We're In Denial About Growing Administrative State
Just what White House chief strategist Stephen Bannon meant when he recently suggested "deconstructing the administrative state" is unclear. To critics, he would gut the whole superstructure of social and environmental safeguards, starting with the Environmental Protection Agency (which, say news reports, may face a staff cut of one-fifth). But regardless of Bannon's meaning, the relentless growth of the administrative state is a reality that we can't escape.
To be clear about vocabulary: the "administrative state" and "the regulatory state" are essentially one and the same. It is a gigantic enterprise. Clyde Wayne Crews Jr. of the Competitive Enterprise Institute, a free-market think tank, estimates that the costs of complying with federal rules and regulations totaled nearly $1.9 trillion in 2015, equal to about half the federal budget ($3.7 trillion in 2015).
A main rap against the administrative state is that, through its aggressive growth, the executive branch has usurped power from the other parts of government, mainly Congress. Agency regulations and various forms of "guidance" create new policies, rather than just implementing existing laws. The courts have not much curbed this, following a 1984 Supreme Court ruling — Chevron U.S.A. v. Natural Resources Defense Council — that judges should give "deference" to executive agencies' interpretations unless their rules are clearly unreasonable.
When it suits their purposes, both Republican and Democratic presidents have resorted to expansive interpretations of their administrative powers. Frustrated by congressional inaction on climate change, the Obama EPA proposed regulations — The Clean Power Plan — requiring power plants to reduce carbon dioxide emissions. And the Donald Trump administration has insisted it has broad regulatory powers to alter immigration policy.
Still, the phrase "administrative state" is used mostly by conservatives, who regard its growth as a loss of liberty and an undesirable increase in government's powers. "The administrative state represents a new and pervasive form of rule, and a perversion of constitutional self-government," writes historian Steven Hayward in the current issue of the conservative Claremont Review of Books.
Hayward dates the administrative state to the early 20th century and the influence of Progressives, particularly President Woodrow Wilson. Progressives had an unrealistic faith in experts to guide social progress, Hayward argues. This justified a new political order: "The public (could) speak about the ends of government, while the means would be left to the expert administrators." The same philosophy prevails today, Hayward says.
Aside from excessive meddling, the other big complaint against regulation is that it hurts the economy. No one really knows by how much, but "there is ample evidence that regulation has expanded and that this expansion has limited economic growth," as Ted Gayer and Philip Wallach of the Brookings Institution recently wrote. One study estimates that regulation has shaved 0.8% off the U.S. annual growth rate which — if confirmed by other studies — would be huge.
There's a paradox. Americans tend to like the effects of individual regulations and dislike the effects of regulations collectively. We like clean air and water; safer vehicles; effective drugs; honest financial markets; uncontaminated food and much more. But we dislike the burden of collective compliance that is time-consuming and drowns us in paperwork. It may discourage startup businesses or make it harder for existing firms to survive.
It's time to make the administrative state a mainstream concept, through the creation of a regulatory budget. The point is not to justify the instant repeal of most rules, as Bannon's critics fear, but to improve understanding and accountability. We need to develop a better idea of the impact of regulation on both government and the economy. Until now, we've tended to examine regulations in isolation — an understandable bias, because (for instance) there's not much connection between a regulation on food safety and one affecting the electrical power grid.
But that's just the point: By comparing the costs and benefits of dissimilar regulations, we may discover which are truly valuable and which could be discarded without much, if any, loss. Or we may learn that an approach in one area could be profitably adopted in another. The costs of regulation, though initially imposed on businesses, are usually transferred to consumers through higher prices.
In 2015, the Code of Federal Regulations totaled 178,277 pages in 237 volumes, reports Crews' annual study. At the end of the year, there were 3,297 new rules in the pipeline; 218 were "economically significant," meaning that they were projected to have an annual impact of $100 million or more.
Like it or not, we do have an administrative state. It isn't going away. We're in denial — and shouldn't be.