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In a world of salacious political headlines and shifting cultural winds, regulatory policy still mostly flies under the radar of both policy wonks and the public at large. However, an upcoming Supreme Court opinion seems to be a rare exception to the regulatory state’s generally stealthy nature.
A long-standing legal doctrine known as “Chevron deference” is expected to change following the Supreme Court’s upcoming decision in the case of Loper Bright Enterprises v. Raimondo. The decision in this case, and the subsequent actions of policymakers, has the potential to shift the balance of power from the executive to the judicial and legislative branches and presents an opportunity for those wishing to challenge the growth of the administrative state.
Chevron and the Regulatory State
Chevron deference, a principle of administrative law [ [link removed] ] introduced by Chevron v. Natural Resources Defense Council in 1984, “compels federal courts to defer to a regulatory agency's interpretation of an ambiguous or unclear statute that Congress delegated to the agency to administer.” Statutes, which is to say the laws enacted by Congress, are the source of regulations, in the sense that they authorize regulatory agencies to create new regulations. Sometimes a new regulation is challenged in court if a plaintiff believes that the new rule goes beyond the scope of the mandate created by the authorizing statute. Chevron deference essentially means that ties go to the regulator: If an authorizing statute is ambiguous and the agency’s actions are reasonable, the court must defer to the agency’s interpretation [ [link removed] ] of the statute.
Loper Bright has the potential to alter the regulatory landscape that was created by this doctrine. This case, in which a group of commercial fishermen is suing the National Marine Fisheries Service for imposing a costly at-sea monitoring program without clear statutory authorization, poses a direct challenge to Chevron deference. Oral arguments were heard in early January, and while the Supreme Court’s opinion is still pending, most experts expect Chevron deference to be narrowed down, if not scuttled altogether [ [link removed] ].
Where does that leave the regulatory state? For existing regulations, even a complete dismantling of Chevron deference probably won’t lead to massive, immediate change. Apart from the specific regulations being challenged in Loper Bright, any regulation that relied on Chevron deference to uphold an agency’s interpretation of authorizing statutes would likely remain in effect, until other legal challenges work their way through the court system and potentially force changes to those regulations too. It will be a long time before any changes to Chevron deference materially affect existing regulations.
New regulations, on the other hand, might face additional scrutiny, as legal challengers will no longer have to worry about losing because of Chevron deference. Nonetheless, we can expect that, as always, regulators will continue to create new regulations, and in time we might see some of those new regulations overturned because Chevron deference was changed in Loper Bright.
So we will still have an enormous stockpile of old regulations, and regulators will continue making new ones. I would guess that regulators won’t really act differently simply because Chevron is no longer a thing; they’ll leave it up to the public to challenge them in court rather than avoid creating a new regulation they want to make. It’s relatively low-cost for an agency to go to court to defend its actions, whereas it’s costly for private-sector plaintiffs to challenge those actions. I expect that current regulatory practices will remain almost entirely intact, and regulatory process reform will still be needed.
For would-be regulatory reformers, the list of potential process reforms is very long and will remain so even after Loper Bright. Some of these reform options would yield tremendous economic benefits and are also politically feasible. These include addressing the problem of existing regulatory accumulation, improving the quality of new regulations and changing how courts approach disputes over regulations.
Slowing or Reversing Regulatory Accumulation
Regulations have consistently accumulated for decades, slowing economic growth by nearly 1 percentage point [ [link removed] ] per year since the late 1970s. To slow this regulatory accumulation, and perhaps even reverse it, Congress should set specific targets for regulatory reduction, implement “one in, X out” regulatory budgets, and attach sunset provisions to any new regulations.
Targeted Red Tape Reduction Efforts
As modeled in legislation by Ohio [ [link removed] ], Congress could create a regulatory budget that would require agencies to reduce regulations by some predetermined percentage (e.g., 30% over a three-year period). These requirements typically have three components: (1) Create a baseline measurement of regulatory impact for each agency. Usually, at the state level, this is accomplished by counting regulatory restrictions (i.e., the prohibitions and obligations created by regulations), but at the federal level, regulatory impact would probably be measured in terms of money. (2) Set an initial reduction target, such as 30%. (3) Apply strong oversight.
This targeted approach has been used to great effect, usually by executive order, in some states and Canadian provinces. Recent research shows [ [link removed] ] that when British Columbia cut nearly 40% of its old regulations, its economic growth rate increased by more than 1 percentage point. These targeted red tape reduction efforts are typically paired with a “one -in, X out” regulatory budget.
One In, X Out
Another approach to reducing red tape is to establish a “one in, X out” regulatory budget (where X typically equals one, two or sometimes three) or a pay-as-you-go regulatory budget. The idea here is that any new regulation’s cost must be offset by modifying existing regulations such that a particular goal is achieved. Different versions of this approach have been used in various U.S. states, Canada and other jurisdictions. The intended goal could entail offsetting the new regulatory restrictions by eliminating some old restrictions. Or everything could be monetized, so that new regulatory costs are offset by eliminating existing regulatory costs.
President Trump’s Executive Order 13771 [ [link removed] ], for example, required the cost of any new regulation to be at least offset by modifying or eliminating two existing regulations. In recent years, several bills have been proposed that follow a similar logic (see examples here [ [link removed] ], here [ [link removed] ] and here [ [link removed] ]), but they have stalled in the legislative process.
