Stealth Deregulation: The Untold Story

Whenever possible, Republican presidents have pursued a policy of widespread deregulation. They have used a variety of stealth tactics to undermine important financial, environmental, consumer and workplace regulations.

The enormous ecological and economic damage in the Gulf of Mexico caused by the British Petroleum oil spill is just one telling example of the breakdown of regulation and oversight by the federal government. There are many more. Consider the 2009 outbreak of salmonella in several peanut butter factories. And of course it is now clear that the lack of government oversight of the financial sector was a major cause of the mortgage loan crisis and the severe economic recession that it triggered.

Some people have blamed such regulatory lapses on the inherent incompetence of the federal government. But these failures have little to do with incompetence and everything to do with the rise of a conservative, anti-government ideology that has been fundamentally hostile to regulation. “Deregulation” was the mantra of President George W. Bush and his Republican predecessors, and many of the problems we are now facing are the predictable result of this failed political philosophy. Importantly, these conservatives not only undermined federal oversight of the energy industry, the food system, and the financial sector, they also worked to reduce broad protections for consumers, workers, and the environment.

One particularly glaring example of this atmosphere of deregulation: the Minerals Management Service (MMS) of the Department of the Interior, the agency charged with overseeing oil operations in the Gulf of Mexico. During the Bush administration, the staff of MMS frequently partied with oil company representatives and accepted expensive gifts from them. In return, British Petroleum got a waiver from conducting an environmental impact analysis and no inspections were conducted of its blowout preventers. In addition, BP was allowed to not use an advanced blowout prevention technology (one that is required by many other countries) because the MMS agreed with the company that it would be too expensive. Not surprisingly, Randal Luthi, MMS director under Bush, eventually was rewarded with a well-paying job as head of the National Oceans Industries Association, a private trade group that focuses on creating "a favorable regulatory and economic environment for the companies that develop the nation's valuable offshore energy resources."

Most Americans still do not know the full story about this Republican effort to weaken and dismantle regulatory protections for the public. Indeed, most were not even aware that it was happening on such a wide scale. That is because much of this deregulation was accomplished behind closed doors, deep in the bowels of the federal bureaucracy where it got little attention.

This article will bring to light how this strategy of stealth deregulation was pursued in the administrative branch under George W. Bush. It is a story of devious appointments, slashed budgets, weakened rules, and relaxed enforcement. I will also discuss what needs to be done to solve the problems caused by this era of runaway deregulation.

The Attack of the Anti-Regulators

Imagine the following scenario: a new president comes into office and announces that he will appoint a dedicated pacifist to head the Department of Defense and a mafia lawyer as Director of the FBI. What would be the reaction? Many in the public would be outraged and the media would go into a feeding frenzy. In short, all hell would break loose.

In reality, of course, the chances of a president getting away with such ridiculous and disruptive appointments would be slim to none. And yet President George W. Bush did essentially the same thing: he routinely appointed officials whose political priorities ran exactly counter to the missions of the agencies they were charged with running. And many of these appointees worked for or represented the very industries that these agencies were supposed to be policing. For example, important posts in the Food and Drug Administration were filled by people who had careers working for the drug industry.

Exhibit One is Daniel Troy, who Bush appointed to be Chief Counsel for the Food and Drug Administration. Previously, as a lawyer, he filed a number of lawsuits against the FDA arguing against its right to regulate drug companies. Once in office, he stalled efforts to investigate the problems surrounding ephedra - a dietary supplement implicated in the deaths of more than 100 people. Amazingly, in a speech he gave to drug industry lawyers after his appointment, he offered the help of the government in defending these companies against lawsuits by consumers, such as those claiming that medications caused devastating side effects. Not coincidentally, enforcement actions against improper drug advertising went down dramatically after his appointment.

J. Steven Griles was another example of a Bush appointment that seemed designed to sabotage the agency to which he was appointed. He served as Deputy Secretary of the Interior in Bush’s first term. He worked previously as a high-paid lobbyist for the coal and oil companies – the very industries he was then put in charge of regulating. Not surprisingly, the National Mining Association celebrated his appointment, lauding him as “an ally of the industry.” And to top it off, while working for the government, he still received $284,000 a year from his former lobbying firm that continued to represent those industries.

