Chapter 39: Revolving Doors and Corporate Capture of Federal Agencies

“[H]igh-income individuals and big-profit businesses have rewritten the rules of the economy, “capturing” the regulatory system and using it to squeeze out their competition.”

–Annie Lowrey (1)

 

Federal government agencies are unfortunately plagued by two real dangers that blunt or undercut their ability to serve the interests of ordinary Americans. These two pathologies are related to each other, but we’ll treat them individually to make them easier to understand.

The Revolving Door

The American system of governance is plagued by the government-to-lobbyist revolving door—often just shortened to the revolving door—which is when people move from government positions in the legislative and executive branches to positions within the industries that need to be regulated for the public good. This is a problem with respect to congressional members as well as political appointees and civil servants in executive branch agencies leaving public service to lobby for wealthy industries. Why is this a problem? The consumer advocacy organization Public Citizen nicely summarized the three ways the government-to-lobbyist revolving door threatens the government’s integrity, so we’ll quote its reasons directly:

“Public officials may be influenced in official actions by the implicit or explicit promise of a lucrative job in the private sector with an entity seeking a government contract or to shape public policy. 

Public officials-turned-lobbyists will have access to lawmakers that is not available to others, access that can be sold to the highest bidder among industries seeking to lobby. 

The special access and inside connections to sitting government officials by former officials-turned-lobbyists comes at a hefty price tag, providing wealthy special interests that can afford hiring such revolvers with a powerful means to influence government unavailable to the rest of the public.” (2)

The practice is quite prevalent. A recent study by Public Citizen found that “nearly two-thirds of recently retired or defeated U.S. lawmakers now working outside politics have landed jobs influencing federal policy.” (3) The same is true for people who leave positions in federal agencies for lucrative positions in industry. Professors Zahra Meghani and Jennifer Kuzma point out that “high ranking ex-government workers often secure employment either in the very industries they used to regulate or at firms that provide lobbying or legal services for those businesses.” (4) Especially with respect to federal agencies, the revolving door is truly a two-way passage, with people spending a good portion of their careers moving back and forth between government work and work for the industries that those agencies are supposed to regulate. To get a flavor of how the revolving door works, some examples are in order.

One of the most potentially impactful examples of the revolving door involved White House climate change policy under President George W. Bush. Philip Cooney was a lobbyist for the American Petroleum Institute prior to being selected to be the chief of staff of the White House Council on Environmental Quality. Cooney personally watered-down reports on climate change to suggest that the science on the matter was less certain than it actually was. (5) When this was revealed, Cooney resigned his position in the White House and took a job with Exxon Mobil, which has spent at least $8 million funding groups challenging the existence of global warming. (6)

The case of Elizabeth Fowler is another poignant example. Most people don’t know that Fowler was the primary architect of President Obama’s Affordable Care Act (aka, Obamacare) when she served as an important legislative staff member for Senator Max Baucus (D-MT). Prior to this, Fowler worked as Vice President for Public Affairs for Wellpoint, a very large health insurance company. The Affordable Care Act passed Congress and was signed into law in March of 2010. Fowler was then hired by the Obama administration as Special Assistant to the President for Healthcare and Economic Policy—primarily to oversee implementing the Affordable Care Act. After doing that job for approximately two years, Fowler then jumped back into the healthcare industry as a top administrator at pharmaceutical giant Johnson & Johnson. (7) None of this is coincidental, nor is it coincidental that the Affordable Care Act was extremely friendly to the health insurance and pharmaceutical industries. It broadened health coverage only by forcing Americans to buy a policy from the private health insurance industry at the same time that it prevented people from choosing a viable public health insurance option. Advocates for a single-payer healthcare system were not even allowed to testify before Senator Baucus’ committee. (8)

The Trump administration was marked by many examples of the revolving door. Eugene Scalia, who was appointed Secretary of Labor, used to do legal work for corporations seeking to limit worker benefits. For example, Scalia—son of the conservative former Supreme Court justice—”argued on behalf of Wal-Mart against a Maryland law that would have required the retail giant to spend more health care money on its employees.” (9) Andrew Wheeler, the head of the Environmental Protection Agency, used to be a lobbyist for the coal, chemical, and uranium industries and has been described by a spokesperson from the Natural Resources Defense Council as “a person who has made a career out of trying to push back against common-sense safeguards to protect the air we breathe from dangerous chemicals like mercury, arsenic and others.” (10) Overall, President Trump named more lobbyists to cabinet-level posts in his first three years than did Presidents Obama and Bush in each of their eight years in office. (11)

Rules against the revolving door are fairly weak. With respect to executive branch officials, there is a lifetime ban on switching sides in a “particular matter” involving “identified parties on which the former executive branch employee had worked personally and substantially for the government.” There is a one-year “cooling off” period for senior officials from lobbying officials in their former agencies, and other restrictions. There is a cooling off period for legislative branch employees as well. (12) The limitations are easy to steer around—Public Citizen referred to revolving-door restrictions as “sorely inadequate” because the cooling off periods are too short. (13) Once the one-year probation period is over, there are no more restrictions. Indeed, former congressional members retain special access to members-only gymnasiums and restaurants. When survey researchers ask the public, they find strong majority support for a five-year cooling off period and plurality support for banning former public officials for life from lobbying. (14) Both Presidents Obama and Trump signed executive orders to try to limit executive branch revolving doors. Nevertheless, the revolving door is alive and well.

