition to
beneficial changes to markets that were not anticipated prior to deregulation.25

P residential requirements for regulatory impact analysis before issuing reg-

ulation became the third milestone. At the same time that economic forms
of regulation were declining in the 1970s, a new type of “social regulation”
was emerging, aimed at protecting health, safety, and the environment. Concerns
over the reporting and compliance burdens of these new rules led to the next wave
of regulatory reform, focused not on deregulation, but on ensuring that regulato-
ry benefits outweighed costs.

In 1978, President Jimmy Carter issued Executive Order (E.O.) 12044, which
required agency heads to determine the need for a regulation, evaluate the direct
and indirect effects of alternatives, and, when regulation was necessary, choose
the least burdensome approach. Carter also required agencies to make their regu-
latory analyses available to the public when proposing new rulemaking.

In 1981, President Ronald Reagan replaced Carter’s order with E.O. 12291,
which formalized regulatory analysis requirements and directed that “regulato-
ry action shall not be undertaken unless the potential benefits to society for the
regulation outweigh the potential costs to society.” As discussed in the next sec-
tion, it also established review procedures that increased incentives for conduct-
ing analysis.

In 1993, President Clinton rescinded Reagan’s executive order and replaced it
with E.O. 12866, though the new order reinforced the philosophy that regulations
should only be issued if required by law or a “compelling public need.” It directed
agencies to base rules on an analysis of the costs and benefits of all available alter-
natives and to select “regulatory approaches that maximize net benefits” to soci-
ety unless otherwise constrained by law.

More than twenty-five years and several presidential administrations later,
E.O. 12866 still remains in effect. Subsequent presidents have maintained and sup-
plemented its requirements, including, for example, President Obama’s E.O. 13563
and President Trump’s E.O. 13771. Regulatory impact analysis and benefit-cost
balancing have become standard practice in most regulatory agencies, and it is in-

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150 (3) Summer 2021Susan E. Dudley

creasingly expected by reviewing courts. Further, developed countries around the
world have adopted regulatory analysis as a way “to improve policy coherence and
promote economic welfare through better quality regulation.”26

According to a 2011 Office of Management and Budget (OMB) circular:

Regulatory analysis is a tool regulatory agencies use to anticipate and evaluate the like-
ly consequences of rules. It provides a formal way of organizing the evidence on the
key effects–good and bad–of the various alternatives that should be considered in
developing regulations. The motivation is to (1) learn if the benefits of an action are
likely to justify the costs or (2) discover which of various possible alternatives would
be the most cost-effective.

The OMB continues, “regulatory analysis also has an important democratic func-
tion; it promotes accountability and transparency and is a central part of open
government.”27

T he fourth milestone on the road to the modern regulatory state is the cen-

tralized review of regulations before they are issued. While Presidents
Reagan and Clinton established the White House review procedures that
largely remain today, the roots of that oversight go further back.28 In 1971, Presi-
dent Richard Nixon instituted a “Quality of Life Review” program that required
agencies to submit for OMB review agendas of regulatory actions and certain pro-
posed and final rules along with their supporting analysis before publication in
the Federal Register.

President Ford gave the OMB responsibility for coordinating oversight of agen-
cies’ “inflation impact statements” (later “economic impact statements”) and
directed agencies to submit to the Council on Wage and Price Stability (CWPS)
“a copy of the proposed rule or regulation, the accompanying certification, and
a brief summary of the agency’s evaluation” of costs, benefits, and alternatives
considered.29 According to Murray Weidenbaum, who later chaired President
Reagan’s Council of Economic Advisors, “the driving force behind Ford’s review
process was the Review Group on Regulatory Reform . . . a policy-coordinating
mechanism used in the Ford White House.”

