Nudging the Nudgers with Better Regulatory Policy

by Levi Russell

A recent law blog post by Brian Mannix (hat tip to David Henderson for the link) discusses the significance of the Congressional Review Act (CRA) during a presidential transition period. In a nutshell, the CRA allows congress to overturn a regulation written by an agency in the executive branch with a bare majority in each house until the 60th day after it is issued. Of course, like a bill, the president can veto, in which case congress must come up with a 2/3 majority to override the veto. Given that most presidents wouldn't want to stop their own branch of government from implementing regulations, the CRA doesn't often come into play. However, since Republicans control both houses and the incoming president is a Republican, there are some interesting things that could happen given the Republicans' ostensible preference for less regulation. Mannix has some interesting examples in his post so I suggest reading it.

What interested me was a specific line in the post:

Note that the CRA mechanism is distinct from the proposed REINS Act mechanism.  Under REINS, Congress would need to approve of major regulations before they become effective; under the CRA rules become effective if Congress refrains from disapproving.

This got me thinking about behavioral economics and the idea of "nudges." An example of a nudge is a change to the rules that makes the "best" option the default. Often nudges are suggested as part of government policy, but that's not always the case. An oft-repeated example is to make 401k enrollment with your employer the default option while still providing an "opt out" opportunity for those who don't want to contribute to a 401k.

Looking again at the last sentence in the quoted text above, the REINS Act strikes me as a great example of "nudging the nudgers." That is, imposing a rule on those in the executive branch who are in charge of making and enforcing rules based on legislation. Specifically, the REINS Act would make the default position "no new regulations" and only those that passed additional scrutiny by elected representatives would actually be issued. I argue that, at least potentially, the REINS Act would lead to better regulation for a couple of reasons:

1) There would be more oversight by elected representatives of the regulatory process than there is currently.

2) Massive regulations like those written based on Dodd-Frank or the Affordable Care Act would probably be issued more slowly since the regulations would have to be approved by Congress. This would give us a chance to see how the initial regulations actually play out rather than relying on speculative cost/benefit analysis (side note - most regulations aren't subjected to cost/benefit analysis anyway).

Additionally, the REINS Act could reduce the problem of passing on more authority to the executive branch than it was designed to have. This problem arises when Congress passes a very general bill (which is more likely to garner enough votes to pass than a very narrowly-written bill) empowering the executive branch's bureaucracy to write regulations that are less likely to be in line with the will of the people.

The REINS Act was passed in the House last year and is currently sitting in the Senate. It would be great to see more discussion of this bill, but perhaps I just missed it. I'd love to read your thoughts in the comments below!

Bonus: Here's a great article on "nudging the nudgers."

Note that the CRA mechanism is distinct from the proposed REINS Act mechanism.  Under REINS, Congress would need to approve of major regulations before they become effective; under the CRA rules become effective if Congress refrains from disapproving. - See more at: http://www.libertylawsite.org/2016/11/17/midnight-mulligan-the-congressional-review-act-rides-again/#sthash.dJwa6OFY.dpuf