State Governments Can Lead on Regulations if They Capitalize on Loper
Since 2016, the Code of Federal Regulations has contained a mountainous 180,000 pages of regulations. Old regulations are rarely reviewed even if the rules fail to achieve their goals or even create more problems than they solve. The result is an ever-growing thicket that slows our economic dynamism, hampers American competitiveness, and makes connecting people with promising careers harder. Fortunately, a recent Supreme Court decision provides both state and federal governments a once-in-a-lifetime opportunity to right their regulatory ship and ensure regulations are narrowly tailored to fixing real problems without encroaching on freedom.
Established in 1984, the Chevron doctrine required courts to defer to federal agency interpretations of ambiguous laws so long as those interpretations were reasonable. In its recent ruling in Loper Bright Enterprises v. Raimondo, the Supreme Court struck down Chevron and reaffirmed essential checks and balances necessary for a healthy economy and a functioning republic.
Loper sets a more reasonable balance for federal regulations, and states should ride its momentum to do the same. The Cato Institute reports that between 2000 and 2018, employment in newer companies as a share of total employment fell dramatically across various industries: by 60 percent in high-tech manufacturing, 56 percent in information, 53 percent in high-tech sectors, 38 percent in services and manufacturing, 33 percent in construction, and 13 percent in retail. The primary culprits are state and local barriers to new business formation, including complex permitting and licensing requirements and restrictive zoning laws. These regulatory obstacles discourage entrepreneurship, make housing more expensive, and inhibit economic growth.
State regulations are not uniform and often conflict with each other and with federal rules. This inconsistency creates uncertainty and increases compliance costs for businesses operating in multiple states. The sheer volume of state-level regulations is staggering, with an average of 135,000 regulatory restrictions per state and 416 million words across all state regulations. Even states perceived as business friendly, like Texas and Ohio, have more than 250,000 restrictions, joining California, New York, and Illinois.
States should proactively capitalize upon Loper’s momentum to mount an equal and opposite force against regulatory inertia. Bold state executives and legislatures should lead the charge to ensure that regulators offer the least-burdensome approach to reaching the law’s goals and that bureaucrats do not seek to expand their own power merely because the legislature failed to anticipate every nuance of the statutory text.
First, state legislatures should echo Loper by limiting deference. Thirteen states already prohibit deference or require de novo review when citizens challenge regulations in court. Indiana, Nebraska, and Idaho passed such laws just this year. The remaining 37 states should ensure courts can decide what the law says and that agencies do not implement the law contrary to the legislature’s intent.
Second, states should structurally reform their Administrative Procedures Acts (APAs) to curtail existing regulations. Automatic rule expiration, or sunsets, ensure that the regulatory environment remains dynamic and responsive to the current economy. Additionally, states should make it significantly easier to repeal regulations rather than to enact them. If a rule is working, it can remain, but when regulators expect a regulation to generate a positive impact and that impact fails to materialize, the rule should be quickly discarded.
Finally, bold Governors and legislative leaders should continue to lead the charge against onerous regulations. Iowa’s Kim Reynolds, Montana’s Greg Gianforte, and Virginia’s Glen Youngkin are examples of governors wielding executive power and partnering with their legislatures to limit regulatory overreach. States must seize the opportunity presented by the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo to overhaul their regulatory frameworks. By limiting deference to agency interpretations, implementing structural reforms to Administrative Procedures Acts, and ensuring legislative oversight, states can dismantle the patchwork of burdensome regulations that stifle economic growth and innovation. Proactive measures at the state level will not only restore essential checks and balances but also foster a more dynamic and competitive business environment. Momentum from Loper should galvanize state lawmakers and executives to lead the charge in regulatory reform, creating a more prosperous future for all.