The Crisis of the Administrative State, Part 3

Bureaucracy has been the bane of both rulers and the ruled since the time of the Pharaoh, if not before. Yet the sense that bureaucratic rule is getting worse is pervasive, even among some liberals who usually defend government against conservative criticism. The late George McGovern, the very liberal 1972 Democratic presidential nominee, made headlines back in the 1990s after his attempt at becoming an entrepreneur in a simple industry—a boutique hotel—failed in part because of bureaucratic regulation:

I also wish that during the years I was in public office, I had had this firsthand experience about the difficulties business people face every day. That knowledge would have made me a better U.S. senator and a more understanding presidential contender. . .

McGovern’s chief problem was a bad economy, but the regulations didn’t help:

But my business associates and I also lived with federal, state and local rules that were all passed with the objective of helping employees, protecting the environment, raising tax dollars for schools, protecting our customers from fire hazards, etc. While I never have doubted the worthiness of any of these goals, the concept that most often eludes legislators is: “Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape.” It is a simple concern that is nonetheless often ignored by legislators. . . The problem we face as legislators is: Where do we set the bar so that it is not too high to clear? I don’t have the answer. I do know that we need to start raising these questions more often.

Other liberals besides the late McGovern are starting to get it. Matt Yglesias, a liberal writer for Slate, made the same observation in “Starting a Business Is a Huge Pain”:

Entrepreneurship—even on the smallest and most banal scale—turns out to be a time-consuming pain in the you-know-what. My personal inconveniences aren’t a big deal, but in the aggregate, the difficulty of launching a business is a problem and it may be a more important one as time goes on. . .   The striking thing about all this isn’t so much that it was annoying—which it was—but that it had basically nothing to do with what the main purpose of landlord regulation should be—making sure I’m not luring tenants into some kind of unsafe situation.

Why “a more important one as time goes on”? There is evidence that state and local government bureaucracies responded to the great recession not by simplifying or shortening permit processes to encourage new business, but just the opposite: to avoid laying off or furloughing employees, many planning and development departments expanded the number of steps in building or siting a new business that require permits and inspections, and raised their permit and review fees to make sure their budgets were protected. The permit process actually slowed down, at the very time when it ought to have sped up to create jobs.

Yglesias merely wanted permits to become a landlord, a fairly routine and simple enterprise. As a sophisticated professional with time flexibility, he could cope: “Red tape, long lines, inconvenient office hours, and other logistical hassles probably won’t stop tomorrow’s super-genius from launching the next great billion-dollar company. But it’s a large and needless deterrent to the formation of the humble workaday firms that for many people are a path to autonomy and prosperity.” What about the low-income minority who wants to parlay his cooking skill into an entrepreneurial small business with a curbside food truck? Reasonable food safety regulations make perfect sense, but one suspects the permit process is made more formidable than it needs to be not to protect public safety but to protect incumbent food servers from competition, just as taxicab companies have lobbied regulators to strangle the startup Ubercars in its cradle. In Chicago, it was reported in 2012, 109 entrepreneurs applied for food truck permits after Chicago announced that it would legalize the business; none of the 109 applicants “met the city’s requirements,” according to a spokesman for the city’s Department of Business Affairs and Consumer Protection.

The regulation of low-cost competitive street retail isn’t limited just to food service where legitimate health concerns come into play; according to a report from the Institute for Justice, 45 of the nation’s 50 largest cities maintain extensive regulation of mobile vending of a wide range of products with no health risks at all (such as handmade clothing), “making it needlessly difficult or even impossible to set up shop in many cities.” Somehow the “disparate impact” these regulatory schemes have on lower-income minorities never reaches the threshold of a civil rights issue.

(Part 1 of this series is here; and Part 2 is here.)