Obama opens the door to more state regulation of business

Under a policy of "preemption," the Bush administration sharply curtailed the rights of states to enforce stricter laws involving environment, health, mortgages, public safety and other issues. President Obama made clear this week he intends to reverse that policy, ordering federal agency heads to review existing regulations and change most of those that preempt state laws. He told the agencies that federal regulation should be used to preempt state law "only with full consideration of the legitimate prerogatives of the states and with a sufficient legal basis for preemption."

The Supreme Court made it clear the court did not agree with Bush's position on state's rights in Wyeth v. Levine. In a six to three vote, the court ruled in favor of a woman who lost her arm after an improper injection of an anti-nausea medication. The court said drugmakers could not rely solely on federal regulation to shield them from lawsuits brought under state consumer-protection laws.

Doug Kendall, president of the Constitutional Accountability Center, told The Washington Post, "It's environmental law, it's drug law, it's mortgage law, it's a whole host of areas where the Bush administration was really aggressive about using regulatory action to clear state and local laws that businesses and corporations didn't like."

The Chamber of Commerce, of course, blasted the move. Lisa Rickard, president of the U.S. Chamber of Commerce's Institute for Legal Reform told the Post, "Removing federal preemption forces employers to navigate a confusing, often contradictory patchwork quilt of 50 sets of laws and regulations."

But Obama made it clear he wants to protect the rights of states. In issuing his memorandum on preemption, Kenneth Baer, a spokesman for the Office of Management and Budget, said, "This memorandum brings clarity and orderliness back to this rule-making process and also ensures that preemption will be done only in cases where it's legally justifiable."

The change won't come quickly. It takes months to create or change a regulation. But you can find out what is being changed and even comment on the change at Regulations.gov. Here's the basic process for changing a federal regulation:

  • Federal agencies must publish notices of proposed rulemaking in the Federal Register so citizens can participate in the decision making process of the government. The publication notifies the public of a pending regulation change.
  • Any person or organization may comment on the regulation change directly, either in writing, or orally at a hearing. Many agencies also accept comments online or via e-mail. The comment period varies, but it usually is 30, 60, or 90 days. For each notice, the Federal Register gives detailed instructions on how, when, and where a viewpoint may be expressed. In addition, agencies must list the name and telephone number of a person to contact for further information.
  • When agencies publish final regulations in the Federal Register, they must address the significant issues raised in comments and discuss any changes made in response to them. Agencies also may use the notice and comment process to stay in contact with constituents and to solicit their views on various policy and program issues.

In most cases if a regulatory change becomes controversial, you'll hear about in in news stories or from an association or organization to which you belong. For example, a major change in health regulations would probably get noticed by the pharmaceutical companies or health advocacy groups. These groups would be sure that the word gets out to more than just the usual audience for the Federal Register.

Obama's promise to reverse preemption will probably take up most of his first administration, since there are well over 100,000 pages of regulations on the books according to the Federal Register.

Lita Epstein has written 25 books, including Reading Financial Reports for Dummies and the Complete Idiot's Guide to the Federal Reserve.

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