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Tenth Annual Executive Branch Review Conference —EBRX

The Administrative State, Law, and Culture

May 3, 2022

Tenth Annual Executive Branch Review Conference—EBRX
Theme: The Administrative State, Law, and Culture

Tuesday, May 3, 2022
The Mayflower Hotel
1127 Connecticut Avenue, NW, Washington, DC

Opening Address
9:00 a.m.


Hon. Mike S. Lee
United States Senator, Utah

Address
2:15 p.m.


Hon. James Lankford
United States Senator, Oklahoma

 

Schedule:

Welcome & Plenary Session
9:00 a.m. – 10:30 a.m. 

Breakout Panels
10:40 a.m. – 12:00 p.m.

Lunch
12:00 p.m. – 12:20 p.m.

Luncheon Panel
12:20 p.m. – 2:00 p.m.

Breakout Panels
2:15 p.m. – 3:45 p.m. 

Closing Address
4:00 p.m. – 4:30 p.m.

Closing Reception
4:30 p.m. – 6:00 p.m.

Freedom of Thought Project Dinner & Panel 
6:30 p. m. – 9:00 p.m. 

Panels:

  • Regulation by Surrogate? Is the Government Evading the Administrative Procedure Act?
  • The Executive Branch's Duty to Enforce
  • ABA Accreditation of Law Schools
  • American Investment in China
  • Administrative State on the Brink?
  • Religious Liberty and the Department of Defense
  • Climate Risk a New Regulatory Risk? Implications for Financial Regulatory Control of the Financial System
  • Selective Enforcement of Civil Rights Law by Administrative Agencies

Confirmed panelists to date:

  • Hon. M. Miller Baker, U.S. Court of International Trade
  • Hon. W. Scott Bales, Former Chief Justice, Arizona Supreme Court
  • Mr. Eric Baxter, VP & Senior Counsel, Becket
  • Mr. Jonathan Berry, Partner, Boyden Gray & Associates
  • Mr. Michael D. Berry, Vice President, External Affairs, First Liberty Institute
  • Hon. Steven G. Bradbury, Attorney and Former Senior U.S. Government Official
  • Amb. Kelley Currie, Adjunct Senior Fellow, Indo-Pacific Security Program, Center for New American Security; Senior Advisor, Krach Institute for Tech Diplomacy, Purdue University
  • Mr. Alex Dimitrief, Partner, Zeughauser Group
  • Mr. Sean Donahue, Partner, Donahue & Goldberg LLP
  • Dr. David Dollar, Senior Fellow, John L. Thornton China Center, Brookings Institution 
  • Prof. Eugene R. Fidell, Adjunct Professor of Law, New York University School of Law; Of Counsel, Feldesman Tucker Leifer Fidell LLP
  • Prof. Philip A. Hamburger, Maurice and Hilda Friedman Professor of Law, Columbia Law School; President, New Civil Liberties Alliance
  • Ms. Samantha Harris, Partner, Allen Harris Law
  • Prof. William Jacobson, Clinical Professor of Law and Director of the Securities Law Clinic, Cornell Law School
  • Mr. Ivan Kanapathy, Senior Associate, Freeman Chair in China Studies, Center for Strategic & International Studies
  • Hon. Gregory G. Katsas, U.S. Court of Appeals, D.C. Circuit
  • Hon. Sally Katzen, Professor of Practice and Distinguished Scholar in Residence; Co-Director, Legislative and Regulatory Process Clinic, New York University School of Law
  • Prof. Jeremy Kress, Assistant Professor of Business Law, Michigan Ross; Co-Faculty Director, Center on Finance, Law & Policy, University of Michigan
  • Mr. Paul H. Kupiec, Senior Fellow, American Enterprise Institute
  • Prof. Renee M. Landers, Professor of Law and Faculty Director, Health and Biomedical Law Concentration and the Masters of Law: Life Sciences Program, Suffolk University Law School
  • Dr. Nicholas Lawson, Commissioner, ABA Commission on Disability Rights
  • Hon. Kenneth L. Marcus, Founder and Chairman, Louis D. Brandeis Center for Human Rights Under Law
  • Hon. Trevor N. McFadden, U.S. District Court, District of Columbia
  • Prof. Derek T. Muller, Professor of Law, University of Iowa College of Law
  • Mr. Ryan Newman, General Counsel, Governor of Florida Ron DeSantis
  • Hon. Neomi Rao, U.S. Court of Appeals, D.C. Circuit
  • Mr. Justin Savage, Global Co-Leader and Partner, Environmental Practice, Sidley Austin LLP
  • Prof. Christina P. Skinner, Assistant Professor of Legal Studies & Business Ethics, The Wharton School, University of Pennsylvania
  • Mr. Stephen Soukup, Vice President and Publisher, The Political Forum
  • Mr. Hans A. von Spakovsky, Manager, Election Law Reform Initiative and Senior Legal Fellow, Meese Center for Legal and Judicial Studies, The Heritage Foundation
  • Mr. Graham Steele, Assistant Secretary for Financial Institutions, U.S. Department of the Treasury
  • Hon. Stephen A. Vaden, U.S. Court of International Trade
  • Hon. Justin Walker, U.S. Court of Appeals, D.C. Circuit
  • Prof. Adam White, Assistant Professor and Executive Director, The C. Boyden Gray Center for the Study of the Administrative State, Antonin Scalia Law School at George Mason University
  • Mr. Jeffrey H. Wood, Partner, Baker Botts; Former Acting AAG Environment and Natural Resources Division, U.S. Department of Justice

Cost:

  • Conference (with no CLE) - Free
  • Conference with CLE - $50
  • Freedom of Thought Project Dinner - $25 for members, $50 for non-members (members must login to receive discount).

 

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9:00 a.m. - 10:30 a.m.
Welcome & Plenary Session: Regulation by Surrogate? Is the Government Evading the Administrative Procedure Act?

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation • Separation of Powers • Federalism & Separation of Powers
Grand Ballroom
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Event Video

Description

In 1946, after ten years of study, Congress passed, and President Truman signed, the Administrative Procedure Act, a law that has been called the constitution of administrative law.  During the Roosevelt Administration, many new federal agencies were created to implement FDR’s New Deal.  These agencies regulated more private conduct than ever before.  Congress deemed it essential to enact a statute governing how these agencies would operate, and to establish rules of conduct to protect the regulated persons and entities.  U.S. Senator Pat McCarran of Nevada called the APA "a bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated" by federal government agencies.  During the 75 years since its enactment, the APA has been regularly invoked in litigation, as citizens challenge agency action on the grounds that the agency did not comply with APA’s requirements.  

But what recourse do you have when the enforcement action against you is not being taken by a government agency, but by a private entity at the behest of the government?  The government encourages “social media” companies to censor your speech.  The Securities and Exchange Commission establishes a special enforcement unit to police public companies’ compliance with ESG (environment, social, governance) initiatives.  The Biden Department of Labor reversed the Trump administration’s reversal of the Obama administration’s guidance that permitted fiduciaries to consider ESG in their management of certain retirement funds.  In these and other areas of our lives, our activities are being governed, not by the government, but by its surrogates.  

The U.S. Constitution established a national government consisting of three branches.  The administrative agencies have been called a fourth branch.  Now, with corporations, investment funds, and other non-government entities deputized to regulate our conduct, do we have the emergence of a “fifth branch” of government?  Does this fifth branch operate free of the strictures of the APA?  What recourse is available for those affected?  

Our panelists will address these developments, bringing to bear their individual expertise regarding the serious issues raised by the use of regulatory surrogates and the consequences that could result from the emergence of a “fifth branch” of government.  

Featuring:

  • Opening Remarks Hon. Mike S. Lee, United States Senator, Utah
  • Mr. Jonathan Berry, Partner, Boyden Gray & Associates
  • Mr. Stephen Soukup, Vice President and Publisher, The Political Forum
  • Prof. Adam White, Assistant Professor and Executive Director, The C. Boyden Gray Center for the Study of the Administrative State, Antonin Scalia Law School at George Mason University
  • Moderator: Hon. Stephen A. Vaden, U.S. Court of International Trade

Speakers

Event Transcript

Dean Reuter:  Good morning. I'm Dean Reuter, Senior Vice President and General Counsel of The Federalist Society. Welcome to the 10th Annual Executive Branch Review Conference. And welcome to those of you in the room today, and to those of you joining the livestream and watching on video. Our conference is open to the public and the press, so you should feel free to forward the livestream link and video recordings widely.

And I have to say, I had an extensive introduction for the conference prepared for this morning, but you might have heard that last night it leaked out. But I'm going to deliver my remarks, nevertheless. [Laughter] It took a minute, but thank you. When we hosted the first Executive Branch Review Conference, we boldly called it the First Annual Executive Branch Review Conference. And I was cautioned that you can't have a first annual conference. But I assured the skeptics that there would be a second, a third, a fourth, and so on. And it turns out we have not solved the administrative state just yet, but we will continue trying.

In our defense, this administrative state began well over a hundred years ago. And there's an old saying about oak trees that might be applicable here. And it goes that oak trees take 100 years to grow, 100 years to live, and then 100 years to die. Now, I'm not advocating for the death of the administrative state, but maybe we're at the end of the period of growth, that first 100 years. Maybe some pruning is in order, or some forest management, if you will. But that's for the experts to decide. And we have plenty of them lined up today, coming at this from all angles.

Indeed, we always strive for balance on our discussions, featuring the perspectives of conservatives, libertarians, and progressives alike. And I want to make a note to say that we've struggled most this time finding progressive voices to participate today. But, in the end, we have succeeded. But for this conference alone, we invited over 50 progressives who were unable to participate today. So I begin by sincerely thanking those of our speakers who could make it today, very much. Thank you.

It's now my special honor to introduce the speaker for our opening address this morning, Senator Mike Lee. Mike Lee is Utah's 16th Senator, a number that always catches my eye and reminds me of just how young our country and its experiment with representative democracy really is. You all know him well, so I'm going to highlight just two aspects of his career.

First, he clerked for Justice Alito, who's been in the news a little bit recently. And, second, also relevant, Senator Lee is a renowned author of several books, each of them on founding principles and fundamentals of law and policy, each perfectly accessible, with helpfully descriptive titles like Our Lost Declaration, and Our Lost Constitution, and Written Out of History, the Forgotten Founders Who Fought Against Big Government. I recommend them all.

His latest book, Saving Nine, about proposed court packing, emerges next month, on June 7. Given last night's news, Saving Nine can't come out quickly enough. It's available now for preorder online everywhere. The full title again, Saving Nine: The Fight Against the Left's Audacious Plan to Pack the Supreme Court and Destroy American Liberty. So look for a Federalist Society event in the near future featuring Senator Mike Lee, where we can learn even more about his book and you can get a signed copy, hopefully in time for Father's Day. But you'll probably want to get multiple copies for your mother and your children and your loved ones, so you don't create discord in the family. But, with that, please welcome Senator Mike Lee.

Hon. Mike S. Lee:  It's not just your mother who would enjoy reading Saving Nine, but also your children. What child doesn't want to read a book about court packing and the threat it poses to judicial independence? Thanks for that nice introduction, Dean. And I will say that I've never been more proud to be an Alito clerk than I am today.

But our topic of conversation today is an important one, administrative law. There's no easier way to clear a room or end a party than bringing up administrative law, especially with your non-lawyer friends. But it shouldn't be that way. In fact, this should be the most relevant topic on everyone's mind. In this day and age, when people, especially those on the left, continue to harp on what they perceive and continually want to characterize as "the end of democracy as we know it," nothing says, "the end of democracy" quite like administrative law, and quite like the way that administrative law has been abused.

              This is, to be sure, something that's been around for many decades. I trace modern-day administrative law, of course, to the New Deal era. That's when this entire segment of our federal government came into being. But it goes in fits and starts. It hasn't been a steady progression throughout its 75-to-85-year existence. It's had a series of lurches, fits and starts. But there was a massive, massive lurch forward, or backward, or however you want to describe it, during the COVID-19 pandemic, at least in the sense that this is when many Americans became familiar, in one way or another, with administrative law, something that most Americans are blissfully ignorant of most of the time.

              It gave the opportunity for the government to do things that it hadn't done before, and not always in a good direction. As my wife, Sharon, likes to point out, all moves toward totalitarian government are always rooted in an emergency. All totalitarian governments start out with a real or contrived emergency. It's what they do. Now, I'm not here to say that our government is a totalitarian one. It's not. It's just that it's moved away from representative government, away from freedom and liberty and toward more aggressive action, in a way that is unsettling.

              But here's the dirty little secret that members of Congress rarely admit, and few would really even own up to, even if you caught them in a moment of candor, in which they thought no one else was listening. This is all Congress's fault. We did this. We set this in motion. And, so, any time you see a member of Congress disclaiming these things, disclaiming, bemoaning the overreach of the administrative state, remind him or her that we're really to blame. Congress is to blame, because we set this in motion.

              It reminds me a little bit of an experience I had more than 25 years ago when my two oldest children, James and John — themselves aspiring lawyers now, James just graduated from law school, John will graduate next year, both FedSoc members, of course, and both have served as chapter presidents of the BYU Federalist Society, just as their father had a quarter century earlier — when they were babies, one day we were coming home from church and then driving up to my parents-in-law's house. There was a minivan that swerved into oncoming traffic and nearly hit our car. Here I was driving, as a young father with two babies, and this car nearly ended it for all of us.

I pulled over to figure out what had happened, because it appeared that whoever was driving this car was either severely inebriated or had fallen asleep or something. But when he pulled over, we figured out what the problem was. Some father had decided it was a good idea to allow his ten-year-old kid to sit at the driver's seat. And he thought, "Well, I can control it from the driver's seat." The kid couldn't reach the brakes. I guess, as part of the driver's license exam in Utah, they ought to start asking people whether they're smart enough to realize that a ten-year-old can't quite reach the brakes. Well, he couldn't.

              I raise that example today because continuing on in our same course with administrative law would be a little bit like the governmental equivalent of allowing that kid to continue driving for the rest of the day or the rest of year, even when he had proven his inability to behave responsibly. It would be an act of reckless disregard for the safety of others, not to mention the law itself.

              This is what administrative law has done to us, especially administrative law as it's manifested itself throughout the COVID-19 pandemic. It's given us some real-world examples of how this can run amok. Now, Congress, again, did, in fact, screw this up. It created this circumstance. It did so in a number of circumstances. A lot of the problems that we faced during the COVID-19 pandemic that are related to administrative law stem from the same provision of federal law, specifically Section 361(a) of the Public Health Service Act.

Now, Section 361(a) is really, really, broad. In fairness, I guess one could argue it's a model of specificity. Let me show you how specific it is. It says that the Surgeon General and the Secretary of the Department of Health and Human Services will have authority to "make and enforce such regulations as in the judgment of the Secretary are necessary to prevent the introduction, transmission, or spread of communicable diseases between states, or from foreign countries to the United States. It then goes on specify and to list as examples of things that might be regulated under this authority, the "inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as sources of dangerous infection to human beings, and other measures as, in his judgment, may be necessary."

Just imagine the breathtaking breadth of that provision for a minute. Let it sink in. It reminds me of a time when, as a young prosecutor, I was in some kind of proceeding before a magistrate judge. I don't remember what the occasion was. But, for a moment, I forgot that I wasn't in a grand jury proceeding. And I had a witness, an agent of one of our federal law enforcement agencies on the stand. I had asked him all the questions that I was planning to ask him, and, at the end of it, I just said, "Anything else you'd like to add?" And, of course, the judge gently reminded me, "Counsel, come on. You can't do that." But, just as much as you can't do that with a witness on the stand, you definitely can't do that, you should never do that, consistent with the Constitution of the United States. Remember, the very first clause of the very first section of the very first Article of the Constitution says, "All legislative powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and a House of Representatives."

What's made pretty clear in Article I, Section I, is made doubly clear in Article I, Section VII, which says that to make a federal law, you've got to have bicameral passage, followed by presentment to the president. And yet, according to this, you don't really have to have that. All you need is just an authorization from Congress to do stuff. And don't worry, it's more specific than that. It's to do good stuff. This is literally the legislative equivalent of, "We hereby authorize you to make good law. Make it so." And they did. But it wasn't good law. It was just law that they claimed was good. And so they got away with it for way too long, way too much time, far longer than they should have.

Let's talk about a few of the things that they did under this provision. One involved the eviction moratorium. Now, there was, originally, an eviction moratorium created and put in place by Congress as part of the Cares Act. Remember, this was the measure passed in late March of 2020. It was a legislative enactment. But it put in place an eviction moratorium that lasted from the date of its enactment in March of 2020 until the end of July of 2020. But that's where it got tricky. It expired. Congress didn't act. And, once that authority had expired, then the Trump administration, at the time, decided to continue it by executive order. And what did they use? Well, it was Section 361(a) of the Public Health Service Act. Because, after all, it's right there: "And other measures as, in his judgment, may be necessary."

And so what do you do? Well, you have the Director of the Centers for Disease Control make a finding saying, "We think this is necessary. This is really important." And, bingo, there you have it. You've got an extension. That extension, while originally put in place by the Trump administration, was later continued and rather dramatically expanded by executive order at the very outset of the Biden administration. Whereas, in the Cares Act, and under the initial Trump administration iteration of the eviction moratorium, it had been limited to federal properties and properties purchased with federal financing mechanisms, the Biden-era CDC order related to the eviction moratorium was just open-ended, just saying, "Yeah, you can't do it."

Now this was a problem, as this was something that Congress had seen the need to enact legislatively. It then allowed that to expire. And, having allowed it to expire, you would think that would be the end of it. But not so. Now, initially, when this was challenged in court and it made its way all the way to the Supreme Court, the Supreme Court initially decided to let it stay in place. I'll never understand exactly what the Court's reasoning was in doing that. It doesn't make a whole lot of sense to me. There was some thought that the Court seemed to indicate, during the first round of challenges to that eviction moratorium, "Well, this is about to expire in a few weeks, anyway. And so we'll just let it sit."

But, even then, and even after the Court, in making that pronouncement, issued a pretty clear warning to the Biden administration, "You know, you really shouldn't be doing this. It looks pretty sketchy," they went ahead and did it anyway. And, so, weeks later, after the Biden administration blatantly ignored Justice Kavanaugh's rather clear warning in the initial challenge that was brought before the Supreme Court, they did it again anyway. So the Court stepped in and said, "Yeah, you really shouldn't be doing this."

And, in doing that, and striking down the moratorium during the second challenge, the Supreme Court struck it down, remarking that since the enactment of Section 361(a) of the Public Health Service Act in 1944, "No regulation premised on it has even begun to approach the size or the scope of the eviction moratorium." For that matter, in many respects, what we saw during the COVID-19 pandemic dwarfs just about any other executive branch overreach that we've ever seen.

Think about what we talk about in law school, or just as lawyers. What comes to mind when you think of the classic egregious example of executive branch overreach? Typically, for me, at least, it's Youngstown Sheet & Tube v. Sawyer. And that was significant. That was troubling. And yet, that was really quite minor. It was quite mild, by comparison. Truman acted, I believe, in April. By June, it had been shut down by the Supreme Court. The Court granted certiorari before judgment. So it went straight from the district court to the Supreme Court. And, by June, that thing was put to bed.

