Testimony Before the U.S. House of Representatives Committee on Oversight and Government Reform: 'Shining Light on the Federal Regulatory Process'

21 Pages Posted: 17 Jan 2019

Date Written: March 14, 2018


This testimony addresses federal agency use of “guidance,” a term that covers all general statements that an agency makes, short of issuing full-blown binding regulations, that advise the public on how the agency plans to exercise its discretion or interpret law. Part I of my testimony explains that guidance is a very important means for increasing the transparency of federal agencies, though the use of guidance can detract from transparency if it substitutes for notice-and-comment rulemaking. If one’s goal is to increase transparency, one must confront a difficult tradeoff: if you attempt to increase transparency by requiring an agency to make policy only through highly participatory processes like notice and comment (which eat up lots of agency resources), the agency may give up articulating any policy at all, which is actually the worst outcome for transparency. Part II examines the principal justification for why guidance can be issued without notice and comment: that guidance, unlike a full-blown regulation, is not binding. In particular, I consider a common critique of this justification, i.e., that guidance is practically coercive in real life. Guidance can have powerful coercive effects in certain identifiable circumstances, but these effects are far from universal, and even when they happen, they typically are not consciously intended by agency officials. Coercive effects can be mitigated by certain institutional reforms, though many of these reforms would require resources and managerial initiative that may be in short supply. Part III considers the distinct questions that arise when guidance is deregulatory in nature, such that its use may shut out the people protected by regulatory statutes from participating in agency initiatives that may harm them. Part IV examines the ways in which agencies, when using guidance instead of notice-and-comment rulemaking, can foster transparency and public participation in ways that approach what is done in full-blown rulemaking. I consider the costs and benefits of these practices, which vary widely between different agencies and policies, and I note how they may sometimes lead to unintended and perverse consequences that require our vigilance.

Overall, this is a subject fraught with tradeoffs between competing goods, variation between different regulatory areas, the risk of unintended consequences, and solutions that will work only with a commitment of scarce resources. Because of all this, improvements are most likely to be effective if pitched at a workable level of specificity. This counsels caution regarding any sweeping trans-agency legislation. It counsels in favor of seeking improvement at the level of an individual agency or program, either through oversight or possibly through legislation if there is sufficient groundwork laid through dialogue with the agency and experimentation at the agency.

Keywords: administrative law, administrative state, guidance, interpretive rules, policy statements, rulemaking, Administrative Procedure Act

JEL Classification: K32

Suggested Citation

Parrillo, Nicholas R., Testimony Before the U.S. House of Representatives Committee on Oversight and Government Reform: 'Shining Light on the Federal Regulatory Process' (March 14, 2018). Available at SSRN: https://ssrn.com/abstract=3311817 or http://dx.doi.org/10.2139/ssrn.3311817

Nicholas R. Parrillo (Contact Author)

Yale University - Law School ( email )

127 Wall St.
New Haven, CT 06511
United States

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