Over the arc of American political history the presidency has continually grown in power. While still constrained by the courts, and to a lesser degree by Congress, the presidency of the 21st century is much stronger than that of the 19th century. Much of that gain in power has been at the expense of Congress. But as Congress regularly created regulatory agencies in the executive branch, the president has also regularly enhanced his ability to influence the decisions coming out of these agencies.
So it was surprising to see that recently, in a little noticed action, the Biden Administration ceded some decision-making authority to the Department of Treasury and the Internal Revenue Service. The technical aspects of the decision are a bit obscure, so some explanation is necessary.
Since 1981, the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB) has had authority to review the regulations of executive branch agencies before they were issued. OIRA had two primary missions in conducting that review. First, to review the underlying costs and benefits of those regulatory initiatives. Second, to ensure that the regulation was in keeping with the policy preferences of the president. It is through this review that presidents often assert their control over agency regulations.
But since its earliest days, OIRA review of regulations had a few exceptions. One of the most prominent of these exceptions, affirmed by both the Reagan and Clinton administrations, was that most regulations from the IRS were allowed to escape OIRA review. Rationales given for this exemption included protecting the IRS from political influence and OIRA’s lack of expertise on tax policy. Some people, particularly the late Sen. Orrin Hatch, were concerned that the IRS was allowed to make policy without the oversight given other agencies in the executive branch.
In 2018, the Trump administration reversed this longstanding exemption. For the first time since regulatory review was housed in the Executive Office of the President (of which OMB is a part), IRS regulations would be subject to this review. Unlike many regulatory reforms issued under Trump, this one was not explicitly deregulatory; it was a more typical move to increase presidential influence over agency decisions. As such, some scholars (including me) expected the rule to endure a change in administrations.
I was wrong. To be sure, the expansion of OIRA review to the IRS did not get swept aside immediately, as did many of Trump’s regulatory reforms. But the action last week not only restored the previous exemption for IRS, it expanded it. The previous exemption had some exceptions, while the action last week exempts all IRS regulations from OIRA review. The Hunter Biden ‘controlled demolition’ is completeModi’s visit and India’s strategic decision point
Previous restrictions on OIRA review were much more superficial. In 1993, President Clinton restricted OIRA review to only significant regulations, but allowed OIRA to determine significance, ensuring that any regulation that might be of interest to the president and his aides was reviewed by the White House. In 2009, President Obama reversed some actions of President George W. Bush, including the right of OIRA to review guidance documents. But a subsequent memo from Obama OMB Director Peter Orszag made clear that key guidance documents were still subject to OIRA review.
This feels different. For the first time, the ability of the Executive Office of the President to review regulations from an executive branch agency has been curtailed, and it doesn’t seem as if any exceptions or wiggle room are coming. From a substantive perspective, it is not clear to me what the policy implications are besides weakening the cost-benefit analysis of tax regulations (which to be fair was never strong). But the memo is a clear signal that President Biden is willing to give some power back to executive branch agencies that none of his recent predecessors were.