But the comparison is even more stark when you consider the fact that Truman's order seizing all steel production facilities in the United States in furtherance of the Korean War effort, while sweeping and contrary to, and unsupported by, any statutory command or constitutional grant of authority, it was at least confined to a single industry. There was one industry that was affected by this. Some of these things that happened through administrative law during the COVID-19 pandemic were sweeping, absolutely sweeping, and difficult to justify.

Section 361(a) of the Public Health Service Act was also applied elsewhere. It wasn't just limited, of course, to the eviction moratorium. It was also the basis for authority used to require you to wear a mask on all airplanes, trains, buses, and any facility connected to them. I don't know if you're like me, but every single time I flew on an airplane while that mask mandate was in place, it really grated on me every time they would announce something to the effect that this mask mandate is put in place by federal law. I always wanted to raise my hand and add a footnote to it, saying, "It depends on what your definition of the word 'law' is, and the definition of the word 'is' is," because we all know that Congress never enacted a statute saying that. Of course, it would be too much to ask the airlines to say, technically, they're relying on Section 361(a) of the Public Health Service Act enacted in 1944. But that's what they were relying on. And that stayed in place.

Thankfully, Judge Kathryn Mizelle of the U.S. District Court for the Middle District of Florida issued an order just in the last few weeks, getting rid of that. There's a part of me that wishes that I had been on a plane somewhere when they announced that. You've seen these videos of passengers celebrating as they ripped off their masks. This shows us something. As troubling as these developments are, it shows us that more Americans have experienced the horrors of executive branch overreach, of administrative law run amok, during and as a result of the COVID-19 pandemic, than ever before. And I think they realize that it does, in fact, mean something, that it does, in fact, matter.

Now, predictably, there will be some who, upon hearing those words, will say, "Oh, that's ridiculous. This guy's complaining about this de minimis infringement on liberty that is involved in wearing a mask during a pandemic. Oh horrors." Well, yeah. I get it. It's not the same as other intrusions that can take place, some of which we're going to talk about in a moment. But it's still significant. It still matters to the American people that when they're told they've got to comply with a law, and that failure to comply could result in significant fines or imprisonment, that law should be made by men and women of their own choosing, and subject to accountability to them.

Perhaps the broadest and the most egregious of all exercises of COVID-related authority occurred in connection with the Biden vaccine mandates. My wife and I were travelling at the moment these were announced, and my staff started texting me about them. I, at first, thought it was an elaborate practical joke. But he was dead serious about this, that he was going to order, basically, all Americans to get vaccinated or lose their jobs. The way he went about this, or, at least, the most significant part of the vaccine mandates through OSHA, was particularly bad. He relied on Section 655 of the Occupational Safety and Health Act. And, in those, it just allows OSHA to issue an emergency standard. And all OSHA has to do in order to get there is to find that, one, employees are exposed to a grave danger from exposure to substances or agents determined to be toxic or physically harmful from new hazards, and, secondly, that the emergency standard is necessary to protect employees from this danger.

Now, fortunately, the Supreme Court of the United States stayed enforcement of this mandate. It did so, finding it to be, "A significant encroachment into the lives and health of a vast number of employees, that far exceeded the authority that Congress had provided to OSHA. Unfortunately, to many Americans, this action came too late. A lot of people were forced to either get fired. And their employer really had no choice to do that, because any employer with more than 99 employees had to comply or face crippling economic penalties, penalties that no company, no matter how wealthy, could afford to survive. They couldn't just run that risk. And so they had to threaten to fire, and, ultimately, fire anyone who didn't comply.

Now, this may seem de minimis to some, to some people who got the vaccine, had no problem with getting the vaccine, had no bad reaction to the vaccine. But imagine if you were one of those Americans who has a religious objection to getting a vaccine. Or imagine if you were someone who has some type of health condition that it caused your primary care physician to advise you not to get the vaccine because it would cause problems. It becomes less academic at that point. And it becomes significant.

Or imagine if you were one of those Americans who got the vaccine, didn't want to, got it anyway, and suffered an adverse medical effect from it. You'd be pretty displeased. And I think we should all be concerned about the fact, here again, you had executive action taken that was an overreach. And it was a predictable overreach. Just like that idiot who put his 10-year-old behind the wheel of his minivan 25 years ago. This was a reckless act. And, just as it would have been beyond foolish for that individual to allow his kid to continue driving for the rest of the day or the rest of the week, it would be foolish of us to conclude that it's okay for us to continue to operate under these broad, vague, laws.

The fact is that these provisions, Section 655 of the Occupational Safety and Health Act, and Section 361(a) of the Public Health Service Act, these are the tip of the tip of the iceberg. The U.S. Code is replete with hundreds, if not thousands of instances of delegations of lawmaking authority that are at least as broad as, if not broader than these. They almost all have, as a central feature, that their worst manifestations can appear during the course of an emergency. But you know one thing about emergencies. They happen. And because they happen, we've got to be mindful of them, knowing that there will always be overreach.

So that's why it's an important time for us to bring about reforms. And one of the many reforms that I have long thought we need: we need to pass the REINS Act. It's a bill that's been out there for more than a decade. It stands for Regulations from the Executive in Need of Scrutiny. And it says that any time an executive branch agency issues a major rule, an economically significant, major rule, it shouldn't be self-executing. It can't be self-executing. It can't take affect unless or until you've got bicameral passage by Congress. The REINS Act proposal, itself, provides for an expedited fast-track procedure, similar to what we have with the anemic, but well-intentioned, Congressional Review Act: fast-track consideration in both houses of Congress, followed by presentment to the president.

It differs from the Congressional Review Act in one meaningful respect. With the CRA, the president can veto it. And then things continue. The party goes on as planned. That 10-year-old kid remains behind the wheel. But, with the REINS Act, failure at any end — failure in the House or in the Senate, or with the veto pen — results in the agency action not taking effect. This is the first of many reforms that we need. And members of Congress have got to be held accountable for not doing these things. Otherwise, we'll find ourselves back in the same position. Next time, it will be worse. Thank you.

 

Dean Reuter:  The Senator's going to take one or two questions. If you could use the — if anybody has a question — the floor mics on the side. While we're waiting for that, let me ask you a question really quickly if I could, Senator. And that is, did the founders fail to envision the administrative state? And has the structural Constitution essentially failed when the Federalist 51 imagines the three branches using their power as expansively as possible, reaching a stasis? What's gone wrong with the legislative branch?

Hon. Mike S. Lee:  The founders didn't fail. The Constitution didn't fail. The Constitution is pretty clear on this point, especially if you read the Constitution and you understand the words that they used and you understand the warnings that went into the use of those words, you understand that lawmaking is a non-delegable duty. And that's why they said that all legislative powers would be vested in this branch of government. Now, I want to be very clear. It's not that Congress is any smarter than the executive branch agencies. These are very hardworking, well-intentioned, highly-specialized people. It's not about their competence. It's about the fact that you can't fire them. My constituents get to decide whether to fire me every six years, my counterparts in the house, every two years. We're the branch of government most accountable to the people at the most regular interval.

So, no, I don't think the Constitution or the founders failed us here. I think we failed them. We failed the American people. And all of this started -- I trace all of this back to the moment the Supreme Court rewrote the Commerce Clause on April 12, 1937, and made all these activities like labor, manufacturing, agriculture, mining — activities that, while economic in nature, take place in one state at one time — made them all subject to federal regulation. That was the seed-corn that led to the modern administrative state. Because, all of a sudden, Congress panicked. And Congress said, "Oh my gosh. We're going to have to make all of these line-drawing decisions. It's going to be hard. We don't want to do it. So we're just going to outsource that task, saying we shall have good law in area X, and we give that authority to Commission Y."

Questioner 1:  As you know, during Republican administrations, often there are very serious attempts to undo rules that were created, all the thousands, millions of rules that agencies have created. But a formidable obstacle seems to be the State Farm doctrine, which seemed to be gutted by FOX Television, but maybe not really. A lot of panels will still say you need to present special justifications for repealing rules. And I was wondering if there's any thoughts that have been given to making it easier just for agencies to repeal their own regulations and not have to provide elaborate justifications about how the feelings of a ten-year-old won't be hurt by removing him from the driver's seat, or how his limb size is a valid consideration in determining whether someone is fit to drive or not.

Hon. Mike S. Lee:  I think there's something to be said for that. Generally speaking, you have fewer threats to liberty, it's almost axiomatic that you have fewer threats to liberty when you have fewer laws. And so it's not a bad idea for us to do something making it easier to remove a reg than it is to create a new one. And this was, essentially, the strategy adopted by the Trump administration, albeit informally by executive action rather than through statute. President Trump told me early in his presidency, "For every new regulation we issue, I want to get rid of at least two." We have to make that easier. That is a good idea, and something I'll look into as a legislative proposal. I will add here, it will catch up to us quickly if we still don't reform it elsewhere. But I think that is a very good start.

Dean Reuter:  We're going to continue without a break if we could call the next panel up, please. Thank you.

Hon. Stephen A. Vaden:  All right. Well, good morning, everyone. I'm Stephen Vaden. I'm a judge with the Court of International Trade. And I'm the moderator for our first panel today, which is entitled, "Regulation by Surrogate? Is the Government Evading the Administrative Procedure Act?" As we just heard, in 1946, after 10 years of study, Congress passed the Administrative Procedure Act, which was signed by President Truman. And it's a law that's been called the constitution for the administrative state. Congress deemed it essential to enact a statute governing how agencies would operate, and to establish rules of conduct to protect those who were regulated. But what recourse do you have when the enforcement action against you is not taken by a government agency, but rather a private entity at behest of the government?

The government, for example, encourages certain social media companies to censor your speech. The Securities and Exchange Commission is currently looking at a special enforcement unit to police public companies' compliance with ESG, that being environment, social, and governance initiatives. The U.S. Constitution established a national government consisting of three branches. Administrative agencies have frequently been called the "fourth branch" of government. Now, with corporations, investment funds, and other nongovernmental entities deputized to regulate our conduct, do we have the emergence of a "fifth branch" of government? And does this "fifth branch" of government operate free from the strictures of the Administrative Procedure Act? What recourse do citizens subject to these new regulators have? Those are some of the topics we're going to discuss today with three outstanding speakers.

              Our first is Stephen Soukup, who is the Senior Commentator, Vice President, and publisher of the Political Forum, an independent research provider that delivers research and consulting services to institutional investors with an emphasis on economic, social, political, and geopolitical events that are likely to impact the financial markets, both here in the United States, and abroad. Mr. Soukup is the author of The Dictatorship of Woke Capital: How Political Correctness Captured Big Business. He holds a BA in political science from the University of Kansas, and a master's degree in the same from the University of Nebraska. Stephen, the floor is yours.

Stephen Soukup:  Thank you very much. When Senator Lee just spoke, he traced the origins of our administrative state, essentially, to 1937. I would place the origins about 60 years earlier, in fact, in 1876, with the founding of Johns Hopkins University. Within five years, Hopkins had hired, as director of its Department of Political Economy, a man named Richard Ely. And within a couple of years, Ely's most trusted, most loyal, and most destructive student, a man named Thomas Woodrow Wilson, was hard at work helping Ely change the way administrative practice worked in the United States, and changing American's beliefs about what they can and should expect from their government.

              My story, as told in The Dictatorship of Woke Capital, and then I'll try to briefly recount for you today, centers on four men: Ely, Wilson, a man named Dwight Waldo, and then a man named Edward Freeman. Ely was the primary proponent in the United States of something called the "social gospel." What that meant was that he believed that it was the states' responsibility to carry out God's duties or God's recommendations on earth. He believed that it was the states' duty to act Christlike and to try to solve all of man's problems, from drunkenness to racial tensions, to poverty, to slums, you name it. It was something that government should solve in the name of Christ.

Ely's primary student, Wilson, went on to add that the most effective way to do so, the most effective way to enact God's wishes on Earth would be to create a group of men and women who were distinct from legislators and distinct from the general public who had specialized training, specialized knowledge and scientific understanding of how best to administer these policies. Wilson, like Ely, was extremely dismissive of the public. He believed that the people were the problem. He believed that they were selfish, that they were stupid, and that they did not have the understanding of how best to manage the government. And so it was his idea to create this separate class of individuals who would take care of us: essentially, our guardians, if you want to go back to platonic terms.

              When he was elected president in 1912, Wilson was able to act on a great deal of this — signing the Sixteenth and Seventeenth Amendments, by enacting the Federal Reserve Act — to move the needle on government administration. Wilson's primary focus was always what came to be called the "politics administration dichotomy," keeping politics and administration separate. Politics is for the people. Administration is for the guardians, for the people who know how to run the state.

              Wilson's interpretation held sway in this country until probably the late 1940s, early 1950s, when a man named Dwight Waldo came along and said, "What we've learned over the last 50 years is that administration cannot be done scientifically. The idea of keeping administration and politics separate is ludicrous. It cannot be done." And so what Waldo did was encourage administrators to inject their own values into administrative practice. Essentially, he wanted them to be agents of change. "Progressive agents of change" is, in fact, the term that was used.

              By the beginning of the 1970s, by the time that Waldo's ideas had seeped into public administration, what we had in this country was a belief in an administrative state that was manned primarily by experts, specifically trained, that was supposed to be beyond the reach of the government, that was outside of government practice, outside of the effects of the American people, but, yet, that was supposed to also instill its values into its decisions, thereby creating what it saw as an ideal state. It was introducing values into what had otherwise been a strictly scientific endeavor.

              In 1984, a man named Edward Freeman — who was a PHD in philosophy, but was, at the time, a business professor, is now still a business professor — followed through on pushing similar reforms on business administration as those that were pushed on public administration by Dwight Waldo. And what he did was advocate for the use of values, the incorporation of values into business administration. What he created, essentially, was what we know today as "stakeholder theory," which has become the buzzword in American business, the buzzword in American capital markets, one of the most important developments over the past four or five years, this sudden rise in what's known as stakeholder capitalism, or stakeholder theory.

              Now, again, with the administrative state, stakeholder theory began as a scientific principle. It was created by the Stanford Research Institute in the 1960s to try to teach business owners how to maintain a successful business. If you're going to run a successful business, you have to care about your customers, you have to care about your environment, you have to care about your neighbors, you have to care about your employees, etc. It's all common sense.

              What Freeman did was to make this a normative argument, to make the claim that these stakeholders, depending on the values that the administrator, the executive, is trying to enact, could be considered more important than the virtue of the shareholders, that the stakeholders could matter more than shareholders, depending on the situation. And so we get the rise of this idea that shareholders are secondary in importance and that businesses should be enacting social policy, in addition to, and, sometimes, instead of simply trying to make profits.

              Over the past several years, as I said, this has become an enormous part of the way American business functions and an enormous part of the way American capital markets function. Initially, I wanted to say that this was an idea that was consciously pushed by the progressive movement to achieve those goals that were unachievable through traditional public administration, but it's not really that. The way it works is that those people who run large companies, those people who have been inculcated with this stakeholder value theory of business administration believe that they have the ideas that can change the world, believe that they have the was to solve the problems that the administrative state or that the democratic republic state have been unable to solve.

And so what they have done is independently create what amounts to a quasi-regulatory state of their own, a quasi-government of their own, an institution that is determined specifically to address things like climate change and social justice and racial inequality, all without the consent of the people, all without the consent of the bureaucracy, and all beyond any sort of means by which the American people could have any sort of influence whatsoever. Only shareholders can have influence. And, in most cases, the largest shareholders are going to be large asset management firms, primarily, passive asset management firms who share these beliefs, who share the same belief in the virtue of business and the value of business to enact various different normative programs. So that's sort of the history of where we got to this point where we have regulation by surrogate, regulation by proxy, where American big business is now essentially trying to usurp the power of government and usurp the rights of the American people.

Hon. Stephen A. Vaden:  Thank you, Stephen. Our next speaker is Jonathan Berry. Jonathan is a partner at Boyden Gray & Associates. Before that, he served as the Regulatory Officer at the Department of Labor during the Trump administration, where he oversaw the development and enactment of several rules, including some touching on this area. Jonathan also served at the Department of Justice's Office of Legal Policy, where he assisted with the confirmation of Associate Justice Gorsuch. Jonathan is a graduate of Yale College and Columbia Law School, and he served as a law clerk to Judge Smith of the Fifth Circuit and Justice Alito of the Supreme Court. Jonathan?

Jonathan Berry:  Thank you so much, Judge. I really appreciate Steve's history as laying out for you the rise of what we can call the expert class, the technocratic class. James Burnham uses managerial class. And I want to talk about what the challenge is today. Here's how we've gotten to where we are. What's the objective today? I submit that the challenge is to align, as much as possible, this class's interests and incentives with the common good, instead of various kinds of rent-seeking and self-dealing, to which all mankind is tempted. I think we can start to understand this challenge through the lens of agency. In both the public and the private sectors, we have systems of accountability of agents to their principles. This was a theme that Senator Lee hit on repeatedly: accountability, accountability, accountability, and rightly so.

These systems of accountability — again, both in the public sector and the private sector — these are structural protections that, arguably, do much more to protect liberty and self-government than do judicially enforceable individual rights. So, for example, in the public context, all federal laws that create, modify, or rescind private rights or obligations must be enacted with the concurrence of the House of Representatives, whose members are numerous and constantly up for reelection. I can know who my congressman is, and I can know how he votes. But that accountability can be threatened or blurred. Obviously, as Senator Lee talked about, the delegation of legislative power to the executive branch is one huge way for elected legislators to avoid that accountability. But here's another. The larger the electorate, the harder it is for an individual voter to effectively monitor the elected agent. So it's a challenge that Congressional size is capped at 435, or that we now vote for senators directly, instead of via small, state legislative elections, or that — my personal hobbyhorse — presidential electors never really got cultural traction as an independent office, albeit an ephemeral one.

              Corporate law and securities law is similarly structured to make officers and directors accountable agents of their principles. Shareholders get to vote on directors. They have a right to accurate information from the corporation. And corporate agents are forbidden to divert common corporate assets for their private benefit. And, again, many forces can blur, lengthen, or even cut those lines of accountability between corporate principles and agents. As with government, part of the problem is size. For any public company, there are so many other shareholders that I, individually, have no real ability to hold management accountable.

But the challenges of delegation crop up here in the corporate context, too. Today, as a retail investor, I'm a lot likelier to hold shares, not in a company that actually makes stuff, but, instead, hold shares through some kind of institutional investor, a large asset manager like BlackRock or Vanguard or State Street. And their incentives, as Steve has already alluded to, might not be to maximize my returns so much as get as many other people as possible to buy their investment products, and thereby spread asset management costs across as large a pool as possible, and maybe propagate some kind of 21st century social gospel along the way.

So here we've got two streams of power: public and private. And each, on their own, presents serious challenges for principals wanting to monitor their agents downstream. But, here, the accountability program actually gets worse if you defy the ghostbusters and cross the streams. When you have private actors striving to set public policy, which accountability structures are you even supposed to use? Here's an example. BlackRock is the world's largest asset manager, $10 trillion under management. CEO Larry Fink of BlackRock has been leveraging that capital for years to push companies to align their greenhouse-gas emissions with a net zero goal. Even if you were doing that at the express instruction of President Biden, I'm not sure that there's a coherent way to directly invoke the Constitution, or even the Administrative Procedure Act to hold Fink accountable, even though he is, de facto, driving national climate policy, in conjunction with other large asset managers.

