Why Presidential Elections Rarely Lead to Drastic Regulatory Changes

When a new president takes office, headlines often trumpet sweeping regulatory changes ahead. Yet, history shows these predictions rarely match reality. From Obama's promised financial reforms to Trump's deregulation agenda, the pace and scope of change typically falls short of expectations.

The Complex Web of Presidential Power

Presidents face significant challenges when trying to implement broad regulatory reforms. Many regulations are entrenched in Congressional laws, which can only be changed by passing new legislation. Furthermore, the regulatory amendment process is intricate and drawn out, requiring drafting, public input, and multiple reviews, often taking years to complete. Legal scrutiny adds another layer of complexity, as significant regulatory changes frequently encounter judicial challenges that can delay or block implementation.

Case Study: Environmental Regulations 

Consider Trump's attempt to roll back Obama-era fuel efficiency standards. Despite executive orders and agency directives, the process took nearly his entire term, and faced multiple court challenges. Similarly, legal battles and administrative procedures have slowed Biden's efforts to reverse Trump's environmental policies

Case Study: Financial Regulation Post-2008

The Dodd-Frank Wall Street Reform Act of 2010 provides another telling example. Despite the campaign promise to "dismantle" Dodd-Frank, only modest changes occurred through the 2018 Economic Growth Act. Key provisions like the Volcker Rule and stress testing requirements remained largely intact. Even with unified Republican control of Congress and the presidency, wholesale regulatory reversal proved impossible. The experience demonstrates how established financial regulations, especially those with broad institutional support and complex implementation frameworks, resist dramatic change even under determined opposition.

The Limits of Executive Authority

The president's power over independent regulatory bodies is also more limited than generally perceived. While presidential appointments influence executive agencies, they have less sway over independent bodies like the Federal Reserve or FCC. Commissioners in these agencies serve staggered terms, preventing immediate leadership or policy direction shifts.

Checks and Balances in Action

Other government branches are pivotal in balancing the president's regulatory ambitions. Congress can nullify new regulations using the Congressional Review Act, especially early in the administration, and can impact regulatory outcomes via budget control. The judiciary also plays a crucial role by interpreting regulations and overturning those found to be unreasonable.

Economic Forces vs. Regulatory Changes

Economic conditions often influence businesses and financial sectors more than regulatory shifts by a new administration. Interest rates, inflation, and economic growth typically substantially affect business outcomes. Moreover, international economic trends and trade relations can overshadow domestic regulatory changes.

The Numbers Tell the Story 

State Level

Each year, state legislatures across the United States propose an estimated 120,000 bills. Approximately 20,000 to 30,000 of these bills become law annually. States collectively have over 1,000 agencies and departments, each contributing to the regulatory environment.

Federal Level

During each two-year session of Congress, approximately 10,000 to 12,000 bills and resolutions are introduced. On average, only about 300 to 500 of these bills become law. Federal agencies issue around 3,000 to 4,000 final rules each year.

The Reality of Regulatory Change

Regulatory change is usually gradual and incremental, even with a presidential shift in priorities. Bureaucratic inertia from career officials can slow the implementation of new directives. Agencies often maintain consistency due to institutional memory and practices that span administrations. Stakeholder influence further tempers abrupt changes as industry groups and NGOs actively engage in the regulatory process through lobbying and public feedback.

What This Means for You

Understanding the true pace of regulatory change is crucial for business planning and investment decisions. Rather than making dramatic shifts based on election outcomes, consider:

• Monitoring specific regulatory proposals in your industry using tools like Canarie
• Engaging in public comment periods for proposed rules
• Maintaining compliance with existing regulations while staying informed about potential changes

The regulatory landscape evolves more like a slow-moving river than a sudden tidal wave. By recognizing this reality, you can make more informed decisions and avoid overcompensating based on political rhetoric about regulatory change.