A favorite rhetorical punching bag for many federally elected politicians is, ironically, the federal government that they run on our behalf. More specifically, the punching bag is the government regulations of corporations. If you were on planet earth in 2016 you probably paid attention to the 2016 elections and heard many of the candidates for office use words like “job-killing regulations” or some variation of the phrase. If you have been on planet earth since the late 1970’s, you have heard some version of the same phrase in political rhetoric from numerous candidates for office. Like a moth to a flame, politicians cannot resist linking job losses to regulations.
But, before we continue, its QUIZ TIME! Please answer the following question. You have 30-seconds and may not use the Internet or any other resource to determine the answer. Just take your best guess. The answer will be provided later.
Question 1: 2012 was a big year for new regulations. Unfortunately, during the same year, 424,492 people were laid off from their jobs. Whenever a firm lays off workers, the Bureau of Labor Statistics asks executives the biggest reason for the layoffs.
What percentage of layoffs did executives say were lost because of “Government Regulations?”
Answer (Choose One):
(a) 77.2% Regulations kill jobs. Period.
(b) 24.3% Regulations kill jobs. And it is bad enough to be a problem.
(c) 6.9% Regulations kill jobs, but not as bad as you think.
(d) .02% Regulations have virtually no effect on job losses.
For some people, the answer to the above question is irrelevant. To these people, use of the word “regulation” will never enter thought without the word “job-killing” next to it, mostly because the rhetorical cues have been embedded into our national conversation. Even a political neophyte is keenly aware of this rhetorical edict. During the presidential campaign, the ultimate winner of the electoral college vote, Donald J. Trump, promised to rid us of a gazillion pesky regulations that have stifled our ability to do, according to him, anything. Candidate Trump once boldly proclaimed: “70% of Federal Regulations can go. It’s just stopping businesses from growing.” After election day, President-Elect Trump continued his whoop against government regulations. During one of his ‘transition update’ videos, President-Elect Trump ironically promised to establish a regulation that regulates regulations: “I will formulate a rule which says that for everyone one new regulation, two old regulations MUST BE ELIMINATED. So important.”
The democrats and President Obama often speak the same. President Obama regularly conceded that some regulations are burdensome and have a “chilling effect” on the economy, often while defending the importance of regulation in protecting the public from economic and environmental disasters. Many democrats used the word “common sense” to describe regulatory reform or blamed the lack of efficiency in regulation as a problem, which is hardly rhetoric that will defeat a claim that regulation “kills jobs.” The fact is, the answer to the question above is (d) .02%. It has been repeatedly empirically shown that the overall effect of regulation on jobs is incredibly minimal. By comparison, in 2012, 34% of reported layoffs were due to a drop in “business demand.”
It is compellingly easy to connect job losses to regulations, because some regulations transform entire industries. For example, the Cross-State Air Pollution Rule, finalized in 2015, requires older coal power plants to install scrubbers that remove sulfur dioxide emitted by their smokestacks. Meanwhile, the cost of coal has increased (steadily) for years, while the cost of renewable or clean energy, such as wind power and natural gas, has decreased. In 2013, American Electric Power (AEP), one of the nation’s largest coal-based utilities and a company famous for paying more to lobbyists than it does in taxes, said it will have to cut 159 jobs at just one power plant due to the new rule. But the CEO of AEP, Nick Akins, admitted that air pollution regulations have nothing to do with the layoffs at AEP. Mr. Akins, citing the lower cost of natural gas and renewables, admitted that AEP’s business model has shifted away from coal due to the economy for two reasons: “one is our investors expect us to really focus on sustainability and de-risk our business. . . . Secondly, from a customer standpoint, there’s an expectation that we move to [a] cleaner energy economy.” Thus, companies like AEP simply do not use as much coal, and as a result, coal related jobs are being eliminated faster than the golf cart eliminated golf caddies.
The question is, who actually loses as the deregulation blitz takes hold? The answer: YOU, the consumer. And who actually wins in deregulation? The answer: corporations, corporate management and CEO’s, and their shareholders.
The Art of the Rollback
Whatever your opinions of President Trump, one is hard-pressed to argue that he has not been true to his word when it comes to his promise to deregulate corporate America. Since becoming President, Trump and his allies (and some non-allies) have endeavored to decimate many of the regulations of financial institutions, large corporations, and regulations concerning the environment – you can name almost any regulation and it is probably on the chopping block – all of which represent a consumer protection that most of us enjoy.
So far, we have observed the Trump administration and his allies in Congress use a three-prong approach to eliminate consumer protections: (1) by executive order or executive action, (2) using the courts, and (3) using what some refer to as “reverse congressional action” through the Congressional Review Act. Each method has its own nuances, but the method is basically immaterial to the Trump administration, as long as regulations are overturned.
