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«Volume Title: Politics and Economics in the Eighties Volume Author/Editor: Alberto Alesina and Geoffrey Carliner, editors Volume Publisher: ...»

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6.2 Congress, the President, and the Regulatory Bureaucracy Because many of the strongest effects of politicians occur through indirect mechanisms that are not easily observed, the relationship between elected officials and the ongoing process of regulatory decision making is often misunderstood. In this section, we present a framework for the analysis of regulatory policy-making. We begin with the role of Congress, and then we turn to the president.B We start with the premise that congressmen are motivated in large part to seek reelection-certainly other goals, such as implementing good policy, require reelection. This motivation forces congressmen to respond to the interests in their districts. But this does not mean that constituents’ interest are weighed in a uniform way. Rather, weights accorded different interests reflect the degree to which particular interests within the district attend and respond to the actions of a congressman. Since most individuals have only the vaguest notion of their congressman, the main challenge of a congressman is to break through the information barrier. According to Mayhew (1974, 74), “A successful congressman builds what amounts to a brand name,” and empirical studies repeatedly show that name recognition is valuable on election day.9 The problem of building sufficient recognition to succeed on election day leads congressmen to focus on two types of activities: constituency service and national policy issues (Fiorina 1989). Constituency service includes a wide range of activities, which can be grouped into two categories. First, this service entails the congressman’s securing his district its share of governmental expenditures-highway funds, a new post office, urban development grants, sewage treatment facilities, and so on. Also in this category is direct service to individuals and groups, ranging from helping individuals find their lost Social Security checks to intervening in regulatory proceedings on behalf of prominent district interests. Congressmen serve as ombudsmen on behalf of their constituents before a host of regulatory agencies. The large presence of the federal government in the economy implies that the opportunities to play this role are numerous, and this ombudsman activity typically constitutes a major portion of a congressman’s efforts. Moreover, the federal system of regulation is designed to be open to the influence of congressmen (Fiorina 1981; McCubbins and Schwartz 1984; McCubbins et al. 1989), as we will discuss below.

Thomas Romer and Barry R. Weingast The second form of activity in which every member of Congress engages in order to develop a favorable reputation involves specialization in the policymaking process. This is most effectively done through the work of congressional committees. The committee system effectively divides the large set of national public issues into jurisdictions and assigns policy areas by jurisdiction to specific committees. This affords congressmen the ability to specialize on issues that relate to their constituents by obtaining membership in a committee with a policy jurisdiction that is important to the constituency. Because few congressmen can credibly claim a key role in major new legislation, the committee system affords opportunities for many members to specialize and build a reputation for expertise and influence in a specific area.

6.2.1 The Role of Congressional Institutions The literature on congressional institutions demonstrates that they play a key role in determining the specific form of policy outcomes. Recent work has aimed at formalizing the relationship between institutional structure and policy.l0For our purposes, what is most relevant is that these institutions set up multiple veto points, that is, positions within the institution that can readily delay or prevent legislation on a specific topic from becoming law. A major implication of veto power is that it endows relevant legislators with the ability to protect the interests they represent. Attention to the key veto points goes a long way toward understanding policy choice.

Committees are by far the most important veto points because each committee plays a strong role in shaping policy within its jurisdiction. Part of a committee's power arises from gatekeeping-the ability to keep legislation from coming to a vote by the full House or Senate. Exercising such veto power usually requires the support of the committee chairman and a majority of the committee. Put another way, opening the gates typically requires that the committee chairman and a majority of committee members expect to benefit from the legislation. If the legislation will only make them worse off, then the veto power will be exercised. Committees rarely bring their bills before the entire chamber unless they have the support of a majority. Hence most bills succeed once they get to the floor; that is, once they come up for a vote.

In summary, then, committees are powerful because they have a fundamental role in shaping the legislative agenda as well as the substantive content of legislative proposals.

If committees are the most important veto points within Congress, they are hardly the only ones. The bicameral structure of Congress implies that any legislation must attain majority support in both the House and the Senate.

While obvious, this condition can be hard to satisfy when the houses are of different parties, as in 1981-86, when the Democrats held a majority in the House and the Republicans a majority in the Senate. In addition, in each chamber there are players other than committee members who may be relevant for particular issues. In the House, the leadership, in the 1980s, played a Political Foundations of the Thrift Debacle strong role in scheduling and passing legislation.’2 In the Senate, individuals may hold up legislation by filibustering at strategic moments.

Constituency interests represented by congressmen at key veto points gain an advantage in the policy process. Veto power usually assures these interests that legislation will not make them worse off (otherwise it will never make it past the veto point). Though floor majorities, the leadership, and other wellplaced individuals such as the president often play important roles, an understanding of committees and their leaders remains central to the analysis of policy formation.

6.2.2 Congressmen and their Constituents In order to understand the legislative preferences of congressmen, we need to know the types of constituencies they face (Fenno 1978; Moe 1989). The relationship between congressmen and their constituents can be divided into several politically relevant subcategories. The first is a congressman’s entire district, that is, his “legal constituency.” More relevant, however, are a congressman’s supporters within the district who provide resources and votes.

These include organized interests such as environmentalists, labor unions, firms, and trade associations. Congressmen are especially attentive to the active interests within their districts, and this attention provides the basis for the commonly observed geographically based dispersion of interests in Congress (representatives from farm states are advocates of farm benefits; those from cities are advocates of funds for local highways and urban redevelopment).

