Advice to Fernando
Copyright
Frank A. McDonough
This document may be quoted, reproduced and/or distributed without permission provided that credit is given to Frank A. McDonough, author of "Spring training, for the major leagues of government."
The 16th thing you need to know after assuming your new job
Using Regulatory Authority to Change a Program’s Direction
Dear Frank,
Okay, I understand that working with Congress can be a full-time job. Are there other ways to get things done without waiting for Congress to pass a law? Earlier we saw how the White House and Congress implement change. What about me? Will I be able to use the power of rules and regulations to further my program? Is this a possibility?
Thoughtfully,
Brian
Dear Brian,
Yes, you can issue a federal regulation if your organization is one of the many agencies with regulatory power. A little background at this point will help you in the future.
More than one hundred federal agencies have economic, environmental, safety, health, and other regulatory power under law.[i] In 2007, they issued 2,926 final rules with the power of law while Congress enacted “only” 138 laws in the same year. In addition, to enforce their regulations, agencies conducted 939,000 adjudicatory proceedings while federal judges conducted “only” 95,000 adjudicatory proceedings including actual laws in 2007. [ii]
In industries based on technology and in the technology industry itself, companies move faster than the government can regulate, so the government is often playing catch up. This may require writing new regulations, amending older regulations; or, it may simply require enforcing existing regulations.
The many sectors in the economy regulated by the government may surprise you. Here are a few.
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Agriculture
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Environment
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Food and drugs
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Banks and banking
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Occupational safety
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Commerce and foreign trade
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Patents, trademarks, and copyrights
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Commodity and security exchanges
You can access regulations.gov, which is a one-stop Internet site to access and comment on proposed Federal regulations. You can also use this site to search and review original regulatory documents as well as comments submitted by others.
Government laws and regulations have several purposes:
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Maintain competition in each market
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Control behaviors in society
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Punish enemies of the current administration
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Protect consumers from companies that grow too powerful, and treat the consumer in an abusive way.
For example, President Obama used the regulatory power of the Security and Exchange Commission to “investigate” Standard & Poor after the firm downgraded the credit of the United States in August 2011 and created a political problem for the president. S&P, demonstrating unusual courage, ignored earlier private arm twisting by the White House and the Treasury Department, and decided that the size of the U.S. debt justified ignoring the government pressure. The brave people in S&P took on the legal and regulatory power of the government despite the possible future consequences.[iii]
The interests of industry and government are not the same, despite those who talk about a partnership between these two sectors of society. Companies seek greater dominance in their marketplace and more profit. Their goal is to control 100 percent of their market. The government seeks to limit a single company’s dominance while protecting the interests of the American public; at least this is the goal some of the time.
The trick is to find the right balance. Too much regulation can doom an industry sector. Too little regulation, or regulations not enforced, can benefit the bottom line of companies, but bring pain to the American public.
Our country goes in cycles with tight regulations for years followed by long periods of loose and unenforced regulations.
We have been in the latter period since the early 1980s, when corporate leaders in America sought and over time obtained independence from government regulations in banking and finance, environmental practices, labor practices, discrimination, and other facets of American life. Corporate leaders argued that government should get off the backs of industry, repeal regulations, and let the nation’s corporations proceed more freely to create the wealth they promised for the nation.
The Clinger-Cohen Act nullified regulatory policies in IT and telecommunications, which GSA had carefully built up in 34 years and replaced them with a series of always-evolving processes and policies. Did Clinger-Cohen cause improvements in the delivery of major systems? Well, it all depends on the measures you choose. In general, things are no better or worse in the delivery of complex systems. Today, the high dollar systems fail in part or completely with regularity, as they have for 40 years.
Enacting regulations or legislation to control a selected industry’s activities is never an easy battle. Industry employs lobbyists and lawyers to fight for regulations they want and fight even harder against those they do not want, as President Obama learned when revamping the nation’s health delivery system. Pharmaceutical companies, health insurance companies, hospital management companies, their lobbyists, and others in the fragmented health industry ganged up to limit the reach of the president’s proposed plan. Moreover, even after a bill passed, they continued to work to repeal it.
In other cases, companies often seek and get a national regulation to trump regulations and laws passed by state governments. It is easier for companies to influence one short-term political appointee in Washington than multiple officials in 50 state governments.
Alternatively, if a federal agency proposes a hard-hitting regulation, corporate representatives will switch sides to defeat the proposal by campaigning for states’ rights and state, not federal, regulations. Corporate officials will invoke the Constitution and the wisdom of our founding fathers as they lobby for state, not federal regulation. On a case-by-case basis, it suits their financial interests to play one level of government against another.
Congress gets kudos from the public when the president signs an act into law amid media hype. Later, when it is time to implement the new law, Congress may not provide the resources to do the job. This was the situation in Dodd-Frank because Congress did not provide reasonable resources to the SEC keeping their financial industry campaign contributors happy, providing yet another example of spin at the highest level; ensuring a win-win for all parties except the investing public.
During the George W. Bush administration the SEC budget was frozen or cut between fiscal years 2005 and 2007 and it did not return to the 2005 level until 2010 where it remained, ensuring that the SEC could not truly regulate the nation’s financial industry.
In the Madoff case, the second Bush administration was selectively unwilling to enforce regulations and Congress was unwilling to provide adequate resources to the enforcement responsibilities of the SEC. Were these actions a factor allowing Madoff to swindle so many for so long?
Mary Schapiro, chair of the SEC testified in 2011 that the agency needed about 780 people to implement and enforce the Dodd Frank reform law; and it needed more of the latest technology to compete with such things as the hedge funds use of advanced technology and algorithms. Until we have the resources we can write the implementing regulations, but we will not be able to enforce them, she testified. “No matter how strong the rules are, we will have non-compliance” [unless we can enforce them].[iv]
As the Republican Party took control of the House of Representatives and the Senate in 2015, many in the party vowed to overturn Dodd-Frank so that Wall Street and financial institutions could return to the freedoms they had prior to 2007 when the economy collapsed.
For almost thirty years, the government patronized Wall Street and corporate leaders with easy money, limited regulation, and it “got off the back” of corporate America, resulting in three economic fiascos in a short period of two decades. These cost many Americans their jobs, their retirement nest eggs, and in many cases, a large portion of their savings.
Advice to Brian
In my organization regulating technology acquisitions, we often issued guidance, rather than a new regulation. Guidance is easier, faster to develop, and simpler to issue than a new regulation. Guidance is the best approach in a fast moving field when a major issue surfaces requiring a quick response by the government. Later, when government officials understand the issue in all of its dimensions, they can draft a regulation.
If the problem you are trying to solve requires a regulation, expect to spend one to five years from the point where you sit down at your keyboard until all parties approve the regulation and you publish it in the Code of Federal Regulations. Then again, your regulatory work may be destined for a dark corner in a seldom-opened closet.
I leave this discussion reminding you of two final points. You can sometimes treat government policies cavalierly. However, do not ignore regulations. They have the power of law unless a sitting president opposes regulations and government officials do not enforce regulations already on the books, which often happens with Republican presidents.
The highly political world of federal regulations should convince you to seek a job in a non-regulatory agency; and it should sensitize you to the problems you will face implementing regulations to guide the public as you place your new system in operation.
Yours,
Frank