Susan Dudley, Part 3
An introduction to the Opposition Report>
1 Nov 2006 in Regulatory Policy, People & Institutions
On Monday we began a multi-part series on Susan Dudley, the Bush administration's nominee to head OMB's Office of Information and Regulatory Affairs. Her confirmation hearing is scheduled for November 13. A campaign is being led by Public Citizen and OMB Watch to scuttle her confirmation. Our series analyzes the merits of the opposition report. Tuesday's installment provided background on Public Citizen and OMB Watch, the activist organizations who authored the report.
Today we provide an analysis of the introduction to the Report. Because the introduction is essentially an executive summary, we limit our review to a synthesis of what the document alleges and whether its allegations are supported by potentially credible evidence. If an allegation is raised and discussed extensively elsewhere in the report, we postpone our review of that issue until we address the relevant section.
This 4-page introduction cum executive summary is for readers too busy or uninterested in the details. It says Dudley is unfit to lead OIRA for three reasons, paraphrased below:
- "Dudley is ideologically opposed to regulation, and this precludes her from making unbiased decisions concerning public safeguards."
- "Dudley supports policies that would result in 'paralysis by analysis,' thus preventing federal agencies from ever issuing regulations needed to protect health, safety and the environment."
- "Dudley has unacceptable ties to corporate special interests due to her work at the Mercatus Center's Regulatory Studies Program at George Mason University."
Below we focus on these three arguments, which may not be exhaustive. The text in the introduction is not organized clearly. Some of the arguments made in one subsection appear to belong in another, and some of the text seems to raise issues unrelated to any of the three objections.
"Dudley is ideologically opposed to regulation"
The Opposition Report alleges that Dudley is ideologically opposed to regulation, and that such an ideology ought to disqualify her from serving as OIRA Administrator. We address these issues in reverse order..
Is ideological opposition to regulation a disqualifying attribute?
Taking a realistic view of the federal regulatory system, it's not obvious why ideology should be a disqualifying condition. By its nature and design, OIRA has an often adversarial relationship with federal regulatory agencies. In bureaucratic terms, it is the agencies' job is to put forward their best case for the regulatory actions they propose to take. Regulatory agencies should be expected to display a strong institutional preference in favor of regulation. Agency heads routinely support the missions of their agencies. It's common for the heads of regulatory agencies and their deputies to be ideologically supportive of regulation. That's what interested them in public service and what motivated a president to nominate them. Support for the agency's regulatory mission may well be a prerequisite for Senate confirmation.
The job of the OIRA professional career staff is to subject the agencies' best case for regulation to rigorous and skeptical peer review. The staff works to root out analytic error so that the likely effects of regulatory action are fairly presented to decision-makers. The staff can't do this job effectively if the boss has an ideological bias in favor of regulation. For the staff, an Administrator who is ideologically supportive of regulation is almost certainly an unreceptive audience for a fair but critical review of an agency proposal.
Public Citizen has opposed the confirmation of nominees on the ground that they were insufficiently committed to the mission of the agencies they were nominated to lead. A recent example is Andrew von Eschenbach, nominated to be the Commissioner of the Food and Drug Administration. EPA Deputy Administrator Marcus Peacock encountered similar opposition. Grist's Amanda Griscom Little attributes to Gary Bass, OMB Watch's executive director, the sentiment that "Peacock [is] a conservative ideologue 'with a decidedly anti-environmental regulatory track record'." In the case of Graham and now Dudley, Public Citizen's complaint is that the nominee is too committed to the mission of the agency.
What is Dudley's ideology?
Throughout Dudley's public interest comments, one ideological lodestar shines brightly: the regulatory principles of Executive Order 12866 and its predecessor, Executive Order 12291. These Executive Orders contain essentially the same regulatory philosophy. Quoting from the preamble of Executive Order 12866:
The American people deserve a regulatory system that works for them, not against them: a regulatory system that protects and improves their health, safety, environment, and well-being and improves the performance of the economy without imposing unacceptable or unreasonable costs on society; -- regulatory policies that recognize that the private sector and private markets are the best engine for economic growth; regulatory approaches that respect the role of State, local, and tribal governments; and regulations that are effective, consistent, sensible, and understandable.