Another subgroup consists of those with a potential interest in some policy, but who not only lack an organization, they are nearly completely inattentive and can be mobilized only with great difficulty. A good example are individuals who are induced, through dairy price supports, to pay too high a price for milk. Were they politically active, they might counterbalance milk producers’ influence over policy that maintains prices. More generally, taxpayers rarely organize to oppose a specific increase in revenue for some political purpose or to oppose a new loophole. Only on occasion can such a politically latent group play a major role in politics.

A final set of constituents relevant for a congressman comes from outside the district. These constituencies usually have interests that fall within the jurisdiction of a committee on which the congressman serves. This rarely causes congressmen to favor organized interests outside the district over active interests within the district. The typical pattern is for a congressman to receive money and support from groups whose interests are compatible with those in his district or for which the district is inactive or indifferent (Denzau and Munger 1986).

In what follows we use the terms “constituents” and “constituency” to refer to those active interests (whether organized or diffuse, inside the district or out) that play a role in a congressman’s support coalition. Hence we exclude those interests within the district that are either latent or outside the congressThomas Romer and Barry R. Weingast man’s group of supporters. For any given issue area, legislative preferences of relevant congressmen, especially those positioned at key veto points, must be assessed. This requires focusing on their constituency pressures, typically by examining the various active and potentially active constituencies likely to be interested in the issue.

6.2.3 The Relationship of Regulatory Agencies to Congress Because regulatory agencies affect a broad range of interests, it would be surprising to find politicians without the means to influence their decisions.

While direct attention through hearings, investigations, and policy pronouncements is relatively sporadic, there are many other, often more effective devices for political influence. These include a complex incentive system that rewards agencies that follow political intentions and punishes those that do not. The routine process of regulatory oversight does not involve systematic congressional intervention. A regulatory agency attuned to congressional interests (particularly those represented on relevant committees) will rarely deviate in such a way as to incur congressional ire. Such deviations, when they occur, can damage an agency and its leaders-resulting, for example, in the removal of an issue from an agency’s jurisdiction, cutting off funds, or ruining a regulator’s political career. Because of such costs, agencies tend to be attentive to the relevant congressional constituents (Ferejohn and Shipan 1989).

Direct intervention, then, is episodic and relatively unusual, not because congressional influence is weak, but because direct congressional attention and participation is required only when agencies go astray. l 3 The structure of congressional institutions assures that committees with jurisdiction over a regulatory agency’s policy area play a major role in the agency’s fate. It is these committees that handle new legislation and respond to problems with agency performance. Two types of changes in the regulatory environment tend to attract considerable attention by the relevant congressional committees: (1) a change in the economic environment that threatens the regulated industry, and (2) an attempt by an agency to alter the regulatory status quo. In the case of the thrift industry both of these took place.

6.2.4 The Role of the President In general, the president is concerned about reelection, his party’s prospects, and his reputation long after he leaves office-his place in history.

These factors lead him to take a wider view of policy issues than do congressmen. Like congressmen, the president is strongly affected by active constituencies. In contrast to congressmen, however, the president’s electoral base is necessarily larger. Where congressmen can focus on a narrow segment of the national picture, the president must respond to a broader perspective.

The president is therefore more likely to look beyond active interest groups to reach the larger public. Because he commands national attention, the president can potentially transform the politics of certain policy issues. For a small Political Foundations of the Thrift Debacle set of issues-typically those highest on the presidential agenda-the president can sometimes mobilize the nation against narrow, active interests. But, because he does have limited resources, a president typically husbands his time and effort to those areas of high concern to him where the effort will make a difference. As regards regulation, the president has the institutional capacity to monitor and influence on-going regulatory policy (Moe 1985b).

This capacity can be deployed to limit attempts by an agency to change policy course in a manner that hurts presidential interests.

6.2.5 Implications for Regulatory Policymaking The implications of this view of regulatory politics are as follows. First, congressmen on the relevant committees play important roles for ongoing policy decisions within a regulatory bureaucracy. Even though congressmen may not be attentive, members of their active support constituency are. Because congressmen collaborate with these constituents to intervene when regulatory agencies seek to deviate from the constituents' interests, regulators pay close attention to these interests. Intervention by politicians usually means trouble for bureaucrats, and it is widely agreed that agencies seek to avoid it. If an agency presses on in spite of congressional opposition, congressional intervention usually follows. The main lesson for regulatory policy-making is that, in a confrontation between a congressional committee (i.e., committee chair and a supportive committee majority) and an agency, the committee usually prevails.

Second, politicians have a variety of strategies available to them for influencing agencies. Actual legislation is usually not necessary for Congress to get the agency to change c o ~ r s e.This allows congressmen to play the role '~ of ombudsman on behalf of their constituents in a way that is not particularly visible to outsiders. When faced with a conflict between regulators and constituents, congressmen nearly always side with their constituents.

Third, when examining a particular regulatory policy initiative, we should distinguish between the actors implementing policy and the political forces that led to the policy. Too often, students of regulation presume that because a regulatory agency initiates a policy without explicit instructions from politicians, the agency-and not the politicians-must be responsible for the policy change. By the framework we outlined above, this inference is incorrect because it ignores the political forces working on the agency.

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