Protectionist Trump rolls back the Leviathan state

John Kane-Berman says US President is succeeding in cutting back on regulations

Given his protectionist beliefs and actions, few people would have expected Donald Trump to embark upon economic liberalisation. But one of the most important achievements of his presidency as it approaches the end of its first year is the extent to which it has been cutting back the regulatory powers of the federal bureaucracy.

After the African National Congress (ANC) came to power in South Africa in 1994, it was wont to boast each year about how many bills had been enacted. Earlier this month, the Speaker of the National Assembly, Baleka Mbete, said that the fifth parliament had passed 96 bills to date – the implication being that this was a matter for congratulation. In addition to all the laws enacted by Parliament and the nine provincial legislatures, dozens of ministries have crammed the Government Gazette full of one kind of regulation or another.

According to Neomi Rao, administrator of the Office of Information and Regulatory Affairs in the Office of Management and Budget in Washington DC, Mr Trump's promises to deregulate were initially met with scepticism. "The steady expansion of the regulatory state traditionally has been a bipartisan affair."  One crude measure is the number of times prescriptive words such as "shall" or "must" appear in federal regulations. According to the Mercatus Centre, a libertarian research house, there were 400 000 such words in 1970 but 1.1 million in 2017.

President Trump has confounded the sceptics. He has both staunched the flow of new regulations and jettisoned standing ones. Barrack Obama saddled the economy with $15.2 billion of regulatory costs in his final eight months in office. However, shortly after taking over from him, Mr Trump issued an executive order to federal agencies to reduce the regulatory burden by rescinding two existing regulations for every new one issued.  

Various studies indicate that the flow of new regulations out of Washington has slowed substantially. A report published by the Cato Institute showed that since 1994 an average of 216 new rules had been imposed in the first five months of any new administration. In Mr Trump's first five months, the number dropped to 26 – 12% of the long-term average.

According to The Economist, in the last year of the Obama administration the federal government issued 527 regulations regarded as "significant". So far, the Trump administration has issued only 118, few of which actually impose additional regulatory burdens. Many of Mr Trump's edicts have instead been aimed at weakening some of the rules laid down by Mr Obama when he resorted to ruling by decree after he could not get Congress to pass the legislation he wanted.

According to figures published by the US Chamber of Commerce in October, the White House has so far issued 29 orders to reduce regulatory requirements. As a result, federal agencies have issued 100 additional directives against various kinds of regulations. Congress has also withdrawn 14 regulations handed down by the Obama administration in its final days. According to the study published by Cato, the withdrawal will cut annual compliance costs by $1.1 billion.

Under the Obama administration, federal agencies frequently exceeded their legal authority when imposing costly rules. According to Ms Rao, they will now be expected to regulate only when explicitly authorised by law. If this policy is enforced by the Trump administration, it will tilt the balance of power in lawmaking away from the executive branch of government and back to Congress, where it belongs.

No society can operate harmoniously without rules. Too often, however, they are imposed regardless of their economic costs, as we in South Africa know only too well from both before and after 1994. Ministers and bureaucrats can merrily issue regulations confident that the costs will be borne by others – including  businesses, consumers, and taxpayers. However, according to a former chief of the agency now headed by Ms Rae, one of Mr Trump's other reforms has been to appoint regulators committed to deregulation – "ferreting out bureaucratic excesses, ideological detours, and interest group machinations".

Just what we need in South Africa too. 

* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom.