The out-of-control bureaucratic branch of government
Books | How powerful agencies led by unelected officials stifle innovation and encourage corruption
by Timothy Sandefur
Posted 7/29/17, 11:42 am
Timothy Sandefur begins The Permission Society—a runner-up for WORLD’s 2016 Book of the Year in the Understanding the World category—with this sentence: “Not having to ask for permission is one of the most essential parts of freedom.” His last chapter begins: “The basic principle of the Permission Society is that freedom is a privilege the government may give or take away as it sees fit.” In between, Sandefur shows how the United States has morphed from its founding ideal of inalienable rights to an opposite understanding. In chapters on prior restraint and speech, prior restraint and business, and the competitor’s veto, he shows how a Permission Society favors those with power and connections and raises costs for those trying to exercise their freedoms. In the following excerpt, courtesy of Encounter Books, Sandefur shows how the permit system of government kills innovation and leads to corruption. —Susan Olasky
Enforcement by Unelected Bureaucrats
Any law that requires citizens to get a permit before they can do something, and then provides only mushy and obscure criteria for getting a permit, gives officials power to enforce their will arbitrarily and unpredictably. After all, nearly anything can be plausibly described as “in the public interest.” That is why philosopher Hannah Arendt wrote that bureaucracy substitutes the “rule of cleverness” for the rule of law.
Yet judges are usually reluctant to interfere with bureaucratic agencies. Agencies are staffed by experts in environmental science, or whatever the bureaucracy regulates, and therefore presumably know best. Judges have adopted a theory of deference, which allows bureaucrats to stretch their authority as broadly as they want so long as their acts are “reasonable,” an expansive grant of power that deprives citizens of the judicial protection promised by the Constitution, emboldens agencies to stretch their prerogative to the limit, and encourages lawmakers to write ever more vague laws to evade their responsibilities to the voters.
The result is something like this: A politician runs for office on a platform promising, say, to stop pollution. Once in office, he writes a bill that forbids anyone from emitting pollutants without a permit—and also establishes a new bureaucratic agency charged with determining what qualifies as a “pollutant” and how one goes about getting a permit. Once the bill is passed, the politician can tell his constituents that he has taken bold action to solve the problem and move on to the next issue. While voters are applauding his achievement, the new agency begins writing regulations, often with little public attention. These regulations are intricately complex, are backed up by severe penalties, and sometimes have nasty unintended consequences. The unelected officials employed by the agency have every incentive to interpret their mandate as broadly as possible because, after all, they act “in the public interest.” Within a few years, the agency has implemented thousands of petty and complicated rules, which are in effect a code of laws that no elected official ever approved and which neither they nor the voters can realistically control. If the agency ever takes a step that causes a controversy in the media—for instance, declaring a July 4 fireworks display to be illegal “pollution”—the politician who wrote the law can shake his head, claim that was not his intention, and chide bureaucrats for going too far—again winning the applause of voters. But since nothing short of a new law is likely to rein the bureaucracy in, he can probably do nothing meaningful about it, even if he wants to.
Agencies combine legislative, judicial, and executive powers. They write regulations, prosecute alleged infractions, and punish those they find guilty. This is particularly disturbing because although people can sometimes go to court to challenge an agency decision, judges are generally not allowed to consider evidence that was not first presented to the agency at one of its own hearings. Yet the legal rules of evidence typically do not apply to those agency hearings, which means that agencies can base their decisions on types of evidence that courts are not usually allowed to consider—hearsay, for example. Later, when the agency’s decision based on hearsay is appealed to an actual court, the judge is typically forced to rely exclusively on the evidence the agency used, including hearsay or other evidence courts normally cannot use. In some cases, courts are not allowed to review agency decisions at all.
The agencies that oversee permit requirements form a branch of government not contemplated by the Constitution, run by officials who do not answer to voters. The result is a powerful, invisible branch of government that the people cannot control. After the 2013 rollout of healthcare.gov became a fiasco, many critics demanded that Secretary of Health and Human Services Kathleen Sebelius resign. She refused, saying, “The majority of people calling for me to resign are people who I don’t work for.” That was true: as the head of an enforcement agency, she worked for the President, not voters. Americans spend much time and energy arguing over who should be elected to Congress or sent to the White House, but most of the laws that govern citizens’ lives are written not by elected officials but by bureaucrats whose decisions are shielded against the democratic process.
A fourth problem with permit systems is that whenever officials have the power to make decisions from which citizens will profit, those officials are in a position to demand something in return. At times this can take the form of outright corruption. More often, people seeking permits are forced to provide concessions to the government to serve some general social need. Property owners seeking to develop their land are often subjected to “exactions” that force them to give up property or cash to the government in exchange for development permits—or to surrender some of their property in exchange for permission to sell the rest. As we will see in chapter 6, one California city even forced a couple to give up their right to vote on certain property taxes in exchange for a permit to renovate their home.
Still another problem with permit requirements is that any violation of the requirement is itself against the law, even if the requirement is illegal. This two-layer effect often blocks people from challenging these laws in court. In 1963, city officials in Birmingham, Alabama, persuaded a state judge to order Martin Luther King Jr. and his supporters not to march in protest against segregation. City ordinances required protesters to obtain a permit, and King and his allies had not been issued one. King chose to ignore the court order and march anyway. He and over 1,000 protesters were arrested and sent to jail, where he wrote his famous “Letter from Birmingham Jail” on paper smuggled in by friends. His attorneys appealed, arguing that the permit requirement and the court order violated the First Amendment, but even sympathetic justices of the U.S. Supreme Court were unconvinced. Had King patiently appealed the order, they wrote, they might have ruled in his favor—in fact, the court later did declare the Birmingham permit requirement unconstitutional. But King’s outright defiance could not be tolerated, the court said, “however righteous his motives.” People may not “ignore all the procedures of the law and carry their battle to the streets,” because “respect for judicial process is a small price to pay for the civilizing hand of law, which alone can give abiding meaning to constitutional freedom.” That is true, but as King explained, such litigation can often take years and can become a “pseudo-legal way of breaking the back of legitimate moral protest.”
