Neomi Rao is the most important member of the Trump Administration you probably haven’t heard of –she’s the right arm of Director Mic Mulvaney at the OMB, where she leads the Office of Information and Regulatory Affairs. She is the friend of Administrator Pruitt, Chairman Pai and every other regulatory rollback superstar:
HH: Last hour, you heard me play some of President Trump’s comments on regulatory reform and regulatory rollback. The individual who is most responsible for shepherding that rollback is Neomi Rao. She is the administrator for the Office of Information and Regulatory Affairs at OMB, also known as OIRA. And for those who are savvy about government, they know that every reg runs across her desk, as it did across the desks of previous OMB OIRA directors in the past, including Michael Horowitz and other great ones. Welcome, Ms. Rao, it’s great to have on the show.
NR: Yes, thank you, Hugh. Thanks so much for having me.
HH: Can you explain for an audience of lay people that includes Steelers fans what it is that OIRA does?
NR: Sure. One of the main functions of my office is to review regulations. So when an agency proposes a rule, that comes to our office, and we make sure that it is consistent with the law, and that it meets standards of cost benefit analysis. And perhaps most importantly, we make sure that the regulation reflects presidential priorities.
HH: Now in the past, I’ve spent 30 years dealing with regulations issuing from, say, the U.S. Fish and Wildlife Service, the EPA, the Army Corps of Engineers. It was a perfunctory review at best at OIRA when it came to scientific agencies asserting their scientific authority. Has that changed under your review, Ms. Rao?
NR: I think that is has changed over time. There are actually a number of PhD scientists now at OIRA in addition to the economists and policy analysts. And that’s a change that’s been happening over time. But we have some pretty impressive scientific expertise just within OIRA.
HH: Now I have not given you any heads-up as to what we’d be covering, so if this is just not fresh with you, feel free to wave it off. But let’s talk about the U.S. Fish and Wildlife Service, for example. For years, they’ve used the standard that the loss of critical habitat could lead to a species or sub-species being declared endangered. That’s actually a bogus standard, and it’s a standard that is subject to enormous abuse. Has that come across your radar, yet?
NR: We have seen some Fish and Wildlife regulations. You know, I think one of the important things in that area, I mean, some of the rules that I’ve seen is sometimes, the agency will just try to designate an enormous swathe of area as critical habitat without much analysis. And that certainly is something that we’re pushing back on. I mean, there needs to be a reason.
HH: That is…
NR: …for doing that.
NR: And I mean, I think we’ve seen agencies overreach substantially in the past, and we’re making sure that that doesn’t happen.
HH: Well, that brings me to the two biggest rules on my radar, which are both from the EPA – the rollback of the Clean Power Plan, which is currently under EPA process, and the alteration of the Clean Waters of the United States rules. Have any final versions of those come to your desk, yet?
NR: Well, you know, as Scott Pruitt has said, he’s planning to replace the Clean Power Plan. And we’re in the process of concluding review on the first step of that, which is the proposed, the advanced notice of proposed rulemaking. And that should be coming out soon.
HH: How about the Clean Waters Act, the Waters of the United States definition?
NR: Yes, that is also something that is being worked on actively at EPA.
HH: So do you think 2018 is going to be a year of significant breakthroughs on some of these regulatory swamps that need to be drained, Neomi Rao?
NR: Yes, I think it will be. I mean, yesterday, the President announced that we released our regulatory agenda, and you know, agencies are proposing 400, almost 450 deregulatory actions. And so yes, I think that it’s going to be, you know, some of these rules may go, take longer than just 2018, but I think we’ll see a lot more progress in 2018.
HH: Now early in the year, Congress passed a series of Congressional Review Act measures that had the effect of repealing rules completely. I believe they’re considering one now on payday lending. Is that correct?
NR: I think they may be.
HH: So when that happens, that forever bars an agency, absent Congressional authority, from returning to the scene of the regulatory crime. They can’t go back and re-regulate what they’ve been thrown out of. If they get tossed out of the bar, they’re barred reentry. My question to you is the CRA is subject to a bunch of different interpretations, one of which is they could actually pass CRAs about old rules if the appropriate report was not delivered to the Congress at the time of the rule’s promulgation in its final form. Have you had that conversation internally at OIRA?