Corporate Capture of Executive Agencies

Cartoon of Organized Big Business Interests in 1919
Cartoon of Organized Big Business Interests in 1919

The second related issue with respect to the federal agency’s ability to fully serve the public interest is the phenomenon known as regulatory capture, which happens when wealthy corporations, industrial sectors, and financial interests are able to use their close relationships with executive agencies to get them to work for their interests rather than those of ordinary Americans. Obviously, one primary way of doing this is to get corporate lobbyists in government positions, because they will bring with them a pro-corporate ethos and perspective. The revolving door helps large economic interests in this regard. Capture is also facilitated by the fact that the industries being regulated often possess the data and the expertise that executive agencies need to do their work. Moreover, regulated industries cultivate allies in Congress who can put pressure on regulatory agencies to see the industry’s point of view on a particular regulatory issue.

What does regulatory capture look like? Here are a couple of recent examples.

The Federal Aviation Administration (FAA). In 2019, the United States trailed forty-two other countries in deciding to ground the Boeing 737 Max, the company’s newest version of its venerable 737 passenger jet. The plane had already been involved in two crashes that had killed hundreds of people. The crashes were caused by a problem with the automated flight control system that was detected and ignored during the plane’s design and testing phases. How did this happen? Apparently, back in 2005, the FAA made an important decision to turn its safety certification responsibilities over to aircraft manufacturers, a move which was estimated to save the aviation industry $25 billion over the next decade. To be specific, plane safety used to be determined by FAA employees, but that job was now being done by Boeing employees and reported to the FAA. (15) In this particular case, the practice ended in tragedy.

The United States Department of Agriculture (USDA). The USDA has long been an exemplar of regulatory capture. For example, the USDA’s National Organic Standard Board (NOSB) is responsible for regulating organic farming—particularly which foods get to be labeled as organic or not. Consumer and environmental advocates argue that regardless of whether Republicans or Democrats are in charge of the White House, appointments to the NSOB are “stacked” with “members from, or friendly to, corporate agribusiness interests” at the expense of small organic farmers who are more likely to hew to “true” organic practices. (16) Under the Trump administration, the Union of Concerned Scientists put forward a litany of USDA regulatory-capture instances, in which the agency deferred to the interests of agribusiness to allow the overuse of antibiotics in meat and poultry production, to loosen standards for school meals, to lessen the regulation of pesticides, to devalue the views of independent scientists over those funded by the industry, and to take the side of agribusiness giants over small farmers. (17)

Both regulatory capture and the revolving door are problems with the way the federal government operates. They undercut the government’s ability to serve ordinary Americans, and they inflate the power of concentrated economic interests. Tighter regulations could limit congressional members and executive branch officials’ ability to cash-in on their public service. Similarly, an approach to regulation that empowers federal agencies and makes them less dependent on industry-beholden experts might undercut the industry’s ability to capture the agencies designed to regulate them.

References

  1. Annie Lowry summarizing the argument of Brink Lindsey and Steven Teles in her article “Who Broke the Economy?” The Atlantic. December 11, 2017.
  2. Craig Holman and Caralyn Esser, Slowing the Federal Revolving Door. Washington, D.C.: Public Citizen. July 23, 2019. Page 1.
  3. Alan Zibel, Revolving Congress: The Revolving Door Class of 2019 Flocks to K Street. Washington, D.C.: Public Citizen. May 30, 2029. Page 1.
  4. Zahra Meghani and Jennifer Kuzma, “The ‘Revolving Door’ Between Regulatory Agencies and Industry: A Problem That Requires Conceptualizing Objectivity,” Journal of Agricultural and Environmental Ethics. September 17, 2010. Page 579.
  5. Andrew C. Revkin, “Bush Aide Softened Greenhouse Gas Links to Global Warming,” New York Times. June 8, 2005.
  6. “Bush’s Environment Chief: From the Oil Lobby to the White House to Exxon Mobil.” Democracy Now!Radio. June 20, 2005.
  7. Glenn Greenwald, “Obamacare Architect Leaves White House for Pharmaceutical Industry Job,” The Guardian. December 5, 2012.
  8. Stephanie Condon, “Senate Panel Rejects Public Option,” CBS News. September 29, 2009.
  9. Gabby Orr, Marianne Levine, Anita Kumar, and Ian Kullgren, “Trump Taps Scalia’s Son for Labor Secretary,” Politico. July 18, 2019.
  10. Rebecca Hersher and Colin Dwyer, “Get to Know Andrew Wheeler, Ex-Coal Lobbyist with Inside Track to Lead EPA,” All Things Consideredon NPR. July 6, 2018.
  11. Richard Lardner, “Trump Outpaces Obama, Bush in Naming Ex-Lobbyists to Cabinet,” The Associated Press September 17, 2019.
  12. Jack Maskell, Post-Employment, “Revolving Door,” Laws for Federal Personnel. Congressional Research Service. January 7, 2014. Page 2.
  13. Craig Holman and Caralyn Esser, Slowing the Federal Revolving Door. Washington, D.C.: Public Citizen. July 23, 2019. Page 3.
  14. Nielsen Scarborough, “Government Reform, Wave 2 Questionnaire,” School of Public Policy, University of Maryland(Oct. 2017).
  15. D. Saint Germaine, “The Boeing Debacle is the Latest Example of Regulatory Capture,” Medium. March 15, 2019. James E. Hall, “The 737 Max is Grounded, No Thanks to the F.A.A.,” The New York Times. March 13, 2019.
  16. “Regulatory Capture: USDA’s Organic Governance Board Dominated by Affiliates of Industry’s Corporate Lobby,” Beyond Pesticides. January 24, 2019.
  17. Betrayal at the USDA. Union of Concerned Scientists. March 30, 2018.

 

 

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