Abstract of the Week

Government leaks and whistleblowers have driven a significant amount of policy and political news lately, with revelations about the National Security Agency’s spying programs, the scandal at the Internal Revenue Service, and the government’s efforts to crack down on reporters in contact with leakers. David Pozen has a new paper forthcoming in the Harvard Law Review digging into when and why the government approves or disapproves of leaks.

“The United States government leaks like a sieve. Presidents denounce the constant flow of classified information to the media from unauthorized, anonymous sources. National security professionals decry the consequences. And yet the laws against leaking are almost never enforced. Throughout U.S. history, fewer than a dozen criminal cases have been brought against suspected leakers. There is a dramatic disconnect between the way our laws and our leaders condemn leaking in the abstract and the way they condone it in practice.”

“This article challenges the standard account of this disconnect, which emphasizes the difficulties of apprehending and prosecuting offenders, and advances an alternative theory of leaking. The executive branch’s ‘leakiness’ is often taken to be a sign of institutional failure. The article argues it is better understood as an adaptive response to external liabilities (such as the mistrust generated by presidential secret-keeping and media manipulation) and internal pathologies (such as overclassification and bureaucratic fragmentation) of the modern administrative state.”

“The leak laws are so rarely enforced not only because it is hard to punish violators, but also because key institutional actors share overlapping interests in maintaining a permissive culture of classified information disclosures. Permissiveness does not entail anarchy, however, as a nuanced system of informal social controls has come to supplement, and all but supplant, the formal disciplinary scheme. In detailing these claims, the article maps the rich sociology of governmental leak regulation and explores a range of implications for executive power, national security, democracy, and the rule of law.”

The Long Road to Reform at the US Postal Service

The Wall Street Journal looks at what ails the struggling US Postal Service, which has experienced declining revenue over the last five years and faces a rapidly approaching debt ceiling.

“The past has saddled it with far more capacity than it needs in an era of email and websites—more property, more sorting facilities, more workers—and a business model that the U.S. Government Accountability Office describes as ‘not viable.’”

“Everyone knows the USPS needs significant change. But politics have produced a nearly unbreakable gridlock. Junk mailers and periodical publishers lobby hard for low mailing rates. Unions protect jobs. FedEx and UPS want to rely on the USPS where convenient, but don’t want too much competition. And members of Congress demand efficiency—as long as it doesn’t mean closing a post office in my district.”

“Eventually, something will give. Until then, the imperative is to preserve the core competencies of USPS: the brand, the people’s trust and that delivery network.”

New Regulations Wait Record Time for Approval

Brad Plumer highlights a new report from Coalition for Sensible Safeguards finding that “more than 120 proposed regulations have languished in the White House’s Office of Information and Regulatory Affairs (OIRA), taking longer than they should to complete.”

“The report suggests that business lobbying may be a factor in the delays… The White House, however, says that it is simply taking time to craft the rules properly… By executive order, OIRA’s reviews are typically meant take 90 days or less… More than 70 rules have been sitting at OIRA for longer than 90 days.”

“OIRA took an average of 69 days to review ‘economically significant rules’ in 2012, a longer wait than in any year since 1994. (The average review time for 2013 is up to 98 days.)”

When Presidential Leadership Matters

Matthew Yglesias argues that while for some issues it might be that “the president who leads best leads least visibly,” a strong push by the president can make a big difference in efforts to make policy within the executive branch.

“One counterexample that’s come up a lot on my trip to visit with European Union officials is the idea of a Trans-Atlantic Trade and Investment Partnership… There are a lot of potential parts to a TTIP but one key area is regulatory harmonization. Right now, for example, car safety standards in the U.S. and EU are quite different even though car safety outcomes are similar.”

“In principle, it should be possible to eliminate this kind of duplication of effort on a wide array of consumer safety issues. But actually doing it isn’t just a traditional negotiating process in which officials from both sides sign on a dotted line. You actually need the regulators working in the agencies to reach some kind of consensus, and to do that they need some kind of real sense of political direction from up top.”

Investigation to Look at Efforts to Reduce Methane Leaks

“The Environmental Protection Agency’s Inspector General plans to investigate what actions are being taken to reduce methane leaks from natural gas pipelines,” the Associated Press reports.

