John Blomster: Welcome to Ƶ, a podcast where we explore today's biggest legal topics with distinguished guests and experts from around the globe. I'm John Blomster. And today we're speaking with Jonathan Masur, John P. Wilson Professor of Law at the University of Chicago. Many of Jonathan's research efforts are focused on economic, patent, administrative, behavioral and criminal law and his latest scholarly paper “Chevronizing Around Cost Benefit Analysis: Deregulation in the Trump Administration” analyzes the Trump administration's different strategies and approaches to weakening regulations in the financial, environmental, energy and healthcare sectors, among others. So, we're super excited to dive in. So, thanks for joining us today.
Jonathan Masur: Thank you for inviting me.
JB: When President Trump first took office, he really has been trying to make good on his promise of, you know, introducing a sweeping deregulatory agenda. How ambitious has that agenda been when compared with previous administrations?
JM: Well, it's probably been the most sweeping deregulatory agenda that we've seen, at least since the early years of Reagan, and maybe even before that. I mean, he's really trying to undo, essentially every major regulatory endeavor that Obama tried to put in place. And there were a lot of them and many of them were very significant. So, this is a quite substantial effort that's going on across the entire administration.
JB: As you write in the paper the Trump administration has taken on a number of different strategies with varying degrees of effectiveness in order to weaken regulations across various industries. You know, you group them into into three main buckets: the procedural hurdles, cost benefit analysis and activating on the concept of Chevron deference—you know, that affects, you know, statutory interpretations. So, I'd like to go through through each of these and so talking about the procedural hurdles first. How is the administration tried to use its executive powers to create challenges for regulatory bodies?
JM: So, Trump has enacted a couple of executive orders that basically impose arbitrary hurdles to agencies regulating. The most important of them are what are called the Two for One Rule and the Zero Regulatory Budget. So, the Two for One Rule says that before any agency can promulgate one new regulation, it has to get rid of two old existing regulations. And that would be sensible, I suppose, if you believe that there was a huge stock of worthless regulations out there that should be eliminated, maybe you're forcing the agency to go back through them. But there isn't any reason to believe that that's actually what the world of regulation looks like. And so what this really looks like is it sort of making a lot of extra work for the agencies and maybe forcing them to get rid of some good regulations in order to do one more new thing?
The Zero Regulatory Budget is basically saying that for every dollar of new costs that a regulation creates, they have to eliminate $1 of costs from some previous regulation which their undoing, deregulating, overturning. And the ridiculousness of that rule is that it's completely silent as regards to benefits. And so you could have a new regulation that created a billion dollars in benefits, but only a million dollars in costs. So, that sounds like a great regulation, you know the benefits are 1,000 times greater than the cost. And yet, your agency couldn't promulgate that regulation, unless they could find a million dollars of cost saving somewhere else. And the cost savings that they found, might involve overturning some other regulation, which was also very beneficial.
So, it's just sort of arbitrary hurdles thrown up for no other purpose than to make the agency's jobs tougher, to just put a big thumb on the side of the scale against regulation and to kind of force the agencies to slow down their efforts.
JB: What's been the impacts of this particular strategy?
JM: Well, I think that agencies have generally responded to those particular procedural hurdles by just trying to find kind of small or meaningless regulations that they can get rid of. They've tried to sort of finagle their way around those particular requirements to the greatest degree possible, but the consequences that they're, you know, that it's slowing down their work a lot. They're having to find candidates to eliminate in order to put together a new regulation. And so it's like throwing sand in the gears basically, it's just sand in the gears of the regulatory state, just making it harder for agencies to do their job.
JB: So, the second approach, and you really take a, you know, very deep dive into this in the paper, we're talking about cost benefit analysis. First, broadly, how is cost benefit analysis generally employed when it comes to evaluating regulatory needs?
JM: Okay, so the idea behind cost benefit analysis is that the government, which includes these administrative agencies, should be taking actions that make people's lives better and not make them worse. And so that means when it regulates it should be creating regulations that make people's lives better on the whole.
Okay, so what does that mean? How do we figure out whether something's making somebody's life better? Well, a lot of these regulations involve trade-offs. So, think about your typical environment regulation, of which many of the regulations we talked about in the paper are examples. It often comes with costs. So, let's say we're asking factories to install some kind of pollution-reducing technology like a scrubber on top of a smokestack, or switch from a cheaper chemical to a more expensive chemical. But then there are also benefits, it saves people's lives, fewer people get sick, fewer people die from lung cancer and things like that, if you've made the air cleaner. So, how do you figure out whether the regulation is good or bad, all things considered. You've got to compare those two things, you've got to compare the value of the lives that are being saved versus the cost that you're imposing on the businesses in the first place.
