Will “One In, Two Out” Rule Reduce Red Tape or Create Regulatory Uncertainty?

February 27, 2017
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Could President Trump’s “One In, Two Out” Rule Impact Your Business?

While many of President Donald Trump’s executive orders have made headlines, one of the less controversial policy changes may have the most significant impact on New York and New Jersey businesses. Under the executive order, entitled “Reducing Regulation and Controlling Regulatory Costs,” executive agencies must eliminate two existing regulations for each new rule issued.Could the One in, Two Out Rule Impact Your Business?

Regulatory Cap

The executive order aims to cut regulatory burdens and costs. As stated by President Trump, “it is essential to manage the costs associated with the governmental imposition of private expenditures required to comply with Federal regulations.” 

Toward that end, the so-called “two for one” mandate specifically states: “Unless prohibited by law, whenever an executive department or agency publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.” The executive order further provides that any new incremental costs associated with new regulations must, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.

The executive order also imposes a “cap” on new regulations for Fiscal Year 2017, which has already begun. It states that the “heads of all agencies are directed that the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero.” The only exceptions are rules that are otherwise required by law and rules that are authorized in writing by the Director of the Office of Management and Budget.

Potential Impact on Businesses

The executive order represents one of the most significant regulatory policy changes in several decades. In numerous studies, businesses cite increasing regulatory burdens as a top concern. So, if the end result is a leaner and more streamlined regulatory environment, the executive order is certainly good news. However, the devil is in the details.

To start, the mandate does not impact independent regulatory agencies over which the President does not have direct control. That leaves key agencies like the Securities and Exchange Commission (SEC), Federal Communications Commission (FCC), and Federal Trade Commission (FTC) outside the purview of the order.

Since the executive order is drafted broadly, it is unclear how it will be applied in practice. For agencies like the Department of Labor, the Internal Revenue Service and the U.S. Patent and Trademark Office that are looking to make policy changes under the Trump Administration or seeking to overhaul complex regulatory regimes, the order could actually lead to headaches for everyone involved. Any regulatory changes must still comply with Administrative Procedure Act’s requirement for public notice and comment. In addition, the wholesale elimination of regulations creates a serious litigation risk.

Do you have any questions regarding the “One In, Two Out” rule and its potential impact on your business? Would you like to discuss the matter further? If so, please contact me, Michael Jimenez, at 201-806-3364.