House Reconciliation Bill Takes Aim At Regulation, But Needs Fixes

Forbes

07-05-2025

Congress must navigate labyrinthine budget reconciliation rules to enact meaningful regulatory ... More reforms. getty
Congressional Republicans are moving one step closer to achieving their long-sought goal of overhauling the regulatory state. Tucked into the House Judiciary Committee's section of the GOP's reconciliation bill are two clever reforms. One creates automatic sunsets for federal rules and another incorporates a version of the REINS Act, which would require congressional approval for major regulations. These provisions attempt to strengthen legislative control over the administrative state. While the effort is admirable, one of the provisions could easily backfire, ironically making it harder to deregulate rather than easier.
Let's start with the positive. The sunset provision would mandate that any rule currently in effect automatically expires five years after the law's enactment, unless affirmatively reauthorized by Congress. Roughly 20 percent of all rules would be up for review annually, and the bill gives agencies flexibility to determine which ones to review each year. This is a smart, comprehensive approach. However, it is also a one-time review, meaning once a rule is reviewed it won't be designated for sunset review again.
Whether this reform survives the Senate's Byrd Rule, which bars provisions in reconciliation bills that are merely incidental to budgetary outcomes, is unclear. Like the REINS provision, the sunset review may need to be limited to rules with an impact on federal revenues or spending. Nevertheless, it's a commendable attempt to work within reconciliation's constraints.
The bill's more controversial provision is the inclusion of a modified REINS Act. Traditionally, REINS (which stands for 'Regulations from the Executive in Need of Scrutiny') would require that any major rule, typically defined as having an economic impact of $100 million or more, receive an up-or-down vote from Congress before taking effect. In this iteration, the bill ties congressional approval to any 'major rule that increases revenue.'
At first glance, that might seem like a clever workaround to meet the Byrd Rule's budgetary relevance requirement. But this approach has a serious flaw. As written, it could unintentionally subject nearly all significant deregulatory actions to congressional veto. That's because eliminating regulations spurs economic growth, which boosts federal income and corporate tax revenue indirectly.
As a result, almost any sizeable deregulatory action could plausibly be considered a 'major rule that increases revenue.' Instead of clearing the way for deregulation, this REINS provision might ironically tie it up in red tape.
Unless clarified, this structure threatens to invert the intended purpose of the REINS Act. Some past versions of REINS explicitly exempted deregulatory actions to avoid needlessly obstructing efforts to ease regulatory burdens.
Fortunately, the fix could be relatively simple. The bill's language could be narrowed to cover only major rules that 'directly' increase revenue, such as through a 'new fee, tax, levy, or surcharge,' etc. This change would ensure the provision targets regulations with an intended purpose to bring in new funds, not regulations that result in incidental revenue gains from economic expansion or regulatory streamlining.
Better yet, the REINS provision could maintain consideration of indirect revenue effects, but focus solely on rules that decrease revenues instead. This would be more in line with reconciliation's core fiscal objective of reducing the budget deficit, and it would likely mean Congress would have to approve most major regulations that add new regulatory burdens, since these will tend to indirectly reduce tax revenues as they reduce the size of the economy.
To be clear, House Republicans deserve credit for creativity here. Attempting major regulatory reform while navigating the procedural labyrinth of budget reconciliation is no easy feat. The House has put forward a serious, substantive effort. The reforms may not all survive the Senate parliamentarian's scrutiny, and even then moderate votes will still be needed to ensure passage. But if this moment yields even incremental progress, it could mark a significant shift in the balance of regulatory power.
Austin Pendleton smiles in a scene from the film 'Catch 22', 1970. Getty Images
There's a touch of Catch-22 irony in all of this. The procedural rules that were created to keep the budget process in check are making regulatory reform more complicated. It's enough to make even committed reformers question whether meaningful change is possible within such a tangled web of constraints. However, the House has shown that there is still room for policy innovation.
With some modest tweaks, the REINS provision could significantly move the needle in a better direction and become a truly effective tool for good governance. Meanwhile, the sunset provision would require a long-overdue review of outdated and unnecessary existing rules. For now, this bill represents a promising advance for regulatory reform. It is worthy of strong consideration.