A paradox at the heart of American bureaucracy

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American bureaucracy is choking itself with its own red tape (via DALL-E 3)

Why do so many feel like American bureaucracy is deeply broken?

Noah Smith argues that our public agencies are underfunded and understaffed, lacking the capabilities to swiftly promulgate rules or make the decisions we ask of them. Others argue that the explosion of veto points has systematically empowered parochial private interests at the expense of the public good, as Will Rinehart catalogs. Ezra Klein’s famous “everything bagel liberalism” hypothesis suggests bureaucracies become dysfunctional when they lose focus, trying to accomplish everything, everywhere, all at once.

Each of these three theories is true to an extent, but there is an underlying commonality being overlooked: the way in which we hobble public priorities–even narrow ones–from the very start. At times, the quickest way to doom a project to be over-budget and long-delayed is to make it an urgent public priority. Not because government is bad at executing its aims per se, but because added requirements and expectations that come with disbursing public money do not apply to equivalent actions taken by the private sector. Unfortunately, it is often those most enthusiastic about the benefits of government investments and interventions that support these rules, undermining the quality of government for all of us.

Perhaps the most glaring examples of late have come from NEPA, or the National Environmental Policy Act. NEPA requires federal agencies to assess the environmental impact of any federal action, from buying office furniture to green-lighting oil and gas drilling. If a federal action is expected to have a significant environmental impact, agencies are required to write a comprehensive Environmental Impact Statement, which can take years and cost millions of public and private dollars. NEPA is not itself a set of environmental standards, merely a mandate to produce a study. Federal agencies finding that their intended action will cause environmental degradation are still free to go through with it.

The delays and costs associated with NEPA often halt worthwhile projects or send the message that building something that might activate NEPA rules is not even worth trying. Courts can rule agencies’ NEPA reviews insufficient, creating major risk and uncertainty for investments to which it might apply. In one famous example, an eight-year NEPA review held up an offshore wind project off Cape Cod that would have offset 880,000 tonnes of CO2 emitted per year. But that was just the start. Activists using every tool at their disposal filed one bad faith lawsuit after another, arguing the review was insufficient. After 16 years in limbo, Cape Wind gave up and abandoned the project entirely, leaving Massachusetts reliant on fossil fuels for more than three-quarters of its electricity.

As the Commerce Department doles out CHIPS and Science Act subsidies to semiconductor manufacturers over the coming months, NEPA lurks in the background as a potentially devastating threat to the timely construction of new factories subsidized by the $50 billion pot set aside by Congress. Yet here’s the rub: NEPA only applies here because the federal government is subsidizing chip fabs. Ironically, only because Congress came together in bipartisan fashion to make a generational investment deemed critical to economic and national security do new fabs need to undergo this burdensome, costly step. If the semiconductor industry was not overwhelmingly concentrated on Taiwan–and therefore not an urgent security issue–TSMC or another chip giant seeking to expand in the United States would be free from such a review. Of course, we have no reason to believe the environmental impact of a privately-funded chip plant expansion would be any different than that of one receiving public subsidies.

“Buy America” rules are an even more frustrating example. Public infrastructure projects or investments are required to use mostly American-made inputs. In the case of projects like bridges, tunnels, and roads, that means American-made steel, iron, and cement, regardless of whether they can be found at lower cost from other sources. But such rules even extend to government procurement of IT infrastructure, raising its cost by 25 percent. According to one estimate, Buy America rules alone raise the cost of buying a metro car for local transit systems by one-third. Government makes these investments in the public interest. However, if a company wanted to build its own internal transit system on a sprawling corporate campus, for example, no such Buy America rules apply. Only when new infrastructure is built because our elected governments deem it to be socially important and in the public interest are they forced to use more expensive equipment and materials.

Proponents of Buy America rules often argue that these requirements are a critical source of demand for American manufacturing. Yet versions of Buy America requirements have been on the books since the 1930s and they have done little if anything to slow the decline of manufacturing as a share of the national labor market. The decline of such jobs is a global phenomenon that no government procurement rules can fix. Despite their evident failure to address this problem and widespread acknowledgement that our infrastructure costs are far too high, these rules are only getting stronger under the Biden administration.

Supporters of a more muscular, capable state undermine their own goals when they support policies like Buy America, NEPA, or the litany of other burdensome rules that only apply to government actions or projects. Rather than showing the public that government can in fact do good for the average citizen, they instead doom government to appear hopelessly incompetent when compared with the private sector. They may do as much to hobble the actual, on-the-ground effectiveness of government as any libertarian advocate of “starving the beast.” This is the paradox at the core of so many flaws of American bureaucracy.

Government projects will inevitably have standards. The public does not want to see government pay employees starvation wages, nor does it want tax dollars buying materials made with slave labor in Xinjiang. But people do want better value out of public infrastructure funds. They do want new bridges, subways, and chip factories delivered on-time and at a decent price. As the United States enters into a period of mounting fiscal challenges, our spiraling infrastructure costs will become more salient and spark more outrage.

If those who believe in the power of government to improve people’s lives want to win over the public in an era of increasingly-intense fiscal trade-offs, they’ll have to recognize that their efforts to strengthen government’s impact are often self-defeating. Rather than asking how many problems a dollar of public money can solve, we should flip our presumption. Just as Ezra Klein warns against using narrow programs to solve all social ills, we should carefully scrutinize every additional requirement that gets in the way of our public priorities. We will continue to disagree over the proper size and scope of government, sure. But we should be able to agree that when democratic government mobilizes for reasonable aims, it should be allowed to deliver.

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