This strategy of handing over regulatory bodies to the industries they are supposed to regulate has been dubbed by critics as “foxes guarding the henhouse.” Among some of the other more obvious foxes in the Bush administration:

Eugene Scalia, appointed to be Labor Department Solicitor. Scalia’s sympathies were unlikely to be on the side of labor since his previous job was specializing in anti-labor law and representing the management side in labor disputes. He also represented many of the companies that were opposing the new ergonomic rules that were later abandoned by the Department.

Jeffrey Holmstead, who became the EPA's assistant administrator for Air and Radiation. How protective could he be of the environment when he formerly worked as a lawyer representing numerous corporations seeking to block environmental regulations? He eventually headed the administration’s efforts to relax clean air requirements for coal-fired power plants – a move that Sen. James Jeffords called “the biggest rollback of the Clear Air Act in history.”

Marianne Horinko, Asst. Administrator for the Office of Solid Waste and Emergency Response – in charge of the Superfund program to clean up toxic waste sites. Before this, she worked as an attorney representing the industry side in Superfund suits. The rate at which Superfund sites were being cleaned up fell dramatically under the Bush Administration.

Michael F. Duffy, Federal Mine Safety and Health Review Commission. His primary experience was working as an attorney for the National Mining Association and the American Mining Congress.

Chuck Lambert, United States Department of Agriculture official in charge of regulating the meat packing industry. His previous job was working for a lobbying group for the National Cattlemen’s Beef Association. He was just one of a dozen people with ties to the meat industry who were appointed to the USDA, leading one consumer advocate to observe that “the USDA gives the impression of being a wholly owned subsidiary of America’s cattlemen."1

And these are just a few examples. An investigative reporter for the Denver Post found that over 100 of the high level officials appointed by President Bush in this first term of office were “overseeing” the industries they used to represent as lobbyists, employees, or lawyers. As Maria Weidner of the Earthjustice Legal Defense Fund observed at the time: “They are lawyers and lobbyists who build their careers by helping industry get out of … regulations. Now they will be doing the same things, only the taxpayers will be paying for it."2

The Deregulation Playbook

Once these anti-regulatory ideologues and industry representatives were in place, they were free to begin to impede the regulatory process and to undermine regulations passed by Congress. The specific tactics varied, but included:

Stalling. Agency personnel routinely and systematically delayed in formulating and issuing regulations mandated by law. For example, even though the Bush administration promised to act quickly to devise urgently needed rules to protect the right whale from extinction, it took the maximum time allowed by law, then refused to issue the rule, in violation of the law, for an additional 453 days. 3

Cutting Their Own Budgets. Remarkably, Bush appointees routinely tried to cut the budgets of their own agencies – making it more difficult for them to do their job. The budget for mine safety inspections, for instance, went from $139 million in 2001 to $118 million in 2006.

Inactivity. Administrators simply ignored emerging problems. In the area of workplace safety, despite evidence of a number of threats to Americans on the job, the Bush Occupational Safety and Health Administration largely sat on its hands during its entire tenure – issuing only one significant new regulation in eight years. Also, for years, Bush environmental officials refused to admit that global warming was a serious issue that merited immediate action.

Reducing Enforcement. Regulations are only effective if they are enforced vigorously. Bush appointees routinely worked to weaken enforcement. For example, they cut the civil penalties that polluters had to pay by half – weakening the incentives to comply with environmental protection rules. Another example was the reduction of inspectors and inspections in areas like food safety and mine safety. In 2003, the FDA conducted over 11,000 inspections a year for food safety – a figure that fell to 6,000 by 2007.

“Relaxing” Rules. Bush officials would look for opportunities to create exceptions or loopholes to rules so that various businesses could escape regulation. For example, they relaxed nationwide permit rules so coal companies, developers, and others could fill in thousands of streams, swamps, and other wetlands, without public notice or comment.

Listening Only to Industry. Many Bush appointees met routinely with business lobbyists interested in deregulation, but met only rarely or never with representatives of public interest groups. For example, Dick Cheney and other officials on the Energy Task Force met dozens of times with business leaders from the oil, gas, coal, and nuclear industries. Only one meeting was held for environmental groups – it lasted just one hour and much of that was taken up with introductions of the participants.

Refusing to Fill Appointments. Bush often took an inordinate amount of time filling high-level management vacancies in agencies he didn’t like. This left these agencies adrift, often run by temporary appointments who tended to not be very aggressive in pursuing the mandate of these organizations.

