Obama Administration Sits on Key Regulations

The Obama administration roared into office four years ago with an openly ambitious regulatory agenda, releasing a higher-than-usual number of major regulations in the first two years. In 2012, the number of new regulations has plummeted in a year in which the president's regulatory policies have emerged as a major campaign theme.

Federal agencies are sitting on a pile of major health, environmental, and financial regulations that lobbyists, congressional staffers, and former administration officials say are being held back to avoid providing ammunition to Mitt Romney and other Republican critics.

Despite looming legislative deadlines in the Affordable Care Act, court deadlines requiring environmental-protection rules, and a financial industry awaiting clarification on key reform details, the pace of regulatory release has slowed by almost half. The drop-off stands out not just compared to earlier years of Obama's term but also compared to other years in which presidents are running for reelection, according to analyses from experts at George Mason and George Washington universities.

The administration has also failed to release a required regulatory outlook document, describing its regulatory agenda. Such documents are supposed to be published every six months; the most recent one was published in January, making this the longest lag between outlooks since the deadline schedule was created in 1994.

The slowdown comes in an election year in which government regulation has exploded as a hot campaign theme. Romney has assailed the president for costly overregulation, often slamming specific rules: He describes EPA regulations of power-plant pollution as a “war on coal,” and a rule requiring employers to cover contraception in their health insurance plans triggered a firestorm over a “war on women.”

Sources in regular contact with agencies say they've been told that new rules won’t resume until after the election, and many expect an avalanche of new major rules shortly afterward.

"They're ready to burst," said Susan Dudley, director of the Regulatory Studies Center at George Washington University and a top official at the White House Office of Management and Budget during the George W. Bush administration. "Some people use the analogy of a closet door—you keep putting things in, and it's ready to burst."

In the business community, the anticipated surge of coming regulation has been likened to a tsunami. Business groups are worried about health care and environmental regulations, but also major outstanding labor rules. The agencies charged with implementing the Dodd-Frank financial reform law have routinely blown through legislative deadlines.

"There is a lot that's sitting, waiting to come out," said Daniel Bosch, manager of regulatory policy at the National Federation of Independent Business. NFIB estimates that there are more than 4,100 regulations in the pipeline. That list does not include the many anticipated regulations that are still with administration agencies.

OMB declined to comment on critiques that it is delaying completed regulation, though the number of regulations the White House has held for longer than the customary 60-day limit is significant; about 70 percent of regulations under review have been held for more than 90 days, according to Dudley’s analysis. Instead, OMB highlighted the administration's efforts to minimize burdensome regulation. "The Obama administration has taken steps to eliminate billions of dollars in unnecessary red tape and burdens to make government work better for our nation’s citizens and businesses while also protecting American lives and well-being,” said Moira Mack, an OMB spokeswoman, in an e-mail. 

Much of the delayed regulation is tied to major Obama administration policies, not vestigial red tape. Both the Affordable Care Act and Dodd-Frank require significant regulatory clarification in order to move forward. State officials and businesses whose participation is critical to the success of health reform, in particular, fear that regulatory delays may cause problems in 2014, when the law's major provisions go into effect.

AMBITIOUS ON ENERGY

Obama, who came into office seeking major climate-change legislation, began reshaping regulatory policy on clean energy and the environment from the first days of his administration. At the Environmental Protection Agency, Administrator Lisa Jackson rolled out a stack of Clean Air Act rules to regulate toxic pollution from coal-fired power plants in 2009 and 2010. Jackson, a zealous clean air advocate, made it clear she planned to flex her regulatory muscles. Obama—at least at first—gave his blessing, despite fossil-fuel industry charges that the rules were a “train wreck.” 

In 2010, EPA took on an even bigger role: After Congress failed to pass a climate-change bill, the agency began using regulation to control global-warming pollution. All those new regulations clashed with the 2010 midterm elections, where Republicans and the tea party, fired up against the growing role of government, made “job-killing regulations” a potent campaign cry.

