Public Administration Review • May/June 2001,

Ronald C. Moe

Congressional Research Service

The Emerging Federal Quasi Government:

Issues of Management and Accountability

In recent years, both Congress and the president have

turned to hybrid organizations (Fannie Mae, National Park

Foundation, Polish-American Enterprise Fund, for example)

to implement public policy and functions that traditionally

have been assigned to executive departments

and agencies. Hybrid organizations, which possess legal

characteristics of both the government and private sectors,

tend to generate considerable support and criticism.

Today [in 2001-rg], associated with the federal government alone, there

are literally hundreds of hybrid entities that have collectively

come to be called the “quasi government” (Seidman

1988). The relationship of this burgeoning quasi government

to elected and appointed officials is of growing interest,

and some concern, as it touches the heart of democratic

governance: To whom are these hybrids

accountable? How is the public interest being protected

against the interest of private parties?

The scope and consequences of these hybrid organizations

have not been studied extensively. Basic definitional

issues resist resolution. Even the language used in

discussing the quasi government is in dispute. Should

quasi government management be discussed in the language

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Conclusion: Quasi Management of

the Quasi Government

The arguments between competing management philosophies

aside, is anyone minding the quasi-government

store? Quasi-government hybrids do receive oversight from

time to time. It may be directed by executive agencies (for

instance, Federal Railway Administration oversight of the

Union Station Redevelopment Corporation) or by congressional

committees (such as House Banking Committee

oversight of Freddie Mac), but such oversight is as likely

to be protective or promotional as it is critical. Today, the

Office of Management and Budget is almost exclusively a

budget-driven organization with little capacity to review

and assess the quasi government (Moe 1999a). Comptroller

General David Walker’s statement, cited in the preceding

section, reveals the General Accounting Office has also

moved away from its traditional public law focus on ensuring

agencies’ compliance with general management

laws, instead promoting performance-based exercises. The

General Accounting Office itself is becoming, or trying to

become, the model “performance agency” in the federal

government.

Who is minding the quasi-government store? Nobody.

For entrepreneurs, this is not cause for alarm. The fewer

general management laws (“red tape”) informing the government,

both direct and quasi, the better. Market principles,

emphasizing competition, risk taking, outsourcing, cooperative

agreements, and management autonomy, are encouraging

the growth in the quasi government.

For constitutionalists, on the other hand, growth in the

number and varieties of hybrid organizations and their autonomous

management is a symptom of decline in the

democratic system of government. While government activities

of a commercial character are legitimately subject

to marketization in practice (for example, the Federal Deposit

Insurance Corporation or St. Lawrence Seaway Development

Corporation), the legal wall between the sectors

needs to be maintained as a bulwark of citizen

protection against misuse of government of authority by

parties with private interests.

The American Revolution was ignited, in no small measure,

by the practices of an early quasi-governmental hybrid

entity, the British East India Company. With broad

authority from Parliament, the company collected taxes

according to its own rules. The citizenry of Boston in 1773

staged a “tea party” to express their opposition to this type

of public management. While we do not anticipate another

tea party, there is, nonetheless, sufficient evidence today

of nonaccountable activity going on in the quasi government

to give pause to any concerned citizen.

The debate over the current and future course of the

quasi government is centered on fundamentally opposing

principles. Under limited circumstances, and after meeting

a heavy burden of proof, hybrid organizations may be

a creative response to a specific set of circumstances. By

their very nature, however, hybrids carry risks for a democratic

polity. The management of these risks is among the

most critical government responsibilities. The quasi management

of the quasi government is itself a risk to the citizenry

that needs to be understood, addressed, and ultimately

reduced so that full democratic governance can be restored

to our republic.