The government, for its part, would like to point the finger back at private investors. Again, this is big in the ESG space. A major part of the SEC's justification for its proposal to require new disclosures of greenhouse-gas emissions is that investors are asking for it. This is, likewise, the same move the SEC used last year to justify approving the NASDAQ stock exchange's diversity quotas.

One last layer to this accountability problem: these public sector and private sector agents are, in fact, of course, the same narrow class of people. And their real accountability mechanism is not responsibility to shareholders or to voters, but, to themselves. I think a lot of what gets called "virtue signaling," colloquially, with, for example, institutional investors or CEOs touting ESG practices, is really messaging directed to one's colleagues in the managerial class to broadcast, and, hopefully, bolster one's own status.

So, that, at last, brings me to a little sketch of a way forward, something I'm happy to flesh out in our discussion. So if I'm a CEO, heaven forfend, and I take my corporate jet on a frolic to Lucerne in Switzerland for a ski trip, I have diverted corporate assets for private benefit, and I have breached my fiduciary duties. But if I take that jet to Davos, in Switzerland, so that I commit my company to new climate change policies, and maybe also go skiing, I may still be diverting corporate assets for private benefit. That's because I may be inflating my own stature among the smart set, at the expense of my company's long-term interests, which may or may not include those climate commitments.

But if we had a more robust appreciation of the corporate fiduciary duty, for that structure of accountability, an appreciation of the duty that resists self-dealing when it comes to reputation, and not just tangible assets, I think we would have fewer CEOs crossing those streams and wading into contentious policy debates. To state it more generally, if we paid as much attention to the accountability structures for private power as we do for public power, if we had a fifth branch review conference alongside this executive branch conference, we just might start untangling the accountability problems that arise when private and public powers cross. Thanks.

 

Hon. Stephen A. Vaden:  All right. And for those of you in the audience, before I introduce our third and final speaker, please be thinking of questions. I'm certain Jonathan just triggered a lot with his remarks, there. But, after a little crosstalk, we're going to turn it off to you. And I hope we have some good questions to challenge and stimulate debate.

              Our third and final panelist is Mr. Adam White. Adam is a Senior Fellow at the American Enterprise Institute, where he focuses on, among other things, the administrative state. He also co-directs the C. Boyden Gray Center for the Study of the Administrative State at the Antonin Scalia Law School at George Mason University. He started his legal career as a law clerk for Judge Sentelle on the U.S. Court of Appeals for the D.C. Circuit. In 2017, he was appointed to the Administrative Conference of the United States. And, in 2018, he published a particularly relevant article to today's panel, on the power of Google over information and disinformation. And that article was entitled, "Google.gov," published in the tech policy journal the New Atlantis. He holds a JD from Harvard, and he got his Bachelor's in Business Administration from the University of Iowa. Adam?

Adam White:  Thanks, Judge. Is it okay if I stand? I feel like I'm looking at half of the room. When I wrote that piece, "Google.gov," I didn't mean for everybody to take it so literally. I was really struck by Dean's opening introduction and Senator Lee's opening remarks. Dean spoke of the administrative state in terms of centuries, hundred-year periods of history. And Senator Lee spoke of fits and starts over the same historical trajectory. Maybe another way of putting it would be "Rome wasn't built in a day." And it won't be unbuilt in a day either.  But, of course, some days are more important than others. There are turning points in the history of administration: if not days, then, at least, moments or eras. It sort of feels like we're in that kind of moment now, for reasons that have been discussed so far, and then reasons that I'll get into.

I've been thinking a lot for the last couple of years about two trends, which we've touched on. One is the outsourcing of policy-making to the private sector. We saw some of that in recent years. First of all, with efforts by regulators to not force social media companies to take down content, but, at least, to sort of publicly encourage them. "Who will get rid of this meddlesome tweet?" But also, during COVID, on measures that I personally was very, very sympathetic towards, on masking, on vaccines, and so on, in the moments where government thought it didn't have power to do these things directly, you often saw President Biden sort of muse aloud, "Well it would be nice if companies would just impose these requirements". And companies did, often, for very, very good reasons. Again, I'm very much in favor of those measures. But it was a little unsettling to see everybody snap to attention so quickly and in the same direction.

              So that's one trend I've worried about, is just the public discussion of policy suddenly becoming real-world fact, through the private sector. The second trend that I'm very worried about and this bubbled up in late 2020, beginning at the SEC was discussions among financial regulators the SEC, then the Fed, the FDIC, and so on to start changing bank regulations and capital market regulations to redirect capital away from disfavored industries, in this case, carbon-heavy polluters. But it wasn't through normal rulemaking. They made very clear from the start they wanted to do this through regulator's softer powers, particularly bank supervision powers, prudential oversight of financial institutions. Really the most unchained, powerful, discretionary powers in the federal government.

              In both of these things, we see government acting indirectly to make changes in the real world that aren't really directly accountable back to government, for many of the reasons that Jonathan just described. And I've been thinking about these trends towards the outsourcing of policy and the attempt to turn the financial regulators into the everything regulators. And I see a number of reasons, probably too many reasons to count. Some of them are obvious. One is just a continued trend a century-long trend or more, now away from checks and balances.

When you look at the arguments that the New Dealers made almost a century ago about constitutional government, you read not just Woodrow Wilson, but James Landis, and their frustration with checks and balances. You would see the exact same arguments that are made today about the notice-and-comment and process. We're sort of defining constitutional government down. Before, it was "Congress is too slow." Now it's "Notice-and-comment is too slow." And so there's just this continued trend towards government's softer, yet, sometimes, more swift and more discretionary powers.

Of course, they have the ongoing problem of delegation, which exacerbates all of this by just giving government policy-makers more power to begin with. And we see just a basic breaking down of norms, throughout government. But, here, in this case, for example, financial regulators never would have dreamed, even just a decade ago, to turn financial regulation to such broad issues, removed from the direct concerns, the traditional concerns, of financial regulators. The reason why the Fed, the FDIC, and others have so much power is because they stayed in their lane for so long. And now we're seeing that norm break down.

              There's two other themes I want to point to, reasons why I think we're coming to this point. The first is that the Administrative Procedure Act. And last year we celebrated its 75th anniversary. What a great party that was. I joke, for the nerds who actually did throw a party. But the APA is just fundamentally ill-suited towards the most significant debates we're having now. For example, the soft power of agencies. We've been debating guidance documents for years now. Before long, we'll look back to the good old days when they actually bothered to publish guidance documents, rather than just make speeches.

The APA really is not well-geared towards reining in agency soft power. But, also, it's not well-geared to rein in use of licensing or approval power. Whether it's infrastructure, or mergers, and so on, the APA is very, very, good at stopping agencies, or, at least, creating judicial review for agencies when they try to do things. It's not good to oversee agencies when they're not doing things, or when they're making unreasonable demands as a condition of granting a license or approving a merger or approving the continued listing of securities on public markets. The APA just isn't well-geared for that. And I think we're now seeing the limits of the APA.

              But the last, and, I think, the most important cause that we really need to consider is the role of regulatory instability underneath all of this. We're now decades into a trend of radical swings in policy from one administration to the next. One administration makes a rule. The next administration undoes it. The next administration redoes it. It's just reg, rinse, repeat, over and over again. And I feel sorry for the people, the companies, the individuals who are regulated in this environment. Justice Gorsuch wrote about this in some of his Tenth Circuit opinions about regulatory instability.

I have great sympathy for the Davos class we were just talking about. I aspire to be one of them. But just imagine what it's like to lead a large public company right now. When one administration makes a rule, you have no confidence that rule will be around for very long. It will probably be changed within years. You'll have this sort of fog of judicial review around it for years. What's a company in that context, in that situation, going to do? They're going to look for the long run. They're going to look long-term stability. They're going to try to figure out where the policy equilibrium is going to be, over the horizon. And they're just going to go to that point. They're going to prize stability. And, frankly, I think what a lot of companies are doing right now in the policy space just reflects that. They are swimming to where they think the pup will be. They're being nudged along the way by the things I just described.

But a lot of this, I think, is just companies trying to find stability in an era of great instability. And I think administrative law for the last few decades, having prized and this was something I always admired with Justice Scalia the virtue of Chevron deference, was it allowed agencies to change their minds, to let elections have consequences. But in his famous Duke Law Journal article, when he argued in favor of Chevron, he did point out change is good, but you can have too much of a good thing. And there might be real due process concerns that arise if policy-making flip-flops too much. He never really spelled that out. I wish he were still here to explain it now, because I think we're in that moment. And I think we're seeing companies grapple with that problem.

              Now, what I just described, in terms of outsourcing of public policy to companies, and, also, the turning of financial regulators into the everything regulators, there's a couple of concrete issues we're going to grapple with in the next couple of years. And I know there's CLE credit for this panel, so I want to, at least, partly, do my job here. So here's two specific issues to look out for. One is judicial review. Judicial review is going to get much more difficult in upcoming years, because some of the trends we're discussing are going to really complicate the causal links between government action and real-world outcomes. And so it's going to be more and more difficult to actually prove standing to have judicial review of some of the government actions that underly the eventual policy outcomes.

              The second has to do with cost-benefit analysis. And I'm not just sucking up to Brian Mannix and Susan Dudley, here. But imagine this. Right now, the financial regulators are telling companies, "You need to worry about swift transition in policy." They call it transition risk. In the future, if we have a climate crisis, policy might need to change very quickly. And you need to prepare right now, or explain how you're preparing for the possibility of radical policy changes in the future. They're, in effect, trying to get companies to pre-comply with rules that haven't been written yet. When it comes time to actually write those rules, what's the cost-benefit analysis going to look like? If companies are already pre-complying with rules that haven't been written, when the rules are written, the costs of those rules are much lower. The costs go way down, the perceived benefits stay the same.

              And so I think it's important to start intervening in these issues now, and flag the cost-benefit issue, because I think it's lurking out there in the future. I'll just say I guess I've gone on a bit long just one thing, one last thing. It is The Federalist Society after all. And, as I was doing my mandatory five Federalist Papers last night, I keep circling back to Alexander Hamilton on execution. We all read "Federalist 70," energy in the executive. But, in the papers that bookend that paper, he talks about what he calls the "true test of government." He says, "The true test of government is its tendency and aptitude to produce good administration." And that's amazing. For everything he wrote about executive power, for everything he wrote about judicial review, he says in The Federalist, "The true test is whether your constitutional system produces good administration." He actually says it twice. He says it in "Federalist 68," and he quotes it in "Federalist 76." He's like a law professor who cites himself.

              I think that quote is becoming the great question of our time. Of course, constitutional issues are key. And, of course, today, as we're debating the fate of Roe v. Wade, that's in the forefront of our minds. But we need to take administration seriously. Hamilton recognized that you needed not just good laws, but good administration to create stability, so the rest of us can just get on with living our lives, whether it's individuals, companies, and so on. And everything we're describing today, there's no shortage of problems with it. But maybe the greatest problem is just the sheer uncertainty that it's going to foster, preventing people from innovating, from creating, or just getting on with their lives. And I think that might be -- I think we may be failing Hamilton's true test. Thank you.

Hon. Stephen A. Vaden:  We've got two microphones. So if you have a question, please move to one of them. But, before we turn to that, I have a question that I'd like to throw out to our panelists. I know you were talking about what are we to do, and the wide swings in regulation. And, Jonathan, you had a proposal for, perhaps, using our corporate accountability measures to handle corporations who, from some points of view, might get away from just profit and loss and act as kind of free-wheeling bureaucrats who no one elected out there.

              I guess my question for the panel is if you were in government right now, it seems to me there are two models that are being thrown out there, a somewhat active government role to counteract some of these trends in the private sector. A good example of that might have been what we recently saw in Florida with the bill that took away the Reedy Creek District from the Disney Corporation. And then there's another model out there, which isn't discussed as much, that I think is based on Calvin Coolidge's admonition that four-fifths of our problems could be solved if we would all just sit down and be quiet. And that is to have the government do nothing. And by that I mean that, frequently, the government acts as the handmaiden of big business.

For example, the United States Trade Representative Catherine Tai spent most of her first year in office doing diplomacy on behalf of some of our largest tech corporations, by reaching deals to encourage foreign countries not to tax them. Now, the value of that personal lobbying effort is incalculable. It would start with the gigantic tax savings that those corporations are going to receive. Nothing that she did is illegal. It's entirely appropriate for her to do that. But, on the flip side of the coin, there's nothing in law that requires her to do that on behalf of those corporations. So one could foresee an executive in the future sitting in the oval office and ordering his cabinet officers, "Take no action on behalf of," pick whatever corporate realm you want, "Don't get in their way. They're free to lobby the French government, and say, 'Please don't tax us.' But we will express no opinion on that. And, by the way, we also won't, when we're dealing with trade things, spend quite so much time on intellectual property. They're free to defend it with their own private lobbying efforts. But I want you focused on other policy matters."

              So I'm curious, when it comes to what our panelists' thoughts are, is a more activist role of government to stop this perceived problem? Is an inactive role the better? Or is it a mixture of the two, from your perspective? Jonathan, I'll turn it over to you first.

Jonathan Berry:  Great. I hesitate to paint with a broad brush beyond the -- I think the categorical statement I'm personally comfortable making is that we ought not to, we shouldn't refuse to consider activist options. Sometimes I think there is a very fine, very strong presumption, and I think this is reflected in our Constitution. Our Constitution, in fact, has a substantial bias in favor of inaction when it comes to legislation. For example, you've got to get through these distinct and different hurdles with bicameralism and presentment, get the concurrence of these three different political branches that are all elected separately. They all have to concur in order for new law to get made. And that reflects very deep wisdom. Adam, not I, can provide quotes from The Federalist to back that up.

              I think the challenge today is that I think it's true that a lot of the problems we're seeing with big business today arise, at least in part, from the growth of government itself. So I'm hesitant about jumping from the frying pan into the fire. But, to bring it back, the fact that it is possible for, even common for government intervention to make things worse, is not reason to refuse to consider, almost as an article of faith, that intervention is never appropriate. Sometimes it is. And I guess I would add, to use the Florida example, recall that, as I understand it, the law that Governor DeSantis signed did not create a -- to channel opposite world Ibram Kendi, or something like that. He didn't create a Department of Anti-Wokeness in Florida State government. They did something relatively targeted, and rifle-shot. So, sometimes that could, potentially, be appropriate.

Stephen Soukup:  One of the things that I find difficult to support government action, for example, what Governor DeSantis did, is that in sort of the philosophy I've developed around woke capital and the other influences of progressivism on business is this idea that the biggest problem is the politicization of everything. This was the warning given to the West, given to liberal democracies by Carl Schmitt, the Weimar-era philosopher-jurist from Germany, who warned that liberalism tends to create conditions in which we bifurcate into friend and enemy groups. And then, as these friend and enemy groups continue to escalate their fight, eventually, society looks for an authority of some sort to end the squabbling. And then Schmitt went on to prove that correct by becoming a Nazi and supporting Hitler, etc. Hitler was his person who stopped the squabbling, who ended the total war of the total state, where everything is politicized. For Schmitt, that's what he saw. And we saw how that turned out: 12 million dead, just in the concentration camps.

              When I see government, for example, taking action to punish Disney for its attempts to overturn democratically elected law, I worry that this is part of that escalation. I don't blame Governor DeSantis. He didn't bring Mickey Mouse into the political realm. Bob Chapek and Bob Iger brought Mickey Mouse into the political realm. And he's simply trying to push back against it. But, yet, there is some escalation involved. And that discomforts me a little bit, because the total state and total war amongst the participants in the total state is one of the things I think we have to guard against.

              At the same time, as Jonathan said, I think that there is a danger in inaction, as well. We've talked a lot about people involved in administrative law and its crossover with business, have talked a lot, recently, about the SEC's proposed new rules on climate change disclosures, that the SEC has proposed, and is taking comments right now on forcing companies to disclose their climate change plans, their emissions, all sorts of different things related to sustainability and climate change. If the federal government does not act, that doesn't mean that companies are not going to be able, or are not going to be required to do that.

Brian Moynihan, who is the CEO of Bank of America, is the president of a group, speaking of the Davos group, that is part of the world economic forum, that has been working on their own disclosure requirements for the last five years. If the SEC doesn't require these disclosures, this world economic forum group and all of its affiliates are going to require these disclosures privately. They're going to require companies, if you want, for example, to get funding, if you want access to BlackRock to put your company in its index funds, if you want the S&P to give you decent ratings, if you want any of the access to the financial capital markets in the world, particularly in Europe or the United States, you're going to have to comply with these disclosure rules anyway, which is, essentially, the idea of these private entities acting as quasi-regulatory agencies. So I think that it's a delicate balance. We need to have some pushback so as to not allow the world economic forums of the world to dominate this sphere. But, at the same time, I think we need to be careful about how we execute government action, in order not to escalate the total war and the total state.

 

Prof. Adam White:  And I'll just say, very briefly, I'm very wary about these sorts of things, myself, and not just in Florida. I'm sympathetic to what Republicans in Florida wanted to achieve. I'm not sympathetic to them deciding that their method of pushback would be not through their own sort of political action outside of government, but to actually use the levers of government in a targeted way to retaliate against companies that were speaking. I think that's very, very, dangerous. I'll say the themes I was touching on, they aren't limited to Democrats. I want to be very, very, clear. This past year in Texas, what we saw on abortion, I'm very sympathetic to Texas on their wanting to push back against the Court and its abortion jurisprudence. I hope the Court overturns Roe v. Wade. But when Texas outsourced the execution of abortion law in their state to trial lawyers, I think that's very, very dangerous. I think it breaks the lines of accountability between the execution of government, the writing of laws, and the people that elect them.

And so one of the most troubling things about the themes we're talking about today, about government accountability and these issues, is that it's not a strictly partisan issue. I think we're going to have great, great, temptations from both sides to use these tools. When I talk about the climate finance issue, and turning climate regulators into everything regulators, I often say if this approach on climate finance works in this administration, the next administration will not -- they might change the policy, but they won't change the toolbox. You can just cross out "climate" and write "China" in there, and you'll see the exact same thing. Now, that's when a lot of my friends say, "Well, now you're talking." And I kind of agree. But I think this is very, very worrisome. And so I think we ought to worry about retaliation on the right.

Hon. Stephen A. Vaden:  All right. Let's go to some questions. To my right.

Questioner 2:  Adam's concern about regulation, that one administration puts it in and the other one puts in the opposite, and having to be regulated that way, my question is as follows; we heard Mike Lee say this morning that the REINS Act comes in. The REINS Act comes in, whichever administration has it, all those regulations are baked in the cake. And that administration is weaker than the one preceding it. And everything we have is there. And all of this bicameralism then bakes those into the cake, except for one thing. And I want to know if the panel thinks that this might be a way to stop that seesawing, without bicameralism. And that is collusive use of the Regulatory Review Act, in such a way that you have the SEC, you control Congress, you control the presidency. You have the SEC put in a regulation that there shall be ESG reporting by all the companies. And then you use the Regulatory Review Act to strike it down, because you've already talked to Mitch, and you've already talked to whoever the head of the House is. And, then, not only does that regulation get struck down, but all those similar to it can't come back. That's my question.