“In April the EPA lowered its estimates of natural gas leaks but some scientists questioned the figures. The issue is important because natural gas emits far less pollution than coal when burned, but those benefits can be offset by leaks of methane, which is a potent greenhouse gas.”

Feds Get Better at Stopping Medicare Fraud

USA Today looks at a major jump in the policing of Medicare fraud, after the government “revoked the ability of 14,663 providers and suppliers to bill Medicare over the past two years — almost two and a half times the number that had been revoked in the previous two years.”

“A key part of the anti-fraud effort…includes a new, easier-to-read summary statement that allows recipients to see exactly who has billed Medicare with their identification numbers… During the past four years, the government has recovered $14.9 billion in Medicare fraud money, due in large part to the 2010 health care law.”

“The law allowed the government to analyze data to spot indications of fraud and stop paying providers… all providers had to go through a reapplication process to participate in Medicare. Those who didn’t meet a requirement, had felony convictions, had incorrect addresses or who weren’t properly licensed are no longer allowed to bill Medicare.”

Congressional Term Limits Are Not the Answer

As Rep. John Dingell (D-MI) prepares to become the longest serving member of Congress on Friday, Tim Kane argues that term limits are not the answer to the staying power of incumbents.

“The reason I say that is because they are a shortcut. We wish democracy worked better and didn’t allow incumbency to self-serve. But it doesn’t, so instead of reducing the power of incumbency, we treat it superficially.”

“What natural rule changes would reduce the power of incumbency?  One would be to make gerrymandering unconstitutional (again). Another good reform would be to allow individual candidates to raise unlimited funds, instead of channeling finances through the established political parties.  And the good news is that the U.S. is moving in the right direction on both of those fronts.”

Regulation Should Target Bad Guys, Not Burden Good Guys

Stephen Goldsmith lays out his vision for regulatory policies that “allow streamlined certification for businesses with stellar records so they can concentrate on building their business without interference,” while ensuring that “inspectors can pay more attention to the finding the bad guys and attending to real problems.”

“Data mining can easily look at other applicant characteristics by combing data in other agencies for information that might trigger a deeper review: failure to pay taxes, employee complaints about working conditions, consumer complaints, operating under aliases, delinquent reporting of important issues and the like. This approach should drive inspectors’ priorities, time and attention.”

“Big data not only provides much more insight into the regulated, but also into the regulator…  We no longer need to assume that granting inspectors discretion means abuse when we know exactly what they see, how long they are at a site and which inspectors are outliers.”

Chart of the Day

– USA Today looks at the continued efforts to implement the Dodd-Frank financial reform law, as regulators gradually finalize regulations to curb the abuses that led to the financial crisis, often well past the deadline in the law.

“Nearly 63% of those deadlines were missed, while just over 37% were met with finalized rules… The update also showed regulators haven’t issued proposals for 64 of the 175 rules with missed deadlines.”

“The White House and Congress didn’t streamline or consolidate the regulatory agencies in charge of Dodd-Frank rule-making. Some provisions require approval of multiple agencies, whose members at times disagree on legal points and nuances. Some of the disagreements have delayed changes for weeks or months.”

Federal Agencies Win the Power to Expand Reach

The Supreme Court’s recent decision in Arlington v. Federal Communications Commission, which empowers federal agencies to interpret ambiguities in the law even where it expands its own jurisdiction, “is an important win for all future presidents,” writes Cass Sunstein.

“For almost three decades, the court has ruled that when Congress gives a federal agency the power to issue regulations, that agency is usually authorized to interpret ambiguities in the original legislation… For more than a decade, judges and scholars have differed over what happens when an agency is deciding on its own ‘jurisdiction,’ that is, on the scope of its own authority.”

“Scalia’s opinion reflects his longstanding commitment to clarity in the law, a commitment that Thomas shares. It also reflects the majority’s belief, cutting across ideological divisions, that ambiguities in the law should be resolved by officials who are ultimately accountable to the people and likely to be experts on the issues at hand.