When he took office, President Carter abandoned some of the Nixon and Ford
procedures but established his own cabinet-level Regulatory Analysis Review
Group to serve as an “expert regulatory ‘watchdog’” to review agencies’ most im-
portant regulatory proposals. It was supported by CWPS economists and backed
up by senior officials in the White House, OMB, and Council of Economic Advi-
sors. Carter further centralized the coordination of executive oversight in 1978
with his Regulatory Council, which included representatives from independent
as well as executive agencies. It was responsible for a semiannual agenda of regu-
latory actions and an:

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Dædalus, the Journal of the American Academy of Arts & SciencesMilestones in the Evolution of the Administrative State

agenda of regulatory reform proposals which stressed: (1) enhancement of presi-
dential oversight; (2) institutionalization of cost-benefit regulatory assessment pro-
cedures; (3) adoption of flexible regulatory alternatives and market mechanisms in
lieu of traditional command and control regulation; and (4) further examination of
non-governmental solutions (such as greater insurance availability) to problems pre-
viously viewed as primarily regulatory in character.30

A month before he left office, President Carter signed the Paperwork Reduc-
tion Act of 1980, which established the Office of Information and Regulatory Af-
fairs (OIRA) in the OMB to review and approve all new reporting requirements to
minimize the burdens associated with the government’s collection of information.
When President Reagan took office in 1981, he further centralized and formalized
regulatory oversight by giving the newly created OIRA a gatekeeper role in review-
ing draft regulations–as well as paperwork–to ensure they were consistent with
his E.O. 12291. Unlike previous review practices, Reagan required executive agen-
cies to submit all regulations to OIRA and not to publish them until OIRA had com-
pleted its review. He also issued E.O. 12498, which required publication of the an-
nual Regulatory Program, coordinated by OIRA, which listed the most significant up-
coming regulations to “improve the management of regulatory activity within the
Executive branch” and “provide the public and the congress with a greater oppor-
tunity to learn about and evaluate . . . regulatory priorities and procedures.”

Although Reagan’s centralized regulatory review was initially controversial,
each subsequent president has continued and expanded OIRA’s central regulatory
oversight role. As noted, President Clinton retained the key features of OIRA reg-
ulatory review. Clinton narrowed OIRA’s purview to rules deemed “significant,”
and his order softened Reagan’s rhetoric, with the preamble emphasizing “plan-
ning and coordination,” reaffirming “the primacy of Federal agencies in the regu-
latory decision-making process” and promising to “restore the integrity and legit-
imacy of regulatory review and oversight” and “make the process more accessible
and open to the public.” It replaced the Regulatory Program with the semiannual
Unified Regulatory Agenda, listing “all regulations under development or review,”
and the annual Regulatory Plan, providing more detail on “the most important sig-
nificant regulatory actions that the agency reasonably expects to issue in proposed
or final form in that fiscal year or thereafter.” Unlike Reagan, Clinton included
independent regulatory agencies in this planning process, though not in the re-
quirement to submit individual regulations to OIRA for review.

Presidents George W. Bush, Barack Obama, Donald Trump, and Joseph Biden
all retained the Clinton procedures for White House oversight of regulations and
continued to assign OIRA responsibility for crosscutting administration-wide ac-
tivities. President Obama’s E.O. 13563 raised concerns over “redundant, inconsis-
tent, or overlapping” regulations and encouraged greater “coordination, simpli-

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fication, and harmonization.” President Trump’s E.O. 13771 (rescinded by Presi-
dent Biden) made OIRA responsible for carrying out its requirements for agencies
to offset the costs of new regulations by removing or modifying existing rules.

OIRA’s regulatory oversight role has several functions, including coordinating
interagency disputes on regulation, liaising with White House officials to ensure
regulations are consistent with presidential policies, and reviewing agency regu-
latory impact analyses to offer what President Obama called a “dispassionate and
analytical second opinion” on agencies’ actions.

As Justice Elena Kagan, then a professor at Harvard Law School, observed in
her landmark article on presidential administration, presidents confront a prin-
cipal-agent problem: “In a world of extra ordinary administrative complexity and
near-incalculable presidential responsibilities, no President can hope (even with
the assistance of close aides) to monitor the agencies so closely as to substitute all
his preferences for those of the bureaucracy.”31 OIRA serves as monitor and as rep-
resentative of the president’s priorities on regulatory matters, but those are not its
only roles. As an aggregator of information and perspectives across the executive
branch, it serves an essential coordinating function in an expansive bureaucracy
made up of myriad narrow-mission entities.32 Its staff of career regulatory experts
is a source of institutional knowledge that endures across administrations. White
House staff bring their political perspectives to regulatory policy, to be sure, but
OIRA’s cadre of career professionals with their expertise, knowledge, and cross-
cutting perspective bring useful insights and experiences to presidential decisions.

