This article advances a political theory of regulation that accounts for the choices of regulators and regulated entities when both are governments. Leading theories of regulation assume that governments regulate profit-maximizing firms: Governments set rules, to which firms respond rationally in ways that constrain their behavior. But often the entities that governments regulate are other governments. We argue that government agencies and private firms often face different compliance costs, and that agencies have greater incentives than firms to appeal regulations through political channels. Simultaneously, the typical enforcement instruments that regulators use to influence firm behavior may be less effective against governments. Our empirical subjects are public and private entities’ compliance with the U.S. Clean Air Act and Safe Drinking Water Act. We find that, compared with private firms, governments violate these laws significantly more frequently and are less likely to be penalized for violations.Back in the later eighties and early nineties there was a movement to get government to comply with the same laws as citizens. The embodying example was Congress which had exempted itself from all sorts of regulations including employment, EEOC, environmental, etc. that governed the actions and decisions of regular citizens. Eventually, (under Gingrich?), there was a truing up and most of the exemptions were rescinded.
My impression is that in the intervening twenty years, politicians and agencies may have fallen back into bad old habits. My recollection is that Obamacare was supposed to cover all congressional employees but that Congressmen ended up exempting them. And of course there is the recent example of the EPA flooding the Animas River in Colorado with toxic pollutants despite having been forewarned by citizens that the EPA's activities were likely to result in such a spill. There is the travesty of the VA in its pursuit of whistleblowers while delivering substandard care to veterans. All examples of government exempting itself from the very regulations that they impose on others.
Part of this is just standard organizational theory. Bureaucracies protect themselves first and foremost. Whatever beneficial mission under which they were originally charged, they quickly evolve to self-sustenance and a major portion of that self-protection is by exempting oneself from the very regulations you were established to promulgate.
Predictable it might be but it remains repulsive. No wonder there is such a hunger in the electorate for candidates who are not tainted by the stench of insider status.
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