The Regulatory State Has Grown Too Big

Jonathan Turley argues that the efforts to show President Obama’s ignorance of what was happening at scandal-plagued government agency’s demonstrate how the “carefully constructed system of checks and balances is being negated by the rise of a fourth branch, an administrative state of sprawling departments and agencies that govern with increasing autonomy and decreasing transparency.”

“Today, we have 2,840,000 federal workers in 15 departments, 69 agencies and 383 nonmilitary sub-agencies… The fourth branch now has a larger practical impact on the lives of citizens than all the other branches combined. The rise of the fourth branch has been at the expense of Congress’s lawmaking authority.”

“This rulemaking comes with little accountability. It’s often impossible to know, absent a major scandal, whom to blame for rules that are abusive or nonsensical. Of course, agencies owe their creation and underlying legal authority to Congress, and Congress holds the purse strings. But Capitol Hill’s relatively small staff is incapable of exerting oversight on more than a small percentage of agency actions.”

It’s Too Hard to Fire Misbehaving Bureaucrats

In the wake of the Internal Revenue Service scandal involving agents who improperly singled out conservative groups for extra scrutiny, Conor Friedersdorf argues that “the majority of proficient public employees are seeing their agencies and reputations suffer because it is excessively difficult to terminate the worst of the worst.”

“What caused me to reach that conclusion? Not a belief that federal employees should be as easily terminated as at will employees in the private sector. Unlike private sector workers, federal employees serve beneath presidents, which is to say, ideologue politicians with a bad habit of installing hack cronies wherever they can… But top to bottom, we’re far closer to the opposite extreme.”

Politico: “Under federal rules, a fired government worker has the right to appeal to the Merit Systems Protection Board. He or she can challenge the decision, argue that their actions don’t meet the threshold for termination and ask to be reinstated… The initial appeals take an average of 93 days to process.”

“If the regional board rules against the IRS employees, they could appeal to the national Washington, D.C.-based board, which takes on average another 245 days. The IRS employees wouldn’t collect a paycheck during the appeals process. They would get back pay only if they are ultimately reinstated.”

The Nominations System is Breaking Down

President Obama has nearly filled out his second term Cabinet, but Ezra Klein and Evan Soltas note that there has been very little progress on judicial and sub-Cabinet nominations.

“The only Cabinet-level appointment left to fill is the Small Business Administration… there are around 60 open judicial vacancies, including 11 at the appellate level and three on the D.C Circuit… about a quarter of the top jobs at the State Department are empty. The Department of Homeland Security is missing its top cybersecurity appointees. The IRS hasn’t had a director since November. The Commerce Department doesn’t have a chief economist.”

“Some of the blame here goes to the Republicans who’ve made the nominations process an almost impossible gauntlet… But much of it accrues to the White House… If this keeps up, we’re rapidly nearing a point in American politics where good people refuse entreaties to apply for these jobs, as it’s just not worth the trouble… we need to make it possible for people who haven’t lived their lives with an eye towards passing a political vet to, well, pass a political vet. Life is messy. Living it shouldn’t be a disqualification for public service.”

Meet the New Lobbyists

“There has been a quiet upheaval in the lobbying industry,” according to Tom Edsall, who looks at how the industry is “relying on new tactics to shape the legislative outcomes it wants” in the face of new restrictions and reporting requirements.

“For example, constricted definitions of lobbying contained in Congressional regulations have been construed to exempt from disclosure money spent on grass roots mobilization; on television, digital and social media campaigns; and on public relations efforts to build support among voters and key elites.”

“The growing network of ‘strategic communications,’ digital practitioners and the newly created PR subsidiaries of old-line lobbying firms is, in effect, supplanting special pleaders’ traditional tactics while simultaneously enhancing their ability to operate out of the limelight. Many of the activities most people would call lobbying now fall outside of its legal definition. They have become a large but almost invisible part of special interest influence on public policy.”

Why Congressional Staffers Are Screwed

Ezra Klein digs a little deeper into how Congress broke the rules in order to force itself onto the health care exchanges and then failed to “create new rules for how the program should work for them.”