Prof. Adam White:  I wrote a piece on this at the beginning of the Biden Administration, when there were some proposals from a couple of law professors at Harvard to do this, for agencies to basically tee up CRA resolutions in bad faith in order to knock down, and permanently knock down, conservative policies. It's been a while. I can't remember. There were technical reasons why their theory just didn't work, actually, on a plain reading of the CRA. But let's not miss the forest for the trees, here. It's the most pathetic and passive-aggressive thing that we've ever seen, seeing government, especially at the beginning of an administration, when they have the most possible time, teeing up CRA resolutions to lock in the agency on things. I'm grateful that I think the law doesn't hang together, and that it would actually have failed if they'd tried it. But I think it's a pretty sad sign of the times.

Hon. Stephen A. Vaden:  Jonathan, you are a former regulatory policy officer for a cabinet agency. Do you have time to tee up phantom regulations?

Jonathan Berry:  There wasn't a ton of time for this. We did do the first post-CRA disapproval reg that I'm aware of, on unemployment insurance eligibility issue, while we were there. But part of the challenge there is also just the scope of the effect of the resolution. Disapproval is relatively narrow. I believe the words are substantially similar. And so the gauge of that slug is pretty small.

Hon. Stephen A. Vaden:  All right. I think we have a question over here.

Questioner 3:  Jonathan pointed out that it's generally inappropriate for a CEO to spend money on his own private ski vacation, but it's generally now considered appropriate if he goes to the same ski resort and gives a talk at the World Economic Forum. But should that be the case? If that CEO spends $1 million on himself, or his wife, or his son-in-law, that's clearly wrong. But if he donates it to the National Resources Defense Council, or the Black Lives Matter Foundation, as a way of elevating his own public persona, furthering his own career, should that be considered a financial conflict of interest, in the same way that more traditional conflicts of interest are recognized in corporate governance?

Jonathan Berry:  Definitely not an expert in this space, but I think there is a good argument to be had that the scope of the corporate fiduciary duty, as already understood, does, indeed, box out self-dealing that is not strictly pecuniary. Your example is somewhat pecuniary, because it does involve donation of money. But it's not money that goes to the private bank account of someone, of a corporate officer, or something like that. But, in reality, the duty is for the officer or for the director to serve the best interests of the corporation. And there are various ways that that can be subverted.

And one, I think, that does need more attention, in this era of woke capitalism, is corporate officers, essentially, bolstering their own reputation, standing, stature, sort of within that professional managerial class, at the expense of business interests. This is an example, by the way, of sort of paying more careful attention to the structural issues in a way that may prevent or reduce some of those downstream issues of companies doing crazy woke things, where you are at least tempted to do what was done in Florida, contra Disney.

Stephen Soukup:  Yes.

Jonathan Berry:  That was a better answer.

Stephen Soukup:  The example that I always use, which you probably know, Richard, is Mark Benioff, the CEO of Salesforce, who, for a period of eight years, awarded himself, and then sold, 10,000 shares of his company stock every single day for eight years, 10,000 shares, every day. He's worth $8 billion now. And, as part of his plan to reform capitalism, to make it work for everybody, he gives away hundreds of millions of dollars of shareholder money every year, not of his own money, but of shareholder money, every year. And I think that the term is "modern-day robber baron," is what he is. And, to do that, I think, is both unethical and should be considered criminal, as well.

Questioner 4:  Excuse me. Some of us do not know the corporation or CEO to whom you're referring.

Stephen Soukup:  The company is Salesforce, and the CEO is Mark Benioff.

Questioner 4:  Salesforce?

Stephen Soukup:  Salesforce, correct.

Adam White:  Actually, Steve, can I say something?

Hon. Stephen A. Vaden:  Yeah, go ahead.

Adam White:  A little over a century ago, Louis Brandeis sort of made his historical legacy, before he was even on the Court, by writing a book called, Other People's Money. And that book would be very different today.

Questioner 5:  Good morning. So let's kind of start it out saying the APA is the constitution for the administrative state, a common phrase I always find faintly ridiculous, faintly sinister, actually. But let's kind of go with that. And then we also have the idea sometimes floating around that we should have a constitutional convention to reform the Constitution, which I might be okay with if we can just come up with equivalents for Washington and Hamilton and Madison. But, on the other hand, I think maybe we do have the equivalents — flatter ourselves — for the Congress of 1946. Isn't it time — and kind of summarizing some of the things it said — for us to have a substantial revision of the APA, or call it something else? And what do you think that would look like, if we kind of re-found the administrative state and put in a new constitution for it, a new APA?

Adam White:  I'll just say, in 1946, when Congress made the APA, it was a large project in making execution look less like execution. It was an exercise in making some execution look like adjudication, make some execution look like legislation, but keep changing what we think of as actually executing the laws. And they did it because they were mapping new processes onto broad delegations. They also, in the same year they passed the Congressional Reorganization Act -- Joe Postell, from Hillsdale, did a great paper on this recently, looking at how Congress changed itself to become more of an oversight body than a legislation body. And so I've been sympathetic over the years to APA reform. I mean, who could be against reform? But, I think, at the end of the day, what really needs to be fixed is the delegation problem. And, until you fix that, you're really just -- you're doing a lot of things, but not really getting at the core problem. And you're not really getting back to real execution of real laws.

Hon. Stephen A. Vaden:  Anybody else?

Allison Ball:  I've got a question, too. So, a lot of what you've been describing is my actual life. I'm the state treasurer of Kentucky, so I deal with our investments. And, I'll tell you, there is a move afoot. And it's very strong right now among conservative treasurers across the country, and people who deal with this, that we need to have government action. It's only government action that can solve these problems. And I find it to be a little concerning. And you all have just identified some of the problems of looking at it that way. But a couple of you have said there may be a place for government action in some instances. Could you, as you think about that, could you elaborate what that might be?

Jonathan Berry:  So, I think, one example -- and I've been an admirer of the work of lots of upstate treasurers and other financial officers who are starting to really alert to this issue -- from that position, if you are aware that there are major swaths of the financial sector, for example, that are acting to essentially cut off the lifeblood of your state, then, arguably, there's an obligation on the state officers entrusted with that to, at minimum, make sure that state pension funds and the like are not being used to actively finance that kind of work. That seems like a layup, honestly. And I think that's why we're starting to see so much traction.

Stephen Soukup:  Yeah. I agree. The action taken by Treasurer Riley in West Virginia, the initial action where he took --

Allison Ball:  -- Which we just did too.

Stephen Soukup:  Pardon me?

Allison Ball:  We just did too, in Kentucky.

Jonathan Berry:  Mazel Tov.

Stephen Soukup:  Yes. Take the operating budget out of investments with BlackRock, because BlackRock pushes policies that are contrary to the best interests of the people of West Virginia, and/or Kentucky. I think that's important, not just because it takes power from those — in this case, Larry Fink, the CEO of BlackRock — who would push a political agenda, using other people's money, but also because it puts control back in the hands of those who are closest to the people. If we look at our federalist state, if we look at the way it should be set up, if you look at the way capitalism functioned prior to the Civil War, it functions best when those closest to the people have the ability to look out for the people's interests most aggressively.

Jonathan Berry:  I would add to that, just briefly, it's not as if -- with these gigantic asset managers, it's not as if these are, their sort of growth is some sort of untrammeled success story of capitalism, or something like that. Just to give one example, their size and scope is, in part, a by-product of our tax laws, of tax-advantage savings vehicles that causes these massive aggregations of wealth. So it's not like -- Larry Fink is not a yeoman entrepreneur, out in the frontier, working at his tool and die shop, or something like that. I'll come up with a better metaphor next time. So, I think that's worth considering.

Hon. Stephen A. Vaden:  Adam, a few moments ago, you expressed some concern, if state governments were taking actions that were targeted against specific political thoughts of CEOs. The treasurer of the State of Kentucky, do you have concerns with her investment decisions? Or is she acting as a normal market participant, investing her own money, and can do what she wants with it?

Adam White:  State pension funds, state funds, obviously, are different in a variety of ways, in no small part because you have a variety of obligations, both to your funds, and also to the people of the state. I want to just say for the record, I'm not against corporations being involved in politics or policy. They always have been. They're often a force for good. I'm worried about sort of coordinated efforts, especially at the government's own behest.

I will say, in your situation, or any similar situations, I wouldn't know what to do in your shoes. If you could actually get, like, a much better return on your investment, in the long run, with BlackRock, I don't know what you would necessarily say to your pensioners. You're making a difficult sort of balance between short- and long-term. And I really think one thing the states can do particularly well, is point out the problems, here. You have a unique platform, both individually and collectively, across states, to sort of push back politically, not through government regulation or regulatory action, but through your platform. And so I don't know what to tell you, in terms of government action. But I certainly hope that you'll be a vocal contributor to these debates.

Hon. Stephen A. Vaden:  All right. And with that, I think we can adjourn, and breakout panels are to follow. So let's just thank our panel.

 

10:40 a.m. - 12:00 p.m.
Breakout Panel: The Executive Branch's Duty to Enforce

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation
Palm Court
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Event Video

Description

The debate over the Executive branch's duty to defend laws passed by Congress against constitutional challenges arises with every new presidential administration. Although historically most Attorneys General have agreed that the President's duty to defend is subject only to certain narrow exceptions, questions have been raised about recent administrations in this regard--including with respect to the handling of the enforcement (or non-enforcement) of federal immigration law, the implementation of the Affordable Care Act, and the defense of religious liberty, speech, and gun rights, to name just a few. When does the exercise of executive discretion cross the line into political partisanship, and what are the effects on the rule of law? This panel will explore this issue in depth and touch upon various aspects of the debate.

Featuring:

  • Mr. Steven G. Bradbury, Attorney and Former Senior U.S. Government Official
  • Mr. Sean Donahue, Partner, Donahue & Goldberg LLP
  • Mr. Ryan Newman, General Counsel, Governor of Florida Ron Desantis
  • Mr. Justin Savage, Global Co-Leader and Partner, Environmental Practice, Sidley Austin LLP
  • Moderator: Hon. Gregory G. Katsas, U.S. Court of Appeals, District of Columbia Circuit

Speakers

Event Transcript

Host:  Welcome. Thank you for being here. This panel, entitled The Executive Branch's Duty to Enforce, is sponsored by the Litigation Practice Group. Our moderator for this panel is Judge Greg Katsas who serves on the United States Court of Appeals for the District of Columbia Circuit. Prior to his service on the court, Judge Katsas held many senior positions in federal government, including Deputy Assistant and Deputy Counsel to the President, Assistant Attorney General for the Civil Division, and Acting Associate Attorney General. He was also a partner at Jones Day in Washington D.C. and served as a law clerk to Judge Becker on the Third Circuit and to then Judge Clarence Thomas on the D.C. Circuit and then to Justice Thomas on the Supreme Court. Judge Katsas.

Hon. Gregory G. Katsas:  Thank you. So our topic is the executive branch duty to enforce federal law or equivalently the executive's discretion not to enforce federal law. It's a big topic. Panelists are going to touch on at least three different aspects of this question. One is the very familiar issue of prosecutorial discretion which arises any time executive decides not to bring some kind of adjudicatory enforcement proceedings that would be legally justified.

      This has been a topic of major debate in the immigration area. At one end of the spectrum, everyone agrees that the government doesn't have to try to remove any individual alien that could be removed, just as the government doesn't have to pursue every criminal case it could pursue. At the other end of the spectrum, if the government were to simply announce that they are not going to enforce any immigration law under any circumstance, that would obviously be lawless.

      So what, if any, are the principled lines that can separate one extreme from the other? Is there any guidance we can draw from the Constitution itself which simply requires the executive to take care that the laws are faithfully executed? What can we draw from Heckler v. Chaney, which is the leading Supreme Court opinion saying that exercises of enforcement discretion are presumptively unreviewable at least on under the APA? And whatever lines there are, how do they apply to initiatives like the DACA program which establishes criteria for non-enforcement in advance and covers a large number of aliens and links the non-enforcement decision to the provision of various benefits?   

      The second thing we're going to talk about is the executive's duty to defend the constitutionality of federal statutes when they're challenged in court. When I served at DOJ in the Bush 43 administration, there was a pretty long standing and wide spread and bipartisan consensus that the executive has a duty to defend constitutionality of federal statutes, regardless of the how much the executive likes or dislikes the statutes, with two narrow exceptions: one, if no reasonable argument could be made in defense, or two, if the statute trammels on executive authority, in which case the theory was DOJ's primary responsibility is to the President over Congress in the event of a conflict.    

      That consensus has maybe been frayed a little bit over the last couple of administrations with the Obama administration’s refusal to defend the Defense of Marriage Act and the Trump administration's refusal to defend the Affordable Care Act in the last round of Supreme Court litigation. At the same time, the executive enthusiasm for defending statutes has arguably waned in some high profile cases. States have shown in increasing willingness and eagerness both to challenge and defend federal statutes and federal regulations and, under the special solicitude of Massachusetts v. EPA, have been given perhaps greater standing in order to come into cases and do that.     

      So we've seen this weird situation now where, take the last iteration of the Affordable Care Act litigation, you would think the configuration would be the regulated party versus the federal government, which is what we had in 2012. But it's sort of morphed into California v. Texas, California standing in for the federal government to defend the statute and Texas trying, unsuccessfully, to stand in for the challengers. And query whether if every major challenge to an edgy statute or regulation is going to turn into California v. Texas or Texas v. California, depending on whose ox is being gored, does that make it less essential for DOJ to itself defend on the theory that Congress itself should have, needs to have its own interests represented?    

      The last topic we're going to touch upon is agency authority over ambiguous statutes and regs under Chevron and Kisor. This is not traditionally thought of as an issue of enforcement discretion, but think of what happens under these deference doctrines when an ambiguous statute has at least two reasonable interpretations. Court doesn't roll up its sleeves and look at text, structure, cannons, and history and figure out what the best reading of the statute is in a 51 49 case. The agency gets to decide and gets to decide based on its discretionary policy judgements.     

      So what happens when there are two reasonable answers? One illustration of this, close to home for me, is the debate in recent years over net neutrality. It turns out that that question turns on this wonky legal question about whether broadband internet service is a telecommunication service under the Communications Act. And the D.C. Circuit has said it is reasonable to answer that question yes and it is reasonable to answer that question no. So guess what happens? The FCC goes back and forth depending on how the make up of the commission. They said no in 2002. They said yes in 2015. They said no in 2018. And one suspects they may not be done. Are there any principled limits on the circumstances in which the executive should turn ambiguous statutes on and off as administrations change?   

      We've got a great panel to talk about these issues, so let me just introduce our speakers without further ado.    

      Justin Savage leads the Environmental and Automotive Practices at Sidley Austin. He counsels clients in heavily regulated industries such as energy, chemicals, and mining. His expertise extends across the spectrum of environmental, transportation, and administrative laws including the Clean Air Act, Clean Water Act, CERCLA, NEPA, the EPA, FOIA and various statutes administered by NHTSA. Justin served for nearly a decade in the Environment and Natural Resources Division at the Department of Justice where he led teams in several multi- billion dollar enforcement cases. He's frequently taught environmental law, including for DOJ and the American Law Institute. 

      Steve Bradbury served as General Counsel of the Department of Transportation from 2017 to 2021. He also served as the Acting Deputy Secretary of Transportation and briefly as the Acting Secretary of Transportation. From 2005 to 2009, Steve served as the Acting Assistant Attorney General and the Principal Deputy Assistant Attorney General for the Office of Legal Counsel at DOJ. As head of OLC he advised the president, the attorney general, and the entire executive branch on a wide range of issues. He was also a litigation partner at Kirkland Ellis and at Dechert, and he clerked for Judge James Buckley on the D.C. Circuit and Justice Clarence Thomas on the Supreme Court.

      Sean Donahue focuses his practice on appeals in environmental cases. He represents public interest, governmental, and private entities in clean energy, natural resource, and other environmental cases. For four years he served as an appellate attorney at the ENRD. He formally practiced at Jenner & Block, and he now runs his own firm. He's argued some 50 appeals. He's taught courses in environmental law, civil procedure, and constitutional law at Washington & Lee, Iowa, and Georgetown University Law Schools. He currently teaches climate change law and policy at Stanford Law School. Sean began his career as a law clerk to Judge Ruth Bader Ginsberg on the D.C. Circuit and to Justice John Paul Stevens on the Supreme Court.

       Finally, Ryan Newman is the General Counsel to Florida Governor Ron DeSantis. During the Trump administration he served as Counselor to the AG, as Deputy General Counsel at the Department of Defense, and as Acting Assistant Attorney General for the Office of Legal Policy. He's also served as Chief Counsel to Senator Ted Cruz. Ryan clerked for Justice Samuel Alito on the U.S. Supreme Court, for Judge J. L. Edmondson on the Eleventh Circuit, and for Judge Richard Leon on the District Court here in the District. Before becoming a lawyer, Ryan was an armor officer in the U.S. Army, and he deployed to Iraq to participate in Operation Iraqi Freedom. Thanks for your service, Ryan.

       Justin, the floor is yours for whatever opening you'd like to give us.

Mr. Justin Savage: Thanks, Judge. And thanks Steve, Sean, and Ryan for joining this what hopefully will be an interesting discussion. So I’m going to start this morning by boring you. I’m going to argue for the traditional approach of substantial discretion, particularly enforcement discretion under Heckler v. Chaney. I know there’s some hipster theories, some cool theories. I have kids in their 20s, and they say I’m old and boring. But sometimes old and boring is good, and tradition is good because it’s not fragile. It’s passed the test of time.

So cast your mind back to the 1980s where there was a much different D.C. Circuit. And a panel on that Circuit in Heckler v. Chaney decided that it would be a good idea to force the FDA to regulate drugs given to people on death row. Does anyone think that makes sense? I don’t.  

So what happened is the U.S. Supreme Court decided that unless there are clear textual and other statutory signals, the executive enjoys nearly unreviewable, presumptive discretion to enforce. As both a legal and policy matter that makes sense to me. As someone who both enforced law for 10 years and now defends companies and individuals, it makes sense. The executive is elected. Judges are not. Line prosecutors in the Justice Department where several people on the stage serve is best able to make the decisions on when, how to enforce, dockets, resources. To me it’s incredibly dangerous that an insular - no offense, Judge - branch of government that’s not elected would be making these calls. Yes, there are difficult lines to draw, but the line should always lean and draw toward more deference not less.

Would someone say, “Well, this could allow the Biden administration to get to wreak incredible outrages upon the country?” I will say there are elections coming up. They’re coming up this year. They’re coming up in ’24. And then cast your mind back to the last administration where several people in this room served. I can see someone I know over there. Think about what happened just with EPA. And we have a few environmental lawyers on the stage. Their typical win rate is about 80 percent. In the last administration, it wasn’t. And I don’t want to call out particular judges or decisions, but I think there were some incredibly invasive decisions in environmental law that disrupted what the last administration wanted to do.

So in closing, all I’ll say is Heckler v. Chaney to me should remain our north star. We should be committed, unless there are clear textual signals in the text of the statute, to unreviewable enforcement discretion.  

