Showing posts with label administrative state. Show all posts
Showing posts with label administrative state. Show all posts

Monday, October 29, 2018

Government by Consent or Expertise


I’ve been going through a Hillsdale online course (their newest, I think) called Congress: How It Worked and Why It Doesn’t. In his introduction, Hillsdale President Larry Arnn points out that the title refers to both past tense—“when it worked”—and present tense—“it doesn’t.” There isn’t anything in the title that says, “And how we get it to work again.” I’m halfway through, but I’m hoping there will be something hopeful like that.

Anyway, in our ongoing primer on the Constitution here, it’s appropriate to talk about what has been going awry with Congress over the past century.

According to Article I of the Constitution, legislation happens in the legislature, composed of two houses: the House of Representatives, which is based on population, and the Senate, which provides equal representation for the states. The two houses have to come into agreement on any legislation that they pass along to the president for his signature, before it becomes law.

But the self-proclaimed progressives, such as President Woodrow Wilson, and others of his time—Herbert Croly, John Dewey, both Theodore and Franklin Roosevelt—thought they knew better than the founders about how things should be run.

They set out, rather matter-of-factly, to overturn the US Constitution, and replace it as they saw fit. And they and their followers, over the course of a century, have been far too successful.

The idea, they claimed, was that life in the industrialized world was too complex to be handled by anyone but experts. They liked the idea of using the legislature to express the general will of the people—a desired outcome, like clean water or safer working conditions, for example—and then turning over all the details to some expert administrative body.

They claimed that this would better do the will of the people, and do it more efficiently—and separately from politics.

Dr. Kevin Portteus
screen shot from lecture 5 of
Congress: How It Worked and Why It Doesn't

Dr. Kevin Portteus, the teacher of this Hillsdale course, in Lecture 3: “Politics and Administration,” offers this definition:

Politics is politics in what we might think of as the ordinary sense, the martialing of votes, the changing of public opinion, and the enactment of a political program. Whereas, on the contrary, administration constitutes the implementation of the broad policies laid out in the political process.
It didn’t matter to the progressives that the legislature would be giving up their lawmaking power. Their “progressive” vision was all that mattered.

So Congress would pass vague “laws” requiring a general desired outcome. And they’d turn over the authority to accomplish that to administrative bodies of bureaucrats, with practically unlimited authority to set the rules, enforce them, and adjudicate disputes—all branches of power in one.

So now, besides voters and elected officials, the process has a third party. Dr. Portteus describes these extra-constitutional lawmakers, and three basic characteristics required in order to be one. Pay attention to the second one; there’s a lot there. And then, if you understand the second, how do you square that with the third?

