Trump beware: Banquo’s ghost lurks

“Fire burn and caldron bubble … something wicked this way comes”—and it’s neither Shakespeare’s Macbeth nor his lady.

Enter, stage right, Presidential adviser Stephen K. Bannon, desiring to “deconstruct the administrative state,” and President Trump’s son-in-law, Jared Kushner, toting a White House assignment to make government more efficient.

This is not newly ripened extremist populism. In 1921, Commerce Secretary (later Republican President) Herbert Hoover proposed, for efficiency, merging the Interstate Commerce Commission (ICC, now Surface Transportation Board, or STB) with other transportation regulatory agencies. Republican President Ronald Reagan said in 1981 that “government is not the solution to our problems; government is the problem.”

In 1993, Democratic President Bill Clinton, in creating the National Partnership for Reinventing Government, said, “Our goal is to make the entire federal government less expensive and more efficient.” The result was some 400,000 federal jobs eliminated, and the ICC reconstructed as a lesser STB. In fact, every modern President has sought to improve the efficiency of the bureaucracy.

Here we go again, but with a double-caffeine jolt. Since taking office Jan. 20, Trump’s Executive Orders, budget recommendations, nominations of Cabinet secretaries and his more than 13,000 Tweets (most followed by between two and 15 exclamation points) convey an unambiguous message that federal agencies will be shrunk, administrative regulations will be chopped and the ranks of bureaucrats will be purged.

Among some 430 federal agencies employing almost 1.5 million workers are the STB and Federal Railroad Administration (FRA). While their regulatory authority may not be explicitly diminished absent congressional edict, their fitness, willingness and ability to perform may be weakened.

Consider the FRA. Aside from the Republican-majority Congress imposing agency-weakening budget cuts, the FRA Administrator, who reports directly to Trump’s cabinet-level Transportation Secretary, may command reduced regulatory involvement, rescind previous rulemakings, and be less aggressive in issuing new directives.

Moreover, FRA’s controlling statute allows the Transportation Secretary to outsource FRA’s safety regulation mandate to states or even the private sector. The Transportation Secretary also holds authority to delegate safety and other duties of the Federal Transit Administration (FTA), and a merging of FRA and FTA may be in the works. Additionally, FRA organizational changes could shift FRA purse-strings oversight of Amtrak and high-speed rail projects elsewhere in DOT.

As for the STB, its chairman, designated by the President, sets the agenda on matters without statutory deadlines, such as whether to grant or revoke exemptions from regulation; initiate investigations; redefine rail revenue adequacy; revise, replace or supplement a complex test for determining maximum allowable freight rates for shippers lacking effective transportation alternatives to rail; or permit competitive switching at certain sole-served facilities to afford a second railroad choice for so-called captive shippers.

Then there is the matter of the 2015 Surface Transportation Board Reauthorization Act, which created two new, but yet unfilled, seats on the current three-member Board. Should Trump, with Senate consent, fill them, the STB will have a 3-2 Republican majority that could rescind or loosen, for example, restrictions on rail mergers imposed by a Democratic Board majority almost two decades ago.

The power of quasi-legislative and quasi-judicial federal regulatory agencies is broad, with the 1946 Administrative Procedure Act favoring their orders with a presumption of validity unless shown to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law. Newly confirmed Supreme Court Justice Neil Gorsuch views them negatively as an unaccountable-to-voters fourth branch of government exercising excessive powers.

So it is that many congressional Republicans and their supporters advocate limiting federal agency powers through the Regulatory Accountability Act of 2017. It would defeat a 1984 Supreme Court doctrine—Chevron USA v. Natural Resources Defense Council—that awards great deference to regulatory agency decisions.

Perhaps the ghost of Banquo will appear to reveal to Trump a great political irony known to economists as the law of unintended consequences—that diluting or disabling federal agency power may deliver more and even less desirable regulation at the state and local levels, or via the courts.

Oh my, double, double toil and trouble; fire burn and caldron bubble.