Last month, Senator Ted Cruz introduced the SANDBOX Act, his controversial bill to subsidize the tech industry through systematic deregulation of AI. The bill purports to create something called a “regulatory sandbox.” The reality, though, is that it empowers an obscure White House bureau—the Office of Science and Technology Policy (OSTP)—to dole out nearly limitless exemptions from existing rules to individual businesses with little transparency, accountability, or oversight.
One need not be a policy wonk to recognize that the Act’s basic paradigm of using deregulation as a form of dispensing political favors is prone to abuse and antithetical to the rule of law. Yet Cruz’s bill is hardly on the vanguard. Rather, it follows in the well-trod footsteps of the current Trump administration, which has made the innovation of individualized exceptions and waivers one of the signature features of its governing approach.
Early in his administration, for instance, Trump made audacious use of a provision in the Clean Air Act that allows the president to temporarily exempt facilities from complying with the law’s toxic air pollution standards if technology for meeting those standards is not available and if doing so advances national security interests. Instead of passively receiving requests for these exemptions, as the law appears to contemplate, Trump officials actively solicited them, even going so far as to set up an email address (airaction@epa.gov) for industrial facilities to use to make the requests.
Even more brazenly, President Trump has started exempting individual firms from his (likely illegal) tariffs in exchange for political favors. The most prominent example came a few weeks ago when he temporarily exempted the pharmaceutical firm Pfizer from his 100-percent tariff on imported drugs. In return, the company agreed to charge state Medicaid programs lower prices for certain of their products.
On top of all of this, the Trump administration has used the promise of suspending enforcement actions against a wide variety of actors—including, most notably, universities and law firms—to secure greater control over them.
Rather than representing an entirely new phenomenon, however, this basic scheme of issuing individualized exemptions and waivers from otherwise generally applicable requirements should be seen as just the latest evolution in presidential control of the administrative state. After all, deregulation regimes based on political considerations emanating from the White House have become one of the defining features of the modern presidency—as best exemplified by the centralized regulatory review process conducted out of the Office of Information and Regulatory Affairs (OIRA). From this perspective, the “innovation” of the SANDBOX Act, the Clean Air Act exemptions, and the tariff waivers might best be characterized as OIRA 2.0.
The OIRA 2.0 model shares several salient attributes with the centralized regulatory review process. Like its predecessor, its primary function is to deliver regulatory relief to well-connected corporate interests. OIRA 2.0 also operates with little in the way of transparency, and its design affords no meaningful role for other stakeholders to participate. The fact that it is institutionally housed in the White House—albeit in other offices such as OSTP or the Office of the U.S. Trade Representative (USTR), rather than OIRA—all but ensures that naked politics, instead of fidelity to the law or sound policy analysis, ultimately drives decision-making.
The main difference between the models is that OIRA 2.0’s regulatory relief program is targeted at individual firms, whereas with OIRA 1.0 the target is entire industries (or, in some cases, discrete segments of particular industries, such as firms with relatively few employees).
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It might be tempting to dismiss the phenomenon of OIRA 2.0 as an aberration—a transitory artifact of Trumpism—rather than a real structural shift in presidential politics. After all, OIRA 2.0 is highly transactional in nature and bears an uncanny resemblance to the kind of organized crime-like tactics that Trump has long embraced in both his public and private life.
But changes in the broader legal and political landscape have produced a hospitable environment in which something like OIRA 2.0 would likely have taken hold even in the absence of a Trump presidency. The continuing ascendancy of the Unitary Executive Theory is especially noteworthy in this regard. Trump’s novel claims of authority to dispense exemptions and waivers to individual businesses are a logical step in the Unitary Executive Theory’s inexorable march toward the extreme of exhaustive presidential control over all aspects of the executive branch.
In addition, the conservative approach to regulatory policy has markedly shifted in recent years, increasing the need for something like OIRA 2.0. Part of this shift can be seen in the Right’s gradual abandonment of regulatory cost-benefit analysis, which served as a key pillar undergirding OIRA 1.0. Somewhat ironically, advances in the methodology had begun to undermine its ability to consistently provide support for deregulatory policies—indeed, in many cases, cost-benefit analysis justified stronger regulations. The resulting marginalization of OIRA 1.0 as a deregulatory tool for conservative presidential administrations in turn has helped clear the path for OIRA 2.0.
