Sen. Mike Lee highlights problem of regulatory capture in Washington, D.C. [UPH Wire]

*Sen. Mike Lee highlights problem of regulatory capture in Washington, D.C.*
“Today, the vast majority of federal ‘laws’ are not passed by the House and
Senate and signed by the President; they are written by unelected
bureaucrats via a decision-making process that is opaque and highly
technical – precisely the kind of venue that is susceptible to capture by
concentrated interests,” writes U.S. Senator Mike Lee in an essay

recently published in *RegBlog*
,
a daily online source of regulatory news and commentary produced at
the University
of Pennsylvania Law School

.
“No matter where they live or which party they support, most Americans no
longer believe that we have a federal government of, by, and for the
people,” Lee writes, which advocates for new legislation that would “would
put regulatory agencies and the rules that they issue under closer
congressional supervision.”
Senator Lee’s essay is part of a wider series, “Rooting Out Regulatory
Capture
,”
which features commentary and analysis by a variety of leading scholars and
other major public leaders, including Senators Elizabeth Warren (D-Mass.)
and Sheldon Whitehouse (D-R.I). *RegBlog* is a leading, nonpartisan daily
publication devoted to covering regulatory issues sponsored by the Penn
Program on Regulation

and produced by students at Penn Law.

*Fighting Regulatory Capture in the 21st Century*
Senator Mike Lee
*RegBlog*
It is not every day that I have the opportunity to join with my colleagues
Senator Sheldon Whitehouse (D-R.I.) and Senator Elizabeth Warren (D-Mass.)
to advance the same cause. On paper, you might think that the three of us
do not have much in common.
And yet, here we are—two progressive Democrats and one conservative
Republican—speaking out on the same topic, because we are committed to the
same mission: fighting regulatory capture in all of its forms. Our common
ground on this issue is a testament to the emerging consensus among
policymakers, scholars, and activists on both sides of the aisle and
everywhere in between that regulatory capture is one of the most pressing
political, economic, and moral issues of our time.
But too often—especially on Capitol Hill—this consensus breaks down along
partisan lines. Members of both parties are guilty of railing against
regulatory capture when it is politically convenient to do so, and then
looking the other way when it is not. For veteran observers of Washington,
this pattern of selective outrage may be predictable, but that does not
make it productive.
As I see it, the only way to reduce regulatory capture is to end the
conspiracy of acquiescence that has allowed it to flourish under Senates,
Houses, and presidencies of every partisan combination. There is no
legitimate reason why some regulatory agencies should fall under intense
scrutiny for their cozy and collusive relationships with regulated
industries and special interests, while others are given a pass.
To elaborate on this point, if we oppose regulatory capture within the U.S.
Securities and Exchange Commission or within the Federal Reserve, we must
also oppose it within the U.S. Environmental Protection Agency and the
Federal Communications Commission. Likewise, if we oppose regulatory
capture when it leads to the selective under-enforcement of agency rules,
we must also oppose it when it produces excessive regulations that distort
the market to protect incumbents.
This is the approach that is recommended in the book, Preventing Regulatory
Capture: Preventing Special Interest Influence and How to Limit It. In the
introduction to their book, Professors Daniel Carpenter and David Moss
provide a useful definition of the phenomenon that accounts for its variety
and scope. As they put it, regulatory capture is “the result or process by
which regulation, in law or application, is consistently or repeatedly
directed away from the public interest and toward the interests of the
regulated industry, by the intent and action of the industry itself.”
But private, for-profit companies are not the only ones engaging in
regulatory capture. Carpenter and Moss are quick to point out that it is
not just possible, but common, for special interests other than regulated
industries to capture a regulatory agency. In fact, labor unions and
non-profits—no less than wealthy corporations and Wall Street megabanks—are
capable of, and interested in, capturing regulators in order to advance
their narrow interests.
In other words, regulatory capture, properly understood, is a symptom of
the perennial tension between the public interest and the cacophony of
clashing private interests at the heart of our republic. James Madison,
writing in The Federalist Papers, called the inevitable conflicts that
arise from this tension “the mischiefs of faction.” He believed, along with
the other Framers, that the American Constitution was uniquely equipped to
limit the power and influence of special-interest factions. At the core of
the Founders’ constitutional design are two basic principles.
First, the laws that govern a nation and direct its economy should be
written by people who are elected by—and therefore are accountable to—the
public. That is why Article I of the Constitution grants all federal
legislative powers to Congress—the branch that the Framers expected to be
the most accountable to the people. Today, as at the time of the Founding,
special-interest factions, and the government privilege that they seek,
thrive in obscurity, whereas it is much more difficult to undermine the
public interest when policymaking and decision-making are both visible and
accessible to the average voter.
Second, the powers of government should be separated, so that the people
who write the laws are not the same as those who enforce the laws or
adjudicate disputes regarding their meaning. When these powers are combined
in a single entity, the incentives—and potential rewards—of regulatory
