Mr. President, I rise to speak about two bills that I am introducing today to address a serious and persistent threat to the integrity of our government: regulatory capture. Over the last 50 years,…
Mr. President, I rise to speak about two bills that I am introducing today to address a serious and persistent threat to the integrity of our government: regulatory capture.
Over the last 50 years, Congress has tasked an alphabet soup of regulatory agencies to administer our laws through rule-making, adjudication, and enforcement. Protecting the proper functioning of these regulatory agencies has led me to the topic of regulatory capture. I held a hearing on the subject last year in the Senate Judiciary Committee and now am filing two bills that will make our government more resistant to the ever-growing power of special interests. I urge my colleagues to join me in passing these important good-government measures.
At bottom, regulatory capture is a threat to democratic government. ``We the People'' pass laws through a democratic and open process. Powerful interests then seek to ``capture'' the regulatory agencies that enforce those laws so that they can avoid their intended effect, turning laws passed to protect the public interest into regulations and enforcement practices that benefit limited private interests.
This concept of ``regulatory capture'' is well-established in regulatory and economic theory.
In 1913, Woodrow Wilson wrote this: ``If the government is to tell big business men how to run their business, then don't you see that big business men . . . must capture the government, in order not to be restrained too much by it?''
The first dean of the Woodrow Wilson School, Marver Bernstein, wrote that a regulatory commission will tend over time to ``become more concerned with the general health of the industry,'' and try ``to prevent changes which will adversely affect'' the industry. This, he said, ``is a problem of ethics and morality as well as administrative method''; ``a blow to democratic government and responsible political institutions.'' Ultimately he said it leads to ``surrender'': ``The commission finally becomes a captive of the regulated groups.''
Regulatory capture has been the subject of work by Nobel laureate George Stigler in his article ``The Theory of Economic Regulation.'' Students of administrative law know how well established the doctrine of ``regulatory capture'' or ``agency capture'' is in that field.
Last year, a senior fellow at the Cato Institute wrote in the Wall Street Journal about ``a striking example of regulatory capture.'' He described the phenomenon this way: ``Agencies tasked with protecting the public interest come to identify with the regulated industry and protect its interests against that of the public. The result: Government fails to protect the public.'' His example was the Minerals Management Service, in relation to the BP oil spill.
The failures of MMS in the lead up to the oil spill in the Gulf of Mexico, the cozy relationship between MMS officials and industry executives, and the shameful behavior of some MMS employees are archetypal symptoms of regulatory capture. But the report of the commission on the Gulf oil spill never mentioned ``regulatory capture.''
That is a pretty strong signal that regulatory capture isn't getting the attention it deserves.
When you think about the century-long academic and policy debate about regulatory capture, and when you look at the cost of recent disasters in areas regulated by the Minerals Management Service, the Mine Safety and Health Administration, and the Securities Exchange Commission, it seems pretty evident that Congress should be concerned not only about those prior incidents, but about addressing the threat of future regulatory capture. The experts I have spoken with in my home state of Rhode Island certainly understand that regulatory capture matters. They don't want a captured agency to allow the next oil spill or other man-made disaster to happen in our state, or for a financial agency to allow speculators to wipe out the savings of our citizens. Surely constituents of each of the members of this body would agree whole-heartedly.
That is why I am introducing two pieces of legislation today.
The first bill is called the Regulatory Capture Prevention Act. It would create an office within the Office of Management and Budget with the authority to investigate and report regulatory capture. The office would ensure that abuses were not overlooked, and sound the alarm if a regulatory agency were overwhelmed by a more sophisticated and better- resourced regulated industry. Scrutiny and publicity are powerful tools for protecting the integrity of our regulatory agencies. This bill would employ them to prevent powerful interests from coopting our laws.
The second bill is called the Regulatory Information Reporting Act. It would shed extra sunlight into regulatory agencies by requiring them to report to a public Web site the following: first, the name and affiliation of each party that comments on an agency regulation; second, whether that party affected the regulatory process; and finally, whether that party is an economic, noneconomic, or citizen interest. By centralizing this information for public and congressional scrutiny, the bill would create a simple dashboard for hints of regulatory capture in agency rulemaking.
As the Senate considers these bills, we should remember how much agreement exists about regulatory capture. During the hearing I chaired on regulatory capture last year, all of the witnesses, from across the ideological spectrum, agreed on each of the following 7 propositions. First, regulatory capture is a real phenomenon and a threat to the integrity of government. Second, regulated entities have a concentrated incentive to gain as much influence as possible over regulators, opposed by a diffuse public interest. Third, regulated industries ordinarily have substantial organizational and resource advantages in the regulatory process when compared to public interest groups. Fourth, some regulatory processes lend themselves to gaming by regulated entities seeking undue control over regulation. Fifth, regulatory capture by its nature happens in the dark--done as quietly as possible; no industry puts up a flag announcing its capture of a regulatory agency. Sixth, the potential damage from regulatory capture is enormous. Finally, effective congressional oversight is key to keeping regulators focused on the public interest.
With that as a starting point, I am hopeful that the Senate can agree on legislation to address this very real problem. Administrative law may not be the most glamorous subject, but I hope to work with colleagues on both sides of the aisle to eliminate regulatory capture.
This is so important because for as long as there are regulatory agencies, regulated industries, and money, there will be efforts at regulatory capture. We owe it to our country to do everything possible to defeat such efforts to capture our government of the people, by the people, and for the people.
