Ash to Ashes: The Likely Fate of Obama’s Reorganization Plan

Roy Ash’s death was announced today.  Seventy-five years ago this week President Franklin Roosevelt unveiled his famous Brownlow Report (see Andy Rudalevige’s overview here). And today, as I write this, President Obama is slated to unveil his plan to consolidate six government agencies dealing with trade and commerce into a new department.  How are these events related?  All are characters in a long-running but often overlooked and underappreciated drama: the continuing efforts by Presidents to enhance their ability to “manage” the executive branch.

Under the Constitution (Article II, section 3), the President is charged to “take care that the laws be faithfully executed”.  In the modern era, with the proliferation of government agencies and programs, that charge has taken on new significance.  To fulfill the expectations associated with serving as the nation’s “chief executive”, presidents have sought ways to enhance their control of the executive branch.  One of the first, and perhaps the most successful efforts to do so occurred under Franklin Roosevelt, based on recommendations contained in the Brownlow Report which he commissioned to recommend ways to streamline the executive branch and enhancing his control over the major managerial processes – budgeting, personnel and policy planning.  That Report, published in 1937, led to the creation of the Executive Office of the Presidency (EOP), including the White House Office, and to the consolidation and restructuring of portions of the larger executive branch.  Significantly, however, much of Brownlow’s plan to streamline the executive branch in the name of efficiency was blocked by Congress, which sought to preserve its influence over key departments and agencies.

Flash forward to the Nixon Presidency.  He took office in 1969, and one of his first acts was to appoint his own Brownlow Committee – the Ash Council, head by industrialist Roy Ash. Over the next several years, the Council issued a number of reorganization plans.  (Ash later went on to serve as director of the Office of Management and Budget).  The most ambition plan to come out of the Ash Council was Nixon’s decision in 1971 to abolish several constituency-oriented cabinet-level departments and replace them with four new “super departments”, including a Department of Economic Affairs.  That superdepartment would absorb the Commerce Department, the Small Business Administration (SBA) as well as a variety of other economic-related programs then lodged in other government agencies.  When that plan went nowhere in Congress, Nixon sought to institute his own version of it by appointing five “super counselors” who would supervise all government agencies dealing with broad functional areas – national security, natural resources, community development, etc., and who would report directly to him. Roy Ash was one such counselor, charged with supervising government agencies dealing with economic affairs.  That plan eventually was scuttled by the Watergate scandal.

Today, according to news reports, President Obama will announce his own, more limited reorganization plan focusing on agencies dealing with trade and commerce.  Without knowing the details, I can’t comment on its substance, or on the likelihood that it will achieve its stated goals which almost certainly include promises to save taxpayer money and reduce bureaucratic inefficiencies. But based on previous efforts to reorganize government, which include plans to consolidate economic programs into a single department, I am confident that the following observations are accurate:

1. The timing of this announcement, in the midst of persistent high unemployment, and with an election less than a year away, is no coincidence.  This is as much about election-year politics as it is about restructuring the executive branch.  The idea here is demonstrate the President’s commitment to doing everything he can to resuscitate the economy and create jobs.
2. The reorganization plan, even if implemented in full, is almost certainly not going to achieve the projected cost savings, whatever those are. The reasons why are complex, but the single biggest explanation is that government agencies are not created to be efficient.  Their bottom line is not to make a profit.  Instead, they often have multiple objectives that are in tension.  Take the Small Business Administration (the SBA).  You might think its mission is to make loans in the most cost-efficient manner by, for example, identifying companies that are likely to do well and who can pay back the government loans quickly and, in the process, generate more tax revenues.  In fact, however, the SBA must consider other values when deciding which company to back. For example, it may have an interest in promoting minority-owned businesses.  There may be geographic considerations – for instance, targeting inner-city business located in poorer regions – that affect its decisions.  Should the SBA focus on promoting emerging industries that may have greater payoffs down the road, or emphasize loans to established businesses with a proven track record?  Given these conflicting missions, it is probably inappropriate to judge the SBA’s effectiveness solely on its “bottom line” however that is defined.  Similar arguments can be made regarding the other agencies involved in the reorganization effort.  (Thanks to Middlebury student Brittany Perfetti on whose research paper I drew for some of the SBA-related observations.)
3. And that brings up a third, crucial point: Obama lacks reorganization authority to make these changes on his own.  Both FDR and Nixon issued reorganization plans under authority granted to them by Congress, but that authority lapsed after Carter’s presidency and has never been restored.   As a result, if Obama’s plan is to reach fruition, it will need congressional approval. This almost certainly will not happen.  One reason, of course, is that this is an election year, and a Republican-controlled House is not likely to sign on to this legislation for fear of the political repercussions.  In particular, the plan promises to upset key constituents groups that have close ties with Congress.  And that raises my fourth point:
4. Previous reorganization efforts along these lines have foundered on the shoals of interest group resistance.  Note that this isn’t the first time a President has suggested folding the SBA into the Commerce Department.  This is a recurring suggestion that, despite it superficial appeal, never goes anywhere.  The reason is because the powerful small business lobby, including the National Federation of Independent Business, consistently opposes these mergers for fear that small business interests will get swallowed up in a department controlled by larger economic interests.  It is not clear to me that it will be any different this this time around.
5. There is an additional obstacle to a successful merger along the lines proposed by Obama: it ignores issues of organizational culture and mission.  By culture, I mean the views held by the dominant group within an agency regarding what its mission should be.  Culture influences how agencies recruit and promote individuals, and how it defines its critical task.  And when agencies that have different cultures are merged in a single department, conflict often results.   It can lead to greater inefficiencies and reduced effectiveness.  Witness what happened to FEMA when it was merged into the newly created Department of Homeland Security, and its focus shifted from disaster relief to terrorist response.  While mergers may look logical on paper, it takes a keen understanding of the individual agencies’ operating culture to know whether a consolidation will take hold.  And that leads me to my final point:
6. Both the Brownlow Committee and Ash Council recommendations came after a lengthy study process based on input from scores of experts both inside and outside of government.   It’s not clear to me that this more recent proposal put forth by the Obama administration has a similar genesis.  Instead, it seems to me more likely that someone dusted off a previous reorganization plan and decided it would make for good election year politics without really thinking through the implementation details.  It is possible I am wrong, but I haven’t heard of any study group at work that would produce a Brownlow-like Report.

Bureaucratic politics is inherently unsexy.  Ash, may he rest in peace, confided that when he would discuss details of his reorganization plan with Nixon, the President’s eyes would glaze over.  But the reality is that, despite the lack of glamour, how presidents “manage” the bureaucracy is perhaps the most crucial determinant of their power, broadly defined.  Obama is but the latest in a string of presidents dating back to Teddy Roosevelt who have sought to use their reorganization authority to strengthen their control over the implementation of government programs.  History suggests, however, that this latest effort will produce much less than promised – not just in cost savings, but more importantly in enhancing the President’s administrative power.

Addendum: According to  this Politico story the President is seeking fast-track authority which would allow him to submit reorganization plans to Congress and it would have 90 days to either reject or accept the plan in its entirety.  Presidents use to have this authority for trade agreements, but not for reorganization authority as far as I can remember.  I don’t believe Congress will grant any reorganization authority that doesn’t allow them to edit the proposal before accepting it.   Again, my guess is this means the plan will go nowhere prior to 2012.