Proposed Law Caps Federal Agency Spending on New Regulations, Requires Congressional Sign-Off for Net Cost Increases

The REG Budgeting Act of 2025 is essentially a new fiscal leash for federal agencies, designed to control how much new financial burden they can put on businesses and individuals each year through regulation. Think of it as a hard spending limit for red tape.

The Regulatory Credit Card Limit

This bill tasks the Director of the Office of Management and Budget (OMB) with setting an annual cap on the total "unfunded regulatory costs" across the entire government. By September 30th every year, the OMB Director must set a total limit and then individual limits for each agency. The crucial detail is this: if the proposed limits allow agencies to impose a net increase in these new costs, that limit doesn’t become official until Congress approves it via a joint resolution (SEC. 2). If Congress bogs down and doesn’t approve the increase, the default limit kicks in, meaning agencies get a zero-dollar budget for new, unfunded costs that year. For the average person, this means that rules intended to improve safety, the environment, or consumer protection—rules that often require businesses to spend money on compliance—will now face a strict, centrally managed budget.

The Gatekeeper and the Paper Trail

Under this system, the OMB Director becomes the ultimate gatekeeper for new regulations. Agencies can’t finalize a rule that adds unfunded costs until the OMB has submitted its reports to Congress. If an agency wants to propose a rule that would push them over their annual limit, they have to notify the Director before finalizing it, explaining why they need to exceed the cap and what less-costly alternatives they considered (SEC. 2). The Director then has to sign off on the overage and report the justification to Congress within seven days. This process creates a significant administrative hurdle for agencies like the EPA or OSHA, who might be trying to implement time-sensitive health or safety rules. It’s a massive new layer of paperwork and review that could slow down everything.

Real-World Friction Points

Who feels this change? First, the federal agencies themselves, which will spend significant time justifying costs instead of writing rules. Second, the public: imagine the FDA wants to mandate a new, costly safety requirement for certain imported foods following a contamination scare. If that rule pushes the FDA over its cost limit, it gets held up until the OMB Director and possibly Congress signs off. This mechanism could lead to vital public protections being delayed or blocked simply because they cost too much in a given fiscal year. The bill does include an exception for emergencies or trade agreements via Presidential Executive Order, but that’s a high bar to clear for most routine, yet important, regulations.

The Judicial Backstop

One provision that stands out is the allowance for judicial review (SEC. 2). If an agency finalizes a rule in violation of these new cost control procedures—say, they didn't get the required OMB sign-off before exceeding their limit—any affected person can sue to challenge the rule. This essentially gives businesses and regulated entities a powerful new tool to challenge regulations, shifting the battleground from the agency’s technical work to the OMB’s procedural compliance. It adds a layer of legal risk to every new rule, which could further incentivize agencies to avoid any regulation that imposes significant costs, even if the public benefit is clear. To manage all this, the bill creates a new position: the Associate Administrator for Regulatory Budgeting, ensuring someone’s full-time job is to count the costs and guard the cap.