Ignoring Expert Advice. When research produced results that the Bush administration did not like, administration officials often ignored it and refused to act on it. A particularly egregious example was the suppression of scientific research about the seriousness of global warming and the attempt to gag administration scientists who tried to speak out on this issue.

Embracing “Voluntary” Regulation. Abandoning aggressive approaches to regulatory enforcement – like the use of the courts to force compliance – the Bush administration favored “voluntary” compliance schemes which often had little effect. The SEC, for instance, relied heavily on voluntary regulation of financial institutions. After the financial meltdown in 2008, the Chairman of the SEC admitted that this approach was “fundamentally flawed from the beginning … because investment banks could opt in or out of supervision voluntarily."

 

The Secret Office of Deregulatory Affairs

Just in case some federal administrators forgot what administration they were in and became too enthusiastic about initiating regulatory protections, the Bush White House vigorously employed the oversight powers of the Office of Information and Regulatory Affairs. Created in the Reagan administration, this little-known 50-person unit is buried in the Office of Management and Budget. In conservative administrations, the job of the OIRA is to review every proposed regulation and see it if may be too costly, particularly to business. If so, it is sent back to the particular agency for review or repeal. For much of the Bush administration, this agency was run by John Graham – a well-known opponent of much federal regulation. In the past, he had written that efforts to regulate such things as nuclear power and PCBs were simply a product of “a hypochondria raging among various consumer advocates and public interest groups.”4

Graham was particularly enthusiastic in using his unique administrative powers to frustrate regulation. During the eight years of the Clinton Administration, the OIRA sent back only 16 proposed regulations. In his first year alone, Graham sent back 19 regulations. And in his second year, his office identified 326 regulations for possible rejection or softening. Not surprisingly, many of these regulations were specifically targeted by various business interests and right-wing think tanks. In fact, when Graham entered office, he secretly surveyed business groups in order to compile a hit list of regulations they considered too onerous. The list included a wide variety of environmental, health, and safety regulations, including some addressing pesticide use, coal-mine ventilation, air and water quality, lead paint disclosure, toxic-release reporting, and family and medical leave. According to one lobbyist, “This was hush-hush, behind closed-doors stuff.” For business interests, this process showed them that Graham was on their side. As another lobbyist observed, “With Graham in that job, we figured we could get whatever we want.”5

New (Anti) Regulatory Philosophies

Anti-government ideologues in the Bush administration were not only trying to relax regulations and their enforcement, they were also trying to change the way administrators think about regulations. They were promoting new “regulatory philosophies” that primarily functioned as rationalizations for more deregulation. One new way of thinking about regulation that proved particularly dangerous to the public and the environment was cost-benefit analysis. The Bush administration acted vigorously to impose strict cost-benefit tests on all new proposed regulations, insisting that the benefits of new rules outweigh the costs. One of the chief promoters of this approach has been none other than John Graham, the one-time head of the Office of Information and Regulatory Affairs discussed earlier – a man who believes America has become highly over-regulated. At first glance, cost-benefit analysis sounds pretty reasonable – no one wants regulations that create more harm than good, right? But the problem is that there is a strong anti-regulatory bias in this analytic process.

Consider this: it is usually much easier to calculate the costs of regulations than it is to quantify the resulting benefits for society. For example, one can easily find out how many millions it would cost a utility to install a scrubber on a coal burning utility plant; but how much is it worth in dollars to save a life, or to reduce disease, or to have cleaner air? There are no markets for such things, and so they are difficult to “monetize.” This means that many benefits will always seem less important than the costs of the proposed regulations. The Bush administration admitted as much in 2004 when it deleted 55 pages describing benefits of a program to save an endangered species, leaving only the sections describing the costs to industry. An official explained that it was “too difficult to monetize the value of a species" – and the agency then used the amended report to justify cutting back the amount of protected habitat.6

Consider also what happened when the EPA proposed new regulations to limit runoff from construction and development sites, the largest source of pollution in coastal waters and estuaries in the U.S. During construction and development, massive amounts of sediments are carried into our water systems, and these activities also greatly increase storm water runoff that contains pollutants like pesticides, oil, grease, and fertilizers. But officials in the Bush White House gutted the proposal because the EPA was not able to put a dollar figure on the benefits the new regulations would produce for natural ecosystems and human health.7

