By now everyone on Substack is tired of the debate between the Abundance groups and the anti-monopoly populists. I am too. But on at least one very important topic, there is a place where they agree.
It seems that the populists, Abundance advocates, and even Russ Vought have woken up to the reality that the process for making (or repealing) federal regulations is truly broken. We have great sounding procedures on the books designed to ensure transparency, participation, consideration of important stakeholders, rigor, and accountability to the rule of law. But the steps add up to a laborious process. Here are the legal hoops every government agency must jump through, and some agencies have extra steps:
Collect data to legally support a proposed regulation.
Propose a rule with extensive cost-benefit analysis, and take public input.
Finalize the rule, responding to the public comments and changing the proposal as needed.
If any special interest disagrees with the rule, there will be litigation challenging it, including appeals.
After surviving legal challenge, a “compliance period” where companies have time to make changes.
Based on my first-hand experience, if you’re really sprinting through every step, it takes about a year to propose a rule; a year to finalize a rule; at least two years to go through judicial review including the appeals if you’re lucky (and that’s assuming you win); and another year for the rule to go into effect. That’s five years, and that’s the best-case scenario. It usually takes longer.
This isn’t a new problem. Administrative law academics have a word for this. They call it “ossification” analogizing to the organic process of bone growth, which builds slowly bit by bit, but hardens over time into a rigid material. Nobody ever decided this is how the process should be. But process steps have built up over time and rigidified into a long and drawn-out process.
The issue of ossification has largely been relegated to academia, but not anymore. Ezra Klein’s and Derek Thompson’s popular book Abundance has kick-started a renewed focus on making government less process-oriented and more effective. The book highlighted “The Procedure Fetish” that has taken hold in the United States—a lawyerly focus on process intended to force inclusion and establish legitimacy, but that has been weaponized by special interests and sabotaged the government’s ability to get anything done. The book and Ezra Klein’s podcast have pointed to the regulatory process as one of the main “veto-gates” that prevents government from doing anything.
But they aren’t the only ones with this observation. Just this week, the Roosevelt Institute released a post-mortem of the Biden administration, and the resounding message is that the regulatory process is broken because there are too many steps full of veto-gates. It simply takes too long to take any executive action of significance.
Even Russ Vought in the current administration is taking notice. The White House’s deregulatory agenda appears to be stuck in the same ossified process that all modern administrations get bogged down in. The Office of Management and Budget just circulated a memo imploring agencies to move faster and cut corners for fear of running out of time.
We’re all singing the same tune. I think this renewed focus on the lengthy regulatory process is finally opening eyes to the true risk of regulatory ossification. Academics focus on the fact that the process is burdensome and costly. That there is risk of special interest capture in the lengthy process. That it pushes administrations to do enforcement or “guidance” instead of regulations, which create less certainty and are weaker. All true. But the real threat is more fundamental. It is currently impossible for a President to campaign on a significant regulation, and accomplish that promise, before running for re-election. Right now, in order to fulfill a campaign promise to take meaningful executive action that any special interest might challenge in court, Presidents or their party need to survive, at a minimum, multiple elections. When academics look at this timing issue, they tend to focus only on the time it takes between a proposal or final rule, or both. But when you also add the legal challenge, which is increasingly seen as a standard part of the process, many regulations take more than 8 years from start to finish. That means a President can’t even see regulations they started at the beginning of a two-term presidency through to the end.
This is no way to run a democracy. The most pollyannaish and stripped-down theory of democracy is that we have candidates that tell the public what they want to do, we vote for them to do those things if we like them, and if they fulfill the promise to do those things, we reward them by voting for them again. What happens to democracy if the process of government prevents fulfilling campaign promises? A never ending cycle of politicians making promises in abstract that never materialize, with change-election after change-election because no politician ever does what they said they would, even if they wanted to. To not overstate the case, there are still things the federal government can do, like law enforcement, grants and subsidies, changes to public benefits programs, national security and trade, and more. But most significant economic policies require legislation or regulation. Legislation is stalled by the 60-vote threshold in the Senate. And regulation (including deregulation) is blocked by this ossified process.
Let me give you a few examples that I’ve personally worked on to show you what this looks like. I worked at the Consumer Financial Protection Bureau (CFPB) off and on for a collective 10 years, at the beginning as an intern, and at the end running the agency’s policy office.
In 2012, the CFPB decided to propose a rule to make payday lenders underwrite to ensure borrowers would not get stuck in debt traps (“underwriting rule”), and also to stop payday lenders from submitting bounced debits to your bank account over and over again to coerce customers to refinance (“payments rule”). We immediately started conducting research to support the rule. Then we sent the proposal to a Small Business Review Panel in 2015, which is the first step. We issued the formal proposal asking for public comment in 2016. We got over 1 million comments, including 100-page comments from both industry groups and consumer groups. We had to respond to all of them, so we spent an exhausting year (trust me) writing a 1,689 page final rule, which the CFPB issued in 2017.
But that was just the beginning, because then the payday lobby sued. The case, CFSA v. CFPB, was a little more complicated than usual because there was a Constitutional challenge to the CFPB’s existence that went up to the Supreme Court in a different case called Seila Law v. CFPB, and during that time, the payday rule was stalled. The first Trump administration also decided to abandon one part of the rule, the “underwriting rule,” but they kept the “payments rule.”
