Mr. Bannon Goes to CPAC


In a fascinating address given at the CPAC annual convention, Trump political strategist Steve Bannon explicitly articulated the framework for the Trump Presidency over the next four years—and possibly beyond. His speech to the convention made it clear that the Trump Administration was not at all interested in tinkering around the edges. They mean to achieve structural reforms that, if enacted, will have profound effects on public administration for generations. (A video of his short speech is below.)



Bannon laid out what he referred to as three verticals that delineate policy areas that are the focus of the Trump Administration. They are:


  • National Security


  • Economic Nationalism


  • Deconstruction of the Administrative State


Bannon may call these policy areas as “verticals” but they are not isolated from one another; in fact they are inextricably intertwined. In some important ways they are at war with each other. It is for instance, flatly impossible to simultaneously deconstruct the Administrative State and implement a program of “Economic Nationalism”. That is because a program of Economic Nationalism is indistinguishable from a national Industrial Policy, which would ultimately be implemented by the bureaucracy. And it would face the usual problems of rent-seeking and regulatory capture.


Each of these three prongs will be addressed over time. Today, the focus will be on the idea of deconstructing the Administrative State, which lies at the heart of the agenda.


The Rise of the Administrative State


Excluding political junkies, public administration scholars, and specialists in administrative law, very few people are aware of how the modern Administrative State actually works in practice. The public thinks that policy is made when Congress passes legislation that becomes law upon being signed by the President. In reality, Congress does not pass “laws” as conventionally understood. Congress passes aspirations, e.g.—The Clean Water Act—and then as part of the law, instructs the relevant Agencies to promulgate rules to effectuate the law’s intent.


That’s where the trouble begins.


The devil is in the details, as they say, and the details are in the rules the Agency issues. After a comment period, the rules, possibly with adjustments, are then published in the Federal Register, at which point they have the force of law. This is where policy is actually made—in the rule making process. For example, to continue on with the Clean Water example, it makes a great deal of difference whether water is considered legally “clean” when it contains x quantity of pollutants per unit or y quantity of pollutants per unit. That type of decision is usually part of the rule-making process.


Unless Congress explicitly sets the standard when it passes a law, the regulatory Agency determines the standard. And according to current legal practice, Courts are supposed to show deference to Agency interpretation of the language of the law, even to the point where Courts are required to overturn their own interpretations of a law when it conflicts with Agency interpretation. This is known as the Chevron Doctrine, named after the Supreme Court’s ruling in Chevron v. Natural Resources Council (1984).


The Chevron ruling supercharged the growth of the Administrative State by increasing the power of the Agencies vis-à-vis the Courts and the Congress. Agencies clearly have an incentive to get the first shot at issuing an interpretation of a statute that enhances the Agency’s power, particularly if the Courts are supposed to show it deference. Moreover the Executive branch has an incentive to get an Agency to issue friendly interpretations of a statute before it is contested in a civil Court, because doing so would strengthen its case in the event of a subsequent lawsuit. The Obama Administration was famous for this, although the Courts did slap down the attempt to circumvent the law by obvious and deliberate Agency misinterpretations of it.


That said we now live in a society in which every facet of modern life is subject to direct or indirect regulatory review. Not only do the regulatory Agencies have an iron clad grip on the process, they are largely impervious to outside oversight. It is virtually impossible to effectively discipline, must less terminate, an incompetent civil servant. Moreover, some Agencies have investigative powers. Some have enforcement powers. Some have criminal enforcement powers, some civil. Agencies also have their own administrative courts—where the judges are selected by the Agency and the judges are employees of the Agency. In effect, some Agencies have the power to act as judge, jury and prosecutor.


The growth of the Administrative State means that policy formation and governance is left largely to an unaccountable bureaucracy with its own agenda. More accurately it represents a set of sometimes competing, sometimes-aligned interests and agendas operating far from pubic view. To the extent that an Agency is captured by an outside interest (often the case) it represents that interest rather than the public interest. The EPA for instance acts like a branch office of the Sierra Club. The Export-Import bank is an important source of subsidies for Boeing. And the weapons procurement bureaucracy at the Pentagon is in a league of its own.


It is clear, or ought to be, that the tremendous growth of the bureaucracy and its subsequent rule-making has stunted innovation, raised the cost of doing business, and has acted as a brake on competition by protecting existing businesses at the expense of potential new entrants into the marketplace. But that is not the worst of it. The worst of it is that it has upended the system of checks and balances that fosters healthy debate and forces compromise among competing interests. It has allowed Congress to pass aspirations instead of laws while leaving the heavy lifting for the bureaucracy. If things turn out well, Congress takes credit. If not, it’s obviously the fault of bureaucrats.