NR: Yes, we have, and I do think, you know, I think that there’s some interesting possibilities there. I think what we found is that there are not too many important rules that actually meet that criteria. And I think if there are some that people find, I think you know, it’s certainly appropriate for Congress to take a look at those.
HH: Has Congress come to you with a list of those they would ask for your opinion on as to whether or not a final report was filed such that the CRA deadline has passed or whether the door is still open? Do they have your concurrence on what is at least a possible agenda for late CRAs?
NR: You know, I don’t actually see that they need my concurrence. You know, they can determine if the agency never you know, had a determination that something was major and never reported it to Congress. I think Congress can make that determination for itself.
HH: So if they didn’t do that, do you believe, this is asking you to put your old law professor hat on. If they didn’t make that determination, and did not provide that report, do you think Congress has the authority to come in and pass a rule, or pass a law repealing that rule, even though it’s back to 1996 when the CRA passed?
NR: You know, I think that that, I think it’s a possibility. I mean, one of the things that the CRA does, I mean, of course Congress can at any time overrule a regulation with a statute, right? One of the advantages of the CRA is you don’t have to have 60 votes in the Senate.
NR: So I think that you know, but I think that this is one of those areas where I think it’s, you know, it’s part of, it’s partially, it’s Congress’ responsibility. And I think if they bring such an action and it comes to the President’s desk, he could certainly sign it.
HH: The reason I bring it up is there is a threat to losing control of the House. And if the House is lost, you can’t pass CRA resolutions. And so if it’s going to happen, it would be best to happen in 2018. But to happen, there needs to be focus on what would be the appropriate test case. And it would be a test case, and this is the debate I ask you to weigh in on, not a particular rule. Is it wise to open that door to pass regulations, because some of the buzz I’ve heard is that we don’t know if that door is open, we don’t know if we want to open that door? What’s your opinion on that, Director Rao?
NR: Sure, I think you know, I think it’s a good question. And I guess first, as I said, I haven’t seen, you know, I’m not sure that there are that many rules that we care about that fall into this category. So I would start by saying that, right? So I’m not sure how much of a practical concern this is. No one has come forward with some great rules that didn’t meet the standard. So I think that’s one thing to start with. Also, I do think that there are concerns. I mean, if a rule has been on the books for a very long time and Congress and the president and agencies have continued to enforce it, there could be some serious rule of law concerns with reopening that. But you know, I think that, I do think that that’s something that is certainly a legitimate debate that Congress can have.
HH: Yeah, I think some of the critical habitat designations of the past could easily get CRA’d if they were not put forward. They’re such a nightmare for people who own land, and such an assault on property rights. My last question, Neomi, is there’s a magical bullet out there, it’s for an agency to get somewhat Machiavellian, pass a terrible rule, and then invite a CRA repeal of it in order to seal the door to that tomb forever. Has that ever been discussed? That’s very Machiavellian, but it would be very effective.
NR: I have heard some people mention an idea like that, but I think it’s very risky, given all the things that have to work. You put in place a bad rule, you’re placing a lot of faith in Congress to get the CRA through. And they’ve passed some CRAs, which has been great, but not on all of the rules that one may perhaps have liked them to. So it’s a difficult road to go down. But…
HH: All right, last subject, shift completely to net neutrality. That worked very quickly. Why was that possible for Ajit Pai to dump net neutrality quickly, but other rules take forever to dump?
NR: You know, why was it, well, I mean, I think that the net neutrality has been under such active debate, you know, even when it was, when it was enacted. And I think that they have been working on it for a number of months. So I think it really depends on the rule. But to replace one rule, you know, requires another rule. And so depending on the complexity of the rule, it can take some time to get rid of.
HH: And so is there, if you had to tell people, give them an advance on what to look for in 2018 as the big rules that will be repealed beyond the EPA and beyond that, how about the CFPB, Consumer Finance Protection Bureau? Are we going to roll back some of that stuff? And by the way, as a Constitutional scholar, should any of it be legal given the nature of the agency and the flimsiness of its authority on which it rests?
NR: Yeah, well, I certainly hope a lot of what the CFPB did will be rolled back. But, and I’ve written in my scholarship a great deal about the Constitutionality of the CFPB. I mean, it’s an agency that has a lot of Constitutional infirmities. I mean, it’s really accountable to no one. And of course, those court cases challenging that structure are working their way through the courts.