T hese four milestones–passage of the Administrative Procedure Act, eco-

nomic deregulation, regulatory impact analysis, and White House re-
view–have shaped regulatory practice in the United States. The con-
straints they have imposed have done little to reduce either the stock or flow of
new regulations, however, and concerns that executive-made laws are not appro-
priately accountable to American voters remain. Changes related to judicial over-
sight, legislative action, application of regulatory analysis retrospectively to ex-
isting rules, extension of OIRA oversight to independent regulatory agencies, and
more concerted efforts at regulatory budgeting may yet mark new milestones.

Greater judicial oversight. As noted earlier, since the mid-1930s, the courts have
generally been deferential to Congress and agencies when it comes to regulation,
leading many to conclude that the nondelegation standard is dead.33 The land-
mark 1984 Supreme Court case Chevron U.S.A. v. Natural Resources Defense Council
established the Chevron deference principle, which holds that, in the face of am-
biguous statutory language, courts should defer to an agency’s interpretation of
its statutory authority as long as it is reasonable, even if it is not the best interpre-
tation. In legal scholar Peter Wallison’s words, Chevron is “the most important sin-
gle reason that the administrative state has continued to grow out of control.”34

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Yet this deference may be changing. There is growing interest in challenging the
“intelligible principle” standard and reviving the nondelegation doctrine. Recent
opinions suggest that some in the judiciary, including perhaps a majority of Supreme
Court justices, are open to revisiting both Chevron and nondelegation doctrines.

Additionally, the Supreme Court appears to be paying more attention to
whether agencies justify their decisions with sound regulatory impact analysis.35
In 2015, it rejected an Environmental Protection Agency (EPA) regulation as arbi-
trary because the EPA had not weighed both the costs and the benefits, concluding
that “against the backdrop of this established administrative practice, it is unrea-
sonable to read an instruction to an administrative agency to determine whether
‘regulation is appropriate and necessary’ as an invitation to ignore cost.”

Legislative support for regulatory procedures and analysis. Two of the milestones de-
scribed here–passage of the APA and economic deregulation–benefited from
bipartisan support across all three branches of government. In contrast, require-
ments for regulatory impact analysis and executive oversight have been largely
the purview of the executive branch, with only sporadic support from Congress.
While some crosscutting procedural laws, such as the Unfunded Mandates Re-
form Act (1995) and Regulatory Flexibility Act (1980), include requirements for
agencies to develop estimates of the costs and benefits of certain regulations, their
coverage is more limited than the presidential orders.

To ensure the continuity of regulatory impact analysis, Congress could rein-
force the bipartisan principles embodied in presidential executive orders, espe-
cially Clinton’s E.O. 12866 and Obama’s E.O. 13563. Such codification would lend
congressional support to the orders’ nonpartisan principles and the philosophy
that before issuing regulations, agencies should identify a compelling public need,
evaluate the likely effects of alternative regulatory approaches, and select regula-
tory options based on an understanding of social benefits and costs. Ideally, such a
requirement would override authorizing statutes that ignore or explicitly prohibit
analysis of trade-offs.

While executive orders include language explicitly precluding judicial review,
Congress could make compliance with analytical requirements judicially review-
able. Regulatory scholars Reeve Bull and Jerry Ellig found that explicit mandates
for regulatory analysis appear to produce not only relatively sophisticated agency
economic analyses, but more rigorous judicial review as well.36 Congressional ac-
tion on regulatory practice could also support other potential milestones, including
extending regulatory analysis requirements to independent regulatory agencies,
better retrospective evaluation of existing regulations, and regulatory budgeting.

Retrospective evaluation. Since Carter’s E.O. 12044, presidents have directed
agencies to apply regulatory impact analysis retrospectively to be sure existing
rules are having their intended effects. Reagan’s E.O. 12291 applied to existing as
well as new rules, and Clinton’s E.O. 12866 directed each agency to “periodical-

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150 (3) Summer 2021Susan E. Dudley

ly review its existing significant regulations to determine whether any such reg-
ulations should be modified or eliminated so as to make the agency’s regulatory
program more effective in achieving the regulatory objectives, less burdensome,
or in greater alignment with the President’s priorities and the principles set forth
in this Executive order.” Obama’s E.O. 13563 directed agencies to “consider how
best to promote retrospective analysis of rules that may be outmoded, ineffective,
insufficient, or excessively burdensome, and to modify, streamline, expand, or re-
peal them in accordance with what has been learned.”

