Economy / Regulation

Regulations: Another Front in the War Between the Branches

While politics and partisanship are the primary forces driving the discord in Washington today, it is power that will ultimately determine the outcome of such conflict. In our government, power is shared between branches, which in times of divided government like the present, essentially means shared between parties. With each side empowered to block the initiatives of the other, multilateral policymaking can come to a standstill.  While many may resort to “blame game” political posturing in the face of an immobile legislative process, there are also ways to attempt to alter policy unilaterally.

At such times, it becomes exceedingly relevant that the president is the chief executive of the expansive federal bureaucracy.  According to the unitary executive theory, the president ought to be able to direct the actions of federal agencies in accord with his wishes, albeit within the bounds set by law. If the president can and does command the bureaucracy so directly, he gains access to an apparatus that affects the life of every American, allowing him the potential to exploit the discretion granted to federal agencies by Congress to enact his policy preferences.

There is good reason to believe that the president acts in line with the unitary executive theory. His levers of influence over the executive branch are many: appointment of top agency executives, drafting of budget proposals, and centralized review of regulations through the Office of Information and Regulatory Affairs (OIRA). OIRA reviews all economically significant rules proposed by federal agencies.  By screening the regulations produced by the bureaucracy, the White House should be able to ensure that these regulations are agreeable to their views, enabling the administration to make policy through a separate channel while avoiding Congress.

In practice, it appears that President Obama has responded to divided government through these measures, taking advantage of his independent authority.  He pledged before his second term even began that he would not allow Congressional resistance to thwart his plans. And he has duly taken major steps on his own, or at least sought to do so, in areas like gun control, student loans, emissions standards, and even immigration, through the program referred to as Deferred Action Against Childhood Arrivals.

However, there is a central point of contention regarding the unitary executive theory – to what extent is the president the sole boss of the executive branch in the first place?  Congress has historically held its own claims to power over federal agencies. And it possesses its own means to make good upon those claims: appropriations decisions, congressional hearings, confirmation of presidential appointees, and even rewriting agencies’ authorizing legislation. We have seen these congressional prerogatives conspicuously at work in recent months, as Congress has been conducting hearings into the behavior of State and Treasury department officials regarding the attacks upon the American diplomatic mission in Libya and the potential targeting of conservative groups by the IRS, respectively.

When these two competing masters of the executive branch are divided over their policy preferences, the same gridlock plaguing the legislative process can spill over into the realm of regulations. Each side will strictly supervise the activities of the other lest they gain an advantage.  Although the conventional wisdom is that the president will turn to unilateral executive branch action to enact his preferences, which would seemingly involve a greater output of regulations, scholars Jason and Susan Webb Yackee instead find that regulatory activity actually tends to decline during periods of divided government.  This is most likely due to the difficulty agencies face as a more assertive Congress exercises stricter oversight and the political divisions leave them unable to please all players with any proposal they might issue.

It appears that Obama’s tenure has followed the pattern predicted by Yackee and Yackee. According to the reports OIRA annually submits to Congress, during the first two years of the Obama administration, under unified government (FY 2009 and 2010), the average number of major rules issued was 66. Following the 2010 midterm elections, the average has been only 50.

Thus the hazards of gridlock are more all encompassing than typically recognized. Not only do divided government and polarization tend to prevent major legislation from passing, crippling the country’s capacity to address emerging challenges, but they also hinder the ability of agencies to regulate according to the evidence, forcing them to account for political considerations and potentially leaving certain market failures unresolved to the detriment of the U.S.’ collective wellbeing.