Stealth Tactics Designed to Undermine Accountability

For conservatives, one of the main advantages of these kinds of deregulation tactics was that they took place deep in the bowels of the federal bureaucracy and so these decisions often flew underneath the public radar. Republicans were well aware that most Americans actually wanted more regulation, not less, in many areas like the environment and health care. For example, 60% want the government to spend more money on environmental protection. And only 7% of Americans want less regulation of pharmaceutical and drug companies, while 57% want more. And when conservatives tried to roll back these kinds of regulations in Congress during the 1990s, the public quickly found out and reacted very negatively. So to avoid this kind of public backlash, conservatives turned to “stealth tactics.” Once they had control of the presidency, they largely abandoned attacking consumer, environmental and workplace regulations in Congress where everyone could see what was going on, and instead turned to undermining these regulations in the dark halls of the federal bureaucracies. The idea seemed to be this: what people don’t know about, they are unlikely to get upset about.

What Can Be Done

While few Americans knew about all of these deregulation efforts, we are all now painfully aware of many of their disastrous consequences. People do tend to notice when tens of millions of gallons of crude oil spread over the Gulf of Mexico, when their food makes them sick, or when their retirement funds are cut in half. Clearly many of us are now outraged by the results of runaway deregulation, but what can we do about it?

First, the public must reject the conservative philosophy that fueled the deregulation fervor in the first place: the belief that the best market is an unregulated one. By now it should be abundantly clear that unregulated markets are prone to any number of problems and that there are legitimate reasons for government to step in to regulate them for the public interest. (For a description of the numerous failures inherent in a free market economy, see the  article “Capitalism Requires Government.”) It should also be evident that we cannot always trust businesses to do the right thing since they have to put corporate profits before the public interest.

Second, we must elect leaders who appreciate the importance of regulation as a way of protecting the public interest. Fortunately, President Obama understands this point and has pledged to use the administrative powers of government to actively protect consumers, workers, and the environment. He has appointed regulators who not only have expertise in the areas of their responsibility, but who also have pledged to vigorously enforce the rules and regulations of their agencies. The President has also promised that science and research will once again play a respected role in the formation of regulatory policies. Reports on his first two years in office found that many agencies have been much more diligent in their enforcement of regulations. For instance, Occupation Safety and Health Administration inspectors increased the number of citations for health and safety violations, and the agency shifted its attention toward high-risk sectors and repeat violators.

We must also insist that Congress step up to bat on these issues – something it has not always done, even when Democrats have been in control. It needs to ensure that agencies have the funds necessary to do their jobs effectively. In 2009, for instance, Congress passed a bill increasing the funding for the Consumer Product and Safety Commission, which should now allow this agency to increase a staff that had been reduced to almost half of what it was in the early 1980s. Increased budgets for other key agencies are also needed. Further, Congress needs to increase its oversight of these agencies and not wait until some disaster has struck before it calls hearings about a malfunctioning agency.

All of this recent activity to begin to revitalize our regulatory system is a good sign. But this should not be taken to mean that conservatives have given up on their efforts to promote deregulation. In 2010, for example, the Republican leadership called for a complete moratorium on new regulations – at a time when polls showed that a majority of Americans wanted increased regulation of the energy industry, health care companies, and the financial industry. Conservatives will try to return to their anti-regulatory agenda whenever they can – especially if the Republicans are able to gain control of the presidency and the administrative branch once again. And they made their intentions clear after taking over the House of Representatives in the 2010 elections. Who did the Republicans name to chair the House committee in charge of regulation of the financial sector? Rep. Ron Paul, who once observed: “I don’t think we need regulators.”

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1. Anne C. Mulkern, “When Advocates Become Regulators,” May 23, 2004, Denver Post.

2. Earthjustice and Public Campaign, “Paybacks: Policies, Patrons, and Personnel,” September 2002.

3. This and many of the other examples in this section come from The Bush Legacy: An Assault on Public Protections, a highly information 2009 report put out by OMB Watch. http://www.ombwatch.org/node/3877

4. Carl Pope, Strategic Ignorance (San Francisco: Sierra Club Books, 2004) p. 52.

5. Michael Grunwald, “Business Lobbyists Ask to Discuss Onerous Rules,” Washington Post, December 4, 2001.

6. Sherry Devlin, “Feds: Benefits of Bull Trout too Hard to Put a Value On,” The Missoulian, April 7, 2004.

7. “Special Interest Takeover: The Bush Administration and the Dismantling of Public Safeguards” (Washington, D.C.: The Citizens for Sensible Safeguards Coalition, 2004), p. 54.