And so that's what cost benefit analysis tries to do. It tries to measure the value in terms of the you know, how much it means to save somebody's life, to prevent somebody from becoming sick or ill with a particular disease and then compare that to the economic cost of imposing the regulation. And, you know, that requires a whole bunch of different value choices about, like, how much are we going to value a human life? I mean, it involves trade-offs. Anytime we're making trade-offs, we're going to have to make some sort of tough value choices, but cost benefit analysis tries to do that in a pretty reasonable way.
And so what the Trump administration is doing is that at least a couple cases, they're trying to manipulate the cost benefit analyses to say what they want them to say. So, one example of this is the Obama era fuel economy regulations. Obama was going to really tighten fuel economy rules for cars and trucks going forward. Trump is trying to reverse that. Obama did a cost benefit analysis showing that it would be really beneficial to do that. Trump got his EPA and his department of transportation to produce a cost benefit analysis showing that it would be bad to do that. But you know, these are numbers. This is calculations and economic models that can be scrutinized. And so in the paper, we try to take a pretty close look at those and we show that there are a lot of ways in which the Trump cost benefit analysis is really flawed and faulty. And we think it's possible that a court will reach out and strike it down on that basis.
JB: If the Trump administration hypothetically would be, you know, successful in leveraging this flawed interpretation of the CBA. Does that run the risk of showing, oh well, this this whole process of cost benefit analysis is malleable?
JM: Right. I mean, I think that's the concern. And that's been a concern about cost benefit analysis, since it began in the first place, which was, you get a bunch of economists in the room, they can produce numbers that say anything you want the numbers to say. And so it's just it's not going to tell you anything reliable. And I guess what we found in this paper is that there are limits to that. So, in the fuel economy case, they made the numbers say what they wanted them to. But to do it, they had to make a whole bunch of assumptions and use a whole bunch of models, which we think are pretty plainly erroneous, plainly flawed on their face. And we think a court might recognize the same thing and strike it down.
There are other important cases where the, sort of, what's interesting is that the dog didn't bark, I guess I would say. So, another example of this is the deregulation of the Clean Power Plan. So, Obama implements the Clean Power Plan, is going to shift the power generation in the country away from coal and there's a cost benefit analysis that accompanies that regulation that shows that it's really beneficial. It's a really great thing. And so Trump now wants to undo it. You know, no president has ever had more of an incentive to manipulate a cost benefit analysis than Trump did to manipulate the cost benefit analysis that showed that the Clean Power Plan was a really good thing for the country. And yet, when his agencies produced that CBA, what they found was that the cost benefit analysis actually shows the CBA is doing good things for the country, and that it's actually doing much, much more good than harm. So, even according to Trump's own agencies, the Clean Power Plan is a good thing and should be kept in place.
JB: That leads into the next strategy of Chevron deference, because when the approach to cost benefit analysis did not work The Trump administration, as you pointed out, turned to the interpretations of the statutes around the regulation. So, could you explain what exactly is Chevron deference and then what role it played in the repeal of the CPP?
JM: Sure. So, Chevron deference is a doctrine that says that if a statute is ambiguous, the agency gets to pick its interpretation of that statute, so long as the interpretation is reasonable. But also if a statute is unambiguous, then that's just what it means and nobody gets any deference and nobody has any flexibility. So, Chevron involves a two-step test. Step one, determine whether the statute is ambiguous or not. If it's unambiguous, that's the end of your consideration. You just have to do what it says. If it's ambiguous, then you defer to the agency's interpretation, so long as the agency's interpretation is reasonable. So, this is like this old legal canard of when the facts are on your side, you bang on the facts and when the law is on your side, you bang on the law. So, when it comes to the cost benefit analysis of the Clean Power Plan, the facts are very much not on the Trump administration’s side because as I said, even their own cost benefit analysis reveals that the Clean Power Plan is doing great things. And so they're going to try to use the law instead. And so what they've tried to do is they've tried to interpret the Clean Air Act, which the Clean Power Plan is based on, to prohibit regulating in the way that the Clean Power Plan regulates. So, they're basically trying to say, we realize that this is good policy. We're not trying to argue that it's not good policy. But our hands are tied, the law does not permit us to regulate in this fashion. And that's kind of a surprising tack to take. It's a, maybe a, doubtful strategic move on the part of the administration, because that's the kind of argument that could easily lose in court. But I think what it shows you is that they weren't able to make the facts say what they wanted them to. And they were worried about just going on in public with a plan where they said, “We realize that the facts show you that this plan is a terrible plan, but we're doing it anyway. And we don't care whether you like it or not.” They were nervous about the politics of that. And so that's why they've turned to this legal strategy.
