Secretary of Business: Trade Subsidies and the Socialization of Opportunity

On Monday, President Obama said in an interview with MSNBC that one “bipartisan” thing he would like to do in his next term is reduce government waste by consolidating a variety of existing agencies involved in helping American businesses.  The idea, said the president, is to streamline the bureaucracy and create a “one-stop shop” under “one secretary of business.”  Bureaucratic reform is definitely a good idea, but this proposal is pretty weak.  Moreover, the impetus behind the move and the rhetoric to support it are particularly troubling.

Conservative commentators have spent the week criticizing the plan for various reasons, and now the Romney campaign has picked up on the issue with a new ad and some fresh lines in the stump speech.  The most common retorts have been that we already have a secretary of commerce, that adding a bureaucrat in Washington won’t help business, and that Obama now wants to add even more regulation.

Despite the recent attention, the president’s proposal is not new.  Reorganizing the federal bureaucracy was a topic in his 2011 State of the Union Address , and he proposed a more detailed plan (the one he alluded to on Monday) in January of 2012.  That plan involves reshuffling various agencies handling international trade matters into a single department.

The agencies included in the plan are the Department of Commerce, the Export–Import Bank, the Overseas Private Investment Corporation (OPIC), the Small Business Administration (SBA), the United State Trade and Development Agency (USTDA), and the United States Trade Representative (USTR).  While the plan isn’t new, this is the first I’ve heard of possibly naming it the Department of Business.  I suspect it would eventually have some other, even more obfuscating name, but “secretary of business” gets the idea across well enough during campaign season.

In January, a White House press release described the plan like this:

The President is proposing to consolidate those six departments and agencies into one Department with one website, one phone number and one mission—helping American businesses succeed.

One Department: there will be one Department where entrepreneurs can go from the day they come up with an idea and need a patent, to the day they start building a product and need a warehouse, to the day they are ready to export and need help breaking into new markets overseas.

The new Department will lead the development and implementation of an integrated, strategic, government-wide trade effort and have a focused capacity to help businesses grow and thrive.

This is not something to get too riled up about.  Utopian visions of government intervention notwithstanding, the reshuffling would most likely amount to little more than a harmless distraction.  Without proposing any substantive changes in the way these agencies operate, it’s difficult to see how a reshuffling would actually make any real difference.  The whole idea seems like a waste of time designed to look like progress.

But there are also some potential downsides worth addressing.

First, the plan is not very specific and leaves open a lot of questions.  For example, which portions of the Department of Commerce are at stake?  Commerce is a very large cabinet department that includes the Census Bureau, the National Oceanographic and Atmospheric Administration (that tracks hurricanes), the National Institute of Standards and Technology (a gigantic science laboratory), and the Patent and Trademark office.  When Rick Perry advocated abolishing the Department of Commerce, I doubt he had all these agencies in mind.

I don’t think the president wants to include them in his umbrella trade agency either, but he hasn’t specified what he would include.  The proposal did single out the “Department of Commerce’s core business and trade functions.”  I would not have thought that the Patent Office fit into that group, but the description of the new department’s activities mentions help getting a patent.

The reshuffle would almost certainly include the International Trade Administration, the bureau within the Commerce Department that handles antidumping and countervailing duty investigations.  Indeed, trade “enforcement” has been a prominent part of the president’s trade agenda (as well as both candidates’ campaigns in the 2012 election) and that certainly includes trade remedies.  But the other agency that administers those laws, the independent International Trade Commission, has not been included in any reorganization discussions.

This omission raises a lot of questions, and it is quite unclear how the reshuffle would affect the administration of America’s very contentious trade remedy laws.  Other omissions are equally confusing.  Why is the Customs office not included?  What about the Bureau of Industry and Security, which administers export controls—a function it shares with the State and Treasury departments?

Second, many trade policy experts are wary of any effort to downgrade the status of the U.S. Trade Representative, a cabinet-level position with international ambassadorial status.  Under the president’s reshuffle scheme, the USTR would become a sub-agency within a larger trade bureaucracy.  The most important function of the USTR is to negotiate trade agreements and represent the United States at the World Trade Organization; it has no significant domestic function.

Organizational independence for the USTR is worth maintaining.  On the one hand, placing the USTR within this new trade agency suggests that the president sees its role as being primarily one of “enforcement” of existing agreements rather than as an engine for further liberalization of global trading rules.  On the other hand, in the USTR’s negotiating capacity, the office is already too cozy with export-oriented industries looking for preferential market access abroad.  The USTR can and should be dedicated to advancing trade liberalization by working within the global trading system.  It can best do that by being fully independent of the protectionist bureaucracies that administer U.S. trade policy.

Third, the bulk of the agencies intended for inclusion in the plan are involved in corporate welfare of one form or another, and it is clear that the new department’s primary purpose would be to hand out subsidies.  When the president talks of a one-stop shop, he seems to be saying that the secretary of business would be #1 on the speed-dial for every American company’s man in Washington.  It is this function that prompted David Harsanyi at Human Events to label the proposed agency the Department of Cronyism.  K Street can handle multiple phone numbers, but the benefit of having your former CEO be the subsidy czar is incalculable.

These agencies should not be consolidated; they should be abolished.  A government agency whose sole purpose is the promotion of business embodies the ideology so prevalent in Washington today that economic growth depends on forward-thinking government management of capital.  When the president told business owners, “you didn’t build that,” he may have been talking about roads and schools, but he painted a vision of society in which government is responsible for guiding us toward economic opportunity and deserves the credit for individual success.  I have no doubt the secretary of business will see it that way too.