When coupled with a targeted red tape reduction effort, a “one in, X out” regulatory budget would not only help reduce the overall regulatory volume, but also lock in any successes so that future regulatory accumulation does not erode those gains.
Sunset Provisions
Finally, implementing sunset provisions can help to slow or reverse the process of regulatory accumulation. A sunset provision is an expiration date built into regulations whereby they automatically expire after a certain amount of time has elapsed. While sunset provisions are well known in legislation, they remain relatively rare in regulation. But that could change if Congress passed a law requiring agencies to attach sunset provisions to new regulations.
Such legislation has been recently considered, for timelines ranging from three years [ [link removed] ] to 10 years [ [link removed] ], but these proposals never made it out of committee. Regulations with sunset provisions would have to be reissued or reauthorized in some way after they expire. The power to reauthorize rules could be vested in the regulating agency itself or in Congress, and the authorizing statute would need to specify the criteria that should be evaluated when reviewing regulations for potential reauthorization.
Improving the Quality of New Regulations
Too many new regulations do not solve real-world problems at a reasonable cost. Even worse, too many regulations are created without even knowing what their potential costs or benefits might be. We need better ex ante assessment of new regulations, and better use of that assessment in deciding whether and how to regulate.
Right now, the main reason any agency performs an ex ante regulatory impact analysis is Executive Order 12866, a 1993 executive order that explicitly requires regulators to evaluate the costs and benefits of a small subset of potential regulations, among other things. However, Congress could require that more new regulations undergo more thorough analysis, as was proposed in the SMART Act [ [link removed] ] of 2022.
Furthermore, Congress could make those analyses more central to agency decisions on whether and how to regulate. Under the realistic assumption that regulators can’t accurately predict all outcomes, Congress could force agencies to build some plans for retrospective review while crafting a new regulation. For example, the Regulatory Accountability Act [ [link removed] ] would have required federal agencies to consider “whether existing laws or rules could be amended or rescinded” to address whatever problem the new rule was intended to solve. Ideally, agencies would develop and implement data-driven plans for testing the efficacy of new rules at regular intervals following their creation, and update those rules based on the results of those tests.
Modifying the Scope of Judicial Review
Even in a world without Chevron deference, agencies still have the advantage in court. They can spend years preparing legal and economic justifications for new regulations, and if the private sector challenges one, regulators, unlike businesses, don’t have to worry about billable hours at white-shoe law firms because they already employ small armies of regulatory attorneys. And on top of that, other forms of agency deference will presumably still exist.
Auer [ [link removed] ] deference [ [link removed] ], for example, applies to an agency's interpretation of its own regulations. Courts will defer to the agency unless the interpretation is plainly erroneous or inconsistent with the text of the regulation. The rationale behind this deference is that the agency, as the regulation writer, is best positioned to understand its intended meaning.
Further, Skidmore [ [link removed] ] deference [ [link removed] ] is used when an agency's interpretation of a statute isn't entitled to Chevron deference, such as when an agency is crafting documents that are not regulations per se (e.g., interpretive rules, policy statements or agency manuals) but that still carry weight. Courts will defer to the agency's interpretation based on the thoroughness of its consideration, the validity of its reasoning, its consistency with earlier pronouncements and other persuasive factors. This deference is less formal and gives courts more discretion than Chevron deference.
There’s a good chance that Auer deference will be challenged at the Supreme Court—it narrowly withstood a challenge [ [link removed] ] in 2019—but we don’t know when. Meanwhile, Congress could expand the scope of judicial review of regulators’ actions by explicitly authorizing judicial review on questions of law that would normally give Auer or Skidmore deference to agencies.
A bill introduced in 2021, the Separation of Powers Restoration Act [ [link removed] ], offers a good example of such congressional action, though Congress would likely need to modify the bill to reflect Loper Bright. This legislation was originally designed to take on agency deference in general, making courts decide de novo, and without giving deference to the agency's interpretation, all relevant questions of law. This would include the interpretation of constitutional and statutory provisions, which is currently covered by Chevron deference, and of rules made by agencies, which is covered by Auer deference. If Auer and Skidmore still stand after Loper Bright, or if any parts of Chevron remain, Congress might have an opportunity to act.
In a post-Loper Bright world, legal challenges to agency regulations might become more frequent and more important. As I already mentioned, agencies have no problem absorbing the costs of court challenges. Businesses, on the other hand, have to weigh the legal costs of a challenge against the potential gains. When an agency loses a case in a lower court, the agency will almost certainly appeal when it’s such a low-cost option for them. Congress could act to change the rules so that regulators bear more of the court and legal costs, potentially including attorney fees [ [link removed] ] of the challenging party if the challenger prevails in court.
Limiting or eliminating Chevron deference would be a step toward regulatory reform, but continued scrutiny of rulemaking practices will still be necessary. Agencies will continue to pass new regulations, and absent serious improvements in process and oversight, existing regulations are likely to remain intact until and unless they’re challenged in court. But regardless of the outcome of Loper Bright, Congress can and should take steps to reduce regulatory accumulation and improve the quality of new regulations. These reforms will yield great economic benefits for the American people.

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