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Shrinking Government Bureaucracy

Shrinking Government Bureaucracy is a compilation of policy proposals the Competitive Enterprise Institute recommends government officials enact immediately to rein in America's sprawling federal regulatory bureaucracy and boost the U.S. economy.

Given the scope of economic regulation in American life, even incremental improvements to the structure of government offer outsized benefits for liberty and growth, including saving Americans' tax dollars to lightening the burden on job creators around the country. 

In this series, CEI experts outline the top priorities for free-market reform that Congress and the executive branch can work together on in order to streamline government operations, roll back burdensome regulations, and properly align the structure of federal agencies with their core missions.

Policy recommendations range from reorganizing to completely rethinking seven different government entities: Federal Deposit Insurance Corporation, Consumer Financial Protection Bureau, Environmental Protection Agency, Federal Communications Commission, Securities and Exchange Commission, National Labor Relations Board, and the Department of Commerce. Some of these reforms can be achieved via executive action, while others will require members of Congress to take back authority from government bureaucrats. 

"Often, the essential question is not how we would run the government better. Rather, we need to ponder what the executive branch we deserve looks like and how it aligns with our Constitution and statutory limitations." - CEI President Kent Lassman

The concrete policy proposals found in Shrinking Government Bureaucracy provide a good start toward answering this essential question.

>> View the one-pager here.

>> Read the full report here.


Rethinking the Environmental Protection Agency

The U.S. Environmental Protection Agency’s (EPA) budget is the most impenetrable of all federal department and agency budgets. It is long past time to make the EPA budget at least as transparent and comprehensible as the budgets of other federal domestic agencies. The Office of Management and Budget’s (OMB) FY 2018 budget request for the agency is a significant improvement in terms of transparency over previous budget requests, but there is still a long way to go.

The OMB should work with the EPA to produce an intelligible budget. For years, the EPA has warded off congressional oversight of agency policy making by submitting a budget that fails to identify:

  1. Who at the EPA is spending the appropriation;
  2. How they are spending it; and
  3. Pursuant to what statutory authority they are spending it.

The result is that Congress has no idea how the EPA spends taxpayer money. Lawmakers cannot discern how much the agency spends on nondiscretionary duties, which are assigned by Congress, compared to how much it spends on discretionary activities of its own choosing. In submitting its annual budget justification, the EPA should use the same rational format employed by other agencies—which clearly identifies the spender, how much they spend, and the legal basis for the spending. Only when Congress can follow the money can it exercise its power of the purse to effectively oversee agency policy making.

In addition, many of the EPA’s functions could be abolished, pared back, or transferred to other agencies without any negative effects on the nation’s environmental quality.

Recommendations

  • Abolish the Office of Enforcement and Compliance Assurance and return its functions to the program offices.
  • Abolish the EPA’s 10 regional offices and transfer their emergency response capabilities into the Federal Emergency Management Agency.
  • Eliminate the Integrated Risk Information System program and fold its functions into the Toxic Substances Control Act program.
  • Eliminate all Healthy Communities and Smart Growth Programs and related grant programs
  • Eliminate the Environmental Justice programs and related grant programs
  • Eliminate the Environmental Education programs and related grant programs
  • Reform EPA science programs

Rethinking the Department of Commerce

The Department of Commerce’s mission statement is a charter for government interference in markets. It employs 47,000 people directly and spends about $8 billion annually on its mission to promote “job creation and economic growth by ensuring fair and secure trade, providing the data necessary to support commerce, and fostering innovation by setting standards and conducting foundational research and development.”

In practice, this means the Department exists to reward businesses for following its favored policies. It provides bailouts, handouts, and the spoils of redistribution. In effect, the Department of Commerce is a boon to rent-seeking businesses. That alone should be reason for its elimination. Even taking the Department at its word, all of its tasks, as laid out in its mission statement, are things that happen on their own in the general functioning of markets. In addition, the Department’s activities that may yield some public benefit can be parceled out to other agencies as per the following recommendations.