HH: Last, very quickly, I don’t have enough time unless you can stick around. I don’t have enough time.
NR: I can stick around if you’d like, yeah.
HH: Please do. I have a special question for you.
HH: Stay tuned. I’ll be right back, America.
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HH: The 28 CFR 600.1 are the grounds for appointing a special counsel. And I have been arguing with Del Quentin Wilber, who is the Wall Street Journal’s very fine reporter, but he is limited by his education at Medill journalism school at Northwestern to literalism that this does not limit the Attorney General, even though it permits the Attorney General, it reads, 600.1, “The Attorney General, or in cases in which the Attorney General is recused, the Acting Attorney General, will appoint a Special Counsel when he or she determines that criminal investigation of a person or matter is warranted and – (a) That investigation or prosecution of that person or matter by a United States Attorney’s Office or litigating Division of the Department of Justice would present a conflict of interest for the Department or other extraordinary circumstances; and
(b) That under the circumstances, it would be in the public interest to appoint an outside Special Counsel to assume responsibility for the matter.” Here’s the crux, Ms. Rao. It says this is when an Attorney General or acting Attorney General will appoint someone. But Del is arguing unless there’s a criminal investigation, he or she cannot do so. Does the authority to act in fact limit the authority to that which is specified?
NR: I’m sorry, Hugh, I’m not familiar and read into those statutes. I’ve been really busy focused on, you know, cutting back the administrative state. So I’m sorry, I can’t speak to that.
HH: Okay, but I’m speaking more generally not about special counsels, but the grant of regulatory power to do a thing does not preclude other executive branch power from doing that very same thing in a different context. It’s an attempt to use a regulation to limit the executive authority of the president, which I believe defeats the unitary executive theory. Do you have any comments on that general question?
NR: Well, I mean, I do think generally, neither a regulation nor a statute can trump the president’s Constitutional authorities. And so I think as a general matter, that is absolutely true.
HH: Now as with regards to the Attorney General, he’s recused from this. And so Rod Rosenstein answers to the President. And as a general matter of administrative law, the president directs the acting Attorney General, does he not?
NR: He, well, sure. I mean, the Attorney General or the acting Attorney General reports to the president.
HH: So this, there’s so much confusion about this in the media. There is, there’s, I had Akhil Amar on last week talking about whether or not the president can ever theoretically obstruct justice and all these other things. But in terms of the administrative state, everybody who is not an independent agency answers to the president. And therefore, the president can direct them how to act, can he not?
NR: That is certainly true. I mean, Article II of the Constitution vests all executive power in the president. And so the president, you know, I like to think of him as the administrator-in-chief in addition to the commander-in-chief.
NR: So yes, he does have the ability to direct his subordinates.
HH: So can he reach, for example, into the Department of the Interior and set the regulatory agenda for Secretary Zinke? Can he reach into the Department of Homeland Security and set the new secretary’s agenda, because he is the administrator-in-chief? Can he do that, in your view?
NR: Yeah, I mean, and I think the primary way, of course, a president can do this is by choosing cabinet members who reflect their priorities, right? And you know, I mean, there are some concerns, because I mean, statutes do confer specific authority on agency heads, but I think it’s perfectly appropriate for the president to direct those authorities consistent with his priorities.
HH: That’s what I’m getting to, because we are getting into a situation where the question is do agencies run themselves. And this takes me back to the Consumer Financial Protection Bureau. That agency has no oversight. That’s its Constitutional infirmity. And so I’m curious as a regulator, it’s our last minute, are you tempted to reject all of their regulations as being Constitutional infirmed that come across your desk?
NR: Well, I mean, if, their regulations currently don’t come across my desk. I think if they came across my desk, they’d have a lot more accountability. But I mean, I also just wanted to mention, we didn’t really talk much about the news of yesterday, which is that we’ve already, this administration has been doing quite a job in terms of cutting back regulations. You may have seen yesterday the President announced he had said at the start of his administration we’re going to eliminate two regulations for each new one. And over the past year, we’ve eliminated 22 regulations for each new one, saving some $8 billion dollars.
HH: Indeed. We played that audio, and that’s why I wanted to have you on, to congratulate you. Keep going, keep pushing, Neomi Rao. I appreciate it very much. It is the heartbeat of deregulation. Thank you for being with me.
End of interview.