Read Part I here and Part II here.

Special interests hold power in the administrative state. 

Political scientists and legal scholars suggest the administrative state exists because as policy problems became more complex, Congress needed to develop expertise within the executive branch to not only understand the economic and technological changes in the postbellum American economy but also regulate the industries arising from these changes. The problem with this story is that it does not explain why Congress placed expert agencies in the executive branch. 

As a practical matter, presidents do not control the bureaucracy. Special interests define bureaucratic power. Even if one believes, as a first principles matter, that the President can ignore whistleblower protections against firing an employee who disclosed confidential information to Congress or can fire a civil servant at will notwithstanding statutory authorities, most Presidents find engaging in first principles decisions to be costly. Such decisions risk congressional oversight and special interest litigation – and not on grounds that the President violated the Constitution. Instead, the President violated a bargain made between a post-Nixon Congress and interest groups representing the public interest. That the President faces public interest costs in making what he believes are constitutionally valid decisions is an empirical refutation of the idea of unilateral presidential control over the executive branch. To reduce the risk requires that Congress renegotiate the deal it made on public interest grounds. 

One view of regulation is that it is a line of text on paper that makes a demand on the public. That view may be an oversimplification. If regulation exists as a delegation from Congress, then it signifies the desires of Congress to avoid having to resolve a conflict between (usually two) policy coalitions that demand some new policy. By writing statutes ambiguously, Congress forces the policy conflict onto the agencies. What becomes finalized as regulatory code is simply a resolution among competing coalitions (special interests).

Because special interests set the regulatory agenda, they hold power in the administrative state. Thus, we ought to mean by regulation the policy preference of the winning coalition. That preference subsidizes the interests of the winning coalition. What is codified on paper is simply a reference to the winning preference. Power in the administrative state is thus not held by the codifier but by the interest group whose agenda-setting strategy wins out.

These interest groups do not represent the disinterested entrepreneur or the small business that lacks agenda-setting power. The pioneer class of entrepreneurs are innovators, disruptors, and social capital builders. They are threats to the incumbents who lobby to tilt the agenda in favor of their coalition. Those incumbents, ever threatened by the creative destruction posed by the market newcomer, use the regulatory process to block that newcomer. A strategic incumbent, therefore, knows that regulators (agents of neither Congress nor the President but of special interests) can destroy the innovator outside of public means. 

Daniel Epstein is an Assistant Professor of Law at St. Thomas University Benjamin L. Crump College of Law.