capture increase dramatically.
Our constitutional system was set up to operate according to these two
basic principles, but this is not how the federal government works today.
Today, the vast majority of federal “laws” are not passed by the House and
Senate and signed by the President; they are written by unelected
bureaucrats via a decision-making process that is opaque and highly
technical—precisely the kind of venue that is susceptible to capture by
concentrated interests. As creatures of the executive branch, these
bureaucratic agencies also have the power to enforce the very rules and
regulations they write. And in many cases, executive agencies wield a
quasi-judicial power through administrative law courts.
Proponents of this combination of insularity and centralized power within
executive agencies claim that these innovations on the Framers’ original
design are necessary in order to protect against regulatory capture. But
experience has shown the opposite to be true. Concentrating the powers of
judge, jury, and executioner in a single governmental body made up of
individuals who never stand for election makes an easy, high-value target
for special-interest factions vying for access to the levers of power in
pursuit of their own interests.
The point here is not to assign blame or impugn the motives of any of the
parties involved in regulatory capture. I know first-hand that the men and
women who run the executive-branch agencies—as well as those employed by
the industries and special-interest groups affected by federal
regulation—are hardworking, well-intentioned, well-educated, and
highly-specialized. The vast majority of the time, the parties involved in
regulatory capture are not corrupt, dishonest, or acting illegally.
But that is precisely the problem. The status-quo arrangement of incentives
and power within the modern administrative state has made regulatory
capture all but inevitable. The American Constitution was written by men
who, as James Madison wrote in Federalist No. 10, understood that “[t]he
latent causes of faction are . . . sown in the nature of man.” So the
Constitution establishes a system that divides government power and makes
lawmakers dependent on the people, in order to make it as difficult as
possible “for the mischiefs of faction” to systematically redirect the law
away from the common good.
The modern administrative state flips this theory on its head, consolidates
power, and assumes that good intentions will always overcome “the latent
causes of faction.” This upending of our constitutional order was not
accidental, and it did not happen overnight. Over the course of the 20th
century, Congress steadily surrendered its constitutional powers and
responsibilities to the executive branch. And, since that period, this
trend has only accelerated.
One of the unintended—but indisputable—consequences of Congress recasting
itself as the backseat driver of American government has been to move the
bulk of lawmaking into the bureaucracy, where the opaque and highly
technical decision-making process facilitates regulatory capture by
concentrated interests. This shift not only has led to bad policy, but it
has also inexorably spurred public distrust for our governing institutions.
So it should come as no surprise that the movement against regulatory
capture is gaining momentum at this particular moment in our nation’s
history.
Indeed, if there is one undisputed fact about American politics today, it
is that there is a deep and growing distrust between the American people
and our political system in Washington. No matter where they live or which
party they support, most Americans no longer believe that we have a federal
government of, by, and for the people.
And in many cases they are right. Increasingly what we have today is a
government of unelected officials with a degree of job security that would
make tenured professors envious; a government by well-connected market
incumbents and fashionable special interests; and a government for the
benefit of political and economic elites.
Regulatory capture has played an important role in building today’s
discredited status quo and insulating it from reform. So any effort to win
back the trust of the American people—as both political parties will surely
hope to do in the years ahead—must include an agenda to rein in the
agencies and regulate the regulators.
The goal of our reforms cannot be to target one regulatory body or another,
while leaving untouched the dysfunction and culture of capture throughout
the rest of the bureaucracy. We need to elevate principle over party and
pursue structural reforms that make Congress once again responsible, both
in the sense of discharging its constitutional duties and in terms of
holding itself accountable to the people.
Two such reforms that I support are the Regulations From the Executive in
Need of Scrutiny (REINS) Act and the Regulatory Accountability Act of 2015.
Each in its own way would put regulatory agencies and the rules that they
issue under closer congressional supervision—which is to say, they would
make what is now a headless fourth branch of government accountable to the
American people.
These are not partisan proposals. And there is no good reason why they
cannot achieve the support of both parties. Strengthening Congress so that
policymaking is more transparent and accountable to the public is not a
partisan project—it is about putting the federal government back to work
for the American people.
This is a goal that I know Senator Whitehouse and Senator Warren share,
even though we may not always agree on how to get there. And it is that
common commitment to restoring a government of, by, and for the people that
gives me hope for the future of this country and for the future of our
collective fight against regulatory capture.

*Contact*:
Rebecca Anderson
randers@law.upenn.edu
# # #
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