“If they go all the way in repealing the Grassley amendment, their relationship with the law will be exactly the same as anyone else who works for a large employer — it’ll be how the law is supposed to work… But as it stands now, Obamacare creates problems for Congress that it doesn’t create for any other large employer.”

“That said, Congress might just have to tough this one out. A core part of the Republican strategy on Obamacare… is to try to botch implementation by holding up the funds needed to make it work, fighting the health plan in the states and refusing to pass legislation fixing whatever drafting problems or real-world issues present themselves during the early days of the law… They want to burn down the health-care system to save it. But this time, their own insurance is going to get caught in the blaze.”

Don’t Count on Government to Exit Housing Finance

While proposals to reform the government-sponsored housing giants Fannie Mae and Freddie Mac will likely reappear as the housing market recovers, American Banker explains why you can expect than any efforts to fix the system of housing finance will include a role for the federal government.

“Today, the federal government is effectively the sole credit allocator for housing finance, backing about 90% of new single-family loans. Private capital flows through the system, but does not absorb the credit risk associated with mortgages. Instead, the federal government bears that risk… It is unrealistic to think we will dial back the clock 30 years and finance housing exclusively through bank balance sheets.”

“Without some government involvement, widespread access to the 30-year fixed-rate mortgage would likely disappear, ending the dream of homeownership for millions of Americans.”

Our Problem Isn’t the Process

Ezra Klein speaks with Larry Summers, former director of President Obama’s National Economic Council, who argues that the gridlock plaguing federal lawmakers aren’t a result of structural issues, but all come down to policy.

Said Summers, “the period from 2009 through 2010 was the period of the most legislative action in 30-some years at least. Perhaps even in 60 years. And this year there’s a very good chance that there will be substantial action on immigration…  The question is, on balance, is it clear that we need fewer barriers to action? It may be that people will look back 10 years from now and say it is, but on the strength of two gridlocked years after two whirlwind years, I think that case is a long way from proven.”

Lawmakers Scale Back Insider Trading Law

The Financial Times reports that both the House and Senate quietly passed bills amending a controversial provision of the STOCK Act — meant to prohibit insider trading by lawmakers and other government officials — that some worried could be a national security risk.

“The changes mean Congressional and White House staff members will not have to post details of their shareholdings online. They will also make online filing optional for the president, vice-president, members of Congress and congressional candidates.”

The Hill: “Last year, Congress twice delayed this reporting requirement, most recently until Monday, and called for the National Academy of Public Administration to study the requirement further. On April 1, that group recommended ending the rule.”

Postal Service to Continue Saturday Delivery

Despite the US Postal Service’s significant fiscal woes, the agency has backed away from a plan to end Saturday delivery after its “board of governors directed Postmaster General Patrick R. Donahoe to continue delivery…citing language in the latest law to fund government spending that blocks the proposed change,” the Washington Post reports.

“The service will instead pursue other avenues in its effort to stem massive financial losses, such as asking regulators for permission to raise mailing rates, asking labor unions to open their contracts for give-backs and hoping Congress will pass a bill to stop losses that hit $15.9 billion last year.”

The Revolving Door Keeps on Turning

William Cohan slams former Securities and Exchange Commission Chairman Mary Schapiro after she announced last week that she would be joining Promontory Financial Group, a financial sector consulting firm.

“No need to worry about her and the so-called revolving door between government and Wall Street, she told the Wall Street Journal on April 2… ‘In my case, there’s no revolving door,’ she said. ‘I won’t ever be going back to government.’ Oh well, then, I guess that makes it OK that four months after leaving the SEC, Schapiro is joining a firm stuffed to the gills with former government financial-services regulators peddling their knowledge of Washington’s regulatory thicket to the banks and financial-services companies they once oversaw.”

Meanwhile, the New York Times reports that 28 former staffers to Senate Finance Committee Chairman Max Baucus (D-MT) since 2001, the year he became chairman, “have lobbied on tax issues during the Obama administration — more than any other current member of Congress.”

Ezra Klein: “Baucus doubtlessly ignores endless entreaties from former staffers and current contributors. But the point of hiring Baucus’s former aides isn’t that they can seamlessly insert any language they want into the final legislation. It’s that they have a direct line to Baucus, and to the people around Baucus, and that gives them a huge advantage… That’s the key to most of the lobbying in Washington. It’s not about leveraging bribes so much as it’s about leveraging relationships — and that makes it harder to stamp out.”

