White House Regulation Shift Is a Political Bet

September 12, 2011

Wall Street Journal

LAURA MECKLER And CAROL E. LEE

Cass Sunstein, the White House regulatory chief, had long argued for restraint in the growth of federal rules. As 2011 opened, he found a powerful, new ally inside the White House.

Bill Daley, a veteran of the top circles in business and politics, had been hired by President Barack Obama as chief of staff after the Democrats' disastrous midterm elections. In the months that followed, Messrs. Daley and Sunstein helped reshape the administration's regulatory posture.

The most prominent result came Sept. 2, when Mr. Obama surprised environmental activists by scrapping a rule that would have toughened air-quality standards, and which business groups had said would cost jobs. But the push to give business arguments greater consideration has been seen in other regulatory moves.

Republicans and some business groups say Mr. Obama must jettison a host of other proposed regulations to reverse what they argue is an antibusiness perspective. Brad Dayspring, a spokesman for House Majority Leader Eric Cantor (R., Va.), said Sunday that Republicans welcomed the decision on air-quality standards but can't yet say that administration posture has fundamentally changed. "It's a welcome sign but there's still more to go if there's really a change," he said. "If he could do a few others like that, that would set us in the right direction."

Still, the U.S. Chamber of Commerce, a lobby group for business, has noted a change at the White House. Bill Kovacs, a senior vice president at the Chamber, said Mr. Sunstein is far more visible than during the first two years of the administration. And he said Mr. Daley had "changed the climate" at the White House.

"For the first two years, when there was a concern raised about regulation, the sense was they're just moving forward," he said. "Now, at least they're listening."

Political imperatives have influenced the new approach. Mr. Obama's political team helped spur the change, aiming to reposition the president in the political center and win back independent voters who deserted Democrats in 2010.

The political bet is that the White House can strike a balance that defuses GOP attacks while keeping core supporters in the fold. The risk is that the president fails to satisfy business groups, while alienating his liberal base.

Mr. Sunstein, who has been friends with Mr. Obama since their days on the University of Chicago law-school faculty, has long written about the need to weigh costs more prominently in determining whether regulations are worthwhile. As an academic, he spoke of the risks of over-regulation. Liberals were concerned about his selection to head the White House Office of Information and Regulatory Affairs, which reviews regulations proposed by federal agencies.

"Unless the law requires otherwise, we are going to give very serious consideration to costs and benefits and choose the least burdensome approach," Mr. Sunstein said in an interview.

He has gotten backing from Mr. Daley, the former J.P. Morgan Chase executive who was brought into the White House partly to improve frayed relations with the business community. Before taking the job, Mr. Daley was co-chairman of a Chamber of Commerce committee on financial regulation, arguing against consumer protections that became part of the final Dodd-Frank law. In June, he told a meeting of the National Association of Manufacturers that some regulatory hurdles are "hard to defend."

Soon after Mr. Daley came on board, the president issued an executive order that had been debated internally for months and which directed cabinet agencies to avoid excessive regulations. Based on that directive, Mr. Sunstein launched a review of existing rules and ultimately proposed killing hundreds of them. In July, Mr. Daley directed cabinet secretaries to consider the impact on jobs when proposing new regulations.

On Aug. 16, Mr. Daley met with environmental, public-health and other groups to discuss the Environmental Protection Agency rule that would tighten air-quality standards. At one point he lamented that the issue couldn't be worked out by consensus with industry, as the White House did with the auto industry on fuel-economy rules.

When the American Lung Association mentioned a poll showing public support for EPA standards, Mr. Daley appeared uninterested, according to one person in the room. "He literally cut the person off and said 'I don't give a [expletive] about the poll,' " this person said. A senior White House official said Mr. Daley wanted to hear arguments about the substance of the regulation and its impact, not political arguments, and he was uninterested in all polls on this topic.

The same day, Mr. Daley met with industry groups, who gave the White House a map showing counties that would be out of compliance with the Clean Air Act if the stricter standards were put in place. The map showed that the rule would affect areas in the politically important 2012 election states of Florida, Pennsylvania, Virginia and Ohio.

The White House is pressing forward on other regulations, including a disputed rule on mercury emissions from power plants, as well as rules implementing the Obama-backed health-care and financial-regulatory laws. The White House considered but ultimately rejected suggestions for a partial moratorium on new regulations.

Mr. Obama explained his effort at balance in his address to Congress on Thursday. Some rules put an "unnecessary burden" on businesses and are unjustified, he said. "But what we can't do, what I will not do, is let this economic crisis be used as an excuse to wipe out'' rules that he called "basic protections" for Americans.

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