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Chapter 13
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Bernie Madoff and the SEC
Bernie Madoff’s Ponzi scheme may have cost investors up to $65 million
Many organizations failed after Madoff ‘s crimes discovered
Securities and Exchange Commission had numerous complaints that it failed to follow up on properly
Subsequent SEC analysis claimed errors due to inexperienced staff
A painful reminder that we depend on regulatory agencies to protect us
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Bernard Madoff
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Organization Matters Laws passed by Congress are implemented by
the government’s bureaucracy
Bureaucracies play central role in today’s governments and society as a whole
Organization of a particular bureaucracy depends on its political demands and needs of its clients
Organization also affects a bureaucracy’s ability to accomplish its work
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The Development of the Bureaucratic State
American public concerned with size of bureaucracy
Government at all levels grow enormously during 20th century Society increasingly more complex Attitudes towards regulation of business
and government’s role in social welfare changed
Ambitious bureaucrats have expanded organizations to add responsibilities
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Not So Big by Comparison
Compared with other Western democracies, U.S. government relatively small Most of these countries offer more
welfare and social service benefits to citizens
Taxes in these countries proportionately higher
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Can We Reduce the Size of Government?
Even incumbents “run against the government”
Many Americans lack confidence in government and believe it wastes money
Serious budget cuts require significant reductions in programs Proposed reductions of specific programs
face opposition and are politically risky8
Can We Reduce the Size of Government?
Debate on reductions in bureaucracy shaped by ideology and size of budget deficit Reagan saw small government as
enhancing personal freedom Obama sees government as a way to
promote equality and protect citizens
Not always good politics to downsize government An upside to providing a benefit to citizens
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The Organization of Government
Bureaucracy in Washington actually a collection of smaller bureaucracies
Departments cover broad areas of government responsibility
Independent Agencies stand alone, some controlled by president and some self-governed regulatory commissions
Government Corporations perform services that could be provided by private sector but Congress believes should be done by government
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Figure 13.1
Bureaucrats at Work
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The Civil Service National bureaucracy almost 2.8 million
civilian employees Diverse jobs make up 2% of U.S. workforce
Senior Executive Service top level
Most hired under civil service Pendleton Act (1883) designed to reduce
patronage with merit hiring
Pay and benefits of federal jobs compare favorably with private sector
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Figure 13.2
Diversity Lags
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Figure 13.3
Good Jobs, Good Benefits
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Presidential Control over the Bureaucracy
Civil service and other reforms insulate government workers from party politics
Presidents appoint about 3,000 people to high-level positions Around 1,000 require Senate confirmation
Pluralism can pull agencies in directions contrary to president’s wishes
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Bureaucratic Policymaking
Agencies make policy when Congress authorizes them to administer a program
Regulations established to carry out laws create policy
Congress has prerogative to override regulations it dislikes
Congress can punish agencies by cutting budgets, altering programs, or holding up Senate confirmations 16
Administrative Discretion
Administrative regulations legally binding
Critics of bureaucracy complain agencies granted too much discretion
When agency directives from Congress vague, bureaucrats develop policy details Greatest discretion to agencies involved
in domestic and global security
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Rule Making Administrative process that results in
issuance of regulations Allows interested parties to comment on
proposed rules
Regulations often require individuals and corporations to act against own self-interest Freedom versus order
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And Now for a Real Challenge:
Regulate the World Some scientists fear global warming an
emergency Debate exists over long-term implications International cooperation needed because
greenhouse gas emissions know no borders
U.S. concerned about fairness of any enforcement
China resistant to any regulation or enforcement
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Land and Sea Yearly Mean Temperature, 1880-2000
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Administrative Policymaking:Informal Policies
Difficult to define precise values and goals rationally
Many related goals incompatible
“Best” policy may be one on which most people can agree
Constraints of competing policy objectives, opposing political forces, incomplete information, and pressures of time sometimes result in incrementalism
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The Culture of Bureaucracy
Interactions with bureaucrats sometimes frustrating because they are inflexible or lack authority to get things done Sometimes flexibility limited by legal
requirements and need to treat everyone equally
All bureaucracies have norms that guide behavior Sense of mission affects decisions about
agency objectives
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Problems in Implementing Policy
Paper policies must be put into practice with processes May not do what they were designed to do Trial-and-error common
Difficulties emerge when policies unclear or involve many different agencies and layers of government Implementation sometimes by contracts
with private sector or not-for-profits
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Los Angeles Smog
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Mortgage Relief
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Problems in Implementing Policy
The many obstacles to effective implementation mean patience and analysis essential ingredients to policymaking
So, implementation a gradual process where trial and error eventually lead to policies that work
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Reforming the Bureaucracy:
More Control or Less? Administrative reforms have
taken many forms over the years Deregulation Competition Performance standards
No magic bullet
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Deregulation Reduced government role lets market forces of
supply and demand take over
Popular with conservatives
Considerable deregulation in 1970s and 1980s
Difficult with health and safety issues One way is to allow companies flexibility in how to
meet standards Can also require more transparency and
accountability
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Competition and Outsourcing
Conservatives want government to act more like businesses
Some believe if agencies are not as efficient as private sector, service should be given to private sector
Competitive bidding for services to administer programs common
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Performance Standards Holding agencies accountable for reaching
quantifiable goals Government Performance and Results
Act sets requirements
Concern that if agencies set own goals, will set them to easily achievable levels or that show agency in best light What an agency thinks it can achieve
versus what would be most valuable to achieve
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