Thank you, Judge. And now I’ll pass it on to Steve.

Mr. Steven G. Bradbury: Thanks. Is this on? Yes? Great. Thanks, Justin. I’m going to focus on the regulatory front, the obligation of administrative agencies, executive agencies to implement a statutory program that Congress has enacted. And I want to focus on one word in the Constitution. The word is faithfully. The executive has an obligation to carry out the law faithfully. And I take that to mean that the executive agency, the officers of the executive branch who are implementing a statutory program, have an obligation to implement it in a way that’s consistent not only with the literal terms, words, and phrases of a particular part of the statute but also with the structure of the statute and with the context and purposes that inform its enactment by Congress.

Certainly when it comes to judicial review of those agency actions, as Justin was describing, there’s a role for deference. We don’t want Judge Skelly Wright to substitute his personal preference for the right policy for the judgement of an agency. And there may be areas where the agency, in carrying out the enactment, has to look at the science, has to look at the economics of an industry, has to get up to speed and get expert in those important aspects. And we don’t want courts, who are generalists and who are unelected and unaccountable, to substitute their judgement. So we have deference doctrines like Chevron. And Sean clerked for Justice Stevens, so I’ll offer my observation that I think Chevron is probably the most influential opinion that Justice Stevens ever authored in my view. It makes sense. It’s understandable.      

The problem is that what you see is executive agencies rely on Chevron and other doctrines of deference as covers or devices that they exploit to allow them to push the bounds of what Congress intended in a statute, what the statute really authorizes them to do. And so you see swings, radical swings in policy from one administration to another. And they hang their hat on the fact that the courts are going to give them deference, and so, “Come and get us. We think we can get away with it,” basically.   

One example, that’s close to home for me from the Department of Transportation and also the EPA context, is fuel economy regulation. Congress originally passed the Energy Policy and Conservation Act in 1975 to regulate fuel economy of new motor vehicles. And this was passed in response to the oil crisis in 1973 caused by the Arab oil embargo. And it was an effort Congress envisioned to give a nudge to the automotive industry to be a little more innovative, try to improve fuel economy so that our nation, strategically and as a matter of national security, would be less dependent on foreign oil.

It gave this charge, this mandate to the Department of Transportation in 1975. It did not give it to the Environmental Protection Agency. This is not an environmental statute. This is a transportation policy statute. They gave it to DOT. They could have given it to EPA if it was environmental. EPA had the Clean Air Act. That was enacted five years earlier in 1970. And EPA had, in Title II of the Clean Air Act, authority to set emission limits for new motor vehicles. The object there was to try to clean our cities of smog. That was a real problem.  

But Congress didn’t give the fuel economy mandate to the EPA. It gave it to DOT Secretary of Transportation. It’s implemented through NHTSA. And in that mandate, NHTSA has to take into account technical feasibility, economic practicability, the need of the nation to conserve energy, really meaning at the time oil from foreign sources. And this allows NHTSA to take into account things like what is really today technologically feasible and what will consumers buy? What’s economically practicable? What kind of vehicles can the automakers actually sell in the market?

Congress did not want to disrupt the industry. They didn’t want to make the industry go bankrupt. And they didn’t want to deny consumers and the American people the great benefits to liberty and to the economy that automotive mobility gives. So it was a very carefully crafted statute, and Congress was very intent that these mileage requirements for automotive for new cars gradually increase and don’t go overboard. Okay. And there are a lot of indications of that, which I can go into in detail.

But come the 2010s and the Obama administration, they had a focus on climate change and trying to suppress carbon dioxide emissions. Carbon dioxide emissions don’t cause smog. They cause this much broader concern of global warming the EPA concluded. So they decided to use the fuel economy standards as another lever to try to force the industry, basically, to transform the whole industry to move toward electric vehicles. And they let the Environmental Protection Agency take the lead in that and NHSTA kind of followed along. And they set standards that were dramatically increased in terms of mile per gallon requirements.

The Trump administration came in. We tried to do a reset to make it more of a gradual increase, still pressing the bounds of what’s technologically possible but not at such a steep curve.

 Now you see in the Biden administration, they repealed what we did, and they flipped back. And you have huge increases in mile per gallon requirements, eight percent per year and then in 2026, model year 2026, ten percent, a leap up. And again, EPA is taking the lead on this. The clear purpose is to force the automotive industry to transform itself into electric vehicles, and there won’t be any more internal combustion engine passenger vehicles that are made in the U.S. or sold in the U.S. pretty soon, kind of consistent with the California vision.

     So very quickly, how do we bring this back into check? I think this is -- Congress is just an observer here, sitting back. Congress never addressed through statute how do we deal with climate change and carbon dioxide emissions through regulation of mileage in new automobiles. They never have addressed that at all. So we have this huge new regime created by these agencies.

 So I think we have to rethink judicial review. Under Chevron think about putting more robust content into prong one of Chevron. Don’t just look at whether the particular word is ambiguous or compels one and only one interpretation. Look at the whole structure, the context, and the purpose of the statute.

 We see this in Judge Mizelle’s ruling on the mask mandate in Florida where she looked at a particular word that the agency hung its hat on and said, “Yes, it is ambiguous. It has multiple meanings, but looking at the whole statute, we think Congress intended the narrow meaning.”

 The other doctrine is the major questions doctrine, really an elaboration or modification of Chevron, I think. You see this in recent Supreme Court decisions where basically if an agency has, by rule or otherwise, engaged in something that can be described as a transformational extension of the agency’s regulatory mandate, then the Court is going to insist not just that there be a reasonable interpretation of ambiguous terms but that there be a clear and unmistakable mandate in the statute itself authorizing that extension. I think that’s the right way to go. It has a lot of development to happen in the courts, but I’m very encouraged by that.

 Thank you, and I’ll turn it over to Sean.

 Mr. Sean Donahue: Thank you, Steve. And thanks for having me here today. And I guess I’d say I think my role, perhaps, is to be -- to present a different view on some of these issues. Although basically all the general principles that have been expressed so far, I basically agree with. It was when Steve started talking about a concrete case that I work on on the other side that I can’t follow. I’m not going to talk about the EPA greenhouse gas emission standards. I will note because it’s a matter of public record that the auto industry is supporting what EPA has done. So to the extent that there’s a question of feasibility, just note that. But I generally agree with the view of about how courts should read statutes in a way that is not focused myopically on particular words. They should read the words in context and look at structure and purpose, et cetera.

 I guess I just want to ask -- and this is for those of us who are involved or have been involved as law clerks, as judges, whatever this -- today is a bracing day, another day that reminds us that a lot of norms are shredding or seem to be no longer binding. And I think in administrative law that’s true. We’re in a time of hyperpolarization and a lot of distrust. And I think that plays out in a lot of different ways in administrative law. When you have transitions from one party to the other, there’s no longer a sense that there’s new people in town and let’s help them take existing policies and decide what needs to be tweaked and what needs to be maintained. There’s a sense that everything that the last administration did is anathema and it needs to be taken off the books immediately.

 And that leads to problems. That leads to probably suboptimal policy and also mistakes that -- I would say recommend Michael Lewis’s book The Fifth Risk about the Trump administration’s transition period, particularly with regard to public health. But it’s certainly not unique to any particular administration.

  I would say on the mask mandate case, I don’t agree about the interpretation of the statute. I focused on the case very closely. But I do agree that dispensing with notice and comment on a rule as important as that is emblematic of the kinds of problems that you see with a new administration that’s really eager to do -- and if you think there’s an emergency for public health, there are steps you can take to put a rule in and then hold comment. But not having notice and comment at all an emblem of a kind of problem that we see in a time of frenzied efforts to reverse or alter policy.

 So my perspective on the obligation to enforce the law is I agree with all the general comments. I think the executive has to have some discretion. It depends, of course, on what the statute says. I would note that in the area I work in most, the Clean Air Act, the statute is filled with obligations that Congress chose because it wanted to effect certain public health and other goals that require the agency to act. And those are the law too. And there are those of us who might want to change them, make them stronger, or get rid of them, but they’re the law just as much as the limits. And that’s a point I like to make quite a bit in my practice.

 I’ll say something about major questions because it’s a very hot topic. I think when you look at -- often we when see descriptions of what the doctrine is, it’s a bunch of cases: Brown & Williamson, can the FDA regulate tobacco as a drug; the MCI v. AT&T case; and a bunch of others. And I think at one level the principle of that, an agency shouldn’t be able to find an elephant in a mousehole or take a very small grant of authority and do something sweeping with it, is completely common sensical. We would all -- and I would submit — I’ve not had the energy to do this — but you could look back much further than the earliest cases and find courts interpreting statutes, doing this all the time. We’re reading the statute. This doesn’t seem to be a big thing that you could do a lot with. It seems like a small thing, so it’s not a permissable or reasonable or lawful interpretation.

     I think that’s totally fine. I have no objection. I would say that there’s probably a corresponding principle the other way that if Congress had given the agency a big authority or big obligation and the agency is trying to deny it or not use it, I think that’s an error too. Maybe some sort of Congress doesn’t construct elephant pens to house mice. All of that I find unobjectionable. And that’s the anodyne, benign version of major questions.

 I think there’s another way in which the phrase is used, and that is this is a warrant for us to achieve massive deregulation that we think is great policy. And I see those kinds of uses of it in briefs and arguments, and I, of course, disagree with that. I think you should -- you need to change the law if the law doesn’t currently support. And so I think major questions has a limited role to play in statutory construction.

 And I guess I’ll just -- I think we live in -- and I’ve been practicing now for more years than I want to think of, 30 years. I think we live in a sort of singularly fraught time where we really need to think about the rule of law and the services it provides us in a democratic republic. And we recently had people trying to overturn the results of an election through violence. And we still have people denying the clear and fully adjudicated results of a national election. I think we need to repudiate that. And we need to focus on our disputes on using the law and its processes to achieve change in a peaceful and regular way, and that that, precisely because we’re so divided, we really need to call upon the services that law and the legal process provides us for resolving our disputes peacefully and in accord with the way our country was conceived.

 And with that light note, I will turn things over to Ryan.

 Mr. Ryan Newman:  Thanks, Sean. Well, it’s great to be back. I think it’s great to be back in D.C. [laughter]. Well, I think one of the great challenges is trying to figure out how do you make the government follow the law. That’s what the framers were trying to -- was it Madison who said the first task is to -- the government’s got to control the people, but then how does the government control itself? How do we make the government follow the laws that it enacts?

 Well, the separate of powers and the system of checks and balances often work remarkably well at preventing unauthorized action by the federal government. And that’s a good thing. That preserves liberty. We don’t want the government to overstep its bounds. But what about unauthorized inaction by the government? What about when the government refuses to do what it is legally obligated to do?

 Is the constitutional framework capable of insuring that the federal government actually carries out the laws it enacts? I’m a little concerned that perhaps, perhaps not. If republican government means anything, surely it means that the government must execute the laws enacted by the people’s representatives. I find it interesting that the very first charge leveled against King George III in the Declaration of Independence was that he “refused his assent to laws, the most wholesome and necessary for the public good.” There’s no question that the king trampled on individual liberties. But it’s noteworthy that the first objection that our forebearers raised was that the king would not let them govern themselves.

 It's not too great a leap, then, to posit that when the president refuses to take care that the laws be faithfully executed, he too, he too is denying the people their right of self-government. Sure, the president may veto a bill, subject to override, but once a law is duly enacted, he must take care that it be faithfully executed. In putting down the whisky rebellion, our first president did not retreat from this duty. He said, “It is my duty to see the laws executed. To permit them to be trampled upon with impunity would be repugnant to that duty.”

 Now contrast that with the response of our 46th president to the trampling of our immigration laws at the southwest border. Does anyone really believe that this administration is faithfully, faithfully enforcing the immigration laws enacted by Congress? I mean to ask the question answers it. We all know of course not. Virtually every action that this administration has taken has undermined, has made it more difficult to ensure that the laws, the immigration laws are actually carried out and brought to bear.

 Now as it turns out, I don’t disagree with the principle that the executive branch is entitled to a great deal of enforcement discretion and that generally such discretion is not reviewable by courts. But I do think the lawlessness at the border is the exception that proves the rule. Even the Supreme Court acknowledged in Heckler v. Chaney that agencies cannot be allowed to “consciously and expressly adopt a general policy that is so extreme as to amount to an abdication of the statutory responsibilities.”

 That is precisely what the Biden administration has done. Its goal is not to reduce the amount of illegal immigration at the border, to enforce the immigration laws of this country. Its goal is to facilitate illegal immigration at the border. And don’t take my word for it. DHS Secretary Mayorkas confirmed as much just this weekend when in response to the question “Is it the objective of the Biden administration to reduce the number of illegal immigrants coming across the southern border?” He answered, “It is the objective of the Biden administration to make sure that we have safe, legal, and orderly pathways for individuals to be able to access our legal system.” That’s another way of saying no.

 So the question is what is to be done when the executive branch refuses to faithfully enforce the law? Now Justin says — hey, Justin — that the only remedy is the next election. But doesn’t this make a mockery of the past elections that produced the laws that the executive branch is supposed to be enforcing? Why must the people keep voting to enforce the laws that they have already voted for? Non-enforcement of the law — and I’m not talking about individualized exercises of enforcement discretion. I am talking about general policies promulgated by agencies that are calculated and designed to prevent the carrying out of the laws. That defeats the will of the people, and the courts have some role to play. Just like they would set aside any agency action that exceeds the authority of the government, they should be willing also to set aside general agency policies that are designed not to enforce and carry out the law. And I think that, in limited circumstances — and far be it from me to invite the federal judiciary to involve itself in more issues, but in those extreme circumstances -- and immigration obviously one of them -- the courts do have a role to play.

 Hon. Gregory G. Katsas:  Thank you. We are right on schedule so I’m going to offer each panelist a couple of minutes to respond to your colleagues. Justin.

 Mr. Justin Savage:  Thanks, Judge. And I’ll just say we need to take a step back and a bigger picture. Yes, we’re polarized. But remember in 1856, Preston Brooks went to the floor of the Senate and caned Senator Charles Sumner. We have been polarized before. And right now in this world, there are countries that lock people in their apartments because of COVID or invade other countries and try to destroy them as a society. So yes, we disagree on things. Yes, we should always be vigilant for freedom, but no, I don’t think we’re at a historic low or we in danger because it’s the greatest country in the world that gives us opportunities. It gives us clean air and clean water. I have to travel a lot for work. We should be thankful for that. So it’s really just a question of degree and modicum and where you draw the line on that

       On that, my friend Ryan, I thought it was a stirring speech. I was ready to get up here and vote [laughter]. I didn’t hear a lot of textual clues. And we may not like or folks in this room may not like less immigration enforcement. But I’ll tell you what, if in 2024 Ryan’s old boss comes back or there’s another Republican or maybe his current boss takes that White House, do you really want Sean suing them for more environmental enforcement, more health and safety enforcement, more department of education?

       So for me, I didn’t hear any textual clues that would guide how courts -- all due respect to the Judge next to me -- enforce, force the executive to enforce the law. Thanks.

 Hon. Gregory G. Katsas:  Steve.

 Mr. Steve G. Bradbury:  Well, I guess Sean is recused, but he dropped a little nugget there. He said that oh by the way the auto industry, they support these sky high mile per gallon standards that they’re going to have a great deal of difficulty building to. I think General Motors sold a grand total of 527 all electric vehicles in the first quarter of this year. Elon Musk had a happy little tweet where he said Tesla sold — I don’t know — 310,000 units in the first quarter; General Motors 427 or 527, something like that. And yet, they’re going to have to build pretty much all electric fleets or mostly, and then pay their penalties for their Camaros and their Corvettes which can’t meet the standards and then, of course, raise the prices of those and their pickups and everything else. Prices are going to go up, and of course consumers won’t be able to buy as many units of those new vehicles. And so they’re going depend on used vehicles. We’re going to have a fleet -- right now our fleet is 11 or 12 years old on average on the streets of the U.S. It’s going to go up to 20 years, 25 years. It will be like a little bit more like Cuba. Everybody’s going to be driving around in and they’ll be the fifth or sixth owner of a used vehicle, which is not as safe and not as fuel efficient, et cetera.

       I think this phenomenon of the industry getting in league with the regulator to go along with these impractical efforts to transform an industry and extend the agency’s authority is an example of how entrenched business concerns in an industry actually sometimes embrace draconian regulation. Among other things, it keeps the new entrants out. It just imposes higher costs, which if you’re part of small number of big operators in an industry, you can usually pass along to consumers. And that’s -- we heard about it on an earlier panel today in the ballroom on the investment advisors like Larry Fink at BlackRock and others enforcing these companies to go along with these policies that transform whole industries and areas of the law. And the biggest companies are going along with it.

 That doesn’t mean that there isn’t someone withstanding, maybe representing union workers, who are not going to benefit from electric vehicles because they’re assembled by far fewer workers than internal combustion engine vehicles, or consumers who are very much harmed by this regulatory overreach to try to transform an industry who have standing to get into the courts. And again, the key is if Congress isn’t going to take this on directly is the courts getting more responsible in terms of insuring that these statutory programs stay within the field envisioned by Congress. Thanks.

 Hon. Gregory G. Katsas:  Sean.

 Mr. Sean Donahue:  Well, I think quite apart from regulation, the auto industry pretty much across the board and around the world is going in this direct very fast. So I’m not an expert in what’s feasible, but I would defer to the companies about where they think the market is and what they think that can do. And then on the law, we’ll see and that’ll be hashed out.

       I think when Ryan was talking, I couldn’t -- I think have a fundamentally different view of the immigration issue. I’m sure I do. But everything he said, if the executive branch adopts a policy of not enforcing something that is a statutory obligation, then I think a party with standing normally ought to be able to challenge that. And it all depends on what the statute says. And my very, very imperfect understanding of these disputes is a lot of it is everybody agrees that it’s impossible to fully enforce and it’s a question of how much triage is permissible, required, et cetera.

 But the general principle, Justin, it sounded to me like it was maybe going toward a pretty extreme view of executive discretion where an agency really could say, “Congress told us to do this thing. We’re not really crazy about it, and maybe next election you can...”  But elections, there are a lot of different issues people vote on, and a statutory -- maybe immigration is an issue that’s big enough that voters will. But that sort of idea depends on the premise that this is actually going to be outcome determinative. Maybe it’s not that important of a statute to most people, never going to affect an election. But it seems to me that could sanction just kind of executive undoing of a statute. And that seems to me procedurally problematic or constitutionally problematic. So I’ll stop there.

 Hon. Gregory G. Katsas:  Ryan.

 Mr. Ryan Newman:  Thanks, Sean. I really feel like I have an ally. No, I mean it’s true. A lot of the -- the devil’s in the details. What makes immigration? I don’t want to get into the details of immigration law because it will lead to weeping and gnashing of teeth. But one thing’s for certain though about immigration laws. Congress is pretty clear when it wanted the executive to have discretion on certain things. And so it was also clear when it didn’t really want the executive branch to have a lot of discretion.

