Agency design and political control.

• Author: Berry, Christopher R.

ESSAY CONTENTS INTRODUCTION I. AGENCY DESIGN AND DISTRIBUTIVE POLITICS A. Agency Design B. Distributive Politics C. Administrative Agencies and the Distribution of Federal Funds II. AGENCIES, MONEY, AND POLITICS A. Background and Data B. Empirical Strategy C. Findings: Agency Design and Political Control D. Other Agency Structures E. Interpretation and Mechanisms CONCLUSION APPENDIX I. ROBUSTNESS APPENDIX II. FUNCTIONAL FORM INTRODUCTION

Although historical debates about the separation of powers focus on the interactions between Congress, the President, and the Judiciary, in modern times, the bureaucracy is the elephant in the room. (1) In a world of seemingly inevitable widespread congressional delegation to administrative agencies and the Supreme Court's growing acceptance of independent agencies, (2) how exactly do we hold accountable the fourth branch of government? The canonical answer in administrative law, constitutional law, and political science is agency design. (3) By carefully selecting structural features of administrative agencies and requiring the use of specific decision-making procedures, Congress and the President can ensure responsive and accountable bureaucracy, or so the argument goes. As Congress continues to create agencies with increasingly varied structure--and as the Supreme Court continues to grapple with the constitutionality of those structures (4)--the stakes of these conceptual debates are on the rise. (5) Although the pace at which new agencies are created has slowed, the past several years have nevertheless seen the creation of several new agencies within the federal bureaucratic apparatus, particularly in the financial regulation sector. (6) Indeed, we are in the midst of something of an agency design renaissance--a period of fundamental change with respect to the federal bureaucracy--deriving mainly, if not exclusively, from the emergence of new administrative forms. (7)

Unfortunately, there is virtually no empirical scholarship that demonstrates a link between agency design and political responsiveness. This is due not to a lack of attention but to a fundamental problem of research design arising from the institutional landscape of administrative agencies. Previous literature largely focuses on the study of individual agencies to document political influence exerted by Congress or the President on a specific policy domain--for example, showing how congressional views affect a specific agency's rulemaking or adjudication decisions. (8) Such studies of individual agencies are important, but also analytically incapable of identifying the role of agency design in political responsiveness. First, the relevant institutional features almost never vary within a single agency. If a multi-member board governs the agency, then a multimember board likely always governs the agency; therefore, one can infer nothing about whether board structures undermine political accountability by observing only a single agency. Second, most policy outputs--where one would look to see evidence of political control--are not readily comparable across agencies. The degree of political responsiveness evident in different agencies' regulations or enforcement decisions is nearly impossible to compare because there is no obvious metric. What does it mean to say that a new Clean Air Act regulation promulgated by the Environmental Protection Agency was more responsive--to the concerns of Congress or the President--than a recent decision by the Federal Trade Commission to prohibit a proposed merger? Without the ability to identify and measure some common policy output, inferences about the role of agency structures on policy decisions are impossible as well. As a consequence, there has been very little quantitative scholarship that establishes a link between agency design and a similar agency output across agencies or over time. (9)

This Essay focuses on an activity common to and comparable across many agencies: the distribution of federal moneys. A focus on federal spending, in and of itself, is not novel. Within political science and economics, the so-called "pork barrel" or distributive politics literature has long focused on the allocation of federal funds to different states or congressional districts. Most recent scholarship, however, has focused almost exclusively on Congress's appropriation decisions. (10) This narrowness is unfortunate because after Congress authorizes and appropriates funds, the ultimate allocation decisions--who gets what money--are almost always made by the bureaucracy. (11) Importantly, this is true not only for general programmatic appropriations--those lacking earmarks designating recipients--but also for the vast bulk of earmarked appropriations. Most earmarks are contained in committee reports or other parts of the legislative history of a bill, none of which are formally enacted as part of the statute. (12) Earmarks are not, therefore, legally binding on the agencies. (13) Agencies, of course, might well exercise their discretion to implement whatever legislative deal was actually struck in the Congress--including all earmarks. But given the familiar principal-agent problem between the bureaucracy and political principals, (14) there is no shortage of reasons that an administrative agency might not perfectly implement legislative goals. So long as agencies act as intermediaries in the process of allocating federal dollars, the failure to account for the bureaucracy is a potentially consequential omission. Using the data and methodology from distributive politics, this Essay fills that gap and provides a straightforward way to test the degree of agency structure's effects on allocation decisions.

We base our empirical strategy on the standard methodology in distributive politics. In distributive politics, to study the central question of who gets what from the federal budget for what reason, researchers focus on the receipt of federal funds by a congressional district and ask whether the level of funding increases or decreases when the district is represented by a member of the majority party in the House or the Senate or by a ranking party member or committee chair and so on. (15) Conceptually, our strategy goes one step further: because funds are allocated by different agencies with different structural features, it is possible to ask whether the aforementioned effects vary systematically as a function of different agency features. More generally, our empirical strategy tests whether political factors that are known to affect the receipt of federal funds by congressional districts--for example, whether a district is represented by the President's party--matter more for agencies with structural features that are thought to make them more susceptible to political influence. For example, we can ask and answer the question: are more insulated agencies less responsive to changes in district-level political conditions?

To be clear at the outset, this approach to the problem, while novel, is not methodologically complicated. Indeed, it is quite simple. We simply relate standard measures of agency structure to variables known from the distributive politics literature to affect spending allocations. The standard measures of agency structure are readily available from the literature, though we use them in a different way. Prior studies take agency structure as a dependent variable and seek to explain when and why political principals try to use structure and process to constrain the bureaucracy. (16) In this Essay, rather than treat agency structure as the dependent variable, we treat it as an independent variable and test whether it affects the degree of political responsiveness. To accomplish this, we focus on federal funds distributed by agencies to congressional districts and ask whether those agencies with structural features claimed to facilitate accountability are more responsive to political factors in their funding allocations. We believe this Essay presents the first method capable of testing whether agency structure indeed matters for controlling the conduct of the administrative state.

1. AGENCY DESIGN AND DISTRIBUTIVE POLITICS

   This Essay relates to two longstanding literatures, one on agency design and a second on distributive politics. At their core, both these literatures are focused on the responsiveness of political institutions. The agency design literature--situated at the intersection of law and political science--seeks to understand the effect of structural features like insulation and agency organization on accountability and performance.

   1. Agency Design

      Early scholarship on the administrative state tended to emphasize the bureaucracy's technocratic expertise and celebrated agency insulation from politics. (17) Administrators, it was generally thought, would utilize particularized knowledge to implement desirable public policy. (18) In contrast, having witnessed some of the ills of unaccountable technocratic governance, a second generation of scholarship took the lack of agency accountability--that is to say, insulation from politics--to be a problem for governance rather than a solution. These concerns culminated in the 1970s with a boom of scholarship emphasizing the pathologies of unaccountable bureaucratic entities. (19) A particularly pessimistic account of these agency problems arose in the late 1970s under the "delegation as abdication" thesis, which dominated academic debates about the bureaucracy. Critics of the administrative state argued that an unaccountable and headless fourth branch of government--the bureaucrats--had come to run American politics. (20) The unelected and uncontrollable bureaucracy--not the President or Congress--was said to drive important public policy. (21)

      Aiming to cure this perceived lack of democratic accountability, scholarship over the following decades emphasized the various ways in which Congress and, more...