April 26, 2012

Midnight Regulations Redux

Jerry Ellig

Former Senior Research Fellow

This week, the House Oversight and Government Reform Committee will consider legislation intended to prevent a rash of “midnight regulations” – regulations hastily issued between Election Day and Inauguration Day.  Republicans are concerned that the Obama administration is holding back sweeping and controversial regulations until the president no longer faces reelection. Four years ago, congressional Democrats expressed the same concerns over the Bush administration’s “midnight regulations.”

Here’s why lawmakers of both political parties are right to fear midnight regulations.

Research by my colleagues at the Mercatus Center documents that administrations experience a surge of regulatory activity in the quarter following a presidential election. The surge is largest when control of the presidency switches parties, but a mini-surge usually occurs even when a president gets reelected. So midnight regulations are a real danger this year, regardless of the outcome of the election.

Midnight regulations are often less carefully thought out than regular regulations. When executive branch agencies issue regulations, they are supposed to identify the root cause of the problem they are trying to solve, consider alternative solutions, and assess the pros and cons (“benefits and costs,” in economists’ jargon) of the alternatives. The White House Office of Information and Regulatory Affairs (OIRA) reviews agencies’ regulatory analysis to ensure they do this.

But a midnight regulatory surge can quickly overwhelm OIRA, because the office receives no additional budget or personnel to cope with a spike in regulations.  Jerry Brito and Veronique de Rugy document this problem in this paper and podcast.  Caught shorthanded, OIRA simply cannot devote as much time to reviewing individual regulations, as Patrick McLaughlin documented. And since midnight regulations are often political priorities, OIRA can’t credibly threaten to hold up a midnight regulation, so agencies have less incentive to do careful analysis.

We should not be surprised that midnight regulations tend to be accompanied by poor regulatory analysis, as the Mercatus Center’s Regulatory Report Card data demonstrate.

In other words, midnight regulations get pushed through for political reasons, regardless of their merits. For example, a Bush administration midnight regulation mandating that all government contractors use the E-verify system to prevent them from hiring illegal immigrants simply asserted that the regulation is necessary because contractors do not understand the value of having a more stable labor force. Another midnight regulation mandating underground refuges in coal mines cited several severe mining accidents, but failed to demonstrate that this was an industry-wide problem that required an industry-wide regulation.

If nothing else, these two examples demonstrate that hasty midnight regulations come in all ideological flavors.  Anyone concerned about a transparent and effective government should be concerned about midnight regulations.