Tag Archives: Congress

Why a shutdown threat won’t work

There are many people who think that the Affordable Care Act (ACA) is bad policy. I am among them. There are also many who think that the current trajectory of government spending is unsustainable and economically harmful. I am also among them.

Then there are people who think it would be wise to shut down the federal government if they can’t get language passed that threatens to defund the ACA. (Notice that I didn’t say language that “defunds the ACA”; I said language that “threatens to defund the ACA.” Much of the ACA is actually funded through mandatory spending so Congress would need to pass a full repeal of the bill to defund it. What these folks want is language in the budget resolution saying that the ACA ought to be defunded. The bill might strip out some discretionary funding but most of the ACA would go forward.)

I am not among them.

To help us think through the options, let’s borrow from game theory and employ a decision tree. The House (H) can either choose to pass a continuing resolution (CR) that funds the ACA or a CR that calls for de-funding the ACA. The Senate (S) can choose to pass whatever the House sends them or to reject it. If they reject it, and no CR is passed by October 1, the federal government will shut down. In this case, as the CRS puts it, “substantial ACA implementation might continue during a lapse in annual appropriations that resulted in a temporary government shutdown.” If the Senate passes whatever the House sends them, then it will go to the President (P) who can either sign it or veto it.

At the end you can see the outcomes and the way that each group feels about them.

Options are happy, sad, neutral, and outwardly sad but secretly happy. (click on the images to enlarge):

decision tree

 To figure out the most likely outcome (the “equilibrium”) you do a fancy thing called “backwards induction.” It is actually quite simple: think about how each player would act at each stage, starting at the end of the game, and cross off implausible actions. This will help you eliminate unlikely outcomes. This is what I’ve done below, with dashed lines indicating an action that a particular player is unlikely to take.  

We can with confidence cross off the possibility that the President will veto a CR that keeps the government open and fully funds his signature initiative or that the Senate would reject such a bill.

We can also cross off the possibility that the President would sign or that the Senate would send him something that calls for defunding his signature initiative.

That leaves us with two plausible scenarios: the House doesn’t use the CR as a means to attack the ACA, the CR passes the Senate, and the President signs it. This is the top branch of the game tree. House Republicans will be neutral about this outcome since they will have escaped blame for a shutdown but will have done nothing to stop the ACA. Senate Democrats and the White House will be pleased.

The other somewhat plausible scenario is that the House passes a CR calling to defund the ACA, and the Senate rejects it. The government would shut down and the ACA would mostly be untouched. I’m guessing Republicans would get most of the blame for shutting down the government since they lack a bully pulpit, aren’t as gifted as the president at communicating, and the ideological stereotype is that Republicans would like to see the government shut down any way. The White House and Senate Democrats will be outraged—simply outraged—that Republicans would do this but they will secretly be happy to have one more reason to say Republicans should never be trusted with power.

If Republicans see all of this, they will likely flinch, hold their noses, and pass a CR that doesn’t touch the ACA and hopefully come up with more constructive ways to challenge the policy. But, it is a close call for some House Republicans so for this reason, I’ve only partially crossed off the first bottom fork of the decision tree. decision tree 2

What the tree doesn’t indicate is the long run consequences of a government shutdown. Two and a half years ago, when Washington was staring down a different government shutdown, I drew from the experience of U.S. states to conclude that a shutdown is not in the interest of those who advocate for limited government:

As is often the case, we can look to the American states for some guidance. It turns out that in 23 U.S. states, the government will automatically shut down in the event that the governor and the legislature fail to agree on a budget. In his work on budget rulesDavid Primo examined the theoretical impact of these provisions from a game theoretic perspective. He noted that in states with an automatic shutdown provision, “the legislature will be able to achieve its ideal budget, so long as the governor prefers it to no spending.” (p. 102)

He therefore predicted that states with such a provision will spend more than states without such a rule. He then tested the hypothesis, controlling for a number of other factors known to impact state spending and found that states with an automatic shutdown provision actually spend about $64 more per capita than other states. As he notes, “This effect is remarkably large, given that shutdowns occur rarely.” (p. 103)

This suggests that the federal government’s automatic shutdown provision—by making Congress’s desired spending level a take-it-or-leave-it offer—tends to bias the government toward more spending. By extension, it also suggests that a government shutdown will shift negotiating power toward those who favor more spending. So, paradoxically, fiscally conservative tea partiers stand to lose the most if the federal government shuts down.

Perhaps it is time for them to rethink their support of a shutdown.


Do We Need Greater Congressional Oversight of Agency Rulemaking?

Katherine McFate, president of the Center for Effective Government, writes in the Hill that all regulations are based on congressional law, implying that efforts aimed at greater oversight of agency rulemaking are unnecessary. Technically, she is correct – agencies cannot regulate unless they are authorized to do so by congressional statutes. But her assertion is highly misleading. In fact, agencies have considerable discretion to determine policy and to publish rules that fit their as opposed to Congress’s agenda. Thus, Congress is fully justified in its efforts to push for greater agency accountability.

Scholars have long realized that the traditional rulemaking model (or the “transmission belt” model as Richard Stewart called in his seminal article) in which Congress determined policy through legislation and agencies simply filled in the details was far from reality. While constrained by congressional statutes, agencies nonetheless can substantively shape the policies within their jurisdiction.

Agencies have two sources of power in the rulemaking process: the first mover advantage and expertise. Congress over time delegated considerable policymaking powers to agencies through broad open-ended statutes, which meant that agencies did not need to seek congressional approval in order to regulate. In many cases, they can point to existing statutes as a source of their authority. Rather than initiate policy, Congress ends up reacting to the bureaucracy’s regulatory actions. Yet, given how difficult it is for Congress to agree on any legislation, it may be an uphill battle for Congress to overturn a regulation, letting agency decision stand by default.

Expertise is the second source of agency power. Congress defers to agency expertise on many complex regulatory issues. However, agencies engage in what Wendy Wagner called “the science charade” – masking policy decisions as matters of science. As she explains in her article and an edited volume, scientific analysis often drives policy decisions. Through selective use of evidence or assumptions, agencies can push the scientific analysis towards the answer that would yield their preferred policy alternative.

The EPA’s and DOE’s use of social cost of carbon (SCC) in their rulemaking estimates demonstrates the point. The SCC is an estimate of economic damages caused by greenhouse gas emissions. Agencies use the SCC to estimate the benefits of rules aimed at reducing greenhouse gas emissions and consequently to decide whether the rules’ benefits justify the costs. Higher SCC estimate would justify more expansive and costly regulations.

Even though the agencies claim that they derived the SCC through scientific analysis, critics point to policy choices embedded within the analysis that pushed the estimated cost higher. For example, the agencies chose to estimate global rather than domestic impacts of carbon. Similarly, they omitted from their analysis the recent scientific literature, which pointed to a lower impact of greenhouse gases on climate. These and other choices pushed the SCC higher (almost double the previous estimate), allowing agencies to push for more stringent and costly regulations.

Despite the major policy impact of the SCC’s use in rulemaking, the agencies did not have to consult Congress. They could chose to use the SCC estimates under the powers already delegated to them, even in the face of stiff opposition from Congress. In the meantime, congressional efforts to reassert its authority on the major environmental policy issue have stalled. The GOP-led House passed a bill that would prevent the EPA from factoring in the SCC in its economic analysis. Yet, the measure’s fate in the Senate is uncertain and it would still face the presidential veto.

Contrary to McFate’s assertion, agencies do not simply implement congressional policy. As the SCC example demonstrates, agencies can drive major policy decisions without congressional approval. Thus, Congress needs better tools for more effective oversight of agency regulations.