These directives have met with limited success, however, and agencies devote
much less analysis to evaluating the impacts of their regulations once they are
in effect than they do to estimating hypothetical impacts before they are issued.
This may be largely because executive directives have not changed underlying in-
centives. Unlike other government programs that are reassessed each time their
funds are appropriated, regulations, once created, tend to exist in perpetuity.

In theory, Trump’s regulatory budget initiative that made the issuance of new
regulations contingent on finding a regulatory cost offset could have provided in-
centives for agencies to evaluate both the costs and effectiveness of existing pro-
grams. However, as implemented, Trump’s regulatory budgeting process did
more to slow the pace of new rulemaking than to evaluate the merits of regula-
tions on the books. Agencies chose not to pursue new initiatives that would have
required cost offsets from revisions to existing regulations.

The key to better retrospective regulatory evaluation may lie in developing an
evaluation plan when a rule is first issued and committing to gathering the data
needed for evaluation. Further, designing regulations from the outset in ways that
allow variation in compliance would provide natural experiments from which to
learn from experience. The successful economic deregulation of the 1970s and
1980s benefited from such natural experiments. Intrastate airline fares not sub-
ject to the CAB’s rate-setting authority were markedly lower than interstate fares,
providing a powerful counterfactual for what interstate prices could be with more
competition.

Independent regulatory agencies. As noted above, because presidents’ ability to re-
move independent agency commissioners is more constrained than for executive
agency appointees, they have been hesitant to require centralized review. The ex-
ecutive orders governing OIRA review issued by Presidents Reagan (E.O. 12291),
Clinton (E.O. 12866), Obama (E.O. 13563), and Trump (E.O. 13771) all excluded in-
dependent regulatory agencies. As a result, independent agencies have tradition-
ally performed lower-quality analysis than executive branch agencies.37

Presidents have become less reluctant to exert oversight over independent
agencies, however. Obama’s E.O. 13579, “Regulation and Independent Regula-
tory Agencies,” encouraged independent regulatory agencies to comply with E.O.
13563’s provisions for “public participation, integration and innovation, flexible

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approaches, and science . . . to the extent permitted by law” and directed them to
release public plans regarding how they would periodically review their existing
significant regulations. Legal experts have found that, while the exact approach
to oversight may differ depending on independent agencies’ authorities, presi-
dents could require more analysis and review.38 Congress has introduced bills that
would explicitly allow the president, by executive order, to subject independent
regulatory agencies to the executive analytical requirements applicable to other
agencies. Several bills have also attempted to impose analytical requirements on
specific independent agencies, such as the FCC and the SEC.39

Regulatory budget. In theory, President Trump’s regulatory budgeting require-
ments could have provided stronger incentives for retrospective evaluation. Exec-
utive Order 13771 required agencies to 1) offset the costs of new regulations by re-
moving existing burdens and 2) eliminate two regulations for every new one they
issue. Trump also set up a Regulatory Reform Task Force within each agency to
make recommendations for regulatory reforms (E.O. 13777). President Biden re-
voked both of these orders on his first afternoon in office.

The idea of a “regulatory budget” had been discussed in academic and poli-
cy circles prior to 2017.40 In 1980, President Carter’s Economic Report of the Presi-
dent discussed proposals “to develop a ‘regulatory budget,’ similar to the expen-
diture budget, as a framework for looking at the total financial burden imposed
by regulations, for setting some limits to this burden, and for making tradeoffs
within those limits.” The Report noted analytical problems with developing a reg-
ulatory budget, but concluded, “tools like the regulatory budget may have to be
developed” if governments are to “recognize that regulation to meet social goals
competes for scarce resources with other national objectives” and set priorities to
achieve the “greatest social benefits.”

A meaningful regulatory budget would benefit from legislative as well as exec-
utive action. When passing new statutes authorizing regulatory activity, Congress
is often clear on what benefits it expects those regulations to generate. It could
also set limits on the costs, so agencies are not unconstrained in issuing regula-
tions, but are mindful of Congress’s intent with respect to the burdens those reg-
ulations pose on the American people.