Abstract of the Week

Rick Hasen has an intriguing essay exploring the pitfalls of significantly altering the US political system via constitutional reform to deal with current gridlock.

“I briefly examine four arguments against making constitutional change to deal with current political dysfunction. The first two arguments contend that the current governmental system is not that dysfunctional. First, the current political stalemate may reflect the preferences of the median voter or the public at large. Second, the current political system actually produces a good amount of legislation, and a parliamentary democracy might produce too much rash legislation. The third argument accepts the premise that the current system is dysfunctional, but contends the dysfunction could be cured by sub-constitutional change, such as eliminating the filibuster or adopting additional open primary systems to produce more moderate candidates. The fourth argument also accepts the premise that the current system is dysfunctional, but sees that dysfunction as temporary, and expects dysfunction to be self-correcting as voters reject the current Republican Party far from the median voter, leading the Republican Party, and then Democrats, to move to the center.”

Regulators, Consultants to Blame for Foreclosure Review Failure

A new report from the Government Accountability Office blames the Federal Reserve and the Office of the Comptroller of the Currency for failing to properly design a foreclosure review program and allowing consultants to accrue “more than $2 billion in fees despite reviewing only a small fraction of foreclosed loans,” according to NYT DealBook.

“Regulators at the Fed and the Comptroller of the Currency’s office are questioning the prudence of relying on consultants so heavily… The consultants’ delays and inefficiencies caused homeowners to languish and prompted regulators to scuttle the review and settle with banks for $9.3 billion.”

“Throughout the review, the regulators provided inconsistent guidance to consultants… As a result, borrowers in similar situations were sometimes treated differently… The report also faulted regulators for bogging down consultants with numerous metrics for identifying problems. One consultant reported having to answer 16,000 test questions regarding a single loan.”

There Are Too Many State Legislators

Matthew Yglesias calls for reforming state legislatures, noting that “you all too often have badly underpaid ‘part-time’ understaffed legislators who end up dangerous dependent on lobbyists for basic information and ideas about what to do.”

“You want legislators who are sufficiently well-funded (both personally and in staff terms) to make it possible and desirable for them to really figure out how to serve their constituents effectively and get reelected… And in the state context, I think there’s a relatively easy way to do this—have fewer legislators!”

“If you simply eliminated the lower houses, you’d end up with substantially fewer state legislators. Then you could pay them more and offer them more staff. It’d also be easier for citizens to keep track of who their elected officials actually are.”

Modern Demands Put Pressure on Central Bank Independence

Olivier Blanchard, chief economist at the International Monetary Fund, explains how efforts by central banks to boost employment and keep inflation under control is calling into question the viability of independence from the political process.

“Independence was given because the mandate and the tools were very clear. The mandate was primarily inflation, which can be observed over time. The tool was some short-term interest rate that could be used by the central bank to try to achieve the inflation target.”

“If you think now of central banks as having a much larger set of responsibilities and a much larger set of tools, then the issue of central bank independence becomes much more difficult. Do you actually want to give the central bank the independence to choose loan-to-value ratios without any supervision from the political process. Isn’t this going to lead to a democratic deficit in a way in which the central bank becomes too powerful?”

Annual High-Skilled Visas Running Out

The H-1B application process opened on Monday, through which companies can bring up to 65,000 foreign workers with advanced degrees to the US, and the Wall Street Journal reports that “officials predict employers by Friday will exhaust the quota for this year’s application season.”

“If that happens, the U.S. Citizenship and Immigration Services, the agency that runs the program, will randomly select applications that will then be considered for visas if any applications received before the cap are rejected.”

Matthew Yglesias: “there are much smarter ways of taking advantage of robust employer demand for these workers. We could, for example, simple charge $25,000 a pop… Firms that pay the fee would presumably be better off or they wouldn’t be paying the fee. And the national government would reap a direct financial windfall that can be used to forestall, minimize, or avoid the need for cuts in allegedly unsustainable social safety net programs.”