The Department of Government Efficiency (DOGE), spearheaded by Elon Musk and Vivek Ramaswamy, aims to streamline federal operations and reduce bureaucratic inefficiencies. This initiative reflects a longstanding Republican commitment to enhancing governmental efficiency through various strategies, including cost-benefit analyses, regulatory budgets, and other tools typically involving the White House Office of Management and Budget. Historically, such efforts have faced challenges, particularly when subsequent administrations with differing priorities assume power.
Individual agencies also have spoken of regulatory sandboxes or general deregulatory measures, which, despite their initial success, have often been reversed or undermined by succeeding administrations. This cyclical pattern underscores the need for more robust mechanisms to ensure the longevity of deregulatory initiatives.
One promising approach is the implementation of regulatory contracts, legally binding agreements between regulatory agencies and private entities that commit the government to specific regulatory stances. The precedent for such contracts was established in the Supreme Court case United States v. Winstar Corp. (1996), where the Court held that the government had breached its contractual obligations by altering regulatory agreements with financial institutions. A financial institution receiver promised light touch regulation as part of what was essentially a bank resolution, then later tried to back out of the commitment as it adopted tougher rules. This decision affirmed that the government could be stopped from reneging on its regulatory commitments.
Building on this precedent, regulatory contracts can serve as a tool to solidify deregulatory measures, making them more resistant to reversal by future administrations. For instance, during the previous administration, I proposed a regulatory contract framework for the Consumer Financial Protection Bureau (CFPB) to ensure that deregulatory actions would persist beyond the tenure of any single director. By formalizing agreements with regulated entities, the CFPB could provide assurances that certain regulatory positions would remain stable, thereby fostering a more predictable regulatory environment.
This strategy is not limited to financial regulatory agencies. It holds potential across various sectors, including environmental regulation by the Environmental Protection Agency (EPA), nuclear oversight by the Nuclear Regulatory Commission, and even space exploration contracts managed by NASA. For example, NASA's agreements with private companies like SpaceX could incorporate regulatory contracts to safeguard against potential policy shifts that might threaten ongoing projects. Such contracts would provide legal recourse against attempts to unilaterally alter or void agreements, thereby protecting investments and ensuring continuity.
I hesitate to mention this example, because critics will claim I’m making this about Elon’s personal interests. But it is a textbook example of potential abuse of power to target political opponents. Given the recent political climate, where certain lawmakers expressed intentions to reconsider contracts with companies like SpaceX if the Democrats had won the White House, the adoption of regulatory contracts becomes even more pertinent. By embedding deregulatory measures within legally binding agreements, the DOGE commission can create a more resilient framework that withstands political fluctuations.
It would be a gross abuse of power for the federal government to approve contracts with SpaceX, which have saved NASA billions, only to leverage some random new OSHA or EPA interpretation to back out of the contracts to appease political supporters who don’t like Elon’s personality in a future Democrat administration. Regulatory contracts fix this problem.
Regulatory contracts binding on multiple agencies at the same time, or indeed binding government wide, has never been tried before. Yet it has supportive precedent in law and is just the sort of outside the box thinking the DOGE Commission was designed to foster. To consider one more example, it is likely that reasonable exemptive action from the SEC and CFTC to promote cryptocurrency could be met by a “chokepoint 3.0” among bank regulators to deny cryptocurrency projects a bank account, in a future administration, that makes the good adaptive crypto regulatory work irrelevant.
Regulatory contracts that include multiple regulators and government entities can prevent this future attack vector. Federal regulatory agencies already enter into agreements with each other called MOUs or memorandums of understanding. Why not make the regulated parties who have felt the boot of government party to agreements of this kind?
To advance this initiative, it is advisable for the DOGE commission to conduct a comprehensive study on the application of regulatory contracts across federal agencies. Seeking legal opinions from the Department of Justice's Office of Legal Counsel would provide authoritative guidance on the implementation of such contracts. Standardized templates for regulatory contracts could facilitate their adoption across various departments and inter-agency commitment to joining these contracts can be encouraged.
While past efforts to enhance government efficiency have faced reversals, the strategic use of regulatory contracts offers a viable pathway to enshrine deregulatory measures within the legal framework. No administration lasts forever, but regulatory contracts backed up by the pro-contract and agency-skeptical Supreme Court can ensure that the impact of DOGE’s reforms last well into many future Democrat administrations for a multitude of election cycles to come.
J.W. Verret is an Associate Professor, George Mason University Antonin Scalia Law School.
