In late June, the Supreme Court overturned the landmark Chevron v. NRDC decision, which held that federal courts should defer to agency interpretations of unclear laws so long as the interpretations were "reasonable."

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This may seem like an abstract legal argument, but it has had very real consequences for our daily lives. Since the Chevron decision, the size and scope of federal government regulation has grown significantly. According to the National Association of Manufacturers (NAM), federal regulations cost the economy $3 trillion per year or around $277,000 per company.

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These costs have grown significantly since Chevron. Since 2012, for example, compliance costs have grown by nearly $500 billion.[1]The number of restrictions in the Federal Register has grown by 64 percent since Chevron.[2]

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This is especially important to manufacturers, who pay an average of $29,000 in regulatory compliance costs per employee. This is double the average of American firms.[3] Small manufacturers pay nearly quadruple the average, at $50,000 per employee.[4] According to a recent NAM survey, 94 percent of manufacturers agree that "increased regulatory burdens make it difficult to create jobs, invest in new equipment and expand facilities." Manufacturers told the survey that, without these costs, they would use about half of the money to invest in their companies, and about a third of it for employee initiatives—that is, for raises, promotions, and new jobs.[5]

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One might think that the end of Chevron would jeopardize the entire edifice of federal regulation. But this is not the case. Administrative challenges are subject to a six-year statute of limitations under the Administrative Procedures Act, and the federal government had substantial regulations in place before Chevron.[6] The Loper ruling that overturned Chevron makes pains to say that it does not overturn the dozens of cases that have cited Chevron.[7]

The Loper case does, however, open the entire Biden regulatory agenda to legal challenge upon implementation.[8]This includes nearly 100 regulations across 30 different agencies that NAM has identified as stifling growth and job creation.[9] Challenges to these regulations now have a much higher likelihood of success.

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Loper's higher standard of review will apply equally to deregulatory efforts as well as to new regulations. In all cases, the question before the courts will be whether the agency’s action is authorized by law, not whether it grows or shrinks the size of government.

This higher standard may provide greater stability to our economy, with fewer regulatory swings back and forth between Presidential administrations. As Justice Gorsuch has noted, Chevron allowed administrative agencies to "reverse its view 180 degrees…and still prevail in court." This has come to an end. This increased stability could itself be of great benefit to our economy.

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To learn more about the Balancing Act Project and join the conversation, emailinfo@balancingactproject.org

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