Recommendations

  • Break up the National Oceanic and Atmospheric Administration (NOAA).
  • Make the National Weather Service an independent agency with a view to privatization.
  • Turn specialized centers like the National Hurricane Center and the National Environmental Satellite Service into charitable trusts.
  • Transfer the National Ocean Service to the United States Coastguard and the U.S. Geological Survey.
  • Privatize National Marine Sanctuaries or transfer them to their respective states.
  • Privatize the Office of Oceanic and Atmospheric Research
  • Break up the Office of Marine and Aviation Operations and reassign its assets to other NOAA agencies during this process.
  • Merge the Census Bureau with other statistics agencies such as the Bureau of Justice Statistics and the Bureau of Labor Statistics to create a National Statistical Agency and privatize as many of these agencies’ functions as possible.
  • Make the Patent and Trademark Office a performance-based organization under the Office of Management and Budget.
  • Privatize the laboratories of the National Institute of Standards and Technology.
  • Abolish the International Trade Administration and transfer its remaining duties to the U.S. Trade Representative.
  • Abolish the Economic Development Administration and Minority Business Development Administration.
  • Transfer the Bureau of Industry and Security to the U.S. Trade Representative’s office.
  • Break up the National Telecommunications and Information Administration and transfer its management of assets to the General Services Administration and its auctioning of spectrum to the Federal Communications Commission.

Rethinking the Federal Deposit Insurance Corporation

The Franklin D. Roosevelt administration and Congress created the Federal Deposit Insurance Corporation (FDIC) during the Great Depression as a response to runs on banks that left many depositors without access to their money (as part of the 1933 Banking Act, better known as Glass-Steagall). However, in return for confidence in the banking system, federal deposit insurance introduced a systemic problem of moral hazard—the incentive to engage in more risky behavior that results when adverse consequences are lessened by a third-party guarantee.

Banks are more likely to make risky investments knowing their customers’ deposits are guaranteed. Customers, meanwhile, are less likely to pay attention to banks’ business practices. If all banks are perceived as being equally safe, customers will choose based on other considerations beside sound investment practice, resulting in a loss of competitive market discipline in the banking system.

Recommendations

  • Abolish the FDIC to end the moral hazard of federal deposit insurance.
  • Reduce the FDIC’s incentive to over-supervise banks.
  • Reduce the FDIC’s role in bank resolution.
  • End the Consumer Financial Protection Bureau’s (CFPB) participation on the FDIC’s board.
  • End any CFPB role in bank supervision.

Rethinking the Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau should be abolished. In its current form, it undermines the constitutional principle of checks and balances. If Congress wishes to establish an agency to oversee consumer financial issues, it should start again from scratch, acting in a manner that respects fundamental constitutional principles.

In addition, the current CFPB imposes significant costs on the financial system and on American consumers through overregulation. This leads to higher costs for financial services, loss of access to those services for lower income consumers, and a lack of innovation.

As the District of Columbia Circuit Court of Appeals found in PHH Corp. v CFPB, Congress gave the agency’s director too much power when it created the CFPB as part of the 2010 Dodd-Frank Act, with little attendant accountability (the case is currently being reheard). The CFPB director is not answerable to the president, and Congress holds no power over the Bureau, which is isolated from the appropriations process and instead gets its funding from the Federal Reserve.

Recommendations

  • Force the CFPB to appreciate the effects of its regulations on financial institutions by placing it under the supervision of a board consisting of officials from other federal financial regulatory agencies.
  • Abolish the Bureau’s supervisory role and make it purely a regulatory agency. 
  • Revise the Bureau’s overly broad power over “unfair, deceptive or abusive acts or practices.”
  • Drastically reform the Bureau’s handling of data.
  • Shut down the CFPB’s independent research program

Rethinking the Securities and Exchange Commission 

The nation’s securities laws and the very existence of the Securities and Exchange Commission (SEC) are premised on the situation American investors faced in the 1930s. Those conditions do not hold today.

