Bending the Rules

Procedural Politicking in the Bureaucracy

Rachel Augustine Potter

• Publisher: University of Chicago Press
• Year: 2019
• ISBN:
  9780226621883
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Who determines the fuel standards for our cars? What about whether Plan B, the morning-after pill, is sold at the local pharmacy? Many people assume such important and controversial policy decisions originate in the halls of Congress. But the choreographed actions of Congress and the president account for only a small portion of the laws created in the United States. By some estimates, more than ninety percent of law is created by administrative rules issued by federal agencies like the Environmental Protection Agency and the Department of Health and Human Services, where unelected bureaucrats with particular policy goals and preferences respond to the incentives created by a complex, procedure-bound rulemaking process.With Bending the Rules, Rachel Augustine Potter shows that rulemaking is not the rote administrative activity it is commonly imagined to be but rather an intensely political activity in its own right. Because rulemaking occurs in a separation of powers system, bureaucrats are not free to implement their preferred policies unimpeded: the president, Congress, and the courts can all get involved in the process, often at the bidding of affected interest groups. However, rather than capitulating to demands, bureaucrats routinely employ "procedural politicking, " using their deep knowledge of the process to strategically insulate their proposals from political scrutiny and interference. Tracing the rulemaking process from when an agency first begins working on a rule to when it completes that regulatory action, Potter shows how bureaucrats use procedures to resist interference from Congress, the President, and the courts at each stage of the process. This exercise reveals that unelected bureaucrats wield considerable influence over the direction of public policy in the United States.

1

The Power of Procedure

Contraception—who has access to it and how it is paid for—is contested ground in the ongoing culture wars in the United States. As of 2018, contraception is legally considered a “preventative service,” and in most health insurance plans, women can obtain it without a co-pay or any out-of-pocket fees. When this so-called contraceptive mandate was first announced in August 2011, it ignited a firestorm; the president of Catholic University opined that the policy would lead religious organizations to “abandon their commitment to serve poor people of all faiths” and that the rule impinged on individual freedoms.1 These positions were supported by numerous religious organizations and businesses, and over the next two years, these groups initiated more than sixty lawsuits against the mandate.2 Meanwhile, organizations on the left celebrated the policy change, with the president of Planned Parenthood describing the policy as a “historic victory for women’s health.”3

Many assume, perhaps reasonably so, that such an important policy change originated in the halls of Congress. Indeed, the mandate is often incorrectly attributed to the Affordable Care Act (ACA, or “Obamacare”),4 President Obama’s landmark health-care program. However, while the ACA clocks in at more than 2,400 pages and addresses dozens of topics, including the requirement that insurers cover preventative services free of charge, it is mum on the payment status of contraception (i.e., whether contraception should be considered a preventative service and be provided free of charge). The contraceptive mandate actually stems from a policy decision made by bureaucrats at the Department of Health and Human Services (HHS), a federal agency.5 In August 2011, more than a year after the passage of the ACA, HHS drew on that legal authority to issue a discretionary but legally binding rule stating that contraception should be considered a preventative service.6

This example underscores a common misconception about how law is made in the United States. Schoolchildren are taught that elected legislators hold hearings, deliberate, and vote on bills, which are then sent to the president for his (someday her) signature. This is not inaccurate; many of the major policy changes that have occurred in the past twenty years—from the creation of Obamacare, to the passage of the Patriot Act, to the regulation of banks in the wake of the 2008 financial crisis—have been accomplished, at least in part, through the choreographed actions of Congress and the president.

But this is not the only way that law is made; in fact, it is not even the way the majority of new law is created in the United States today. Unelected bureaucrats—people who work at HHS or the Environmental Protection Agency (EPA), to name two among scores of agencies—routinely create, and subsequently implement, rules that carry the same force and effect as laws passed by Congress. By some estimates, more than 90 percent of American law is created by administrative rules issued by federal agencies.7 In 2014 alone, federal agencies issued more than 3,500 legally binding rules, far outstripping the 224 new laws created by Congress and the president (and even those laws are typically implemented through rulemaking).8

Like laws, bureaucratic rules or regulations—I use the terms interchangeably throughout the book—are substantively important. As the contraceptive mandate rule demonstrates, rules have broad policy reach and meaningfully affect the daily lives of citizens. In recent years rules have also triggered the following policy changes:9

