Regulatory Funny Business
The normal federal agency rulemaking process begins with the issuance of a notice of proposed rulemaking, followed by a notice and comment period. The public and parties impacted by the regulation usually have at least 30 to 60 days to review the provisions of the rule and submit their comments to the issuing agency. Unfortunately, this procedure is often being cast to the side, as agencies are instead using tactics outside of the normal regulatory process to accomplish policy goals.
The Department of Justice (DOJ) is one of the agencies that is using such extra-regulatory measures. CAGW’s June WasteWatcher featured an article on DOJ’s “Operation Choke Point” initiative. According to the article, “DOJ’s operation is targeting 30 high risk industries, which were listed by the Federal Deposit Insurance Corporation in a 2011 report, including firearm sales, ammunition sales, get rich products, dating services, credit repair services, home-based charities, pornography, payday loans, and many others. Essentially, DOJ is pressuring banks to shut down the accounts of businesses and individuals in these industries, but the department is neither pressing charges nor asserting that illegal activity is occurring. Instead, the threat of a DOJ investigation, and the burdensome regulatory compliance costs that an investigation entails, are proving to be enough incentive for banks to shut down current accounts and avoid opening new accounts for individuals in these industries.”
Another tactic that agencies employ to avoid the scrutiny of the regulatory process is sub-regulatory guidance. For example, on November 1, 2013, the Centers for Medicare and Medicaid Services (CMS) issued sub-regulatory guidance suspending all audits of short-stay inpatient claims by Medicare recovery audit contractors (RACs) for the first three months of 2014. This under-the-radar manipulation of the RAC program has greatly stymied the efforts of one of the most successful programs that Congress has mandated to curb Medicare fraud, waste, and abuse. While CAGW recognizes that CMS’ current Medicare oversight programs are fragmented and could be made less onerous for providers, such reforms can only be enacted by law and not by regulatory fiat.
While subverting the regulatory process through threats, guidance, and other tactics may help agencies avoid normal review and other measures that make the rulemaking process more accountable and transparent, these schemes adversely affect the rights of parties impacted by the rulemaking. The Administrative Procedure Act (APA) of 1946 provides for expedited and emergency rulemaking. These provisions were inserted into the act to protect Americans from the type of questionable actions that have been employed by DOJ, CMS, and others. Jerry Brito from the Mercatus Center argues in “Agency Threats” and the Rule of Law: An Offer You Can’t Refuse that “The regulatory process laid out in the APA and the executive regulatory review process to which many agencies are subject exist, among other reasons, to check the potential mistakes and abuses of regulators. These checks are in place not only for the benefit of regulated parties, but more importantly for the benefit of the public, whose interests would be harmed by regulations that unnecessarily hamper innovation or restrict consumer choice.”
Given the specious nature of the Obama administration’s extra-regulatory activities, it is clear that these tactics should simply come to an end. Although ordinary administrative procedures may be more time-consuming and less convenient, legality and equity should be the primary considerations for all regulatory agencies.
– P.J. Austin