That’s the bureaucrat, the administrator, the official. What does he look like? Well, Croly says, “The experts charged with the administration of these laws would become the official custodians of a certain part of the accepted social program. In other words, they must implement some portion of the progressive social platform. So if you’re put in charge of EPA, your job is to implement clean air and clean water policy. That’s your corner of a just society that’s your responsibility.
But, in order to do that, we need people who have three basic characteristics.
The first one is that they’re experts. They have to be trained experts in their particular fields. And we’ve seen this.
The second attribute of a progressive bureaucrat is that he be independent of the partisan political process. And this was the driving force throughout the Twentieth Century behind the creation of entities like independent regulatory commissions. Get the policymakers out of the electoral process, and get them out from under the control of elected officials, so that the people—public opinion—and the people’s elected representatives don’t get in the way of the application of expertise to solve these social problems.
It’s kind of interesting, when you think about it, because, in the progressive mindset, we’re going to have bureaucrats who are pretty far removed from the political process. And if you follow the logic of this argument, the end result of restricting the people’s ability to control government officials—the end result of that is going to be greater implementation of democracy. That is to say, the goals stated in the people’s legislation are going to be less likely to be subverted, because the people who are implementing them are going to have no interest except serving the public interests.
It sounds kind of naïve to us, but they really believed this. They really believed that you were going to have these people who were not gripped by self-interest in the way that the rest of us were, that somehow they would be outside of the ordinary limitations or foibles of human nature. And they would be responsive only to the public good.
And they really believed this. This was not cynical on their part. They were serious.
But, there was one other characteristic that you could not get around. And that is that these people must be committed progressives. They cannot be anti-progressives. Because, if they’re not committed progressives, then they will not zealously enforce the mission of the agency of the program over which they were put in charge.
Because, the danger in that circumstance is that, if such a person is put in charge of a program or of an agency, he would use that position as a vehicle for circumventing the will of the people as stated in legislation.
To give an example, a while ago, about ’99 or 2000, Bill Clinton had to fill a spot on the Federal Elections Commission, and he chose to fill that spot with a man named Bradley Smith. Now, Brad Smith is the expert in federal campaign finance law. And, so, there’s no doubt that he knows his stuff. And by putting him on the commission, he would be independent of the partisan political process. Now, Smith recounts in his book on free speech that his chief opponent, when he was nominated, was Clinton’s own vice-president, Al Gore. And, as Smith recounts in his book, he says, “The reason that Gore opposed me was not because I didn’t know my stuff, and it’s not because I was going to be a captive tool of special interests, because I had my position on the committee. What he objected to was the fact that I questioned the wisdom and the constitutionality of current and proposed campaign finance restrictions. In other words, that I was not committed to zealous enforcement of federal campaign finance programs and the implementation of new and ever more restrictive programs.”
So, you can’t have someone who doesn’t believe, for instance, in greater restrictions on pollution at the head of the EPA. That person is, by definition, because of ideology, ineligible for the position. He must accept—the progressive administrator must accept the basic progressive impulse of society and of the program he is supposed to run. And, as Croly says, “He qualifies for his work as an administrator quite as much by his general good faith as by his specific competence.” So, in other words, as important as his technical ability is his commitment to progressivism.
So, non-progressives, if you want to call them conservatives, are by definition ineligible to hold any of these administrative positions.
You saw similar dismay over various Trump appointees, but in particular Betsy DeVos over Education. The Department of Education still exists at the federal level after almost two years—which is disappointing to some of us. But the fear from the other party is that she might “gasp!” find something to cut. And the very nature of a federal agency is that it must keep growing. Reagan found similar pushback on his policies as well, even failing to end the then-new Department of Education.

In this and other agencies, some of the difficulty come from within the agency. Perhaps not every employee in an agency is a fully committed progressive (which means Democrat or socialist, but only very rarely a non-conservative Republican). But most are, by definition.

Thomas Sowell
image from here
There’s a story, a pivot point Thomas Sowell talks about his time at the Labor Department, after finishing his PhD in Economics as a Marxist. In short, he was studying the sugar industry of Puerto Rico, and whether the Labor Department’s setting of minimum wages was leading to unemployment. There was a way to test whether this was true, or whether a competing theory about hurricanes harming the crops was the cause. Thomas Sowell figured out they could get data about crops standing in the fields before hurricanes to tell them. That data wasn’t in the Labor Department; it was in the Department of Agriculture. There was huge pressure not to even ask for it, but he filed a request:


That was 1960. I have yet to receive an official reply to my request.
This was more than an isolated incident. It forced me to realize that government agencies have their own self-interest to look after, regardless of the interests of those for whom a program has been set up. Administration of the minimum wage law was a major part of the Labor Department’s budget and employed a significant fraction of all the people who worked there. Whether or not minimum wages benefited workers may have been my overriding question, but it was clearly not theirs. They had reasons to want to believe that it did, but no real incentive to probe too deeply to find out.[i]
Learning that the administrative state had nothing to do with helping people, but only in preserving their own jobs, or putting forward their own ideology—that’s when Thomas Sowell went from Marxist to free-market economist.

In Lecture 5, “Legislation and Regulation,” Dr. Portteus says that government by consent, which we have in the Constitution, and government by expertise, as in the administrative state, are mutually exclusive.

What’s more, any intention of insulating the administrative lawmaker from politics is an abject failure. As Dr. Portteus concludes: 

It does not insulate rule makers from legislative politics. Regulatory agencies are buffeted by all of the political forces that affect legislators and sometimes more so.

It does not base rules on expertise, or even reason. And the CAFE[i] standards example is a wonderful case in point in this regard. And at the end of the day, it doesn’t serve the public interest. That is to say, this process gives undue weight to organized special interests, who influence the regulators and key politicians.
This is why, for instance, it has become so critically important, if you own a business of even modest size, that you have a lobbying operation….
So the regulatory process is something very different from the legislative process…. Over the course of the 20th Century, the regulatory process developed and established in the Administrative Procedure Act is a very different way of making policy from the process established in the Constitution for making laws. The modern one attempts to substitute for, and posit itself as, the parallel legislative process. But it really leads to a transformation of the regime, because it yields a transformation in the way legislation is made.
Another day we can talk about what Congress is doing with its time, if it isn’t making laws. But for now, let’s just remind ourselves of this Spherical Model axiom:

Whenever government attempts something beyond the proper role of government (protection of life, liberty, and property), it causes unintended consequences—usually exactly opposite to the stated goals of the interference.