T he modern administrative state, as measured by the number of agencies,

their budgets and staffing, and the number of regulations they issue, has
grown significantly over the last hundred years. The four milestones re-
viewed in this essay reflect bipartisan consensus on appropriate constraints on
executive rulemaking, but they have not succeeded in stemming the debate over
the proper role for administrative agencies and the regulations they issue. New
judicial interpretations, legislative actions, and extensions to executive oversight
could emerge as the next milestones of constraint on the administrative state.

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about the author

Susan E. Dudley is the Director and Founder of the Regulatory Studies Center and
Distinguished Professor of Practice in the Trachtenberg School of Public Policy and
Public Administration at George Washington University. From 2007 to 2009, she
served as Administrator of the Office of Information and Regulatory Affairs in the
Office of Management and Budget. She has recently published in such journals as
Regulation and Governance, Journal of Benefit-Cost Analysis, Administrative Law Review, and
Journal of Law and Politics.

endnotes

1 Dwight Waldo, The Administrative State: A Study of the Political Theory of American Public
Administration (New York: Ronald Press Company, 1948), viii, 227. For recent scholarly
attribution to Waldo, see, for example, Kathy Wagner Hill, “The State of the Admin-
istrative State: The Regulatory Impact of the Trump Administration,” Emory Corporate
Governance and Accountability Review 6 (1) (2019). For earlier use here and abroad, see, for
example, Alasdair Roberts, “Should We Defend the Administrative State?” Public Ad-
ministration Review 80 (3) (2020), https://ssrn.com/abstract=3441123.

2 Angel Manuel Moreno, “Presidential Coordination of the Independent Regulatory Pro-

cess,” Administrative Law Journal of American University 8 (1994): 461.

3 Field v. Clark, 143 U.S. 649 (1892).

4 J. W. Hampton, Jr. & Co. v. United States, 276 U.S. 394 (1928).

5 George B. Shepherd, “Fierce Compromise: The Administrative Procedure Act Emerges

from New Deal Politics,” Northwest University Law Review 90 (4) (1995–1996): 1557.

6 Kristin E. Hickman, “Gundy, Nondelegation, and Never-Ending Hope,” The Regulatory Re –
view, July 8, 2019, https://www.theregreview.org/2019/07/08/hickman-nondelegation/.

7 A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935).

8 Shepherd, “Fierce Compromise,” 1557.
9 Franklin D. Roosevelt, “Logan-Walter Bill Fails,” American Bar Association Journal 27 (1)

(1941): 52.

10 Shepherd, “Fierce Compromise.”
11 Ibid.
12 Foster H. Sherwood, “The Federal Administrative Procedure Act,” American Political Sci-

ence Review 41 (2) (1947): 271.

13 Shepherd, “Fierce Compromise,” citing “Report of the Special Committee on Adminis-

trative Law,” American Bar Association Annual Report (1943): 249.

14 Shepherd, “Fierce Compromise,” 1648.
15 Ibid., 1678.
16 Mistretta v. United States, 488 U.S. 361, 372 (1989); and 18 U.S.C. § 3551 (1982). See also Whit-

man v. American Trucking Associations, 531 U.S. 457, 472 (2001).

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17 Mark Green and Ralph Nader, “Economic Regulation vs. Competition: Uncle Sam the
Monopoly Man,” Yale Law Journal 82 (5) (1973): 871–889, https://doi.org/10.2307/795533.
18 George Stigler, “The Economic Theory of Regulation,” The Bell Journal of Economics and

Management Science 2 (1) (1971): 3.

19 Susan E. Dudley, “Alfred Kahn 1917–2010,” Regulation 34 (1) (2011), https://www.cato.org

/sites/cato.org/files/serials/files/regulation/2011/4/regv34n1-2.pdf.

20 Donald Simon, Stephen G. Breyer, and Philip B. Heyman, Senator Kennedy and the Civil Aero-

nautics Board (Cambridge, Mass.: Harvard Kennedy School Case Program, 1977).

21 Gerald R. Ford, “Address to a Joint Session of Congress on the Economy,” October 8,

1974, https://www.fordlibrarymuseum.gov/library/speeches/740121.asp.