Section 1 of the EO states then-President Clinton's regulatory philosophy:
Federal agencies should promulgate only such regulations as are required by law, are necessary to interpret the law, or are made necessary by compelling public need, such as material failures of private markets to protect or improve the health and safety of the public, the environment, or the well-being of the American people.' In deciding whether and how to regulate, agencies should assess all costs and benefits of available regulatory alternatives, including the alternative of not regulating. Costs and benefits shall be understood to include both quantifiable measures (to the fullest extent that these can be usefully estimated) and qualitative measures of costs and benefits that are difficult to quantify, but nevertheless essential to consider.
Section 1 concludes with a clear directive to all agency heads under the president's authority to maximize net benefits:
Further, in choosing among alternative regulatory approaches, agencies should select those approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts; and equity), unless a statute requires another regulatory approach.
A fair inference from the Opposition Report is that neither Public Citizen nor OMB Watch agree with this regulatory philosophy. In contrast, Dudley's public interest comments generally hew to it rather closely. In almost all cases where the Report criticizes Dudley's views on a specific regulatory issue, it is the philosophy and principles of Executive Order 12866 that are the source of disagreement.
Dudley's own views appear to be a blend of the economic theory of regulation set forth by George Stigler and the public choice model of James Buchanan and Gordon Tullock. Stigler viewed government's power to coerce as its chief asset, and the interplay of each interest group as a competitive battle to use that power for its own advantage. Buchanan and Tullock expanded upon this thesis with the notion that government agencies and officials have their own interests to maximize. Both of these theories of regulation dispense with any idealistic, foundational "public interest" that guides the political marketplace. Both explicitly allow for (and indeed predict) that a major output of regulation will be what Charles Wolf has called "nonmarket failure," a category that includes government failure as a subset. (The term "nonmarket failure" lacks curb appeal and thus seems to have caught on only among academic economists.)
Stigler and Buchanan were awarded Nobel prizes in economics in 1982 and 1986, respectively. Nobel prizes in scientific fields are not awarded to those who hold fringe views of the science within those fields. Of course, it's not at all uncommon for future Nobelists to have staked out what originally appeared to be a fringe view and over time watched as that view become mainstream opinion. Nevertheless, it is inconceivable that an economist whose views mirror those of one or more Nobel prize winners can be credibly described as "radical" or "extreme," terms the Opposition Report uses 17 and eight times, respectively.
The authors of the Opposition Report display the contrary ideologies of post-modern liberalism or progressive socialism. They view government's power to coerce as the primary instrument through which a broad array of public policy goals might be achieved. Public Citizen describes itself this way:.
We fight for openness and democratic accountability in government, for the right of consumers to seek redress in the courts; for clean, safe and sustainable energy sources; for social and economic justice in trade policies; for strong health, safety and environmental protections; and for safe, effective and affordable prescription drugs and health care.
The key elements of this self-description are Public Citizen's support for strict producer liability ("the right of consumers to seek redress in the courts"); the protection of US labor, especially unionized labor ("social and economic justice"); a natural and economic world without risk ("clean, safe and sustainable energy sources"; "strong health, safety and environmental protection"); and universal access to and publicly-subsidized health care ("affordable prescription drugs and health care").
None of these goals can be achieved through the operation of market forces. Market allocation permits individuals, in large measure, to control their own destinies; government allocation protects individuals from themselves and the competition of others. It inevitably subordinates their preferences to elite oversight, control and direction. A high degree of governmental coercion, in the form of regulation, is necessary to suppress markets so that they do not achieve outcomes contrary to this set of policy goals. That coercive pressure must be sustained to prevent markets from returning to equilibrium conditions, and it often must be intensified to overcome market actors (including individuals as well as firms) from devising ways to evade regulatory edicts.
Economic analysis lays bare the sacrifices that must be made when government exerts its coercive powers. Where a majority of citizens are in favor of making these sacrifices, there is little impediment to the easy adoption of regulations that have more costs than benefits. But where majorities oppose making these sacrifices, or value the benefits that would be sacrificed more highly than the benefits that governmental regulation produces, economic analysis can undermine public support for regulation. So it's unsurprising that Public Citizen distrusts market forces. Consistent with Stigler's theory of regulation, Public Citizen cannot be successful without capturing, and tapping into, and then retaining public support for, governmental use of coercion.
