The Wall Street Journal

How Bureaucrats Rewrite Laws

As the historic 104th Congress draws to a close, scholars have already begun to debate its legislative record. Some stress that the first Republican Congress in four decades enacted fewer major laws than any Congress since the end of World War II. Others respond that it was only natural that a new conservative Congress committed to restraining the post-New Deal rise of national government activism would pass fewer big-government bills. Likewise, while some interpret President Clinton's bright re-election prospects as a negative referendum on the GOP-led House and Senate, others focus on how Republicans ended up setting the agenda on everything from balancing the budget to welfare reform.

For at least two reasons, however, both sides in this early war over the 104th's history are firing intellectual blanks. One reason is that it is not yet clear how much of the legislation will stick politically. For example, Mr. Clinton has made plain that, if reelected, he plans to "fix" the new welfare law. And should the House fall to the Democrats, ultraliberal committee chairmen will move quickly to undo much of what the Republicans did legislatively on welfare, crime, immigration and more.

The other and more fundamental reason is that, no matter what happens in November, it is by no means certain that the laws passed by the Republican Congress over the last two years will survive administratively.

Bureaucratic Wars

Victories won on the legislative battlefield are routinely lost in the fog of bureaucratic wars over what the laws mean and how best to implement them. One of many recent examples is how the Federal Communications Commission has already virtually rewritten the Telecommunications Act of 1996.

On Feb. 8, President Clinton signed the first major rewrite of telecommunications law in 62 years. To many observers, the act represented the culmination of a series of political and judicial decisions that began in 1974 when the U.S. Justice Department filed an antitrust suit against AT&T, leading to a breakup of the old telephone monopoly and the creation in 1984 of the seven regional "Baby Bells." The bill-signing ceremony, the first ever held at the Library of Congress, was draped in symbolism. The president signed the bill with a digital pen that put his signature on the Internet. On a TV screen, comedian Lily Tomlin played her classic telephone company operator Ernestine, opening her skit with "one gigabyte" instead of "one ringie-dingie."

During the debate over the bill and for weeks after its enactment, the press played up the law's social-policy side-shows, like the requirement that most new television sets contain a "V-chip" enabling parents to lock out programs deemed inappropriate for children. But its true significance lay in removing barriers to competition in the telecommunications industry, and devolving responsibility for remaining regulation to the states. While its language is often technical, you need not be a telecom junkie to understand the letter of the law or the record of floor debates in Congress.

For example, Sections 251 and 252 of the law promote competition in local telephone markets, expressly giving state commissions authority to decide, via a strictly localized, case-specific process, what constitutes "just and reasonable" rates. It affords the FCC no role whatsoever in setting local exchange prices: "Nothing in this chapter shall be construed to apply or to give the Commission jurisdiction with respect to . . . charges, classifications, practices, facilities, or regulations for or in connection with intrastate communication service."

The law's devolutionary language and deregulatory intent was so clear that groups such as the National Council of Governors' Advisors quickly produced reports advising key state and local decision makers to prepare for "telewars in the states." Soon, one NCGA report on the law explained, "governors' offices, state legislatures and state public utility commissioners will be drawn into state debates on how to ensure a "level playing field for competition' among those firms seeking to provide local and intrastate telephone service." The major battles, the NCGA predicted, would be over the terms of price and interconnection agreements. Telephone company rivals could be expected to lobby governors, utility commissions and state legislatures in search of allies.

But within six months of the law's enactment, the FCC declared a victor in the "telewars in the states"—namely, itself. The commission produced a 600-page document promulgating presumptive national pricing standards in local telephone markets. The FCC insists that the order is necessary to pry open local markets to long-distance carriers like AT&T, small firms like Teleport, and cable and wireless companies. Otherwise, the commission asserts, incumbent local carriers like the Regional Bell Operating Companies will remain invulnerable to real competition as potential entrants to intrastate markets are forced to contend with 50 different, localized state regulatory regimes.

But the FCC's rushed, revanchist rewrite of the telecommunications law is based on a hypothetical pricing scheme that only an armchair economist could love. In its hundreds of pages of national regulatory dictates, the FCC almost completely ignores the actual costs that local companies incurred to create the system, and the regional and other variations in how they operate.

On Aug. 28, GTE Corp. And Southern New England Telephone Co. jointly challenged the FCC in court, arguing that the FCC's order constitutes an uncompensated taking under the Fifth Amendment by requiring them to sell their services at below actual costs. The order, they claim, would almost certainly enervate competition by permitting long-distance giants like AT&T to buy up local phone networks at huge discounts—an ironic potential outcome indeed given how all this began in 1974. Moreover, not only giants like AT&T but fly-by-night arbitrage artists could enrich themselves at the expense of consumers on the spread between actual operating costs and the prices set by the FCC. In response to the suit, a federal appeals court ordered a temporary stay of the FCC regulations and will hear oral arguments in the case tomorrow.

At a recent press conference, GTE's senior vice president and general counsel, former U.S. Attorney General William P. Barr, demanded to know why the FCC believes that it is better at making decisions "for 50 states than the state commissions are, who have done this historically, who have all the data that are relevant to the state before them."

A Mockery

But whether or not the FCC is wiser than the states, and regardless of who is right about the economics of the case, the FCC bureaucrats' order mocks key provisions of a democratically enacted law. The FCC's action is at odds not only with the textbook understanding of "how a bill becomes law," but with the first principles of limited government and American constitutionalism.

The FCC's action should serve to remind us that the devolution and deregulation of federal authority are always in the administrative details. On telecommunications, welfare, and almost every other major issue, big government is the administrative state in which judges and unelected officials, and not the elected representatives who debate and enact the laws, govern us all.