The Executive Order
All Presidents – with the exception of William Henry Harrison, who died 31 days into his term – have issued executive orders. Executive orders are simply directives to federal regulatory agencies inspired by the Constitution’s requirement that the President “take care that the Laws be faithfully executed.” Early in his administration, President Trump made good on his two-for-one deregulation promise. On January 30, 2017, Trump signed the executive order that states each new regulation proposed by a regulatory agency, must be met with two eliminated regulations. But, during the first six months of the Trump administration, administration officials claim that 16 rules were eliminated for every new rule adopted.
With each new executive order dealing with some regulation, the general speculation from the media is that President Trump simply wants to undo as much of President Obama’s legacy as possible. This is probably true, but the better explanation is that it is simply easier to regulate, or deregulate, by executive order. Executive orders can order the withdrawal of a prior order or “reconsider” a pending rule issued by a regulatory agency. An executive order can also require an agency to do further study of the effect of a regulation before it is implemented. Thus, using any number of executive orders, from an order of outright repeal of a previous executive order up to ordering the review of the impact of certain implemented or pending regulations, a regulation can be indefinitely postponed, or even permanently killed.
Trump has figured this out and has targeted Obama’s executive orders hard. By the middle of last year, Trump’s actions had “withdrawn” 469 of Obama’s planned regulatory actions, “reconsidered” 391 active regulatory proceedings to allow “further careful review” and identified 300 of Obama’s energy-related regulations to rescind or delay. By the end of last year, none of Obama’s executive orders were spared from the Trump administration. President Trump even lamented the fact he could not overturn Obama’s prior Thanksgiving Day pardons of the turkeys “Tator” and “Tot.”
Let’s take a look at two consumer protections that Trump has effectively eliminated by executive order:
1. The Fiduciary Rule.
When you go to a doctor or lawyer, they are required to act in your best interests. Lawyers know this all too well. But financial advisors had no such duty until the Obama administration directed the Department of Labor (DOL) to enact what is known as the “fiduciary rule.” The rule essentially broadens the definition of “investment advice fiduciary” under ERISA. The rule requires financial advisors to act in the best interests of their clients when it comes to overseeing retirement accounts, and other tax-deferred accounts such as health savings accounts. Prior to the fiduciary rule, financial advisors could tell you to invest in a mutual fund that may garner high commissions and fees for the advisor (that you pay) but is a bad or risky investment for your retirement savings.
The fiduciary rule was estimated to save billions of dollars for investors and state employee retirement savings plans. The rule was set to fully take effect on January 1, 2018, but Trump ordered an “economic and legal analysis” of the rule, which led to numerous other memoranda and orders, until finally on November 27, 2017, the DOL announced an 18-month delay to the rule’s compliance deadline. After the DOL studies the rule, it could determine the rule is unnecessary. The review is supposed to conclude by July 1, 2019, after a period of public comment and meetings. Thus, there is no fiduciary rule until at least July 1, 2019.
2. Net Neutrality.
One of the most popular administrative actions in the past decade among consumer advocacy groups, but least popular amongst large internet service providers such as Verizon, Comcast and AT&T, is the preservation of net neutrality rules. Net neutrality is the principle that Internet Service Providers (ISP) must treat all data on the internet the same, and not charge or discriminate by content, website, platform, method of communication or type of equipment.
Easily misunderstood, the term “net neutrality” is essentially an extension of the concept of a common carrier. If you don't remember what the common law term “common carrier” means, you are not alone. Most people do not understand what a common carrier is, or why we have common carriers. Common carriers are transporters of people or property that provide transportation services to the general public on a regular route. This includes pipelines, railroads, airlines, bus lines, shipping, and telecommunications. I like to think of a common carrier as a service that moves something from point A to point B, and needs an easement on private or public land, or needs to use some publically-owned spectrum to complete service. In exchange, the carrier is required to offer the service to the general public, and not just to certain individuals.
For years, ISP’s informally agreed not to limit or block access to any website. ISP’s were classified as information services, not a common carrier. But, larger ISP’s violated these principles, blocking or slowing access to various websites and services. There are numerous examples, but some of the most well-known is Comcast’s block and slowing of peer-to-peer applications, and AT&T’s slowing of the popular FaceTime app. In an even worse example that is unrelated to usage but solely related to free speech, AT&T’s webcast of Pearl Jam’s Lollapalooza performance in 2007 went silent for 15-seconds while Eddie Vedder improvised some lyrics that were anti-George Bush. In case you are curious, the lyrics were “George Bush leave this world alone. George Bush find yourself another home” sang to the tune of Pink Floyd’s Another Brick in the Wall.