• • In 1996, the Food and Drug Administration (FDA) published a rule that limited the advertising and promotion of cigarettes by manufacturers. Among other major changes, the rule prohibited cigarette sales to people younger than the age of eighteen and limited the extent to which tobacco companies could promote their products through public events (e.g., sporting events, concerts) or materials (e.g., T-shirts).10
• • In 2000, the Agricultural Marketing Service (AMS) established national standards for the labeling of agricultural products that are marketed as “organic.” These regulations created an accreditation program for state and private certifying entities and set certification standards for farms and handling operations. At the time, the program was described as the “strongest and most comprehensive organic standard in the world.”11
• • In 2007, the Office of Surface Mining in the Department of Interior proposed a rule that allowed mountaintop coal mining. Before the rule’s issuance, the legal status of this mining practice was dubious, so the rule accelerated the use of mountaintop mining.
• • In 2008, the Department of Health and Human Services promulgated a so-called medical conscience rule that required recipients of federal funds to allow doctors and nurses to abstain from participating in procedures (e.g., abortions) if those procedures were at odds with their religious convictions.
• • In 2009, the EPA issued a regulatory finding that greenhouse gases endangered public health.12 This finding laid the groundwork for a series of subsequent rules designed to limit or reduce greenhouse gas emissions. These rules constitute the largest organized response to climate change at the federal level.
• • In 2011, the Office of Postsecondary Education in the Department of Education wrote a “gainful employment” rule that set benchmark standards for colleges and universities to meet in order to continue participating in the federal student aid program. The standards required programs to meet minimum thresholds, such as a base debt-to-income ratio for their graduates. The intent of the rule was to remove the bad apples from the federal student aid program, particularly for-profit and vocational schools that had been charging students high rates but delivering little in terms of educational and professional outcomes.13
• • In 2015, the Employee Benefits Security Administration within the Department of Labor (DOL) proposed a rule that addressed conflicts of interest for financial advisers. The proposed rule aimed to redress a loss in retirement savings of nearly $17 billion a year, resulting from the fact that some brokers who did not have a fiduciary responsibility to their clients selected investments that were in their own pecuniary interest. These self-serving investments cost clients more in fees than did other potential investments that performed as well or better.

Of course, these are just a small subset of the policy changes that were generated through rulemaking. Each of them was also controversial and netted front-page headlines; indeed, several were even challenged and subsequently overturned in court.14 However, just as the bulk of laws passed by Congress lack substantive policy heft—instead tweaking existing programs, dealing with symbolic issues, or commemorating relatively trivial dates such as World Plumbing Day15—the majority of rules issued by federal agencies deal with the mundane matters of the administrative state. For instance, in 2001 the AMS, the same agency that created the National Organic Program the year before, used rulemaking to set new standards for the size of holes in Swiss cheese.16 More recently, in 2007, the Office of Personnel Management (OPM) issued a rule that increased the amount that federal agencies reimbursed civilian employees for uniform purchases from $400 to $800 per year. While rules such as these are banal in the grander policy schematic, the point remains that, like laws, rules can fulfill a multitude of policy needs.

There are other parallels between lawmaking and rulemaking. Lawmaking is widely understood to be a political activity, meaning that in Harold Lasswell’s famous words it deals with “who gets what, when, and how.” Accordingly, scholars in the positive political science tradition have devoted considerable effort to understanding what motivates legislative actors, who has power within this process, what the strategic incentives of these actors are at each stage, and, ultimately, how laws are made (or not made).17 Traditionally, rulemaking was considered a rote administrative activity,18 with observers often describing it as a way to “fill up the details” of laws.19 This created a perception that policy changes made through rulemaking were both neutral and unimportant. In recent years, however, scholars have increasingly come to view rulemaking in the same vein as lawmaking: as a decidedly political activity.20

The argument in this book builds from this emergent view that rulemaking is inherently political. It is political not just because it deals with politically important topics, but also because the bureaucrats who manage the process behave in politically strategic ways when creating new rules. Indeed, this is a book about how the regulatory sausage is made. Agency bureaucrats inevitably have preferences involving the policies that are created through the rulemaking process. These preferences arise from a host of concerns, including those related to career advancement, job satisfaction, program quality, and even policy itself. However, bureaucrats are not free to implement their preferred policies unimpeded. Because rulemaking occurs in a separation-of-powers system, each of the three constitutional branches—the president, Congress, and the courts—can get involved in the process, often at the bidding of affected interest groups or other constituents. Once involved, these overseers can (and often do) redirect agency rulemaking efforts or sanction agencies that have overstepped bounds, real or perceived.

However, rather than capitulating to the demands of the political branches, the argument I make in this book is that bureaucrats can use their position as both policy proposers and process managers to their advantage. That is, working within a set of established constraints, bureaucrats can use administrative tools to strategically and systematically insulate their rulemaking proposals from political scrutiny and interference. Scholars typically home in on bureaucrats’ advantage at the policy proposal stage; while this is undoubtedly important, my argument instead focuses on the process, specifically how bureaucrats manage the procedures associated with rulemaking.

