Driving a Rules Revolution

December 6, 2019The Wall Street Journal Editorial Board

The Transportation Department codifies reforms to promote innovation.

Parts of the administrative state have come under legal scrutiny in recent years as conservative judges question whether it is constitutional for unelected officials to unilaterally devise, enforce and adjudicate rules governing large parts of the economy.

The Department of Transportation isn’t waiting for the courts. In what could be a model for the executive branch, Transportation moved this week to codify a rule that rationalizes its regulatory powers and strengthens due process.

First, the rule raises the bar for new regulation. Officials are directed to consider alternatives to new regulation and “whether existing rules have created or contributed to” the market failure they want to address. They must provide more rule-making transparency so those affected can comment, especially for economically “high-impact” rules.

Second, the department reins in “guidance” memoranda, which executive agencies in the Obama years used to sidestep formal rule-making. Guidance must come with a cost estimate because it affects decision-making in the private economy. Compliance is technically voluntary but companies don’t want to take the risk.

Third, the rule reforms “administrative proceedings,” or the judicial processes that executive agencies use to enforce regulations. Due process requirements like fair notice and impartiality are strengthened. The rule also provides that the department won’t rely on Chevron —a Supreme Court decision that gave regulators wide authority to interpret their own rules—as a means of “straining the limits” of its power.

Secretary of Transportation Elaine Chao made the bulk of these new guidelines the policy of her department in 2018 and earlier this year. Yet elevating their status to a “final rule” in the Federal Register makes it more difficult for a future Administration to repeal them. It would have to explain why regulators should not carefully weigh costs and benefits, take care that their actions are authorized by Congress and respect due process.

The Trump Administration’s deregulatory efforts have helped sustain the strong labor market and economic growth of the past three years. The most important initiative by Transportation is rolling back the Obama Administration’s rushed fuel-economy rules.

If pruning Obama-era regulations offered short-term economic relief, the revamped approach to regulation could accelerate innovation in transportation that by some measures has slowed in recent decades. Americans commute longer than they did in 1980. This has many causes but one is an outdated regulatory approach that discourages the use of new technology. A clear and stable regulatory environment is especially important for leading edge products like self-driving cars, commercial space travel and drones.

The health of the U.S. economy—and the separation-of-powers legal system—depends on executive agencies modernizing their rule-making. Transportation has offered a useful model.

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