The Expansion of Federal Regulation of the Economy and Society: Case Studies

The Expansion of Federal Regulation of the Economy and Society: Case Studies 

Introduction 

The administrative state, or “the bureaucracy,” comprises various agencies in the federal executive branch. Congress delegates legislative power to the bureaucracy to regulate different aspects of the American economy and society. Some agencies are located in cabinet departments, some are in the executive branch but not under a department, and some are independent regulatory agencies. They are usually staffed by non-politician experts who wield significant authority. In fact, sometimes bureaucracy is called the “fourth branch” of government.

The bureaucracy grew rapidly in the 20th and 21st centuries, and as it grew it became more controversial. Its supporters point out that government agencies provide sound rules and protect health, the environment, air quality, and financial markets. On the other hand, critics maintain that at times, bureaucrats exercise executive, legislative, and judicial powers, violating the separation of powers. In other words, they make rules, enforce the rules, and then decide cases when rules are disputed or appealed. At other times, bureaucrats seem distant from Americans and raise questions about self-rule. Either way, the number of workers for the federal government is currently around 3 million, and most are located in the bureaucracy.

The California Red-Legged Frog  |  The U.S. Fish and Wildlife Service

In 2006, the U.S. Fish and Wildlife Service (FWS) ruled that the California red-legged frog was a federally-protected species. The FWS was authorized to designate a “critical habitat” for threatened or endangered species and could level criminal fines or charges for those who violated the rule. The agency could also control the use of private property in critical habitats.

The FWS used its authority to protect the California red-legged frog. This decision affected a variety of property holders. For instance, an elderly woman was blocked from building a planned home on land she bought for retirement because it was located within five miles of a critical habitat.

The FWS also ruled that the Napa Valley United School District had to purchase 317 acres of vacant land for $4.6 million near a proposed school building to mitigate risks to the frogs. The regulations for protecting the frog also impacted the Napa Valley wine industry.

When California red-legged frog eggs were located on a public golf course, the City of San Francisco developed a multimillion-dollar plan to relocate the eggs safely. Environmental groups were pressuring the city to shut down the golf course instead.

Navigable Waters  | The Clean Water Act

In 1972, Congress passed the Clean Water Act to clean up heavily polluted and contaminated rivers, lakes, and streams in the United States by prohibiting discharge into “interstate or navigable waters.” The law and its enforcement by the Environmental Protection Agency (EPA) significantly contributed to successfully cleaning up a lot of American waterways.

The EPA enforced these rules against large manufacturers and other businesses as well as against individual landowners. For example, Michael and Chantell Sackett started to backfill some property they owned in Priest Lake, Idaho, with dirt and rocks for the foundation of a house.

The EPA ordered the couple to stop altering the landscape and restore it to its natural condition or face a possible fine of $40,000 per day. The agency justified its enforcement of the rule because the lot contained wetlands that the agency considered part of “navigable waters” of the United States.

The Sacketts could have appealed to the Army Corps of Engineers for a waiver, but to do so they would have had to hire experts at great expense. Moreover, the Sacketts knew that the Corps rarely decided in favor of individuals who appealed.

The Sacketts decided to sue the EPA in federal court. Meanwhile, the EPA reversed its order to stop construction. Still, the Sacketts lost their case in the Ninth Circuit Court of Appeals. The circuit court ruled that even though the EPA had rescinded its order, the agency still had jurisdiction over the Sackett property.

In Sackett v. EPA (2023), the Supreme Court ruled unanimously that the EPA’s definition of waterways was too broad and did not apply in this case. The Court decided the land was several times removed from anything resembling a body of water large enough to be considered a navigable waterway. The Court mocked that the EPA would be regulating “puddles and isolated ponds” if it allowed the rule to stand.

Artisanal Cheese | The Food and Drug Administration 

All people want to eat food they purchase from businesses and restaurants to be safe to consume and avoid dangerous bacteria that might make them sick. To that end, the Food and Drug Administration (FDA) ruled that businesses were banned from cutting cheese on wooden boards. The FDA justified its action based on their findings that the boards were harder to sanitize and had higher levels of bacteria that endangered consumer health than cutting boards made of other materials. The FDA had acted because a New York cheese manufacturer experienced a listeria outbreak. (Listeria is a dangerous foodborne bacterial illness.)

The FDA rule provoked a strong reaction from cheesemakers, industry organizations, and members of Congress. Small businesses protested the FDA rule because they were disproportionately hurt by it, which would require prohibitively expensive new facilities that would put them out of business. Industry organizations and cooperatives such as the Wisconsin Center for Dairy Research and the American Cheese Society also complained to the FDA and presented different research about wooden boards.

Members of Congress also heard from constituents and dairy interest groups and sprung into action. These representatives and senators generally represented dairy states or were concerned about what one called “bureaucratic overreach.” They threatened legislation overturning the rule. In the face of such overwhelming criticism, the FDA retreated and dropped the rule.

Teen Smoking  | The FDA v Brown & Williamson Tobacco (2000)

In the early 1990s, teen smoking was on the rise. President Bill Clinton was concerned and wanted to use the federal executive branch to regulate teen smoking. Unlike his predecessors Ronald Reagan and George H.W. Bush, who supported deregulation, Clinton was a president who wanted to use the regulatory power of the federal government broadly.

In August 1995, Clinton stated at a press conference that he was introducing a bureaucratic rule aimed at decreasing teen smoking. “Today I am announcing broad executive action to protect the young people of the United States from the awful dangers of tobacco,” he said. He authorized the Food and Drug Administration (FDA) to design regulations aimed at controlling marketing and sales to teens.

The White House, FDA, the Office of Management and Budget (OMB)—which coordinates and reviews federal regulations—and the Justice Department, developed a long list of tobacco industry regulations. The tobacco industry sued to prevent the implementation of the regulations.

In FDA v. Brown & Williamson Tobacco (2000), the Supreme Court ruled against the FDA. The Court ruled that the FDA exceeded the regulatory authority Congress granted to the agency. The Court clarified that the FDA would have to ban cigarettes completely under the Food, Drug, and Cosmetic Act (FDCA) because the law banned drugs that could not be used safely for a therapeutic purpose. Therefore, the FDCA allowed the FDA to ban cigarettes but not to implement the regulations it created.

In the Senate, John McCain (R-AZ) proposed and pushed legislation to give authority to the FDA to implement the regulations it wanted, but it failed. Still, the regulations may have had their desired effect, despite their short duration. Teen smoking dropped from nearly 25 percent in 1997 down to 15.6 percent within a few years.

Reflection Prompts: 

• List three pros and three cons of bureaucratic regulation on American society and the economy. They may be explicitly stated in the text or implied.
• Choose one example from the essay and explain the role of the bureaucracy in your selected case study.
  • The California Red-Legged Frog
  • Navigable Waters
  • Artisanal Cheese
  • Teen Smoking
• Money is not explicitly mentioned in these cases. How do these cases relate to the “regulation of the economy?”
• Leadership in the bureaucracy is appointed, not elected. What effect might this characteristic have on self-governance?