U NIT 5 – T HE P RESIDENT, T HE B UREAUCRACY AND T HE J UDICIARY PPT 7

B UREAUCRACIES AS R EGULATORS Government regulation is the use of governmental authority to control or change some practice in the private sector. Most controversial role in a land of free markets (capitalism), yet Congress gives mandates to regulate activities such as interest rates, the location of nuclear power plants and food additives.

G OVERNMENT R EGULATION Everyday life itself is subject to bureaucratic regulation; almost all bureaucratic agencies are in the regulatory business. Example: U.S. Department of Agriculture is charged with regulating the quality of meat products.

R EGULATION : H OW IT G REW Until 1887, the federal government made almost no regulatory policies. In 1887, the Supreme Court upheld the right of the government to regulate the business operations of a firm ( Munn v. Illinois) In 1887, Congress also created the first regulatory agency, the Interstate Commerce Commission (ICC), charged with regulating the railroads, their prices, and their services to farmers.

R EGULATION : H OW IT W ORKS 1. Develop a set of rules (guidelines) – usually in consultation with the industries being regulated 2. Apply and Enforce the rules Sometimes waits for complaints Sometimes sends inspectors to the field Sometimes requires applicants for a permit or license to demonstrate performance consistent with congressional goals and agency rules

E LEMENTS OF R EGULATION All regulation contains three elements: A grant of power and set of directions from Congress A set of rules and guidelines by the regulatory agency itself; and Some means of enforcing compliance with congressional goals and agency regulations

H OW S HOULD WE R EGULATE ? The budgets of regulatory agencies, their level of employment, and the number of rules they issue are all increasing. (Even during the Reagan administration)

D EREGULATION The idea behind deregulation is that the number and complexity of regulatory policies have made regulation too complex and burdensome. Critics of regulation have a number of accusations against the regulatory system. It raises prices It hurts America’s competitive position abroad. It does not always work well. Critics of deregulation point to severe environmental damage during the Reagan administration. Many observers attribute a portion of the blame for the bailout of the savings and loan industry to the deregulation of the 1980s.