When President Franklin D. Roosevelt signed the Securities Act of 1933 and the Securities Exchange Act of 1934, many Americans did not have electricity or a telephone. Investors were limited to mail or physical travel to study the particulars of a given firm. Now, many Americans pay their electricity bills on their phones—from which they also can access information from all over the world on industries and firms.

Originally, under the 1933 Securities Act, securities transactions were regulated by the Federal Trade Commission and applicable state agencies, the same as other business transactions. However, the 1934 Securities and Exchange Act created the SEC, which meant investors and entrepreneurs had to comply with a host of prescriptive mandates before offering shares of their businesses—which federal regulators considers “securities”—to investors. Over the decades, laws such as Sarbanes-Oxley and Dodd-Frank have further piled on to these mandates. It is long past time to peel away the regulatory onion.

Recommendation

  • Abolish the Securities and Exchange Commission and transfer its duties to police and punish fraud to the Federal Trade Commission.

Rethinking the National Labor Relations Board

The National Labor Relations Board (NLRB), the federal agency that oversees private sector labor relations in the United States, has long outlived its usefulness. Created under the 1935 National Labor Relations Act, it was intended to implement workplace regulations and resolve labor disputes. It has both a rulemaking and an adjudicatory role. 

However, the NLRB no longer operates as it was intended by Congress—as a neutral arbiter in labor disputes. During the past eight years, the NLRB overturned a cumulative 4,559 years of its own precedent. This radical reversal of Board policy stems from politicization of the agency.

Throughout the NLRB’s history, its partisan composition has depended on control of the presidency. The Board is composed of two Republican and two Democratic members, with a chairman from the president’s party. This has caused case precedent to flip-flop depending on which party holds the White House. This politicization of the NLRB and oscillation of Board policy has eroded union and employer confidence in the institution, as uncertainty reigns among those regulated by the NLRB due to ever-changing Board precedent.

In addition, the NLRB has proven ineffective in its labor dispute resolution role, doing less work at greater cost to the taxpayer. From 1980 to 2016, the Board’s annual caseload fell by 58 percent, from more than 57,000 cases to 24,200, and its output of published decisions fell by 78 percent from 1,343 to 298. Yet during that same period, the NLRB’s annual budget appropriation increased from $112 million to $274 million.  

Eliminating the National Labor Relations Board would improve the resolution of private sector labor disputes. Currently, unions and employers have incentive to file cases in hopes of reversing NLRB policy. Increased consistency in decision making by federal courts would likely undermine the incentive to attempt to reverse policy.

Recommendation 

  • Eliminate the National Labor Relations Board and transfer its rulemaking authority and election duties to the Department of Labor and its adjudicatory authority  to federal district courts.

Rethinking the Federal Communications Commission

Created by the Communications Act of 1934, the Federal Communications Commission (FCC) wields broad authority to regulate broadcasters, telecommunications services, and wireless providers. Recently, the FCC even claimed to have the power to regulate Internet access. Yet the economic and technological realities that purportedly justified the creation of this agency 83 years ago no longer hold true. Information scarcity has given way to information abundance. Americans today do not depend on a tiny handful of companies to communicate with one another and learn about the world around them.

Therefore, the FCC should undertake a comprehensive review of its many regulations and eliminate those that no longer serve consumers to the extent the agency has the discretion to do so. Congress should amend the FCC’s enabling statute to curtail the agency’s authority to regulate the Internet and the media. Lawmakers should also consider abolishing the agency as it currently exists and moving some of its functions elsewhere in the federal government.

Recommendations 

  • Amend the Communications Act to eliminate most of the FCC’s current duties.
  • Explore folding a much smaller FCC into another arm of the federal government, such as the Department of Commerce.

>> View the one-pager here.

>> Read the full report here.