But it all got unstuck after the opinion in Seila Law was issued in 2020, and the CFSA v. CFPB challenge to the payments rule got its first ruling in 2021. The CFPB won. That ruling was then appealed to the 5th Circuit, which ruled that the regulation was fine, but the CFPB was unconstitutional for a different reason than what was in Seila Law. The CFPB appealed that, and won at the Supreme Court in 2024. Finally, the rule went into effect on March 30, 2025, 13 years later! To be fair, maybe 5 of those years were due to the CFPB over-working the rule and the unique Constitutional challenges. But these kinds of unforeseen hiccups and slowdowns are not uncommon. During that time, I went from an intern to the head of policy, got married, had two kids, my beard turned white, and the payday lending market transformed to look completely different than it did in 2012. In our fast-moving economy, the fact that it takes over a decade to do big things means you are always missing a moving target. Just imagine how irrelevant a regulation of AI would be if an agency started it now, and it didn’t go into effect until 2038.
In 2021 I rejoined the CFPB and, having experienced this long process, I was committed to testing whether it was still even possible to do a simple fast-ball-down-the-middle regulation within one term, or whether the process was just broken. And I think we found a pretty good candidate for this test. The CFPB oversees a law that limits late fees on credit cards to a “reasonable and proportional” amount. The agency can issue a “safe harbor” from that requirement, and its predecessor had done that by creating an exemption for fees up to $41. The CFPB had a lot of data showing that $41 was way too high—much higher than what the government had long considered “reasonable and proportional.” Because of this safe harbor, a few major banks had been using late fees as a massive profit generator. So it was a no-brainer that we should drop it $8, which would have saved people $10 billion a year in the middle of a cost-of-living crisis, but leave enough to deter late payment and let banks recover their costs. To give you a sense of scale, $10 billion in savings is a little more than the savings from the recent No Tax on Tips reform. It seemed relatively safe legally because it was deregulatory—taking away a regulatory exemption from Congress’s law—meaning there shouldn’t be issues with the Supreme Court’s new precedent around Chevron deference or the Major Questions Doctrine. There was no stretching of authorities here: Congress clearly told the agency it can do this specific rule, and the math supporting the rule was straight-forward and based on a huge dataset. Best of all, we could do it super fast because we could skip a small business step (it didn’t impact small businesses) and we already had plenty of data on the credit card market.
We kick started the process in June 2022, proposed it at the beginning of 2023, and finalized it at the beginning of 2024, to go into effect in just 2 months. That’s lighting speed for a regulation—less than 2 years beginning to end. And the people who worked on the rule did an excellent job of streamlining it down to just 338 pages (that’s a short story in the world of regulations).
But we got sued within hours of releasing the rule, before the banks even had a chance to read it. The lawsuit was filed in the Northern District of Texas, where none of the affected banks were headquartered but where we almost always got sued because banks would forum shop to get in front of judges that were particularly unfriendly to consumer protection. The court immediately stayed the rule, and then it was stuck in procedural fights over venue for almost a year. Ultimately, the district judge never even issued a first ruling on the merits because the next administration abandoned it after the 2024 election. But we weren’t even close to the end of the process. By my estimation, with appeals we were still two years from the end. Even if we had started this process on day one of the Biden Administration, it would have taken 5 years from start to finish. That means, given the time spent in court, any significant rule that is not finalized in the first year of an administration probably won’t go into effect before the next election (not to mention you have to win, which is also a high burden these days).
If you have made it this far, you may be feeling pretty cynical. I do not, because the fix is actually fairly simple. We need to repeal Chapter 7 of the Administrative Procedure Act (APA), as Professor Frank Cross proposed in 1999, and replace it with a short provision saying ultra vires or Constitutional challenges must be brought straight to a circuit court, not a district court first. Filing lawsuits in district court first adds unnecessary time to judicial review because these challenges never involve trials and they are always resolved in the circuit court anyway. And challenges to some agency regulations, like regulations issued by the FCC, already go straight to circuit court. More importantly, eliminating Chapter 7 of the APA would eliminate judicial review of agency rules for anything other than claims that an agency’s rule is outside its legal authority or violates a Constitutional right. It would make judicial review rarer, faster, and focused only on legal issues, not on policy decisions. It would convert the notice-and-comment process from a veto-gate that special interests use to set up legal challenges, to a quick step to collect constructive information. It would get judges out of the business of reviewing economists’ cost-benefit analyses, so that the economists could focus their analysis on the main policy deliberation and stop writing defensive analyses with the sole purpose of surviving a court challenge. And it would speed up the rulemaking process because less time would be spent marshalling a defense.
Another thing we can do, even without legislation, is repeal Executive Order 12866. EO 12866 was created under President Clinton and requires most agencies to send proposals and final rules to the 45-person Office of Information and Regulatory Affairs (OIRA) to check the “cost-benefit analysis” that agencies write to justify their rules. That’s right, most regulations of the Federal government have to first be double-checked by a team of 45 people. This added step – appearing nowhere in legislation – has created a bottleneck that adds months or even years to the already way-too-long process. At one point this OIRA step was seen as a check to ensure quality and rigor, but everyone now recognizes that it has evolved to a new primary function, which is that the White House uses OIRA as a gate to apply oversight over agency policies. But we don’t need that gate because the White House chooses the heads of these agencies. Just tell appointees they have to involve White House staff in major regulatory decisions and fire appointees if they get too far out of line. If agencies are spending time on regulations that get blocked by OIRA at the very end because the White House does not want to do it, that was a HUGE waste of time and resources that could have been avoided with a phone call at the beginning. We should expect better organization and coordination than this. Getting rid of this duplicative step is table stakes for anyone that wants government to work.
To be clear, if we did these things, judges would still overturn a lot of rules, as they are increasingly doing. And after Loper Bright, judges would still have the first say in what agencies have legal authority to do without any deference to the agency’s opinions on their own authority. But this way, the judiciary would be able to use their Loper Bright prerogative to tell the Executive the limits of their authority quicker, not after years of process during which the agency has to guess what the court might think. And it would give Presidents, of any party, a chance to actually fulfill more of their promises.