[i] Thomas Sowell, A Person Odyssey, © 2000, pp. 130-131.
[ii] CAFE is Corporate Average Fuel Economy

Thursday, May 31, 2018

Red Tape Cutting


There are many things wrong with regulations—almost as an entire category:

·         The definition.
·         The negative economic effects.
·         The beyond the Constitution regulatory tyranny.

As I’ve mentioned before, our founders, when they used the word in the Constitution—i.e., “regulate Commerce,” and “well-regulated Militia”—they meant

to make regular—to make sure something can happen regularly, without blocks or interference. That’s what the founders meant by regulation interstate commerce.
But in today’s government, regulation means something else: governmental power to decide when, how, and whether something can happen. It’s arguable that all government regulation prevents, rather than provides, regularity of something happening.
What we need is for government—especially government regulations—to get out of the way, so that what we want to happen regularly, like commerce, can happen freely.

President Trump cuts red tape
in ceremony in December 2014

A Just the Facts article, “The Effects of Regulations on the Economy,” by James D. Agresti, shows how regulation has actually prevented what it claims to be trying to do:

For example, a 2015 working paper from the Harvard-Kennedy School of Government found that regulations are likely the main reason why community banks’ share of the U.S. banking market fell from more than 40% in 1994 to around 20% in 2015. This is because “larger banks are better suited to handle heightened regulatory burdens than are smaller banks, causing the average costs of community banks to be higher.” Likewise, a 2016 paper in the DePaul Business and Commercial Law Journal found that the 2010 Dodd-Frank “Wall Street Reform and Consumer Protection Act”:
could actually be enhancing the consolidation of the banking industry, in direct opposition to its principal purpose—eliminating “too big to fail” banks. While the industry has intentionally trended towards consolidation in the past, the current dramatic increase of consolidation of banking assets is likely an unintended consequence of increased regulation. This consequence comes from astronomical regulatory costs passed on to community banks, as well as increased capital requirements that diminish these banks’ competitiveness. Dodd-Frank has exacerbated this problem, and it will likely result in further increased consolidation of the banking industry.
What do we keep saying about the unintended consequences of government interference?

If the government wants to implement something beyond the proper role of government, not only will government fail to achieve the stated goals; it will likely do exactly opposite of the stated goal.
Why isn’t that obvious enough that people would stop wanting government to interfere?
It’s hard to get data on the negative effects of regulation on the economy. As Anne C. Steinemann, author of the textbook Microeconomics for Public Decisions, says, it’s pretty easy to create a cost-benefit analysis that will “produce a desired outcome,” and “it is practically impossible to predict all the future impacts” of a government program, “let alone their magnitudes and their probabilities of occurrence.”

An example provided by Agresti compares pro and con arguments. On the pro side, the Obama administration drafted a report in 2014

Estimating the costs and benefits of major federal regulations from 2003 to 2013. It concluded that the costs were somewhere between $57 billion and $84 billion, while the benefits were much greater at $217 billion to $863 billion.
Since we were in an elongated recession without the expected recovery through most of those years, that seems like it could be just a wild invention to say, “You think this is bad? Imagine how bad it would be if we hadn’t stepped in.” You can’t exactly “prove” an imaginary alternate universe.

Meanwhile, a 2013 paper in the Journal of Economic Growth found: 

The effects of federal regulations on the U.S. economy have been “negative and substantial.” They estimate that GDP would now be more than three times larger if federal “regulation had remained at its 1949 level.”
Which is right? Probably the one that coincides with the principles that lead to freedom, prosperity, and civilization. In other words, government regulation, which is rule by unelected bureaucratic fiat—or tyranny—is unable to lift an economy out of poverty and into prosperity. So if the pro-tyranny side is claiming their interference is creating all kinds of magical benefits, chances are they’re skewing the data for their purposes or simply outright lying.