Faced with endless permitting delays and burdensome demands from bureaucrats, property owners often find themselves in a similar position. A person who is told that he may only have a building permit on certain conditions, and believes those conditions are illegal, may not simply ignore them and build anyway. Laws in California and some other states bar him from accepting the permit under protest, starting construction, and later asking a court to rule on the question. Instead, he must postpone work, file a lawsuit, and wait—often for years, sometimes for decades—for courts to rule. However “civilizing” this might be, it is also a “pseudo-legal way of breaking the back” of property owners, with the effect of insulating permit requirements from judicial review. Few citizens can afford such tedious, expensive delays, and those who lose patience and violate the law can then find it impossible to challenge the validity of that law.
But the most troubling aspect of the permit system is that it stifles innovation. As we will see in chapter 5, some permit rules force people who want to start new businesses to prove to the satisfaction of government regulators that there is a “public need” for the business before the person may set up shop. But it is hardly ever possible to prove such a thing or to justify some new idea or new way of doing business beforehand. It would not have been possible in the late 1980s to prove that the United States “needed” a new chain of coffee shops: the country had plenty. Yet within a decade, Starbucks’s brilliant success proved that the public did, in fact, want a new chain of coffee shops. It is never possible to prove—it’s often impossible even to guess—whether a new idea will take off. The only way to tell is to try. But the permit system often makes it impossible to experiment, thus hampering the most important quality of free markets: the possibility of innovation.
Innovation is an elusive quality. It cannot be held in the hand or shown to the eye. It is potential. It is a chance for the future. Its impalpable and vital quality is captured eloquently in a story sometimes told about Benjamin Franklin: asked what some new invention was good for, he is said to have replied, “What is the use of a newborn baby?” One can never know what promise a new idea holds. Yet licensing laws and permit requirements essentially force one to know and quantify this unknowable value. And the cost and difficulty of obtaining a permit often stifles the fragile first steps toward innovation.
The costs of permits can be severe. To take just one example, the Endangered Species Act makes it illegal to “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect” an endangered plant or animal without a federal permit. Since construction usually causes some kind of “harassment,” property owners who discover, say, the Delhi Sands flower-loving fly (Rhaphiomidas terminatus abdominalis) or the western prairie fringed orchid (Platanthera praeclara) on their land must get federal permits before beginning construction. It is impossible to say how much these permits will cost because the government treats each applicant differently, often requiring people to pay for extensive “mitigation” projects in exchange for permits. When one Georgia paper company sought a permit in 1999, the federal government forced it to fund a “conservation bank” to protect the red-cockaded woodpecker, at the cost of $50,000 per bird. In a Texas case, the government forced homebuilders to pay $1,500 per house into a fund for habitat preservation. And when Delhi Sands flower-loving flies were found on the future site of the San Bernardino County Medical Center, the government forced the center to pay over $3 million toward fly preservation—an expense and delay that likely cost human lives for the sake of flies. Simply negotiating over the terms of a permit can take years, with additional delays to prepare mandatory scientific reports, allow public comment, and evaluate proposals.
In places where corruption is common or where permits are distributed only to influential insiders, the process is even bleaker. Permit requirements encourage corruption because the costs and delays lead people to seek extralegal alternatives. In an effort to demonstrate this problem, Peruvian economist Hernando de Soto tried to start a small business in his home country. It took 11 permits and 278 days. He was asked for bribes ten times during the process. That was minor compared to other countries he studied. Tanzania, for example, has such complicated and corrupt licensing rules that, according to de Soto’s calculations, a business that lasts 50 years will have to pay $91,000 to government officials and spend four years in bureaucrats’ offices seeking some form of permit. That doesn’t count the nine years of time waiting for the permits to be issued. “Is it any wonder that 98 percent of all businesses in Tanzania choose to be extralegal?” asks de Soto. “How else could a business owner get things done in an efficient manner, but to grease the palms of underpaid functionaries? No matter where you look, where you find more bureaucracy, you’ll find greater corruption.”
Even without corruption and high fees, the cost of a permitting system can be incalculably high in one respect: potential new ideas can be lost forever if an inventor or entrepreneur decides he just doesn’t want to go through the hassle and delay. Innovations often begin as a hunch, as a barely articulable notion that a new way of doing business, or a new recipe, or a small tweak on existing technology might be better, more useful, or more satisfying. But when told that they will have to undergo expensive and time-consuming permit processes before being allowed to pursue a new idea, many simply give up without trying. The cost to society of stifling innovation is literally immeasurable. It takes the form of what economist Frederic Bastiat called “unseen” costs: wealth that might have come into existence but never does. Because it remains uncreated, it cannot be quantified and people don’t notice it precisely because it never exists. Yet these “unseen” costs are real—they are the new businesses, new technologies, new opportunities that never come about.
From The Permission Society: How the Ruling Class Turns Our Freedoms into Privileges and What We Can Do About It by Timothy Sandefur. © 2016. Published by Encounter Books. All rights reserved. Used with permission.