As part of a larger proposal to shrink and streamline government, the Obama administration announced on January 13, 2012 that it is seeking congressional approval to merge federal agencies. The President’s plan would not allow Congress to modify administration proposals, but the adoption of any plan would be subject to an up-or-down vote.

As his first action with this new potential authority, the President proposed combining the Department of Commerce (DOC)’s core business-related functions with several U.S. trade-focused agencies, including the Export-Import Bank, the Overseas Private Investment Corporation, and the Office of the U.S. Trade Representative (USTR), into a single agency. The President has also said that, for the time being, he will be elevating the Small Business Administration to a Cabinet-level agency. The proposal’s goal to streamline and modernize the government has been greeted with bipartisan applause. However, certain elements of the plan have been met with mixed reaction.

According to Acting Director of the Office of Management and Budget Jeffrey Zients, the architect of this proposal, the consolidation effort could lead to the elimination through attrition of between 1,000 and 2,000 government jobs. The administration has said that the effort could save $3 billion over 10 years. For their part, congressional Republicans seem open to reviewing the president’s proposal. In a January 14, 2012 Bloomberg article, Brendan Buck, a spokesman for House Speaker John Boehner (R-Ohio), said “eliminating duplication and making government more business friendly is always an idea worth exploring.”

Gary Hufbauer, a senior fellow with the Peterson Institute for International Economics, is a supporter of the proposal. In the same Bloomberg article, Mr. Hufbauer is quoted as saying, “I think it would help your trade performance. For most companies that have an issue with government, it’s one-stop shopping.”

However, business groups have been some of the most vocal critics of the consolidation scheme. Their primary concern is that aggregating the responsibilities of the USTR and the DOC under one agency will diminish USTR’s independence. According to a January 17, 2012 article in The Hill, the concerns of industry are magnified by the differences in function between the USTR and the DOC. The USTR is chiefly responsible for negotiating trade agreements for the United States and lowering barriers to trade in other countries.

By contrast, one of the DOC’s main responsibilities is to enforce trade agreements and impose tariffs on imports to the United States, which can be a highly politicized practice that restricts trade and penalizes foreign exporters. In a January 23, 2012 Business Week article, William Reinsch, president of the National Foreign Trade Council, argued that combining these functions under one agency could diminish their effectiveness: “You don’t want your trade negotiator to be the arbiter of trade law and enforcement. The concessions to trade laws would be overwhelming.”

In a January 17, 2012 New York Times article, Bruce Bartlett contended that while there are myriad agencies that are duplicative and inefficient, certain entities like the USTR have small budgets and are nimble, and thus should not be merged. Bartlett believes that no matter what promises are made to ensure USTR’s independence, folding the agency’s responsibilities under the Department of Commerce will not produce any efficiency gains and will likely lead to the politicization of the office.

Outside analysts are right to be skeptical about the Obama administration’s intentions. Given President Obama’s long record of failed Keynesian economic policies, any consolidation must be vetted thoroughly. It is certainly possible that larger devils can be found in the details of this proposal.