Agresti suggests there are plenty of other indicators to lead to the conclusion that regulation is a negative on the economy:

A key driver of economic growth plummeted in the wake of two major regulatory expansions in modern U.S. history. This element is productivity, and as explained by former Federal Reserve Chair Janet Yellen (and various other economists with wide-ranging political views): “The most important factor determining living standards is productivity growth, defined as increases in how much can be produced in an hour of work.”
The Journal of Economic Growth study, mentioned above, uses historical data, of which there is an abundance, and finds

that regulations have “strong and robust negative effects” on economic growth, and these “results are qualitatively consistent with those obtained from studies using the various cross-country and panel data sets on regulation.”
Notably, regulations harm the economy by harming productivity. What we can see is that federal regulations spiked under President Carter (1977-1981) and Obama (2009-2017). “In the wake of both of these regulatory expansions, productivity growth crashed,” as you can see in the chart:

Chart from Just the Facts

So, while we don’t have absolute cause-effect proof, there is plenty of evidence for reasonable people to see the harm government regulation (which is, almost by definition, over-regulation) does to the economy.

What we ought to insist on is adherence to the Constitution; that would give us plenty of evidence that freedom from regulation is good for the economy. But we haven’t tried that experiment in a very long time. The Congress has mostly abdicated its legislative authority to the regulatory arms of the executive branch. And the courts have mostly bowed to the “experts” of those regulatory commissions.

However, there has been some recent progress from this administration: the FCC’s net-neutrality repeal, HHS healthcare reforms, EPA details, some Education Department deregulation. These are actual campaign promises President Trump made that he is keeping.

There are three ways to accomplish regulatory reforms:

·         Executive orders ending the executive orders of the previous administration (easiest to do, but also easiest to reverse by a future administration).
·         Legislation requiring change, and returning responsibility for lawmaking to Congress, and, in many cases, returning the judicial functions to the judiciary, instead of leaving all powers in the hands of regulators to determine law, prosecute, and punish.

·         Reform from within regulatory agencies, which depends on appointees to champion the goal of deregulation.
·
Adam J. White, writing for the Hoover Institution (in “Trumping the Administrative State”), says, ”2018 will mark the beginning of a steady wave of agency decisions that will immediately be appealed to federal courts.” The most high-profile of these

will be filed strategically before courts staffed disproportionately by sympathetic judges in Washington, D.C., or on the West Coast. This litigation may come to resemble the lawsuits challenging President Trump’s immigration and refugee orders: Judges will scrutinize agency actions much more aggressively than before. The traditional deference by judges to regulatory agencies’ decisions is unlikely to prevail, and courts will undoubtedly invoke statements by the president or by his appointees that they see as undermining the credibility that agencies usually are afforded. (This will be quite a turnabout after Democrats less than a year ago criticized President Trump’s appointee to the Supreme Court, Neil Gorsuch, for having questioned the amount of deference” that courts give agencies.)
Of the legislative option, he says this is “an opportunity Republicans may not enjoy again for a long time.” And he adds, if they fail to use it,

It would be disappointing and ironic: Congress’s inaction is itself one of the main causes of our modern administrative state. By failing to legislate on the issues of greatest national interest, Congress creates a policy vacuum that agencies fill unilaterally with regulations. Lawmakers further compound this problem by failing to reform the antiquated appropriations process that no longer ties Congress’s oversight of agencies to its constitutional “power of the purse.”
As for the third option, he makes these suggestions for the regulatory agencies:

They can unilaterally adopt reforms to promote transparency and accountability within their own houses. Perhaps the best example of this so far are the efforts at the Justice Department and Education Department to scale back their reliance on “guidance” documents, a broad category of agency pronouncements that regulate the public but that do not undergo even the minimal procedures for public accountability otherwise required of new regulations. If these two departments succeed in reforming their own practices, they could come to be seen by the public (and by judges and legislators) as the regulatory equivalent of “best practices,” raising the bar for what we expect of other agencies.
So, we’re at a time when we have at least some reason to be hopeful.

In his conclusion, White talks about the most lasting reforms of the Reagan era; they lasted because they became systemic. They became the expected practices over several administrations. Based on that, he says,

Years from now, we may find that some of the Trump administration’s most important regulatory reforms in 2018 were the ones that attracted the least attention. Executive orders and regulatory repeals announced to great fanfare are very important; even more important are reforms changing the culture of modern regulatory agencies, achieved through sustained effort within those agencies, to little fanfare and no ribbon-cutting.
In one of the announcements, President Trump cut a big red ribbon, to mean cutting the “red tape.” I hope his commitment to that is real. And I hope the results will become sustained changes that return us to the freedom that helps us thrive and prosper.