 And that doesn’t resolve the fundamental problem that Sean is touching on which is the triage problem. At some level the system is overwhelmed, and the executive branch simply cannot even in good faith completely comply with the law. That’s certainly true with FOIA. Congress sets all kinds of statutory deadlines that get blown off. But if somebody brings a lawsuit, the courts don’t just say oh, well, can’t do anything here. They recognize, they will acknowledge the resource challenges the executive branch has, but the courts will still oversee and make sure that the federal government is in fact faithfully carrying out the law.

 And so I guess all I’m asking is that the courts not be so quick in the immigration context to just throw their hands up and say oh, well, this is just enforcement discretion. Because what the executive branch is doing right now in a number of areas is particularly appalling. You know, immigration laws make very clear that the executive branch shall take into custody certain categories of criminal aliens. And so today, there are criminal aliens who are being released from Florida prisons that would have been taken into custody by the federal government that are not being taken into custody.

    Why? There’s no good reason for it. And the executive branch hasn’t been able to offer any good reasons for it. The laws are very clear that someone seeking admission who is not entitled to admission to this country must be detained pending their removal proceedings. There’s the limited exception that a person can be paroled, but it’s very capped. It must be. The decision must be made on a case-by-case basis, and it has to be for urgent humanitarian reasons or significant public benefit. And I get that the numbers now — which I’ll just point out, that it’s a problem of the executive branch’s own making — make it very difficult, obviously, for the executive branch to detain everyone. But that’s why Congress also provided the authority to allow the executive branch to have applicants for admission wait in Mexico, pending the resolution of their removal proceedings.

     And yet that authority, which Congress has given to the executive branch to help it meet its statutory obligations, just terminated, terminated the authority, refuses to exercise the authority that Congress has given it in order for the executive branch to meet its statutory obligation. That can only be seen as a faithless attempt to not enforce the immigration laws of this country. And it’s, in my mind, it’s just absolutely appalling. And it’s really problematic.

 And I just want to make one other point, shout out for the states because the states have been rendered effectively powerless to defend their own interests in our system of government. The Supreme Court has effectively in Arizona v. United States said that well, the states can’t enforce or create state enforcement of federal immigration law. So they can’t exercise self-help. So in the context of drug laws for instance, the federal government refuses to enforce a lot of its drug laws, but at least the states have the benefit of self-help. They can enact their own drug laws and enforcement. Not the case, though, with immigration. The states are virtually powerless to do anything about it and are completely at the mercy of the federal government. And so I think that just further underscores the need to have the judiciary play at last some role in ensuring that the executive branch is actually faithfully carrying out the laws that the people’s representatives have enacted. Otherwise, we’re not really a republic anymore. And we’re certainly not a republic of laws.

 Hon. Gregory G. Katsas:  Let just ask one or two questions, and then we have plenty of time for questions from the audience. So, Justin, you said enforcement discretion prevails unless the statute has some textual clues of mandatory duty. So I know you’re not an immigration lawyer. I won’t hold you to this, but let me just describe in general terms a recent Sixth Circuit opinion that I found very interesting. This is by Judge Sutton who’s a very careful and sober, excellent judge. He was dealing with one of the nooks and crannies of immigration law. I’m not sure if this is the provision you had in mind, Ryan, but one of the nooks and crannies of immigration law where there was a mandatory obligation, shall take into custody certain categories of illegal aliens. And Jeff said, “Well, shall means shall, but we need to look at things more broadly. The immigration code is tremendously complicated. There’s a very strong background, interpretive presumption of enforcement discretion. And number three, you have to consider not only the substantive law but the resources that Congress has provided. And even focused on this limited category of shall, the resources provided are off by an order of magnitude. And putting all of that together, shall really means may, or it doesn’t fully mean shall.”

       Does that go too far? Or what’s your reaction to a case like that?

 Mr. Justin Savage:  That seems right. I have my own personal views on immigration. I come from a long line of police officers and sheriffs, believe in the rule of law. But as a legal matter, that seems right to me. There is an opinion in your own circuit -- I don’t know if Sean argued --

 Hon. Gregory G. Katsas:  - Sorry. The Sutton shall is may --

 Mr. Justin Savage:  - Yes. There is an environmental equivalent under what’s called the Prevention of Significant Deterioration or PSD program of the Clean Air Act where -- I don’t know if it’s Sean’s group -- but groups came in and says -- I think it was in the Bush 2 administration -- there’s no enforcement of this. It says shall §167 -- and I forget who wrote the opinion, maybe Sentelle, -- said it does say shall but look at the statute as a whole. Look at the rest of it, and we’re not going to force EPA to do this.

 And having dealt with regulators all the time, having had them as clients, it is a reality that there are some environmental laws that don’t go enforced in some administrations and others are more enforced. Similarly with immigration as a background fact, there are 11 million undocumented, illegal immigrants in this country. It’s a background fact. And there always will be a debate over will there be more or less. So to me, Judge Sutton’s opinion seems to strike the right balance because yes, this is imperfect, yes, do I have my own views on this. But the remedy with the legal standard that you create you can’t say just because we want less immigration, I’m creating a legal standard of that. It has to apply across the board.

 And to me, there’s a lot of danger to that. And if you look at what the Dem AGs or the blue AGs did in the last Trump administration, it was incredibly disruptive. And no one could say that President Trump hid what he was going to do. He was pretty clear. And I think similarly, I don’t think President Biden made any secret of his view of immigration.

 Hon. Gregory G. Katsas:   Ryan, I don’t recall if Florida was in that Sixth Circuit case, but I’m guessing you have a different view, so --

 Mr. Ryan Newman:  - Yeah, we’re not on the Sixth Circuit case, so we had our own case that got mooted out when the, as often times happens, the executive branch decides it wants to change its policies. But yeah, no, my thought is that you do have to look at the statute as a whole. So I agree that just because the statute says shall doesn’t -- and Castle Rock makes that clear. But that’s why you have to be a little discerning and read everything in context.

 And when it comes to the immigration laws, there are mays. There are mays and there are shalls which certainly indicate that the shalls have to mean something. They can’t just mean may. And so I think in that respect, Judge Sutton is a little off base in that.

 The other thing, too, I want to point out is that, yeah, I’m talking about -- I don’t have a problem with enforcement discretion on an individualized basis. The problem that we have with what the Biden administration is doing is that they’re promulgating systemic policies. And so it’s in the wheelhouse of courts to say no, that either for APA reasons or other reasons, if it’s contrary to law, to set those policies aside.

 The executive branch is always able to triage. It triages all the time. But when systemic policies are being created under the guise of triage, when the reality is that they’re aimed at not faithfully carrying out the laws, courts out to be at least skeptical enough to look into it.

 Hon. Gregory G. Katsas:  Let me press you a little bit on what the line is. Heckler says enforcement discretion, unreviewable unless it gets really bad. Is it the breadth? It can’t be just setting the category in advance. You can imagine someone setting a very narrow instead of 700,000 it’s 700, and it makes perfect sense in terms of prioritizing. So it is a pretext? Some of your comments hinted at pretext.

 Mr. Ryan Newman:  Kind of. Kind of. I think it is hard to draw, obviously, a clear line. That’s why courts have struggled with this for a long time. But there wasn’t a Trump administration that was promulgated that didn’t get scrutiny. And so courts should apply scrutiny to see if what the executive branch is saying about its policy really squares up. Obviously courts are going to have to exercise some deference in certain circumstances, obviously, but perhaps a little less so when statutes say shall instead of may.

 Hon. Gregory G. Katsas:  Any other thoughts from the other panelists before we open it up?

 Mr. Steven G. Bradbury:  Well. I’m sorry, Sean. I’ll jump in and say two things. One, the 11 million figure is a very old number. That’s many years old. It’s gone up two or three million just in the last year and a half [laughter].

 Mr. Justin Savage:  I’m not going to tell you my source on that one.

 Mr. Steven G. Bradbury:  On this point, I think that the question has to be at what point does the exercise of a categorical prosecutorial discretion purportedly frustrate the statutory scheme. Basically at what point is it a dereliction of duty so that you’re really not carrying forward the statutory program or mandate that Congress intended. And that is requires a more all-encompassing consideration of the statutory scheme, the purposes, the context, et cetera.

 Hon. Gregory G. Katsas:  Okay. Let’s --

 Mr. Sean Donahue:  - I’m just going to note obviously — and this comes up in other areas including environmental — the role of appropriations. Congress may have said shall about something but may not have given the agency the resources to do it, and what role does that play, and how much should courts think about it is a thought with those questions.

 Hon. Gregory G. Katsas:  Let’s take some questions, please.

 Questioner 1:  The Endangered Species Act. My question’s about remedy. I think everyone agrees well, there’s some place in between here where optimal enforcement exists and then the question is how do you get that? And one of the ways Congress has tried to force more enforcement is in the environmental context through citizen suits. So this is in the legislative history as least in the Clean Water Act, the Clean Air Act saying we think that there’s a danger that the executive won’t take enough steps to enforce these laws, so we’re going to create this alternative enforcement mechanism where if the executive fails or decides to not enforce something, that we going to go ahead and let ordinary citizens step into the shoes of the government as enforcers.

       It seems to create some tension with this idea of inherent discussion with enforcement. I’m curious for the panel’s thoughts on this particular kind of remedy or whether there’s some other remedy that’s not just some judge saying like in the FOIA suit we need to do this particular here but in a more global sense?

 Hon. Gregory G. Katsas:  Citizen suits, right up your alley.

 Mr. Sean Donahue:  I would say if Congress has a citizen suit remedy that there are probably some prerequisites for a proper citizen suit, but that’s a pretty clear statement from Congress that it doesn’t want the executive to have unreviewable, dispositive discretion and not enforce.

 Hon. Gregory G. Katsas:  Anybody else?

 Mr. Justin Savage:  I’ll just say we’ve had qui tam laws in this country since the founding, and I think courts have analogized citizen suits to those. And most in the environmental context — I think this is right, Sean — you have to notify the executive before you proceed with your claim so there is some deference paid. But it’s an interesting legal question and one I know Michael has person experience with.

     Hon. Gregory G. Katsas:  Next question.

 Questioner 2:  Good morning. This is a really interesting conversion and enriching for everyone who’s here. My background is in administrative law and federal courts. And my question focuses on the triangulation of three specific points that is germane to this subject. The first would be Heckler v. Chaney where the Court said that judicial review of prosecutorial or enforcement discretion of an agency is “presumptively unreviewable”. Then we have the EPA with § 704 only discrete actions can be challenged not broader policies. And then the third point is with regard to the evidence that is necessary under the EPA substance of review standard of 706(2)(a), let’s say pretext. The Department of Commerce v. New York, an immigration case by the way, the Court did not enunciate what specifically was pretextual about the government’s proffering, what was contained in the administrative records. We don’t have that. So my question to you is if this is a problem -- and I think it is generally a problem that needs to be engaged upon -- what would be the basis to rebut the presumption of non-reviewability under Heckler? What evidence would be necessary to show pretext or some other basis to find arbitrary and capriciousness?

 Mr. Justin Savage:  Do you want to go first?

 Mr. Sean Donahue:  I would say maybe if the agency explicitly said we’re not enforcing the statute not because of resources or priorities or a decision to focus on the most compelling cases but because we don’t like the statute in some way, that might be something that gets around the problem of discretion.

 Mr. Justin Savage:  I agree, Sean. It’s where do you draw the line between, I think as Ryan formulated it, individualized prosecutorial discretions, either civil or criminal, and then more a general statement of policy or a final rule or applicability. I think it’s tough because you take immigration or environmental law, there’s always going to be some enforcement, but it may be suboptimal from a policy perspective.

 The one example I’d give is the glider truck kit rule from the D.C. Circuit where the -- I’m not going to say who I think did this, but in the last administration’s EPA, they literally issued a policy that said we don’t care if you have glider trucks -- and for those who don’t know, those are older, more emitting trucks -- and there were some statutory issues, and they just said we’re not going to do anything with this. That was challenged and actually stayed in the D.C. Circuit. I don’t know if you -- yeah, if you did that, Sean. I think it was in fact stayed the same day it was filed. So that’s an example, but that’s really -- I think it’s rare. I’ve tried to -- it’s difficult.

 Hon. Gregory G. Katsas:  Is there a separate mic in back in line there. Let’s go to the mic in back and we’ll --

 Questioner 3:  - My question is if you can use mandamus -- I don’t know -- for instance if you’re given a magistrate commissioned by one administration and the next administration won’t give it to you. So my question here is we haven’t brought Congress into this too much except to say something they’re clear on statutes, sometimes they’re not. It seems to me on immigration and environmental laws, those are the places where they’ve said the least specific things they could, overall, because they’re always giving with one hand and taking away another. So maybe those aren’t the best areas. But could Congress put in the statute and we mean it so that they get rid of these problems of everybody bringing suit privately, that Congress has to bring it and say you’re not doing what we passed. We have standing to say you haven’t.

 Mr. Justin Savage:  I think it’s theoretically possible under Heckler v. Chaney, but I’ll also say be careful what you ask for. If you look in the first term of the Obama administration, where both houses of congress were controlled by the Democrats and you got things like Sarbanes-Oxly and some other things. So yes, Congress can clearly speak, but then the question is do you like the consequences of what they’ve done. But maybe that’s the point of the political process playing out.

 Mr. Sean Donahue:  There are a lot of -- we tend to focus on the things that get litigated and fought over, and those are a small fraction of the whole set of instructions to the federal government, and a lot of those are unproblematically implemented, or at least nobody notices when they’re not.

 Hon. Gregory G. Katsas:  Back to the front.

 Questioner 4:  Hi. This may have come up in a different term, but I wanted to ask what role your intent analysis performed by the judiciary plays a role. We know in the criminal law context, right, the criminal’s intent is deeply investigated. So would you look at the agency or legislature intent? Because I know there’s a debate on whether you can have facial challenges to laws or it has to be as applied. I know that in the Trump immigration ban case, one justice, at least, wrote an opinion that said this should totally be rejected because of things he said on the campaign trail proves that he has this First Amendment violating hatred towards a particular religion. So is intent analysis the right way to look at this or what courts could be able to police when people do these categorical things or try to cancel laws that are on the books or non-enforcement?

 Mr. Ryan Newman:  So I’m not a big fan of courts trying to peer into minds of agency officials or legislators or politicians generally. But I think what I’m trying to drive at is that just normal APA review does involve on the part of courts some evaluation or assessment of the reasons that the agency is providing for the things that it’s doing. And it’s completely acceptable to me for courts to address those -- consider those reasons.

 So the migrant protection protocol program, for instance, I think might be a good example of what I’m driving at. This was a program -- it was just argued in the Supreme Court. There was a program that was created by the Trump administration. And on day one of the Biden administration, they canceled the program. They canceled the authority. They offer no reason for it at all. And it did that among across all kinds of immigration policies, just cancelled them, day one, without an explanation and then are shocked that the deluge arrives. And then they turn and use the deluge as a reason for why they can’t continue to enforce the immigration laws. The whole thing’s absurd. But it all started with unreasoned agency decision making at the very beginning.

 And all I’m suggesting is that courts, certainly like they were willing to do in the Trump administration, should apply the same standards. If we’re going to go down this road, let’s go down the road and make sure that the executive branch is faithfully enforcing the laws that the people’s representatives have enacted.

 Hon. Gregory G. Katsas:  Next.

 Questioner 5:  Thank you. I appreciated the very vigorous defense of Heckler v. Chaney and the principle of the executive really should have this discretion. And in thinking about that in terms of Chevron, is Chevron really a great instrument in order to rein in agencies when we’re -- step two has become the big thing, very few step one cases. We’ve got lots of very vague laws. Step two decisions often don’t result in a lot of precedent. They’re very fact specific. They can involve on the courts in very complex regulatory subject. The courts maybe have very little expertise such as in Chevron itself, a very complex, very intricate regulator dispute. So in thinking about the role of Chevron, maybe Chevron we should use things like the nondelegation doctrine or forcing Congress to write tighter statutes instead of using Chevron somehow?

Mr. Steven G. Bradbury:  Let me jump in and I’m sure Ryan and others probably want to talk about nondelegation as well. But I think that the Chevron doctrine is too blunt of an instrument. As I said, very good reasons for the doctrine, it’s a sound concept in general. And I wouldn’t throw it out entirely, but it needs to be, and it is being, I think, rethought ultimately by the Supreme Court. They created it. And the question is you’ve got prong 1. You’ve got prong 2. And on prong 1, it’s not just does this word have only one clear meaning that unavoidable. That’s way too narrow an aperture for prong 1. I think it’s a broader -- it should be a broader analysis looking at all the tools of statutory construction in the entire statutory scheme at play to determine if it’s clear to the court that Congress intended this or Congress meant and understood that this would go this way or this way, both positive or negative. Was this authorized? Was this not authorized?

 And then on the reasonableness prong, prong 2, if you’ve got ambiguity and there’s multiple reasonable interpretations, reasonableness ought to take into account is this something that -- is this a field that Congress contemplated the statutory regime would go in, would the agency can enter into this new field over here. Because that’s what we see happening. Agencies exploit Chevron deference to go into entirely new fields that Congress, when it enacted the statute, did not contemplate at the time. There may not be a clear answer because the field didn’t even exist then perhaps. But Congress didn’t contemplate it.

 I just think, for example, I violently disagree with the Justice Gorsuch’s opinion in the Bostock case, interpreting the term sex in the statute. It has something to do with sex, yes, but we all know Congress didn’t contemplate what was at issue in Bostock when it forbid sex discrimination.

 It comes up a lot more in the regulatory context like fuel economy, but I don’t know, Ryan, if you want to talk about nondelegation. You mentioned that too.

 Mr. Ryan Newman:  Well, I know -- so the major doctrines, for instance, been discussed a little bit. And I’m all for it, I guess. But I think that that’s just -- that that’s the court’s refusal to grapple with the nondelegation doctrine. So that’s really what’s at play here. The problem is Congress enacting laws that don’t provide specific guidance to the executive branch on how to carry the laws out. And in the absence of that, the executive branch is out there just doing whatever it wants to do. I think we should put a stop to that. And I think the court should just get down to brass tacks and teeth put back into the nondelegation doctrine and not fool around with this major question doctrine.

 Who’s to say what’s a major question or not? The question is is Congress providing specific enough guidance and direction to the executive branch? And if it’s not, then it shouldn’t be permitted.

 Hon. Gregory G. Katsas:  We should have time for two more questions. So it’s --

Questioner 6:  - I’ll go as quickly as I can. I actually have three issues that I’m confident the panel can handle them quite efficiently. My first issue has to do with electoral elections as a salvation for the implementation and the non-implementation of policy. My second issue has to do with the unelected politicians and advocates within executive agencies. And my third issue is a variation of -- it reflects the same issues in immigration.

 For the first one, very quickly, I had the privilege of serving as an attorney on the Hill with the committee with jurisdiction over both infrastructure, Department of Transportation, as well as EPA. In the course of my experience on the Hill, we were so frustrated with executive branch overreach, that I went to the Environmental Protection Agency as an executive under the Democratic administration and a Republican administration. And in each instance, we were trying to bring some sense to implementing the statutes. And we both were frustrated with unelected official overreach and blatantly ignoring the political dictates. I’m talking about Democrats and Republicans. And this was at a time when it was not as polarized as it is now between the parties.