Rulemaking procedures are typically cast as a way to constrain bureaucratic behavior; by forcing agencies to follow a set process, bureaucrats—theoretically speaking—have less room to maneuver than they might otherwise. However, procedures are implemented by the very bureaucrats whose behavior they are designed to constrain. Further, the expert bureaucrats who run the administrative process have superior insight into how rulemaking procedures tend to play out and can use this information to steer policy making. This enables bureaucrats to deploy procedures to their advantage in what I refer to as procedural politicking, or using procedures in strategic ways so as to insulate policies that are at risk of political interventions and ensure that bureaucrat-preferred policies endure.

Importantly, I do not take up the question of when and why bureaucrats choose to undertake the regulatory process in the first place—numerous scholars have already addressed that question.21 Rather, I consider what happens once that decision has been made and, more specifically, how procedural choices influence the course of a rulemaking. Ultimately, my goal is to encourage scholars and observers to think about how bureaucratic power is exercised in this policy-making venue.

Understanding Rulemaking

Before proceeding further, it is worth a detour to clarify just what a rule is—and what it is not. According to the Administrative Procedure Act (APA),22 the primary law governing the rulemaking process, a rule is a statement of agency policy that is designed to “implement, interpret, or prescribe law or policy” and that has general or particular applicability and future effect. Rules are distinct from adjudicative actions, which deal with individual case decisions, in that they are policies that apply uniformly to similarly situated individuals.23 The aggregate body of law that is created through the rulemaking process is referred to as the Code of Federal Regulations (CFR).

To create a new rule, agencies must typically follow a process known as notice-and-comment, which requires that affected parties be given prior notice of a rule change and be afforded an opportunity to submit written comments on the change.24 This form of rulemaking, also known as informal rulemaking, is the most common way that agencies make changes to the CFR.25 Generally speaking, the process includes the publication of a proposed rule in the Federal Register, a comment period during which the public can participate, and the subsequent publication of a binding final rule in the Federal Register. The rule generally takes effect after a waiting period (usually thirty days after the final rule is published).

In studying this process, academic scholarship crosses several disciplinary boundaries, including economics, political science, law, and public administration. This interdisciplinarity has led to a rich but disjointed body of research on the regulatory process. Broadly speaking, research on bureaucracy and rulemaking takes one of two approaches, focusing either on external actors and how they can exert political influence over an agency or on internal actors and how meaningfully they deliberate when making policy decisions.

The external perspective on bureaucratic politics is often premised on a principal-agent framework. Borrowed from economics, this framework was developed to explain the dilemma an employer (the principal) faces with respect to her employee (the agent). The principal and the agent are assumed to have different preferences, and so there are a number of intrinsic complications. Because the principal is unable to provide a complete-enough contract to stipulate all the conditions that the agent might possibly encounter and how the agent should behave in those circumstances, she gives the agent discretion—which can be misused. The agent may also misrepresent himself at the point of being hired (adverse selection) or change his behavior after securing the contract (moral hazard).

In the context of rulemaking, the legislature is typically conceived of as the principal (although the president and the courts are sometimes given this role) and the bureaucratic agency as the agent.26 The fundamental problem is that the principal wants the agent to produce rules (which in turn produce policy outcomes) that align with her preferences. The principal must delegate this function as a result of limits on both her capacity and her expertise. However, there is an information asymmetry; she can observe outcomes only in terms of the rules the agency publishes, and not the facts on the ground that led the agency to make that choice. More specifically, the principal cannot obtain this information without substantial investigation (which requires resources) and may not be able to acquire it at all.27

Scholars have identified institutional mechanisms that a principal can implement to solve this “political control” problem and to incentivize the agent to adhere to the principal’s preferences. Most notably, a series of seminal articles by Mathew McCubbins, Roger Noll, and Barry Weingast (colloquially known as “McNollgast”) from 1987 and 1989 argues that by establishing a process that an agency must follow before reaching a policy decision—otherwise known as an administrative procedure—political principals can constrain agency decision making.28 Rulemaking is considered the prototypical administrative procedure; by requiring notice-and-comment, the president and Congress are assured that they will be given advance warning of an agency’s intended policy change. Additionally, these principals need not monitor the process directly but can rely on vigilant interest groups to sound a “fire alarm” and alert them if intervention is necessary.29 In this way, principals can stop a rule in its tracks when needed rather than being presented with a noxious final rule as a fait accompli.

The idea that external principals successfully steer the administrative process has been extraordinarily durable.30 Yet this approach ignores the agency’s role in responding to these outside political pressures. The rulemaking process affords principals ample opportunity to intervene in agency decisions, but it is not all driven from the top down. Agencies have considerable powers of their own in the process. Instead of treating this relationship as rigidly hierarchical, the relationship is likely a more dynamic one wherein principals institute processes and agencies strategically respond to those processes.31 This reconception of the process is particularly appropriate in the context of notice-and-comm...