Regulatory Capture: The Conservative Cure Is Worse Than the Disease

I was recently a panelist at a Senate workshop on regulatory capture sponsored by the Administrative Conference of the United States (ACUS). In an earlier post about this event, I wrote about the potential of enhanced transparency to reduce regulatory capture, which I discussed at the workshop. Conservative commentators at the workshop argued that agencies are captured by public interest groups as well as by regulated entities. They contended that Congress should thus pass the REINs Act to reduce capture from both types of regulatory stakeholders. Of course, their fears of public interest capture are greatly overblown, as the potential for these groups to capture agencies is far more hypothetical than real. But the real problem is that the REINS Act, if it became law, would increase regulatory capture, not decrease it.  

My earlier post explained that the imposition of budget cuts by Congress on regulatory agencies, which make little difference to the size of the federal budget, but which have crippled agencies, is a form of regulatory capture since agency dysfunction benefits regulated entities, not the public.  Agencies also become captured because regulated entities, their trade associations, and the friends in conservative think tanks dominate the rulemaking process, filing many more comments than public interest groups, and meeting with agencies many more times. 

Whether it is lobbying Congress concerning agency budgets or making arguments and presentations at agencies, regulated entities and their allies are able to deploy significantly more resources than public interest groups.  Regulatory capture can occur in other ways as well, but the common denominator among these various possibilities is that it takes resources to pull them off.  The simple and undeniable fact is regulated entities have far more resources than the public interest groups, making it far more likely that they will be in a position to capture an agency.

At the workshop, the conservative commentators argued that the potential for capture is created when Congress passes regulatory legislation that authorizes an agency to establish the details of a regulatory program.  That much is true, but their proposed solution — the REINs Act — isn’t about capture; it’s about gumming up the regulatory process. The law would prevent any new "major" regulation from taking effect unless Congress affirmatively approved the regulation by means of a joint congressional resolution of approval signed by the President.  Conservatives support the REINS Act on the grounds that elected officials should be the final arbiter of all significant regulatory decisions, but this proposal is no solution to regulatory capture. 

In my earlier blog post, I noted that “unlike agencies, Congress does not have to have good policy reasons for refusing to approve a regulation. Instead, the approval process is likely to be nakedly political, reflecting the raw political power of special interests and the large campaign donations that they give.” Instead of reducing the potential for capture, the REINs Act, if it became law, would create a whole new way for regulated entities to capture the regulatory process.

If lawmakers are genuinely interested in reducing regulatory capture, instead of stopping regulatory agencies in their tracks, they should consider the transparency ideas I proposed in my earlier blog. Moreover, they should oppose the REINs Act as cure that is worse than the disease.