More broadly, though, the goal of conservative regulatory policy has changed. Whereas past conservative administrations sought to advance their anti-regulatory agenda either through strategic inaction or by locking in regulatory relief in the form of weak rules that imposed minimal inconvenience on affected industry, the focus now is on wholesale destruction—that is, to repeal rules from past Democratic presidential administrations in their entirety. (This shift is exemplified by the Right’s increasing embrace of “regulatory budgeting” regimes in lieu of cost-benefit analysis.) But, in pursuing this new goal, conservative administrations are now encountering for the first time a problem that has long been well understood by those on the Left: The rulemaking process is incredibly slow and rife with uncertainty. And this is particularly the case for bold actions that push the legal envelope, such as straight repeals of existing rules.
OIRA 2.0 thus offers conservative administrations a convenient pathway for achieving almost immediately the functional equivalent of a full regulatory repeal—albeit for a select group of affected firms. As an added bonus, administrations can dispense waivers from regulations, thereby mitigating their effects, while rulemaking actions to officially strike those regulations from the books wend their way through the process.
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If OIRA 2.0 represents a new paradigm for presidential control of the regulatory state, its advent also appears to herald important changes around the political economy of presidential power, much as the appearance of OIRA 1.0 did in 1980. Notably, its distinguishing feature—regulatory relief on a firm-by-firm basis—raises corruption concerns that are conceptually different from those associated with its predecessor.
The primary risk of the OIRA 1.0 model was that it provided a powerful forum for political corruption. Administrations could take advantage of the weak transparency and accountability measures to substitute political considerations for lawful policy ones in regulatory decision-making. This dynamic was perhaps best exemplified by the Obama administration’s abrupt decision in September 2011 to abandon a rulemaking that would have tightened an air pollution standard for ozone. Leaked documents and whistleblower accounts later revealed that, during a meeting with OIRA, industry groups had threatened to use the action to jeopardize the Obama administration’s prospects for reelection in the 2012 campaign.
While the risk of such political corruption still exists under OIRA 2.0, it also introduces distinct concerns that presidents might begin to use this as tool for personal enrichment as well. For example, a business might donate a substantial amount of money to support a presidential library fund with the expectation that its request for a regulatory waiver will be granted later.
Perhaps even more interestingly, the growing prevalence of OIRA 2.0 could have a discernible impact on the incentives and behavior of regulated industry itself. Given that OIRA 1.0 functioned to provide regulatory relief on an industry-wide basis, it tended to encourage greater solidarity among dominant firms. Indeed, data tracking lobbying meetings at OIRA show that representatives from industry trade groups—an institutional mechanism for building and maintaining intra-industrial cohesion—were among the most influential actors during the regulatory review process.
In contrast, the OIRA 2.0 model could potentially weaken industrial solidarity, at least to the extent that a given industry is not marked by a high degree of consolidation. It is unclear what, if any, role trade associations would play in this regime. Perhaps they could redefine themselves as a kind of “concierge service” to support individual firms in seeking waivers or exceptions. Alternatively, OIRA 2.0 might actively fuel discord within particular industries, if waivers and exceptions come to be seen as a form of competitive advantage.
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The emergence of OIRA 2.0 provides yet another warning about the dire need to impose significant institutional constraints on presidential power. This will necessarily involve a diverse suite of reforms that aim to empower various sites of countervailing forces. Rebuilding a Congress that wields policymaking primacy and an assertive commitment to oversight of the executive branch will, of course, be essential. It will also require carefully decentralizing power within the executive branch away from the White House and addressing power disparities in our society more broadly. As it happens, the issue of regulatory exemptions and waivers illustrates why these reform strategies are so important.
For decades, Congress has incorporated mechanisms for issuing waivers or exemptions to generally applicable regulatory standards in the authorizing statutes for agencies, such as the Environmental Protection Agency, the Occupational Safety and Health Administration, and the Federal Railroad Administration. These mechanisms are distinguishable from OIRA 2.0 in important ways that help mitigate the risk of abuse by presidents with authoritarian pretensions. The discretion for granting these waivers or exemptions is committed to the agency heads, and not the president. By design, then, their operation serves to decentralize power away from the president (at least absent a maximalist vision of Unitary Executive Theory).
In addition, these mechanisms establish either informal or formal transparency provisions and opportunities for public notice and comment. Such measures are essential for preventing the types of political and personal corruption identified with OIRA 2.0 above. While the public participation opportunities by themselves cannot fix the problem of structural power disparities, their faithful implementation can at least alleviate their consequences by ensuring that the granting of waivers and exemptions do not serve to reinforce those disparities.
Ultimately, time will tell whether OIRA 2.0 has any real staying power outside of a Trump administration. Still, its emergence is indicative of shifting power dynamics within and around the presidency. More importantly, it offers crucial lessons for how to rebuild an administrative state that is more resistant to the threat of future authoritarian presidents.
