June 29, 2026

RIP Administrative State! President Trump has slain it by cutting programs, funding, and civil servants, and by minimizing the effectiveness of the rules-confining Administrative Procedure Act. As a result, there are few remaining consumer protections, banking protections, and little aid for the poor. Concurrently, Justice Gorsuch eliminated judicial deference to agency rulemaking.

In place of the Administrative State, Trump is creating State Capitalism in which the government takes a sizable stake in advanced industries. As this system develops, the question left for our federal government is how to keep it working to serve the people of the nation rather than the politics of one person.

President Trump is no longer using the rules-based regulatory process to make policy. By using Executive Orders and Emergency Declarations, he is turning the federal government into a national corporate headquarters, so decisions once made by regulatory agencies and private corporate boards are made by presidential command.

The companies the Trump administration or his friends have a stake in are staggering: Nippon, US Steel, Nvidia, Intel, Fannie Mae, Freddie Mac, and a significant part of the crypto industry. Together, those companies give him control over steel, technology, artificial intelligence, housing, and finance.

Then there is social media, with TikTok as its poster child. Congress enacted a law requiring the Chinese-owned platform to be sold to an American company or face a nationwide ban by January 19, 2025. Rather than implement the statute, Trump unilaterally suspended enforcement without congressional approval and arranged a private deal that would allow a political ally to control it. As for mainstream media, Trump’s FCC controls it by threatening to revoke operating licenses.

The pharmaceutical giant Pfizer was granted a three-year exemption from tariffs in exchange for naming its new direct-to-consumer discount enterprise “Trump Rx.” This example shows how government action can be tied to a company’s branding and benefit.

The tragedy of America’s transformation from the Administrative State to State Capitalism is the accelerating erosion of constitutional balance. As presidents take direct action to bypass Congress, constitutional decay follows.

The regulatory level playing field is gone.

In a system of State Capitalism, the federal government cannot provide a level playing field for business to operate, since it is a participant in some businesses that compete with other non-government-controlled businesses. Because the government has a built-in profit incentive for its companies to win, it will always want more stock as it helps companies profit.

The Intel stock acquisition is an excellent example. The Biden administration initially awarded the company a $28 billion grant to encourage more manufacturing in the U.S. The Trump administration, however, required Intel to provide the federal government with stock as compensation for the grant. Since getting Intel stock took little effort, it is likely the federal government will demand stock in all companies to which it makes grants, loans, or guarantees. From there, expect the government to take a stake in any company for which it issues a license to export goods and services.

In general, permits will make stock acquisition easiest. Operating permits will be purchased with corporate stock. That may seem impossible, but the FCC’s threats to deny license renewals have worked in the communications industry.

Let’s not forget the tax preferences that will be granted to federally owned portfolio companies. The federal government will monetize every preference.

How can State Capitalism be changed to provide a level-playing field?

In an arbitrary state capitalist system, there will be no trade-offs with the government, only capitulation or exit. The American business community may think they are smart capitalists by appeasing the federal government with stock, but the corporations will find that the government will never be satisfied as a junior partner in a dynamic company. Eventually, it will be RIP corporate America.

Most troubling for the business community is that it collaborated to kill the Administrative State, which, frankly, became too bureaucratic, too inflexible, and too political, but at least the politics changed with administrations, so all sides had a chance to benefit when their administration won.

Since power is addictive for all presidents,  Congress must find a way to impose  controls on State Capitalism. That will be difficult because most presidents will veto any legislation that limits their power, and members of Congress of the same party as the president will do all they can to support their president.

If State Capitalism is to replace the Administrative State without clear rules, then replacing “expert-driven” bureaucratic paralysis with a new kind of arbitrary instability will prove to be  a far more unstable system.

It may, however, be the perfect example of power on stilts, and the warning is clear: this system cannot stand for long.