Politics, Bureaucracy, and Farm Credit

A central issue in public administration is the conflict between democracy and the bureaucratic demands of governance (Redford, 1969). The predominant view in the literature is that bureaucracy is best subjected to political control through overhead democracy where elected politicians (usually Congress or the president) use a variety of hierarchical controls to influence the policy activities of bureaucrats. Various models are commonly used to explore these relationships with the principal-agent model predominating. Within this context McCubbins and Schwartz (1984) have suggested using the metaphors of police patrol and fire alarms to explain legislative oversight. In this paper we focus on farm credit policy and suggest three points for consideration. First, another type of oversight suggested by Khademian (1995), bottom-line governance, best explains the oversight relationship with respect to farm credit policy. Second, bottom-line governance and the principal-agent approach are variations of overhead democracy rather than distinctive governing phenomena. Third, a third metaphor, that of a smoke detector, enhances our understanding of bottom-line governance. We focus on two major distributive policy issues relating to agricultural debt policy: the acquisition of debt and the institutions that possess that debt. Re-examining the relationships between bureaucracy and political institutions in the area of agricultural credit is worthwhile for four reasons. First, the characteristics of this policy area differ from those assumed by the predominant theory, the principal-agent model. Second, these characteristics generate a different set of relationships that can best be described as bottom-line oversight (Khademian, 1995; Behn, 1992). In such circumstances bureaucracies are given vast discretion but held to a specific performance standard that is relatively easy to measure even if the day-to-day operations of the bureaucracy are not. Third, such policy areas encourage a different style of congressional oversight. Here is where we add "smoke alarms" to "police patrol" and "fire alarm" oversight. Fourth, agricultural credit policy is important in its own right. The food and fiber industries are economically powerful (adding $800 billion in value to the U.S. gross domestic product annually) and politically powerful (Browne, 1988; Jones, 1961; Talbot and Hadwiger, 1968; Tweeten, 1979; Ulrich, 1989). Agricultural debt totals approximately $140 billion dollars with about two-fifths of the total held by U.S. government-sponsored enterprises. Theory A fundamental tenet of democratic theory is that public policy should reflect a direct link between the governed and the governors; that is, public policy should be made by officials who are accountable to the people. Thus, a direct relationship is needed between unelected bureaucrats, who may exercise policy control, and the elected representatives of the people. Not surprisingly, research into the control of bureaucracies by political institutions is a growth industry (Moe, 1982; 1985; Scholz and Wei, 1986; Wood, 1988; Aberbach, 1990; Wood and Anderson, 1993; Wood and Waterman, 1991; 1994; Woolley, 1993). Much of this research uses the principal-agent model. Principal-agent models assume that bureaucrats and politicians disagree over the goals and means of public policy and, further, that political control over the bureaucrats is made more difficult because bureaucrats have access to policy-relevant information that politicians do not (Moe, 1985, 1098). In this context of goal conflict and information asymmetry, political principals are hypothesized to control bureaucratic agencies through a combination of monitoring, dispensing rewards, and meting out punishments. The research generally investigates this relationship by analyzing how bureaucratic outputs respond to changes in presidential administrations, changes in congressional partisanship or ideology, or changes brought about by periodic political events. …