The White House paid attention. As Obama’s reelection drew closer, his enthusiasm for regulating dimmed sharply. In the summer of 2011, EPA was expected to issue a long-awaited regulation curbing smog-causing ozone pollution from coal plants. But the rule concerned the White House political staff, because it would have directly affected coal plants in Ohio, Virginia, and Pennsylvania—all key swing states. White House officials reportedly told Jackson to delay the rule until after the election—a move, people close to the EPA said, that nearly led to the administrator’s resignation. 

That was the beginning of the freeze. As 2011 drew to a close, EPA staffers continued to finalize major environmental rules—but not to submit them to OMB for review. Industry lobbyists and environmental lawyers estimate that the EPA is currently sitting on about a dozen new major regulations, completed, and ready to roll out the door, but on hold until after the election. Nearly all of them will have a significant impact on the coal and oil industry. 

Among the most politically controversial rules is one that would slash toxic tailpipe pollution from gasoline, but that could also slightly increase costs at the pump. That rule, say industry lobbyists and environmentalists who work closely with EPA, has been sitting at the agency, ready to roll out, for nearly a year. But the White House was reluctant to regulate gasoline in an election year in which pain at the pump has ignited fierce firestorms.

“There are at least a half-dozen other examples like that throughout the agency,” said William Becker, executive director for the National Association of Clean Air Agencies. “And that’s why administrations will do everything they can to avoid putting these rules out during an election year. But all that ends after the election. Then it’s a mad rush to see who gets the rules out the door first.”   

HEALTH CARE IN LIMBO

When it comes to health care, delaying regulations could help the president politically by avoiding discussion of the controversial health reform law. But that makes life difficult for states and industries that need to prepare for the coming changes. The law has several looming deadlines. States must decide this month whether they will build their own insurance exchanges, even though they have not received regulatory detail on key elements of how those exchanges would work and be funded. Insurance companies need to have health plans ready to sell in those exchanges by October 2013, even though regulators have failed to describe what benefits they must include. Large employers are expected to comply with the mandate that they cover their full-time employees, but they, too, lack clarity on what sort of insurance plans they must provide or how much employees can be expected to chip in.

"It is extremely difficult for states," said Krista Drobac, the director of the health division at the National Governors Association. "Informally, we've been told that regulations are all on hold until after the election."

Though the regulations are critical for implementation, many have unpleasant political ramifications. Rules specifying how and when the federal government would run state insurance markets would likely raise cries of "government takeover." And insurance industry regulations with the potential to raise premiums or eliminate existing insurance products could inspire criticisms that Obama was dishonest when he told people that, under his law, "if you like your plan, you can keep it."

Several people who work closely with the Centers for Medicare and Medicaid Services, the agency at the Health and Human Services Department responsible for most of the outstanding health care regulations, say they've been told the delays are due to political considerations, not technical difficulties. One congressional staffer who works closely with CMS said they had been told the agency is on "lockdown."

"There is clearly a cycle, but people who are career employees in HHS have said this is unusual," said Brett Graham, a partner and managing director at the Leavitt Group, which is helping states build exchanges. Leavitt consultants were told by CMS that the agency has put out only about a third of regulations they have completed. "The pipe has been shut off." Mike Leavitt, the former Utah governor and the firm's founder, is running the Romney transition team, but his company has been encouraging states to prepare for coming implementation.

The pattern of postelection regulatory release will probably vary depending on whether the president is reelected. Historical trends suggest that outgoing presidents typically push out a surge of “midnight regulations” before they depart. And given the number of regulations close to completion, and the president’s obvious desire to ensure the success of the signature health care and financial reform laws, it is likely Obama would be no different from his predecessors.

But the current backlog suggests to many observers that the administration will be publishing thousands of pages of regulations in the coming months even if it wins reelection.

"If you were to look at it from a dam perspective, there is a lot of water lapping up against the wall of the dam," said Thomas Sullivan, who runs the Small Business Coalition for Regulatory Relief and is of counsel at Nelson Mullins Riley & Scarborough. “It will either be a flood or a steady stream."