"Paralysis by analysis"
This alliterative phrase is widely used to argue against the use of systematic procedures for evaluating the likely effects of regulation. The notion is that opponents of a regulation can prevent it by imposing on agencies interminable analytic demands. This is a reasonable concern. Still, it should be noted that the concern cuts both ways. As much as opponents of regulation may be inclined to promote layers of regulatory analysis as a tactic to bollix up the regulatory process, supporters of regulation are similarly motivated to eliminate analysis as a tactic to expedite promulgation. Both are tactics, however, not principles. If a public interest untampered by special interest exists, there is an optimal amount of regulatory analysis that is necessary to discern what governmental actions are most consistent with it. The Goldilocks Level of Regulatory Analysis rises with the scale and scope of the regulation and the problem it is intended to remedy. Executive Order 12866 recognizes this insofar as it has three categories of regulatory actions having different analytic burden (nonsignificant, significant, and economically significant).
The regulatory analysis requirements in Executive Order 12866 are largely unchanged since Executive oOder 12291 was issued in 1981. Guidance for regulatory analysis issued by the Bush 43 administration differs little from guidance issued by the Bush 41 and Clinton administrations. No evidence is provided in the Opposition Report suggesting that adhering to these guidelines has become more difficult over the years.
The question at hand ought to be whether Dudley would significantly increase agencies' analytic burden such that "paralysis by analysis" results. But the argument in the Opposition Report in support of the proposition that she would increase agencies' burdens speaks to an unrelated matter -- whether the laws ought to permit decision-makers to utilize regulatory analysis in decision-making. The authors criticize Dudley for recommending that Congress extend the regulatory principles of Executive order 12866 to those laws that prohibit decision-makers from taking into account both benefits and costs. Reasonable people may disagree concerning whether Congress ought to do this, but there should be no disagreement that it is within its constitutional authority to do so and entirely legitimate for Dudley to advocate it. Yet the Opposition Report seems to imply that such recommendations are fundamentally illegitimate or immoral, and that because Dudley has made such recommendations she is unfit to serve as OIRA Administrator.
The Opposition Report could have based its argument on her public interest comments instead. Dudley has frequently criticized agency analyses as seriously flawed and inadequate to inform decision-making. Stipulating that her reviews are accurate, it's reasonable to expect that as OIRA Administrator she would demand that agencies satisfy more rigorous performance standards. This could require significant increases in analytic effort, particularly at those departments and agencies with traditionally weak regulatory analysis programs. But it is unlikely to impose any significant burden on the agencies responsible for health, safety and environmental regulation. These agencies have well-developed programs and decades of experience conducting regulatory analysis.
"Ties to corporate special interests"
The essence of this argument is that working for a university-affiliated research center that has received corporate financial support disqualifies Dudley from leading OIRA. The argument is a peculiar one. For example, if Public Citizen and OMB Watch had applied it in 1993 they would have been compelled to oppose the nominations of Graham Allison, Mary Jo Bane, Ashton Carter, Jack Donohue, David Ellwood, Joe Nye, and Bob Reich -- all faculty from the John F. Kennedy School of Government who were appointed to Executive branch positions of equivalent or greater rank. (In 2005, Harvard University collected over $11 million in corporate funds for sponsored research, 10% of its non-federal sponsored research income. For 2006, the corporate share of Mercatus' Center's non-federal funding is 12%.)
Conflict of interest would be more plausibly alleged if the nominee's prior employment was with an organization whose transparent mission is policy advocacy directly relevant to the government position. In that case, it's reasonable to be concerned that the nominee might both favor her former colleagues and be unable or unwilling to give opponents a fair hearing. But presidents routinely appoint strident policy advocates to senior administration positions. The most notable example in this case is Public Citizen's Claybrook, who led NHTSA during the Carter administration.
As for specific donors, about which the Opposition Report devotes considerable attention, there is little difference in principle between corporate donors to the Mercatus Center and its Regulatory Studies Program and foundation and individual donors to Public Citizen and OMB Watch. All donors have a plausible interest in research outcomes, including regulatory agencies. The question should be whether donors control the research projects that are funded or have influence over research outcomes. Levels of control in project selection range from negligible to total, and government sponsors tend to exert the greatest amount of control. Influence over research outcomes is a more pernicious threat, and bona fide researchers resist sponsors' attempts to influence them.
The Mercatus Center has a policy on research independence that states, in part:
The Mercatus Center is committed to the highest standards of academic quality and credibility, and to ensuring that our work stands up to rigorous peer review. Mercatus scholars independently pursue a research agenda and educational activities that advance our mission. Mercatus does not engage in research or educational activities directed or influenced in any way by financial supporters.
