The New (Old) Threat of “Runaway Bureaucracy”

In Ecclesiastes 1:10 we are asked: “Is there any thing whereof it may be said, See, this is new?” The writer answers with the famous claim, “that which is done is that which shall be done: and there is no new thing under the sun.”

The Framers of the US Constitution sought to separate powers among the three branches of government, but in the centuries since the Constitution was written we have seen a dramatic expansion in the scope, and power, of the unelected mandarins of the executive branch.

This has led many observers to wonder about the dangers of runaway bureaucracy, meaning that the lifetime-appointed officials—no one gets fired, folks—who populate federal agencies have gathered to themselves the power to make rules, exerting the force of law, that have no effective check and which cannot be easily challenged in the courts.

The problem is that the “independent” part of independent agencies simply means that they are not cabinet departments, such as Agriculture or Defense, where administrators “serve at the pleasure of the President.” If the President’s pleasure ends, so does the service.

The independent agencies, by contrast, generally have “commissioners,” or board members who serve fixed terms. They, too, are subject to the presidential nomination and Senate confirmation process, but once commissioners are in office they can serve out their terms even if the presidential mind changes. The most “independent” units are in the judiciary, of course, which for federal judges mean lifetime appointments, even if the pleasure of the President has long been exhausted. Others, such as the Federal Reserve, have board members who serve fourteen years, and still other agencies have terms of six or seven years for commissioners.

The problem is worrisome because most of the rules that govern our lives are sourced not in legislation, but in the delegated authority transferred from Congress to the bureaucracy. One might argue that the electoral check on congressional power grabs is weak, but at least it exists. Bureaucracies are forever, and their imperious commands can be issued with impunity.

The Myth of Runaway Bureaucracy

But there is a counterargument, made forcefully by (among others) my dissertation adviser, Barry Weingast in a famous paper published almost exactly 40 years ago. But because there is nothing new under the sun, the argument is just as relevant today. To explain the counterargument, however, I’ll need to back up and look at an example.

In the 1970s, the era of “consumerism” was new, even revolutionary. Three things were going on at once: (1) a sense of the importance of using liability rules to force companies to account for health and safety concerns for workers, and for consumers who bought and used products; (2) a stirring of the “consumer welfare” rationale in antitrust law, and in movements toward deregulation of industries that had largely been cartelized by government action; and (3) a rush to use regulatory rule-making and enforcement as a substitute for legislation in harnessing and controlling powerful economic actors.

As a moment’s thought reveals, the three forces were mutually contradictory, possibly even incoherent. The court system was being pressed to consider more “strict” liability rules, but at the same time was moving toward a much looser “consumer welfare” standard of antitrust interpretation and enforcement. Ralph Nader was pressing for better consumer protection rules at the same time that he was advocating for deregulation of transportation, especially airlines but also in other industries. And the regulatory authorities—especially the “independent agencies”—were simultaneously trying to increase US energy independence and throttle the power of corporations introduce technical innovations and new products.

The notion of “independent” agencies was a holdover conceit of the Progressive era—the FTC was founded in 1914—based on the idea that citizens were faced with large, concentrated forces they had no hope of dealing with, but which could be managed with the seraphic wisdom of benevolent experts. One of most “benevolent,” and certainly the wisest (in his own mind) of these experts was Michael Pertschuk, who was appointed to serve as a commissioner, and chair, of the Federal Trade Commission in 1977. Pertschuk set out to transform the entire regulatory function and structure of the Commission, prosecuting administrative law actions under an expansive conception of the “consumer protection” mission of the agency. Pertschuk sought to transform the FTC into what he openly called “the greatest public interest law firm in the country,” meaning that advocacy, not law enforcement, was his explicit goal. As Morgan Norval noted in a 1981 piece in Reason, Pertschuk disdained to conceal his views and aims, putting “kept critics” on the government payroll to accomplish explicitly and unapologetically political ends.

So far, this certainly sounds like “runaway bureaucracy.” But this is where the Weingast part of the account becomes important. To understand the debate, consider nuclear weapons: There has been no use, not one, of nuclear weapons in a combat situation since August, 1945. Should we conclude that nuclear weapons are of no consequence to strategies of international relations? Or should we conclude that the threat of the use of nuclear weapons is so enormous, so catastrophic, that much of international relations should be understood as being constrained by the threat?

Surely it is the latter. In fact, the very observation that the weapon need never be used is evidence of its power, not its weakness. That is the way to think of the so-called “congressional dominance” view of bureaucracy: The US Congress, because of its control of the purse strings, and its ability to change the enabling statutes that delegate regulatory power to agencies—and they are called “agencies” for a reason, because they are agents, not principals—has, in effect, nuclear weapons. Congress never has to use those weapons, because they are so powerful that the mere threat, the existence of the club hidden behind the door, is enough to constrain bureaucratic power.

The congressional equivalent of nuclear weapons were in fact used, and to devastating effect, on the FTC. Specific (very, very specific) legislation imposed micro-managed direction of the FTC budget, and its regulatory activities in minute detail. As Weingast and Moran (1983) put it:

In the early fall of 1979, Congress publicly lambasted the FTC for a series of its investigations and programs, branding them as examples of regulatory abuse. Policy initiatives begun during the previous decade were publicly criticized. Several FTC investigations were halted outright, and the threat of more stringent sanctions suggested new directions for the FTC. Emphasizing this, the following spring, the commission was officially allowed to go “out of business” as funds for its operations were not renewed. This occurred in a specific legal manner that gave the agency only 2 days to close down operations. It seemed that, by law, the agency had ceased to exist. Although funds were ultimately renewed to continue the FTC’s existence, the message was clear: more serious sanctions would follow if the direction and impact of policies were not changed. Responding over the next year and a half, the FTC closed nearly all of its controversial rulemaking investigations and antitrust suits. Congress had demonstrated to the agency that it held the upper hand.

Pertschuk was unrepentant, but all of the reforms and initiatives had tried to impose were swept away, and the Commission was forced to operate under a microscope. (The FTC was my first job, after graduate school, and when I arrived there was still metaphorical smoke and flames from the Pertschuk excesses, and everyone was walking on eggshells. Everything had to be checked against what Congress wanted, or might want.)

What’s Old is New Again

Today we are faced with another “runaway bureaucracy.” Actually, in line with my earlier claim, it’s the same runaway bureaucracy, the FTC, this time led by Lina Khan, the Michael Pertschuk of her generation. Some on the left have even noted the similarity while failing to understand the implication. Khan seems to believe that the agency is “independent,” but members of the both the House and Senate are publicly speculating about giving all antitrust authority to the Justice Department, so that it would be under greater direct presidential control.

Khan, and the FTC, are drawing exactly the wrong conclusion from the fact that it has been 40 years since the agency was nuked. They appear to think they can act on their own narrow, and frankly extreme, ideological impulses. Exactly the opposite is true: The commissioners over the past four decades have recognized that the Congress ultimately decides its budget, and delegates its regulatory authority. What the Congress gives, the Congress can take back.