In Polarized Times the Administrative State Undermines Stability and Prosperity

The FCC is about to eviscerate the Obama administration’s rules on net neutrality. One of its reasons is that the elimination of net neutrality will provide incentives for internet providers to put more investments into speeding up the system, because the network providers, not the government, will make pricing decisions.  But how can internet providers be confident that they will reap the value of their investments given that any Democratic Administration elected in 2020 will almost surely bring back net neutrality?  And one of the Democrats’ arguments in favor of net neutrality will surely be that net neutrality gives content providers the confidence to invest in content. Wash, rinse and repeat!

The partisan vacillation about net neutrality show how the administrative state in our politically polarized time can be a powerful force for instability and therefore a hindrance to economic growth. Of course, the original conception of the administrative state made it a bulwark of stability, since its judgments rested on technocratic science.  But no one much defends anymore the view that administrative policies emerge from a transmission belt of science. Instead agencies use their broad statutory delegations to make substantially political decisions. And Chevron has effectively broadened those delegations, because it gives agencies the power to interpret the scope and content of these delegations so long as that interpretation is reasonable, even if it is not the best one.

The instability created by the administrative state contrasts with the stability in government that James Madison believed “essential to [its]national character.”

And the national government created by the Framers created stability by requiring that all enactments enjoyed tricameral support—passage by the House, Senate, and the President (or in the case of the veto by the President by 2/3 of each House.) That obstacle course both necessitates compromise and makes compromises harder to undo.

Requiring compromise also tamps down on partisanship.  In contrast, the administrative state encourages partisanship, because the party in charge of the current administration regulates without substantial input from the other side.

The only silver lining of the administrative state’s growing instability is that it encourages thinking about revising the administrative state to promote greater political stability.  One way forward is for lower courts to take more seriously Chief Justice John Roberts’ refusal in King v. Burwell to apply Chevron to “major questions” of an agency’s statutory framework. Agency flip-flopping in interpretations of law on major questions is most likely to create major instability.  But judicial interpretation would settle the matter until Congress revises the law.

Another way is to pass some version of the REINS act that would require truly important (i.e. expensive regulations) to be passed by Congress. Agencies would propose a regulatory scheme and Congress would be required under time constraints to have an up or down vote about whether to enact the proposal. The congressional blessing would make the proposal law and create greater stability.