This policy denies sponsors control over both project selection and research outcome. This is a demanding standard for a nonprofit organization, and one that probably prevents Mercatus from accepting federal funds, which always come with strings attached. The Opposition Report acknowledges Mercatus' policy but dismisses it as "rhetoric" indicative of "a public interest veneer" (p. 54). These criticisms are themselves rhetorical devices.
The relevant factual question is whether Mercatus has adhered to its policy. Mercatus cannot prove that it has done so, for the absence of evidence of an effect is not evidence of its absence. Alternatively, opponents could prove that Mercatus' has failed to adhere to its policy if they could show that donors influenced either project selection or research outcome. The Opposition Report contains no such evidence.
Partisanship
The Opposition Report does not say so directly, but its authors could be motivated by concern about Dudley's partisanship. To be clear, partisanship is not a pejorative term. It's a normal and routine criterion for nomination to sensitive political positions within the Executive branch, such as that of the OIRA Administrator. Sally Katzen, who headed OIRA from 1993-98 and subsequently served as Deputy Director of OMB, was a highly regarded partisan Democrat when she was nominated in 1993 but was confirmed with broad Republican support. In any case, partisanship cannot be a principled basis for nonpartisan organizations such as Public Citizen and OMB Watch to oppose Dudley's confirmation.
Ironically, if partisanship means fealty to party the available evidence suggests that Dudley may be among the least partisan individuals ever nominated to such a sensitive position. Dudley appears to have been as critical of Bush administration regulatory actions as she was of actions taken by the Clinton administration. In that sense her nomination is actually quite remarkable, and possibly unprecedented. To see why, we examine some statistics from the Mercatus Center's Regulatory Studies Program in general and Dudley's regulatory reviews in particular. For comparison purposes, we have previously noted that OMB Watch commentary and analysis directed at OMB has been extensive during Republican presidencies but was virtually silent during the Clinton administration. This is a crude indicator of political bias/partisanship. Has Dudley (or the Regulatory Studies Program in general) withheld criticism of Bush administration regulatory actions but aggressively targeted actions by the Clinton administration?
Our crude indicator of political bias/partisanship would be met if Dudley had issued public interest comments more frequently during the Clinton than Bush administrations. Thirteen of Dudley's 33 public interest comments were issued during the Bush administration (an average of 2.2 per year) and 20 were produced during the Clinton administration (an average of 2.5 per year). A difference of just 12% in the production rate is not meaningful. Moreover, in 2003 Dudley was promoted to RSP director. It's entirely reasonable to expect a drop in the quantity of her technical output accompanying a significant increase in management responsibility. Dudley's record of output does not support the political bias/partisanship hypothesis that OMB Watch satisfies on the opposite side.
As for the RSP as a whole, there are 102 public interest comments posted on its website from March 1997 through September 2006, an average of about 10 per year. These data also do not support the political bias/partisanship hypothesis. Of the 102 documents, 42 were published during the Clinton administration (0.91 per month over 46 months) and 60 were published during the Bush administration (0.86 per month over 70 months). RSP's production rate is distinguishable only at the second decimal place when categorized by the party controlling the Executive branch.
An obvious question not posed in the Opposition Report, but clearly of interest for evaluating Dudley's likely independence, is whether Dudley or Mercatus have given the Bush administration undeservedly favorable treatment in their regulatory reviews. That would be prima facie evidence of political bias, if not outright partisanship. Conversely, the absence of evidence of undeservedly favorable treatment would be at least weak evidence of non-partisanship.
An alternative hypothesis of political bias/partisanship might be met if RSP public interest comments have been less critical and more supportive during the Bush administration. But there is little evidence to support this alternative hypothesis. The Opposition Report characterizes Dudley as ideologically opposed to regulation irrespective of its merits. The authors do not allege that Dudley treated Bush administration initiatives more gently or favorably than those of the Clinton administration. The Opposition Report is especially critical of, for example, Dudley's review of the Bush administration's drinking water standard for arsenic.
Originally we reported these figures as 13 (Bush) and 21 (Clinton). They do not sum to 33. The correct numbers are 13 (Bush) and 20 (Clinton). Resulting ratios in the text are corrected.
The final sentence is corrected to include three critical words inadvertently omitted; this omission materially changed the meaning of the sentence.
Original: "The Opposition Report is especially critical of the Bush administration's drinking water standard for arsenic.
Corrected.:"The Opposition Report is especially critical of Dudley's review of the Bush administration's drinking water standard for arsenic."
