RETALIATION.

However, in some instances a regulated entity has its own sort of nuclear option. It may be that the target does not have the ability to strike back but that it has politically powerful friends with this sort of power. I discuss each of these options in a bit more detail below. Of course, introducing retaliation introduces an entirely new wrinkle in the game. In addition to discussing different types of retaliation, I also discuss how this changes the nature of the game. While I go into detail what this sort of change may mean below, at this point I provide Figure 3 below how the existence retaliation impacts the game agencies play when given a regulatory nuke.

<<FIGURE 3 OMITTED>>

3.5.1 Too Big To Nuke

The first sort of retaliation worth noting is the punishments targets themselves can inflict on agencies willing to use regulatory nukes. If they find it necessary, big industries like the pharmaceutical and auto industries have the ability to dump millions of dollars into ad campaigns designed to punish an agency that crosses them.

As an illustration of where this sort of retaliation might be relevant, consider the Medicine Equity and Drug Safety (MEDS) Act of 2000. The bill purported to give pharmacists and drug wholesalers the ability to import less costly prescription drugs from outside the United States. Before this could happen, however, the Act required the Secretary of Health and Human Services (HHS) to make a finding that drug imports would not pose additional risks to the public health and would lead to significant savings for consumers. None of those who have served as Secretary of HHS have been willing to make such a finding. There are those who have argued that this should not be surprising because the structure of the Act purposely made it difficult for the Secretary to pull the trigger (Sirota, 2009).

While making cheaper foreign drugs might seem politically popular to the average consumer, to the average U.S. drug company, the prospect is terrifying. The bill allowed Congress to get on record supporting cheaper medications, but put the political onus of pulling the trigger, on the Secretary of HHS. If a future Secretary of HHS does use this regulatory nuke against the pharmaceutical, we might see what retaliation of the pharmaceutical industry looks like.

However, not every regulatory nuke has a gigantic industry as a target. Politically, some of the tools that regulators mainly exploit for their threat value, have impacts that are concentrated on a particular business (rather than industry) or a particular project (rather than policy). In such cases, there is the possibility that the regulatory target does not have much power to retaliate politically.

For example, the government contractors under the thumb of the Department of Labor’s Office of Federal Contract Compliance Programs are generally not national players with vast resources. So, when the office conducts a review of the contractor’s compliance with the Equal Employment Opportunity Act, the regulatory target might not have much political recourse at all. The same may be true of projects killed by the Fish and Wildlife Agency issuing a negative jeopardy opinion, which can essentially kill a proposed federal project. In these cases, a regulatory nuke has devastating impacts, but the impacts are highly localized. It would be akin to bombing Hiroshima and Nagasaki but where the rest of Japan felt basically untouched and unthreatened.

3.5.2 Third-party Retaliation

Additionally, agencies might worry about retaliation from those other than the regulatory target.  Even in the context of actual nuclear armaments, this is not unusual.   Remember again Kennedy’s threat to Russia during the Cuban Missile Crisis: “[I]t shall be the policy of this nation to regard any nuclear missile launched from Cuba against any nation in the Western hemisphere as an attack by the Soviet Union on the United States, requiring a full retaliatory response upon the Soviet Union.” So, if Russia were to decide drop nuclear bombs on Guyana, for example, it had to wonder whether that would mean the United States will annihilate Russia.

Within the context of regulatory nukes, the agency may worry about the responses of few third parties if the agency went nuclear. The entities that most agencies would seemingly worry most about are the three branches of government: Congress, courts, and executive branch.

So take Congress as an example. Congress can do a lot of things to make life difficult for an agency. The extent of retaliation might be seen as a spectrum. Starting with things like attempted intervention as a matter of congressional constituent services and holding congressional hearings, to intermediate sanctions like disfavoring the agency in budgetary matters, and to Congressional nukes in the form of yanking an agency’s power and initiating impeachment proceedings of agency leaders.

Ultimately Congress might roll back the agency’s decision to launch a regulatory nuke, as it did in the instance of the Fish and Wildlife Service’s forced use of the Endangered Species Act to protect the snail darter at the expense of the mostly completed Tellico Dam. As discussed in greater detail below, going forward, Congress can also reduce the power of the regulatory nuke or even take it away from the agency.

Agency’s might also fear retaliation from the courts. Courts, for example, could find that the agency violated the law when using its regulatory nuke. Very often, when an agency uses a regulatory nuke, a law suit will follow, so this might be a real concern. For example, when the EPA did what many considered the unthinkable and attempted to hold the auto industry to statutory deadlines imposed by the Clean Air Act in the advent of something like the catalytic converter, the agency’s action was set aside by a federal district court judge.33

Regardless of how a court views a particular instance, an agency also runs the risk that a court may take some or all of the power out of a regulatory nuke. On one end, a court may find that a regulatory nuke is not warranted but rather some much less powerful remedy is. In other words, a court may find an escape hatch even when an agency or the Congress did not provide one. This of course makes it much more difficult for the agency to make credible threats: an agency cannot claim its hands are tied when a court unbinds them.

This is what has happened, for example, when it came to Title VI of the Civil Rights Act. The Act calls for one remedy—revocation of federal funding for any entity found guilty of discrimination. The courts have found an implied remedy for those faced with discrimination in the form of money damages. Because everybody directly discriminated against has a private remedy, the drastic remedy called for in the Act all the drastic and difficult to wield.

As for the Executive, if an agency crosses the President, it might mean restructuring, personnel changes, or other consequences of losing the love of the person ultimately charged with reigning in the agency. However, more common than employing tools to punish an agency that goes nuclear, we see the President or those heading agencies take precautions to exercise a degree of control over regulatory nukes. A nice example of this is the history of the EPA’s ability to veto dredge and fill permits issued by the Corps of Engineers. At the end of the 1980s, the EPA began to require the decision to use the veto to be made much further up the chain. In the event that a linelevel bureaucrat wants to veto one of the Corp’s decisions, the decision is elevated up the chain of command both with the Corps and the EPA. If negotiations fail on the way up the chain of command, the final decision of whether the EPA will veto a permit rests with the Administrator of the EPA.