In response to violations of the ISP’s informal agreement to honor net neutrality, in 2015, the Federal Communications Commission (FCC) issued its “Open Internet Order” which classified internet access as a common carrier, preserving net neutrality for all.
The Trump administration has a different view. In January 2017, Trump appointed Ajit Pai – former General Counsel of Verizon Communications - as the Chairman of the FCC and later nominated Pai to his second five-year term at the FCC. What most people don't realize is that Ajit Pai was originally an Obama appointee, recommended by Mitch McConnell in 2012 and confirmed unanimously. Thanks Obama.
Pai led the charge to undo the Open Internet Order on December 14, 2017. Thus, net neutrality is no more. In the coming months, internet providers may choose to limit access to certain websites and not suffer any penalty from the FCC.
President Trump has been sued 134 times since taking office, more than three times the number of his three predecessors – combined. Many of these lawsuits deal with some regulatory measure or executive orders, such as Trump’s travel ban or “Muslim ban,” or the withholding of funds for “sanctuary cities.” But perhaps more important is the Trump administration’s defense of litigation concerning regulations. The Trump administration has the authority to settle cases, dismiss litigation, or even refuse to defend litigation in an effort to deregulate.
Reverse Congressional Action
The Congressional Review Act, passed in 1996, gives Congress 60-days to review new federal regulations and pass a joint resolution to overrule the regulation. The 60-days only count days Congress is in session. Lately, Congress schedules very few working days. Thus, in January 2017, Congress had the legal right to review and repeal regulations dating back to May 2016.
When the rule is repealed by the resolution, the act prohibits the agency from reissuing a similar rule “"unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule." This brings us to our second quiz question! Here it is:
Question 2: The Congressional Review Act has been the law for 21 years as of 2017.
Prior to 2017, how many regulations had been overturned using the Congressional Review Act?
Answer (Choose one):
In 2017, a series of disapproval resolutions passed. As of January 1, 2018, Congress passed 15 disapproval resolutions in 2017. Prior to 2017, Congress had used the law just once. Let’s take a look at two uses of the Congressional Review Act to deregulate a consumer protection:
1. Online privacy.
In late 2016, the Obama administration-led FCC passed a regulation that required telecommunication services to allow consumers to opt in or opt out of the use of a consumer’s confidential information, among other privacy protections. In what baffled many pundits from both sides of the political aisle, the Congressional Review Act was used to repeal the rule that prevented telecommunication services from using your private information for their financial gain without your permission. The prior rule required an affirmative opt in. But, with the rule gone, your ISP does not need to get your permission before selling your private information. Consider that the next time you pay your broadband bill.
2. Arbitration Agreements.
The Consumer Financial Protection Bureau adopted a regulation that prohibited the use of pre-dispute arbitration in financial agreements which prevented a consumer from filing or participating in a class action suit. Class action suits often turn a class of consumers into private attorney generals, pushing a company or industry to change its practices. Arbitration clauses are often buried in fine print and consumers are regularly unaware of the language.
In what Senator Elizabeth Warren called a “giant wet kiss to Wall Street,” the Senate voted 51-50 (Vice Pres. Pence breaking the tie) to repeal the rule. Thus, financial institutions may include anti-class action arbitration clauses in auto loans, credit card agreements . . . and consumers probably won’t even know.
Deregulation has far-reaching consequences that no one can predict. But one thing is clear, the Trump administration is going to keep deregulating, even if it ultimately harms consumers. Be prepared, and be aware.
Tai J. Vokins is an attorney licensed to practice in state and federal courts in Kansas. Mr. Vokins concentrates his practice in the areas of civil litigation and consumer protection issues. If you have questions about this article, call Tai at 785-842-6311.
The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.
 40 C.F.R. § 52, 78, and 97 (2016).
 http://fortune.com/2016/10/07/donald-trump-business-regulations/ (notably, one of his favorite campaign advisors, Anthony “the Mooch” Scaramucci said Trump would eliminate 10% of federal regulations).
 Transitions 2017, A Message from President-Elect Donald J. Trump, YOUTUBE (Nov. 21, 2016), https://www.youtube.com/watch?v=7xX_KaStFT8.
 Cary Cognlianse, Adam Finkel, and Christopher Carrigan, Does Regulation Kill Jobs? 3 (2013).
 Reason for Layoff: Extended mass layoff events, separations, and initial claims for unemployment insurance, private nonfarm sector, selected quarters, 2013 and 2013 (May 13, 2013), https://www.bls.gov/news.release/mslo.t02.htm.