 My third privilege was to practice law because of executive branch overreach. I had clients that were normal human beings and very large corporations. I am most proud of the un -- I was not compensated by the White House, but I had the opportunity to work with Boyden Gray, David Rifken, and John Schmidt. And I worked with them because I learned that the Environmental Protection Agency had told the White House that they would indeed go forward with certain aspects of the Clean Air Act legislation and would go forward with the White House’s policy. And I have both documents. After that consultation, the White House thought it was taken care of. EPA went up to the Hill and advocated their original position. My role in that regard was to have a visit with David and then a visit with John, and then a visit with --

 Hon. Gregory G. Katsas:  - We’re running a little short on time, could we get a question?

 Questioner 6:  I’ll wrap it up in two and a half seconds. So I made my first two points. Here’s my third in regard to immigration. I don’t think you’ll ever see it in the Washington Post or the New Time, but if you choose to go on YouTube, you will see state of the union addresses by Bill Clinton and Obama stating that our borders are unsecured and are the most dangerous aspect that we have that needs to be addressed immediately. It was not an issue of partisan party, if you would, issues on immigration. Thank you.

Hon. Gregory G. Katsas:   Any comments? Thank you for your comments. One more question, we have just enough time for you.

 Questioner 7:  And I promise to be quick. One of the things I think that I’ve noticed in practice because I predominately practice in administrative law is that the government is now pushing in a lot of it’s briefing a collapsing of Chevron step one and two, and they just jump to reasonableness review. District courts seem somewhat inclined to look at it and say eh, it’s reasonable. What can practitioners be doing to really bring back the analysis for courts to say you need to engage in step one? Certainly Chevron nine which is basis of Kisor is still very important. How do we get courts to engage with that?

 Sean Donahue:  If I may?

 Hon. Gregory G. Katsas:  Please.

 Mr. Sean Donahue:  In my area there’s a sense that you better contend with the text. And lower courts still apply Chevron, but people in the Supreme Court don’t. It’s basically perceived as sub silentio, if not overruled relegated to the backroom. And so you may practice in a very different area where courts are highly deferential from the get-go. But in the administrative law areas I practice in, you almost don’t make the step two argument. You jump to explaining why the text -- a best meaning argument.

 And I’ll just say I don’t know what’s going to happen even this term with the Court with Chevron, but I think we can at a minimum expect something like happened with agency interpretations of regulations under Kisor, a kind of tightening and instructions that we need to make sure that this is an area where Chevron should apply. We need to engage with the text every time instead of doing what you’ve suggested, kind of jumping to well does this sound generally reasonable. But anyway, I don’t know if you want to share what area you’re practicing in and where there’s this greater instinctive deference.

 Questioner 7:  No, I think you see it some of the independent agencies in particular. It might just be as a byproduct of their statutes that are a little bit more open on the edges.

 Mr. Sean Donahue:  Right. It’s interesting.

 Hon. Gregory G. Katsas:  I’ve been asked to announce that lunch will immediately follow the panel in the state room. Please join me in thanking our panelists for an excellent presentation.

10:40 a.m. - 12:00 p.m.
Breakout Panel: ABA Accreditation of Law Schools

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation
Grand Ballroom
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Event Video

Description

The U.S. Department of Education provides oversight of postsecondary institutions or program accreditation by reviewing federally recognized accrediting agencies. There is one such agency for accreditation of legal education institutions or programs: The American Bar Association's Council of the Section of Legal Education and Admissions to the Bar. The Secretary of Education, by law, is the official responsible for recognition of accreditation agencies based on her determination that the agency is a reliable authority as to the quality of education or training provided by the entities and programs the agencies review. The Secretary of Education has exercised that authority to recognize the ABA's Council as the single accreditation agency for legal education. The ABA has held this position since its adoption of comprehensive standards in 1973--nearly fifty years. 

But the ABA writ large is an organization in decline as its substantial drop in membership--and resulting revenue--demonstrates. At the same time that ABA membership is declining, the ABA's public and official positions on cultural and divisive issues remain. And now those positions are taking root not just in the ABA's policy bodies but also within the Council itself. Most recently, the Council adopted new "anti-bias" educational requirements as part of its accreditation standards. 

Featuring:

  • Hon. W. Scott Bales, Former Chief Justice, Arizona Supreme Court
  • Prof. William Jacobson, Clinical Professor of Law and Director of the Securities Law Clinic, Cornell Law School
  • Dr. Nicholas Lawson, Commissioner, ABA Commission on Disability Rights
  • Prof. Derek T. Muller, Professor of Law, University of Iowa College of Law
  • Moderator: Hon. Trevor N. McFadden, U.S. District Court, District of Columbia

Speakers

Event Transcript

Dean Reuter:  Welcome, or welcome back as the case may be. I am still Dean Reuter, still Senior Vice President and General Counsel of The Federalist Society. I am happy to introduce our moderator for our next panel. And I do want to acknowledge that we seem to be a victim of our own success. Now that we’re all back in person, everybody wants to be in the hallways and the promenade and have a little reunion out there, so thank you for joining us inside here. And again, welcome to the people on the livestream and watching the video.

Trevor McFadden is, of course, the United States District Court Judge for the District of Columbia, where he’s been on the bench since 2017. He’s a graduate of Wheaton College and UVA Law School, a Judge Steven Colloton clerk, and a two-time veteran of the U.S. Department of Justice. He’s also been in big law, serving in private practice. Now, our panel today will discuss the ABA’s role in policing law schools. And interestingly, Judge McFadden has on-the-ground experience in policing—a different sort, admittedly—but having served as a Fairfax County Police Department officer and the Sheriff’s Office in Madison County, Virginia. So please welcome Judge McFadden.

Hon. Trevor N. McFadden:  Thanks, Dean. It’s really good to be with you all this morning. I got to say, you look tired. I see these dark circles under people’s eyes and you’re nursing coffee. Was there something happened last night? A big game or something? It’s great to be with you all on an important topic. As Dean said, we’ll be discussing the ABA accreditation of law schools.

As you probably know, earlier this year, the ABA passed revisions to Standard 303, which requires all of its accredited law schools to provide education about “bias, cross-cultural competency, and racism” at the start of each law school incoming class and at least once again before graduation. It also includes proposed revisions to Standard 206, which will be voted on later this summer, which would be retitled Diversity, Equity, and Inclusion. Among other things, the standard would require representation of underrepresented groups, particularly racial and ethnic minorities on law school faculties and staff. And it would require annual reporting by each law school on its representation of racial and ethnic groups. It appears there would also be potential consequences for law schools, including, presumably, potential for revocation of accreditation if the law schools fail to meet expected benchmarks.

These developments have naturally reraised interest in the uniquely powerful role the ABA plays in the American legal profession. As a practical matter, in many states, aspiring lawyers must attend an ABA-accredited school in order to become a lawyer. These standards, therefore, can have a direct impact on who will teach future lawyers, what these future lawyers will learn, and even who can become a lawyer. We’ve got a great panel here to discuss these developments. I’ll briefly introduce them in the order in which they will speak. And I think you have their full biographies attached in the online materials if you would like to learn more.

All right. First, we have Professor Derek Muller. He’s Professor of Law at the University of Iowa. He's a nationally recognized scholar in the field of election law. He’s testified before Congress, contributed to the federal election law blog, and is co-author on a book on the federal courts—a textbook. He got his BA from Hillsdale College and his JD from Notre Dame.

Next to him is the Honorable Scott Bales. Justice Bales is a retired Arizona Supreme Court Justice. He retired in 2019 after 14 years of service there, including five years as the Chief Justice of the state supreme court. He currently serves as an elected member of ALI’s Council and recently was the executive director of the Institute for the Advancement of the American Legal System at Denver University. Previously, he was Arizona’s Solicitor General, and he was a Deputy Assistant Attorney General and a former Assistant U.S. Attorney in the U.S. Justice Department. Justice Bales clerked for Justice O’Connor on the U.S. Supreme Court and Judge Joseph Sneed on the Ninth Circuit. He graduated from Michigan State and received his MA and JD from Harvard.

Next to me is Professor Bill Jacobson. He’s the Clinical Professor of Law and Director of Securities Law Clinic at Cornell. He has a national reputation as a leading practitioner in securities arbitration. He is also the founder and publisher of Legal Insurrection, a political and legal website. After all my January 6 cases, Bill, I got to say that insurrection word kind of sends me shaking a little bit. Before joining Cornell’s law faculty, he had a successful civil litigation and arbitration practice. He’s a graduate of Hamilton College and Harvard Law School.

And finally, to my far left is Doctor Nicholas Lawson. He’s a disability advocate and a commissioner on disability rights at the American Bar Association. He's also a Georgetown Law Scholar and writes about disability rights issues within the academic medical and legal literatures. He has a BA from Vassar, an MD from St. George University, and a JD from Georgetown Law Center. We’re going to start out by hearing five-minute opening statements from each speaker, and then we’ll move to discussion and finish up with some questions from you all, so certainly, please be thinking about whatever questions you may have. So without further ado, Professor Muller.

Prof. Derek T. Muller:  Thank you. I might run a minute or two past five minutes as we get through. I’m going to try to get 200 years of ABA role in legal education in five minutes. We’ll see. In the beginning, there were no law schools. In the United States, the practice of law was for reading law and for being called to the bar and for that kind of training. But by the nineteenth century, the thought was at universities let’s have a more systematic approach to law. Let’s create schools of law within the universities or a standalone law school, and this will provide an alternative path for people who want to learn about the law. And by the late nineteenth century, the American Bar Association began to encourage the proliferation of law schools and the thought that this would be a better way for getting admission to the bar than the leading law side of things. And it began to develop some procedures and some advisory rules about what a good program of legal education would look like.

But it wasn’t really until the 1920s when the American Bar Association—again, with it having a footprint across the United States—began to develop and encourage schools to get certified or accredited by the American Bar Association—that the ABA would offer this seal of approval of high quality for legal instruction. And as a component of that, they also then encourage state bars to require graduates of an ABA-accredited law school as a condition for sitting for the state’s bar exam. So in the past, while you might have been able to read law or attend whatever school you wanted, one of the encouragements from the ABA to state bars was to move in the direction of this form of legal education. And very quickly, by the end of the 1930s, most states began to require that you graduate from an ABA-accredited law school as a condition of taking the bar.

So the first move to think about is the role that state bars play in this process. And again, with the American Bar Association, because it’s able to approve schools across the United States, it makes it much easier for a supreme court managing the bar in Springfield, Illinois, or Austin, Texas, to say, “We don’t need to determine what a school in Seattle or a school in Miami or a school in Boston is doing. We’re able to sort of understand that the ABA has these standards in place, and that’s the condition we place upon it.” Not all states do that. California is a little different. We’ll talk about that in a moment.

 And then, by the 1950s, the Department of Education or Department of Health Education and Welfare or its predecessors began to get in the business of thinking about accrediting schools on their own. And part of that was coming out of the Korean War and the GI Bill thinking about the role of higher education in the United States more generally and the Higher Education Act of 1965. But the Department of Education wasn’t going to be the entity that was accrediting law schools—that would be far too onerous a responsibility for it—but it would accredit the accreditors, essentially. It would approve accrediting bodies throughout the United States. And that way, when, under Title IV, dollars would flow, federal loans would flow, it would flow through those institutions that some independent accrediting body had approved.

 

So the role of the Department of Education then, when it sanctions what the ABA has been doing in terms of the approval of law schools, is essentially a function not of who’s eligible to take the bar—that’s on the state bar side—but it’s a question of federal dollars and federal funding through those institutions. So the Department of Education’s role is somewhat limited in that respect, but obviously, the ABA’s role is already very significant given what state bars require.

Now, not everyone has to go through that process. So I’ll take California as a brief example. I’m sure we’ll have some other questions about some of the standards the ABA develops over time. But the ABA standards are heavier than other responsibility, heavier than other standards might look like. And in California, there are a number of California-only accredited schools. They’re not approved by the ABA, but they are approved by other accrediting bodies that allow federal dollars to flow through them. And the state of California will allow you to sit for the bar but in no other state unless you’ve practiced for several years, and then some states might let you come in. So another challenge is if you’re going to challenge the ABA as accreditor, you have to think about how you solve the coordination problem across the states when it comes to attorney licensure.

Finally, two vignettes over the last 40 years to think about what’s happened with the ABA. In 1995, the Department of Justice, a different branch of the federal government, came down against the American Bar Association, filing an antitrust action against it—the ABA having de facto exclusive authority over accrediting law schools. Janet Reno led a charge in the Department of Justice to say that the American Bar Association’s standards were too high. They were too onerous. They required too many full-time faculty that were costly. They didn’t allow for the creation of for-profit law schools or innovations to legal education that could lower the cost. So in 1996, the Department of Justice entered a new consent decree with the American Bar Association, where the ABA would cede to some of these demands and seek some supervision over the years.

Now, some of these moves—for instance, the creation of for-profit law schools—didn’t move in the direction that the Department of Justice anticipated. And sure enough, by 2008, with the recession, significant uptick in law school enrollment, significant questions about student debt and student employment outcomes led to actually a rather remarkable proposition from the National Advisory Committee on the Institutional Quality and Integrity in 2016—which advises the Department of Education—to tell the Department of Education the American Bar Association was out of compliance with a number of Department of Education regulations and, in fact, should be suspended from its accrediting authority for one year because it was accrediting too many law schools and it was too easy to accredit law schools at this point in time.

 

 The Department of Education declined that, but what’s happened over the last few years is the ABA has tightened its regulations. Several law schools have folded and collapsed or been relegated to non-ABA-accredited status. And so, that’s kind of where we stand today thinking about the regulatory environment. Thank you.

Hon. Trevor N. McFadden: Thank you, Professor. Justice Bales.

Hon. W. Scott Bales:  Well, first, Judge, thank you for moderating. I assume the game you were alluding to was the Phoenix Suns-Dallas Mavs, and I did stay up and watch that game. And I also want to thank The Federalist Society for hosting this panel. I think too often today, discussion of hard issues kind of devolves into slogans and assertions that are not grounded in fact. And I know from past experience that this is a setting where we can have a pointed debate, and we’ll use words precisely and be attentive to facts and try to state our positions based on reasoned arguments.

So the ABA Council today, its 21 members and fewer than 20 staff, oversees nearly 200 law schools in enforcing 54 standards that are intended to ensure that law students obtain a quality legal education. And in that role, the Council performs well. The vast majority of graduates of ABA-approved laws schools pass the bar, they obtain legal employment, and they repay their student loans. So having said that, I want to try to quickly make seven points. Like Professor Muller, I may go a bit over five minutes, but if I limit myself to about a minute on each point, I’ll try to come close.

The first point is that the accreditor is the ABA’s Council for the Section of Legal Education -- is distinct from the ABA more broadly. Both as a matter of law in terms of Department of Education regulations and as a matter of fact, the Council is separate and independent from the larger ABA and its accreditation function. The ABA membership, the ABA leadership, does not appoint the Council’s members. It does not set its budget. It has independent budgeting authority and has no role in accreditation. The ABA’s House of Delegates can accede to changes in the standards, and it can ask the Council to rethink proposed changes twice. But at the end of the day, the Council has sole authority to set the standard. So my first point is that the ABA broadly doesn’t have a monopoly on accreditation. Indeed, it doesn’t itself play a role in accreditation. The recognized Department of Education accreditor is the Council.

My second point is that the Council today is not controlled by law professors. And that was one of the concerns that prompted the Department of Justice lawsuit in 1995. The Council has 21 members. No more than half can be current law faculty or staff. The other members include three public members, nonlawyers—although, today, there are four—a law student member, and the remainder are lawyers and judges, including three current or retired chief justices and the president of the National Conference of State Courts. And that composition desirably ensures that the Council’s activities reflect perspectives, not just of the legal academy, but also of the legal profession and the bench and the public more broadly.

My third point is that accreditation by the Council, as Professor Muller noted, not only relates to student loan eligibility if you’re a DOE-recognized accrediting agency. And this applies to higher education broadly. It’s not just for legal education. Students that attend programs that are accredited are eligible for federal student loans. But also approval by the Council—often confusingly termed just ABA approval—is accepted by 51 jurisdictions across the nation as meeting the minimum education requirements upon graduation for admission to the bar. So a graduate of an ABA-approved law school is accepted by those jurisdictions by decision that’s jurisdiction-specific as having the minimum education requirements.

 

Fourth, that means that the ABA Council as accreditor has multiple constituencies. Students, in so far as getting an ABA degree -- means they have something that’s portable. They can take it to jurisdictions across the country. They’re given some assurance that they’ve had an opportunity for a sound education. It qualifies them for student loans. It also gives them consumer information because the Council requires regular reporting by law schools under various factors. The DOE is an important constituent. It reapproves the ABA Council every five years, and its goal, of course, is ensuring repayment of student loans by ensuring that students at accredited institutions truly do get a sound education. State supreme courts are constituents because we don’t have to be in the business of making case-by-case assessments about whether a particular school delivers adequate legal education. And state supreme courts do that with respect to foreign law schools and, in some instances, with respect to nonaccredited schools.

Fourth important constituent is the law schools and the faculty themselves because the process of accreditation and continuing review promotes quality among law schools and also gives them information through the reporting requirements, and then finally, the public because it’s meant to ensure that so long as we’re giving people a general license upon graduation to practice law, to affect people in the range of their lives, the supervision that’s entailed with accreditation is meant to ensure, again, that that’s a sound legal education.

Now, Professor Muller has already touched on my sixth point, and that is, strictly speaking, the ABA doesn’t -- or the ABA Council doesn’t have a monopoly on accrediting schools. Schools are not required to be accredited. Law students are not required to attend accredited schools. There are a few dozen nonaccredited schools around the country, largely in California, but also there’s one in Birmingham, Alabama, another in Nashville, Tennessee, and one in Massachusetts. And across the country, lawyers who’ve been admitted for some period of time can often obtain admission in a state without respect to whether they’ve gone to an ABA-accredited law school. And in some states, particularly California, there is a significant number of graduates of nonaccredited law schools who seek admission.

Two more points. The Council continually is assessing the standards and its processes to try to improve them. So for example, law schools need to be fully reapproved periodically. We’ve extended that from seven to ten years because it’s an onerous process, and in the interim, we’ve developed flags for more frequent or interim monitoring so that if a school’s experiencing a large rate of attrition or low percentage of its students are passing the bar, we can focus attention more immediately to try to address those problems. Another example is the adoption of a requirement of bar passage. That was something that was put in place just over the last several years. Another more recent example is we helped law schools pivot immediately when, in the spring of 2020, they needed to shift to online programming, which is something that’s generally very limited under DOE regulation in the standards.

Finally, breathlessly, that brings me to what everyone came for, 206 and 303. Standard 206 has, in one version or another, been in the standards for 40 years. It’s the diversity mandate. It was initially cast in terms of the directive that schools afford full opportunities for legal education for groups that had been subjected to discrimination, particularly ethnic and racial minorities. The revised standard that is expected to go into effect later this year includes a diversity mandate for underrepresented groups with respect to faculty, staff, and students. It doesn’t mandate quotas. It doesn’t mandate racial balancing. It does not require schools in states like California that prohibit the consideration of race or ethnicity in admission or employment decisions -- it doesn’t require them to violate those kinds of prohibitions. To my mind, it’s not a radical proposal. Although it’s not surprising in the current context that it’s excited a lot of controversy.