22 Simon et al., Senator Kennedy and the Civil Aeronautics Board.
23 Martha Derthick and Paul J. Quirk, The Politics of Deregulation (Washington, D.C.: Brook-

ings Institution Press, 1985).

24 Clifford Winston, “Economic Deregulation, Day of Reckoning for Microeconomists,”

Journal of Economic Literature 31 (3) (1993).

25 Robert W. Crandall, “Extending Deregulation: Make the U.S. Economy More Efficient”
(Washington, D.C.: The Brookings Institution, 2007), https://www.brookings.edu/
wp-content/uploads/2016/06/PB_Deregulation_Crandall.pdf.

26 Organisation for Economic Co-operation and Development, Regulatory Impact Analysis:
A Tool for Policy Coherence (Paris: Organisation for Economic Co-operation and Develop-
ment, 2009), https://www.oecd.org/gov/regulatory-policy/ria-tool-for-policy-coherence
.htm.

27 Office of Management and Budget, “Regulatory Impact Analysis: A Primer,” OMB Circu-
lar A-4 (Washington, D.C.: Office of Management and Budget, 2011), https://obama
whitehouse.archives.gov/sites/default/files/omb/inforeg/regpol/circular-a-4_regulatory
-impact-analysis-a-primer.pdf.

28 Susan Dudley, “The Office of Information and Regulatory Affairs and the Durability of
Regulatory Oversight in the United States,” Regulation and Governance (2020), https://
doi.org/10.1111/rego.12337.

29 Office of Management and Budget, OMB Circular A-107 (Washington, D.C.: Office of
Management and Budget, 1975), https://www.fordlibrarymuseum.gov/library/document
/0039/18514794.pdf.

30 Michael Fix and George C. Eads, “The Prospects for Regulatory Reform: The Legacy of

Reagan’s First Term,” Yale Journal on Regulation 2 (2) (1984): 293, n. 19.

31 Elena Kagan, “Presidential Administration,” Harvard Law Review 114 (2001): 2245.
32 Cass R. Sunstein, “The Office of Information and Regulatory Affairs: Myths and Reali-

ties,” Harvard Law Review 126 (2013): 1838.

33 Eric A. Posner and Adrian Vermeule, “Interring the Nondelegation Doctrine,” University
of Chicago Law Review 69 (2002): 1721, https://chicagounbound.uchicago.edu/journal
_articles/1732/.

34 Peter J. Wallison, Judicial Fortitude: The Last Chance to Rein in the Administrative State (New

York: Encounter Books, 2019), 134.

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35 John D. Graham and Paul R. Noe, “A Paradigm Shift in the Cost-Benefit State,” The Reg-
ulatory Review, April 26, 2016, https://www.theregreview.org/2016/04/26/graham-noe
-shift-in-the-cost-benefit-state/; and Cass R. Sunstein, “Cost-Benefit Analysis and Ar-
bitrariness Review,” Harvard Environmental Law Review 41 (1) (2017): 1.

36 Reeve T. Bull and Jerry Ellig, “Statutory Rulemaking Considerations and Judicial Review

of Regulatory Impact Analysis,” Administrative Law Review 70 (2018): 873.

37 Arthur Fraas and Randall Lutter, “On the Economic Analysis of Regulations at Indepen-

dent Regulatory Commissions,” Administrative Law Review 63 (2011): 213.

38 Bridget Dooling, “Bespoke Regulatory Review,” Ohio State Law Journal 81 (2020), https://
ssrn.com/abstract=3550234. The Department of Justice’s Office of Legal Counsel issued
an opinion that presidents could apply E.O. 12866 to independent agencies. See “Ex-
tending Regulatory Review Under Executive Order 12866 to Independent Regulatory
Agencies,” Memorandum Opinion for the Counsel to the President, October 8, 2019,
https://www.justice.gov/olc/file/1349716/download.

39 Susan E. Dudley, “Improving Regulatory Accountability: Lessons from the Past and

Prospects for the Future,” Case Western Reserve Law Review 65 (4) (2015): 1027.

40 Christopher C. DeMuth, “Constraining Regulatory Costs–Part II: The Regulatory Bud-

get,” Regulation (1980).

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