Lesson 54: The Organization of the Federal Bureaucracy
In this lesson, we will look at the four main structures found in
the federal government bureaucracy, including the cabinet departments,
independent executive agencies, independent regulatory agencies, and government
corporations. We will also look at some special situations where government can
take over private corporations.
The major structures of the government bureaucracy have a distinct relationship
to the president, and they have their own internal organization as well as
goals and powers.
The first of those structures is the Cabinet Department, which refers to any
one of the fifteen major departments of the executive branch. Another way to
describe them in management terms is as a Line Organization. That means that in
the federal government, each Cabinet Department of the executive branch is an
administrative unit that is directly accountable to the president.
Each cabinet department was created as the need arose, with the State
department being the oldest and the Homeland Security department being the
latest one to be added. The president can request new departments, but Congress
must approve them.
The president has some control over the departments because he can appoint or
fire the heads in charge. However, he does not have control over the permanent
employees who are hired within the departments because they are committed to
the goals of their department and often resist change.
Another structure in
the federal bureaucracy is the Independent Executive Agency. An Independent
Executive Agency is a federal agency that is not part of a cabinet department
but reports directly to the president. Such a federal agency like the
Environmental Protection Agency is created and then Congress decides its
location within the bureaucracy.
The third major structure of the federal bureaucracy is the Independent
Regulatory Agency, which is an agency outside the major executive departments
charged with making and implementing rules and regulations within a specific
area.
The Interstate Commerce Commission (ICC) was the first such independent
regulatory agency put in place in 1887 to exercise control over rapidly growing
business, and the industrial sector.
Later,
other regulatory agencies were created such as the Federal Communications
Commission.
Eventually, the Interstate Commerce Commission was abolished in
1995 and replaced by the Surface Transportation Board, establishing that
agencies can be created and abolished according to need.
Congress felt the need to
create regulatory agencies because of the complexities involved in carrying out
certain laws in the public interest. Regulatory agencies have the effect of all
three branches of government - legislative, executive, and judicial. They make
laws that they then enforce, and they also settle their own disputes.
The president appoints and
the Senate approves the heads of agencies or members of agency boards. But,
these officials do not report to the president.
There are problems with the system, however,
such as Agency Capture. That is when an industry being regulated by a
government agency gains direct or indirect control over agency personnel and
decision makers.
This has actually resulted in benefits to the industry rather than to
the public interest. Making decisions in the interest of industry often results
in less competition, higher prices, and fewer choices.
Deregulation is the removal of regulatory restraints. Regulations are put in
place and then other administrations remove them. For instance, when President
Carter appointed a chair to the Civil Aeronautics Board, he deregulated airline
fares and routes.
Under President Clinton, the Interstate Commerce Commission was eliminated,
resulting in deregulation of banking and telecommunications industries. At the
same time, extensive regulations were put in place to protect the environment.
President George W. Bush then weakened those regulations.
Leading up to the financial crisis that
occurred in September of 2008, inadequate regulation of the financial industry
played a vital role. President Obama reregulated the banking industry,
resulting in a financial regulation plan of 2010.
A Government Corporation is an agency of government that
administers a quasi-business enterprise. These corporations are used when
government activities are primarily commercial.
The most famous example is the U.S. Post Office. It works differently from
a private corporation in
that it does not pay taxes and does not have shareholders.
There are times when the federal government can take control of a corporation.
When a company goes bankrupt, federal regulations over how that is conducted
are handled by a judge. When banks fail, the government has to take control
through the FDIC and continue providing services to the bank's customers.
The government also has the ability to purchase stock in corporations. When the
FDIC had to take control over Continental Illinois in 1984, it took years to
find a buyer. That rescue was used as a blueprint for what happened in 2008.
The massive bank bailout actually resulted in the government's ownership of
businesses, banks, automobile companies, and even AIG. Even though it was
unpopular, the government recovered its investment and even made money on the
deal.
Freddie Mac and Fannie Mae are government-sponsored enterprises. When the
housing market collapsed, Freddie Mac and Fannie Mae went under. The government
seized control of them in something like a bankruptcy and now they are
government-owned. Also, they are profitable now and all profits go to the U.S.
Treasury.