JB: And that gets to, you know, to the heart and title of your paper. You can circumvent, or what the administration doing is you're circumventing the cost benefit analysis findings by Chevronizing. So, what are the potential impacts of this strategy? And are there future pain points for that approach?
JM: Right. So, first of all, you're exactly right, that that is, I think, what's going on here, that they're trying to circumvent the cost benefit analysis by using law and by using Chevron that way. The main consequence, the most immediate consequence is that this is going to expose a lot of these Trump-era deregulatory plans to pretty serious judicial scrutiny, because they're trying to make legal claims about a lot of these statutes. They're not just saying, “Hey, it's a matter of policy, and we're the ones who get to decide the policy. So, you should defer to us.” They're actually saying, “Look, the law, the underlying law, says what we think it says, and that requires us to take this action.” And that's the kind of claim that courts are very good at looking into. They're very good at making up their own mind as to whether the administration is playing it straight or not. And I think that these are particularly instances in which I would not be at all surprised to see a court overturn the actions the Trump administration has taken. So, they've exposed themselves to a lot of legal jeopardy, precisely because they want to try to use law to get around cost benefit analysis.
JB: One final point on cost benefit analysis. And this was, I thought that this was really interesting how much things have changed, but you write about how the Reagan administration used cost benefit analysis as part of their deregulatory strategy. It was an asset then. Today, it's really been a hindrance. What has changed since then?
JM: The world has changed a lot. And what has really changed is the types of regulations that are coming out of administration. And so when Reagan took office, I think that there was a pretty widespread view that agencies had been a little bit overly aggressive and that they had regulated too much in a variety of ways, and that they needed to be reined in in some fashion. And that's what cost benefit analysis was meant to do, was to sort of rein them in and make sure that they were only regulating in ways that were sensible. But cost benefit analysis has basically been the procedure that the president has used to determine regulation ever since then. And that's across the Clinton and Obama administration's also. And over the last 30 years or so, these administrations have been very careful to regulate only when it really seems justified, to regulate only in accordance with cost benefit analysis. And they have found that even if you're abiding strictly by what cost benefit analysis tells you, there are lots of places where you can pass great regulations that really clean up the air, clean up the water, make the road safer, and just make the country a lot better off. And so whereas when Reagan came in in 1980, we had a big supply of regulations that would not have passed a cost benefit test. Now, we have a huge stock of existing regulations, which do pass cost benefit tests, and they were carefully engineered to make sure they would pass cost benefit tests when they were promulgated. So, if you want to deregulate now, you've got to deregulate in the face of much more carefully done regulations, which satisfy cost benefit analysis. And that's the problem that's been confronting the Trump administration.
JB: Finally, you know, after all this research and all the examples that, you know, that you've laid out in the paper, what do you want the ultimate takeaway to be for law students or the legal professionals who are very interested in making a difference in this kind of regulatory space?
JM: I guess I would say that there are two important takeaways. One is that cost benefit analysis really can be useful and really can tell us a lot about when regulation is going to make the world a better place. And when it's going to save a number of lives that's really justified. And when we should be supportive of that regulation. And we shouldn't run away from the science behind cost benefit analysis, we should embrace it, and it will tell us a lot about the types of regulations that are sensible. And then as a corollary to that, that means that we ought to try to police the use of cost benefit analysis and the misuse of cost benefit analysis and we ought to ask our political leaders, regardless of which party is in charge, “Hey, before you regulate that way or before you deregulate, we'd like you to show us that it's actually a good idea to do so. We'd like you to show us with the cost benefit analysis. And if you can't show us that this deregulation is going to be good for the country, then maybe that's a really powerful sign that you shouldn't be undertaking it and that you ought to be punished for trying to do so, either by a court or in the sphere of public opinion at the voting booth.”
JB: Jonathan Masur is John P. Wilson Professor of Law at the University of Chicago. His latest paper is called “Chevronizing Around Cost Benefit Analysis: Deregulation in the Trump Administration.” You can find links to the paper and more information on everything we've discussed today on our podcast page at law.uw.edu.
Jonathan, thanks so much for joining us today.
JM: Thanks very much, John.