Deconstructing the Administrative State


Deconstructing the Administrative State is a project that virtually all libertarians can support. It is a project that will take years, if not decades to complete. Where to begin?


Executive Orders that overturn prior Executive Orders on matters that should have been decided by Congress are a good place to start. Not only does this teach the lesson that, in general, policy ought to be made by Congress, it reinforces the notion that truly durable policy ought to be formed in the give and take of democratic politics.


There is legislation before Congress right now that would require Congress to approve regulations that impose costs of $100 million or more. The House passed the REINS Act of 2017 on January 5, 2017. It would require a joint resolution of Congress approving all major rules until they can go into effect. That would force Congress to put its fingerprints on regulations that matter, thus forcing democratic accountability on Congress. It would also push the bureaucracy to be more accountable to Congress, thus restoring some of the checks and balances that have been lost over the years.


Another step the Congress should take is to pass legislation that overrules Chevron v. Natural Resources Council. There is no good reason why the Courts should show deference to an unaccountable (to the public) bureaucracy. Such deference is not only profoundly undemocratic; it invites abuse, and empowers the bureaucracy at the expense of the people’s elected representatives.


These three actions are a good place to start. But it is only a start. There is still a long way to go after that.


The Politics of Deconstruction


The political challenge of deconstructing the Administrative State is immense. Bureaucracies are quite adept at developing coalitions to protect them and their budgets. As a result, the inevitable failures of the bureaucracy are inevitably followed with perverse cries for more money—and they get it. Failure is rewarded, not punished. Remember the VA scandals of a few years back? Guess whether the VA budget today is larger or smaller. Hint: the correct answer isn’t smaller.


But the problem is a lot deeper than mere bureaucratic incompetence and perverse incentives. The problem is that regulatory Agencies are a means to an end desired by Progressives. That end is government by bureaucratic experts. More precisely it is government of, for, and by experts rather than elected representatives. It is profoundly undemocratic, inherently unaccountable and structurally incompatible with the U.S. constitutional order.


The U.S. constitution is designed “to secure the blessings of liberty” as the Declaration of Independence puts it. It does so by strictly limiting what government may legally do, leaving the pursuit of happiness to individuals, whose freedom is protected by government. That freedom inheres to the individual; it is a product of natural law, and is therefore pre-political.


The Progressive view, that the Constitution is a “living, breathing document” is fundamentally in conflict with the natural law interpretation. Where the natural law interpretation assumes men have rights by birth, the Progressive view is that rights come from the State. The natural law view sees property and contract rights as fundamental to men’s freedom and the pursuit of happiness. The Progressive view sees the pursuit of happiness in terms of entitlements. We are to be free from fear; we have a right to be well clothed, well housed and well fed.


While the natural law interpretation seeks to restrain government so as to allow maximum individual freedom, the Progressive view seeks to throw off restraints on government so that it can deliver the good life that men cannot achieve on their own. The mechanism to deliver the Progressive promise is the bureaucracy of the Administrative State. The Madisonian separation of powers in the U.S. constitution, designed to protect freedom, is an anathema to Progressives because it stands in the way of the Wilsonian goal of efficiency in administration.


And so when Steve Bannon said that the deconstruction of the Administrative State was a key policy goal of the Trump Administration he threw down the gauntlet. Deconstructing the Administrative State robs the Progressive movement of its prime tool, which is the bureaucracy. Deconstruction of the Administrative State leaves it an empty, powerless shell. Deconstructing the Administrative State and restricting government to its core legitimate functions would re-invigorate individual freedom and effort, leading to an explosion in economic growth and well-being, and a reduction in dependency.


The public policy question is, as always: markets or collectivism? The natural law viewpoint embedded in the constitution favors markets and individual freedom. The Progressive movement favors collectivism and central planning. The bureaucracy is its indispensable tool for command and control. Progressives and leftists of all stripes, trapped in the jejune utopianism of the 1960s, will fight with everything they have to squeeze a 21st century economy into a 1930s bureaucratic structure and the stasis that goes with it.


Because the stakes are so high, the political battle will be fierce. Winning the battle will be a long and difficult process. But the choice is clear: freedom and dynamism or collectivism and stasis.














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