303, as I think the judge said in his introduction, is a recently adopted requirement that, as part of the program of education—law students receive some education on the topics of bias, cultural competency, and racism. The standard doesn’t specify the content. It doesn’t require that it be in a class. It’s just that there be some education on those topics. To me, that goes to fairness and inclusion within our law schools, but it also goes fundamentally to competence of lawyers. Judges and lawyers generally are under ethical rules that prescribe the manifestation of bias in their professional activities. Cultural competency goes to just being able to deal effectively with people from different backgrounds, and that’s increasingly important in our increasingly diverse society as reflected by the fact that cultural competency training is required widely in healthcare professions, law enforcement, and in other fields.

Finally, with respect to racism, it stuck me that last summer, when the Supreme Court issued its opinion in the case Brnovich v. DNC, a voting rights act case, both the majority and the dissent agreed that all Americans should know our history of denying the right to vote for racially discriminatory reasons and the ultimate passage and effect of the Voting Rights Act in 1965. It also reminded me of President Lincoln, who compared the Constitution and slavery to a man who had a cancer or an illness that he concealed, but he was afraid to cut out lest he bleed to death. Now, both the Supreme Court and Lincoln’s quote recognize that law, indeed our Constitution itself, can promote racism or it can combat it. I think that’s a fact that’s important that we generally recognize, but certainly, as lawyers, as people pledged to commit a Constitution that guarantees equal protection and more broadly aspires to justice for all. Thank you.

Hon. Trevor N. McFadden: Thank you, Justice Bales. Professor Jacobson.

Prof. William Jacobson:  Hi. Thank you and thank The Federalist Society for inviting me. This is the second time I’ve spoke at The Federalist Society in about a month. I think maybe I’ll have to join at some point.

[Laughter]

I’m also very honored to be on such a distinguished panel and look forward to our discussion. My own personal relationship with the ABA has been a little bit attenuated. I thought I dropped them 20 years ago because I did not appreciate the leftward drift of the organization.

But I recently found out preparing for this that, actually, I’ve been a member because Cornell pays for my membership. And what got me to inquire is I got an email from them telling me I now have a free senior membership. I don’t appreciate the senior. But my point is that the ABA, I think their membership numbers are a little hard to get at. I actually asked them for those numbers. They refused to give them to me. But the numbers I’ve seen, bandied around, were that something between 10 and 15 percent in that range of American lawyers are members of the ABA, down dramatically from 30, 40 years ago when I think the numbers—and again, I don’t have precise numbers, just the ones we’ve seen quoted—something in the nature of 40 to 50 percent. So whereas the ABA, at one point, was a proxy for the American legal profession, it is not now.

Nonetheless, as a private membership organization, has outsized influence. Its model rules are highly influential, even if they don’t have the force of law. And its judicial nominee rating system also has been extremely influential but has gotten bogged down in politics, again because of the perception that the ABA has drifted to the left. And therefore, Republicans, at best, consider the ABA ratings to be informational, and I think most people tend to disregard them.

 

So the ABA does not represent me. It does not represent the American legal community. But it has a near-monopoly power—not monopoly power—over accrediting law schools because of the function of obtaining federal loans, which is obviously hugely important. I believe every state recognizes graduates who -- or I should say every state permits graduates of ABA-accredited law schools to sit for the bar, and very few states—California, Massachusetts, a couple of others—will recognize local, non-ABA-accredited students, allowing them to sit for the bar, although that’s very limited. And I think the important thing to understand is the Council, which is the accrediting part, receive that power mostly from the government at both the federal and the state level in different ways, but this is a governmental power that has been bestowed on the ABA Council.

And the question is, as long as the -- in my view, as long as the ABA, the private organization of attorneys, was separate ideologically and in other ways from the Council, I think maybe that could function. What alarmed me about the recent proposals is that it appears that the ABA Council has gotten away from ensuring that students receive the—often referred to—the building blocks of a legal education—contracts towards the basic concepts of a legal education—and now has moved into a sociological and a political advocacy for certain types of learning. And those may be very good. You may believe in those. But they’re very controversial because they’ve not traditionally been mandated by the ABA.

So the question is, in my mind, is the ABA properly using its accrediting power to force a result on law schools? And that has nothing to do with whether you like what they are requiring. The question is, is it appropriate? And I’ll give you an example from Cornell University. This is big Cornell University, but I think it’s a good analogy. In July of 2020, as a reaction to the killing of George Floyd, many college presidents in many colleges rushed to implement so-called antiracism programs. And in fact, I believe these ABA changes, at least chronologically, emanated from the protests post-George Floyd. I believe the letter signed by 150 deans was dated in July of 2020. So this was a reaction to that societal upheaval. And it reached Cornell University.

And the president of Cornell University declared in late July of 2020 that we were going to become an “antiracist campus” and that she was going to seek to implement antiracist educational and training requirements on staff, students, and faculty. The recommended reading for that summer was Ibram Kendi’s How to be an Antiracist, which if you’ve ever read, it is quite a book. And the concerns I have that while the ABA does not require what must be taught, the reality, in the real world—in the world that I live in on an Ivy League campus and in non-Ivy League campuses as well—that is going to be the direction. If you look what the DEI departments teach, if you look what the speakers are, if you look what the departments, and if you look at the ideological philosophy of both law faculty and non-law faculty, that is the direction it’s going to go.

And I considered that, and I opposed what the president of Cornell University was doing because I felt that was coercive and that there’s a big question whether these DEI programs even work, even accomplish their mission. That’s never really been properly studied. But at Cornell, I argued that this is coercion. This is not education. And you’re mandating that people take a view of society that society is systemically racist, that the law is systemically racist, and that is a hotly debated issue. But by mandating it from the president on down—or in this case, from the ABA Council on down—you’re resolving that debate.

At Cornell, the way it played out actually surprised me. I was very vocal in my opposition to it. And the staff immediately had training requirements imposed on them because the president could do that. But under shared governance, the president referred to the faculty senate—the university faculty senate, which does have law school faculty on it—the issue of what would be the requirements for students and faculty. And much to my surprise, it pretty much split down the middle. This is almost an entirely liberal faculty, liberal to left faculty. Most people probably support, ideologically, this programming, but there was strong opposition from people who by no means are right-of-center or right-wing to mandates—to educational mandates—on students and on faculty. And there was surprising opposition.

Now, that issue also came a little bit before the law school, although not in as formal way, and there was opposition at the law school to mandates on this. And so, the law school took what I call a baby step. They now have recommendations that students take these sort of courses. And that’s -- but no mandates. And so, this is a hotly contested issue. There’s no uniformity of agreement on it. But now that the ABA Council has passed 303 and will be passing 206, which does have an educational requirement in it -- I think one of the specific things in there is continuing education for faculty members regarding the effective use of diversity in the classroom. That’s not mandated. They have a menu of things that can happen. But we know what’s going to happen. So the ABA, what they have done -- the ABA Council, they have waded into an issue and a dispute as to mandated education on which there is no consensus, even in law schools. Some law schools have these requirements. Others don’t. I believe most don’t.

And so, my feeling is that it was inappropriate. It is inappropriate for the ABA to use the power the government has given to it to advance one viewpoint as to these sort of educational mandates and not to let it play out. And that, to me, is extremely serious because, as one of a very, very, very small number of open conservatives on campus, there is an ever-increasing narrowing of the acceptable discourse on campus. We’ve seen law professors hounded out of classrooms, particularly post-George Floyd. We’ve seen a lot of faculty under attack. We’ve seen students under attack. There is an ever-narrowing -- when it comes to issues of race, dissent is no longer permitted. Everybody has good intentions. Everybody wants to minimize racism in society. But how we get there is hotly disputed.

And so, in my view, the ABA Council has stepped out of its lane. It has injected itself in resolving a hotly contested dispute. And I think—I don’t want to go on too much longer—I think it’s time to reconsider the near-monopoly power that has been given to the ABA Council, and maybe in Q&A, we can talk about that.

Hon. Trevor N. McFadden:  Thank you, Professor. Doctor Lawson.

Dr. Nicholas Lawson:  Hi, everyone. So I don’t think Judge McFadden mentioned I do -- I am a person with a disability. Just a few housekeeping details. So I don’t speak for the ABA or its commission on disability rights. I am a white male, but just FYI -- so the disability population tends to be more racially and ethnically diverse than the general population. So I generally approve of many aspects of the ABA Council’s DEI standards, but there’s a number of things that I strongly object to. So I’m going to talk about two.

So one, I object to its decision to craft the standards so that they effectively exclude women, LGBTQ people, persons with disabilities, and persons from lower socioeconomic backgrounds. Two is that they never mentioned law schools’ obligations to engage in employment affirmative action under the Rehabilitation Act, so this is disability E.O. 11246 on the basis of race, ethnicity, sex, and others, and VEVRAA on the basis of veteran status. So in general, though, I don’t think that there are any viable alternatives to the ABA as sole accreditors of law schools. I’m going to start with my two main objections and then end with why I still support the Council right now.

So the newly -- so first objection. So the newly proposed version of Standard 206 -- so it exempts law schools from responsibility for annual questionnaire results that show lack of inclusion of persons with disabilities, LGBTQ people, women, and others. So according to the ABA’s data right now from the questionnaire -- so there are schools where women make up only 17 percent of full-time faculty. In only a third do they make up the rates of the general population. The newly proposed version of 206 says that law schools don’t need to worry about it. Now, out of the Council’s five offices right now—these things can change in terms of the Council makeup—four out of the five are men. The current chair, the chair elector are both men. The proposed revision also exempts law schools for questionnaire results that show lack of inclusion of LGBTQ folks, even though they lack civil rights and antidiscrimination protections that other marginalized groups enjoy. So there are no known LGBTQ Council members right now, but there have been in some -- in the past.

The proposed revision also exempts law schools from responsibility for questionnaire results that show lack of inclusion of people with disabilities, who make up over 30 percent of the adult population, according to the U.S. census. So I just graduated from a law school last year—I was at Georgetown—where only 1.2 percent of its full-time faculty identified as having a disability. So at UC Berkeley, it’s 2.1 percent. I guarantee that when we get these questionnaire results on disability back from each law school—the Council hasn’t allowed them to be included on the questionnaire until now—we’re going to see tons of zeros for disability, so no faculty identifying as persons with disabilities. What the Council is saying is that law schools don’t need to worry about it, that they’re off the hook. Don’t worry if your questionnaire results come back and you have zeros for disability.

So why? So the Council—so there’s a lot of public record about this—has been -- has consistently trivialized the significance of very low numbers on disability inclusion and other groups. So there are 21 members of the ABA Council now. So the managing director says he isn’t aware of a single current or former Council member with a disability. He’s been there since 2015. He’s not aware of any persons with disabilities out of the hundreds of people that the Council gets to work on accreditation standards and suffices. It’s not like there’s a dearth of highly qualified nominees with disabilities available. I don't know why the Council seems to think that this doesn’t matter. So poverty and socioeconomic status figure nowhere in the Council’s DEI frameworks. Now, I’m going to take a wild guess that most of the current Council members didn’t grow up poor.

So my second objection is that they exempt law schools for noncompliance with affirmative action obligations under Section 503 E.O. 11246 in VEVRAA. So I imagine that most law schools are federal contractors, and so they’re required to comply with these obligations. I don’t know why, but it seems like the Council doesn’t want law schools to be aware of these obligations. They don’t figure into the standards. Now, maybe they prefer the affirmative action framework that currently exists in the student admissions context. Maybe they don’t want to make law schools aware of Section 503 because then they’d have to include people with disabilities. But I think that all the covered marginalized populations end up hurt by the Council decision to keep schools in the dark about these rules.

So I currently still support the Council in spite of all this. And I’m willing to give it another shot to get the DEI standards right and support, for now, its continued role as sole accreditor because I think that the population’s marginalized people—including BIPOC, LGBTQ, disability, women, Asian folks—are better than this. Representation and inclusion matters. I know how awful it is to go to a school where you can’t find a single law professor who’s at it with a disability, let alone a mental health condition. It creates a breeding ground for myths, fears, and stereotypes, and there are tons of myths, fears, and stereotypes about people with disabilities, particularly people with mental health conditions like me, that circulate wildly at Georgetown Law among its faculty and that pervade throughout society—the legal system. This is not good for legal education or society. And I’m sure it’s no different for folks from other marginalized populations. So this is why we need to get the DEI standards right.

So I also believe that there are no good alternatives. I also believe in the importance of talking to people from all different backgrounds and viewpoints, and that’s why I’m here today. One reason I don’t like the idea of separate accrediting bodies is that I think it doesn’t make people talk to each other. I don’t like the idea of creating separate islands of accrediting universes where people go about things their own way. Now, about the leading alternative accrediting agency, the Western Association of Colleges and Schools -- so apparently, none of its accredited law schools met the minimum ABA passage rate of 75. One had a bar passage rate of nine percent, and another has only two full-time faculty.

So just a note allaying conservative concerns. I think that the DEI standards seem unbelievably weak. Looking at a hearing transcript from 2016, there were zero institutions that the ABA withdrew accreditation from over the prior five years. So the idea that the ABA is going to cause any serious trouble for a law school for noncompliance with the DEI standard seems farfetched. And they also effectively let law schools off the hook for data that reveals exclusion of people with disabilities, LGBTQ folks, and women.

So even for racial-ethnic minorities -- so there are three schools right now that have zero full-time faculty from racial ethnic minorities. There are 20 schools that have numbers less than ten percent, and this is in comparison to their 40 percent prevalence in the general population. There are 23 schools where less than three percent of their first-year class identify as black, compared to 13 percent of the population, 15 schools where less than three percent identify as Hispanic in comparison to 18 percent. Even for these schools, I look at the DEI standard, and I think that schools could do virtually nothing and get away with it. And the ABA Council does schools a huge favor by keeping them in the dark about the affirmative action rules for federal contractors. So that’s it.

Hon. Trevor N. McFadden:  Thank you, Doctor Lawson. I have some questions for you all but wanted to give you all an opportunity to respond to one another. And maybe to kick things off, wanted to ask you, Scott, maybe to reply to Bill’s concern that, sure, you talk about cultural awareness, bias—these are great terms that can mean a number of things—but in the real world and in real law schools, these end up being kind of code words for a certain political agenda. And then, also, kind of separately, obviously, Nick has raised some concerns about the under inclusiveness of the standards that the Council is imposing.

Hon. W. Scott Bales:  Sure. With respect to the mandate that there be some education on the topics of bias, cultural competency, and racism, again, the ABA -- I should say it did this partly as a result of the letter from 150 deans that Bill mentioned. But it did so only after a fairly extended process of notice and comment. And that’s typical of the ABA Council’s revisions to its standards. It often will hold roundtables. It’ll solicit input from law schools and otherwise, and then the standards committee will recommend to the Council that it post for notice and comment and propose change. That then is digested before the Council ultimately takes any action. And that happened with regard to 303, that the Council was careful to be explicit that it wasn’t mandating the content or the delivery on these topics.

But it’s hard for me to imagine that a lawyer today could effectively begin practice without any education on those topics. I would hope -- well, first, I think it’s almost certain you’re going to see a fair amount of diversity across law schools in how they approach this. If I were a law dean, I would strive to—in my law school, with the faculty—encourage a diversity of approaches within my own school because one thing that evidence suggests is that, if you’re looking at the effectiveness of kinds of diversity, equity, and inclusion training, elective classes are more effective than mandatory classes. But I can’t comment on the internal politics at a particular law school. I don’t know that. I hear what Bill’s saying—that there’s a concern that this mandate will, in effect, be captured by a particular perspective. That wasn’t the intent of the Council in adopting the revision to 303.

Now, with respect to Nick’s comments -- he’s an effective advocate, and I respect and understand the intensity of his views. I don’t agree with his characterization of how the new 206 will work. And I think he understates the attention that the Council has given to issues related to disability rights. The existing standards -- 205 is an antidiscrimination and equal opportunity mandate that includes protections for the disabled community. There are provisions in existing 207 and Standard 702 with respect to reasonable accommodations. 206, as currently written, talks about schools needing to take concrete actions to achieve diversity with respect to race, ethnicity, and gender, so it’s a fairly narrow definition. It talks more broadly about affording full opportunity to underrepresented groups, which by inference would embrace the disabled.

Revised 206, which partly was prompted by schools asking for clearer guidance, in some ways expands the requirements because it talks about full access for education for people from underrepresented groups. It talks about diversity in terms of including underrepresented groups among faculty and staff, and underrepresented groups more expressly now includes people with disabilities. One way of interpreting Nick’s comments are, while revised 206 goes further, it doesn’t go far enough. His suggestion that because, currently, the annual questionnaire that schools submit that identify, among other things, diversity among students and faculty and staff -- because those questionnaires do not currently include questions about disability that the standards aren’t going to be enforced with respect to disability, I disagree with that inference. And I also would say that the questionnaire is evolving, and there will be questions in the coming year that go to disability as well as some other classifications.

Hon. Trevor N. McFadden:  Thanks, Bill.

Prof. Derek T. Muller:  I just want to jump in on the 303 point because I think there’s some truth in both Scott and Bill’s points that are sort of happening out there. And I think the question is, what’s going to happen in the next several years in terms of the implementation of this? So in terms of the requirements for training of bias, cross-cultural competency, and racism at the beginning of the program of legal education and one other time during legal education -- I think most schools already do that at orientation. I don’t know that there’s too much that’s going to change at all, except that it’s sort of a codification of an existing precedent. And then, the question is, what do you do with that extra component about what’s happening during law school?

And there’s a reason why – why did 150 law deans write the ABA? Because the political economy reason would be look and say, “Well, why don’t you do this at your own school?” The problem is the dean’s not in charge; the faculty are in charge. And so, if the deans can’t get the faculty to move or are reluctant about the faculty moving, the deans can go to the ABA. And when the ABA does something, the deans can come back and say to the faculty, “Well, now the ABA has said it.” Now, that emphasizes the ABA standards are quite minimal. As I construe them, you could meet this with a 60-minute lecture on racism, cross-cultural competency, and bias in your first year, mid-October, two months after orientation, and it would seem to meet those minimum standards.

But undoubtedly, as Bill’s pointing out—and this predates, actually, the passage of 303—I mean, schools are instituting new core requirements or new requirements on students and curricular requirements that are maybe not just one credit but multiple credits long, potentially offering some things that look more ideological than the things that are within sort of the broader ambit of the ABA’s rules. So I think the proof is in the pudding to see in the future how the schools implement these things. Again, it’s easy now to say, “Well, the ABA makes us do it.” That’s going to be half-true at some places because there’s a lot of things that are going to go above and beyond what the ABA requires, and so we’re going to see how that plays out on an institution-by-institution basis.

Hon. Trevor N. McFadden:  Thanks, Derek. Bill, I wanted to give you a brief rebuttal.

Prof. William Jacobson:  Sure. Just a couple of points. I don’t question the intentions of the Council. I don’t view it as bad intent. But my concerns are how I see it playing out. So I do think that what you’re going to see is a lot of people saying, as was indicated, the ABA is making us do it. Okay? The argument that you’ve been making that we can’t mandate something is over. We need to get accredited. And it doesn’t matter whether the ABA, in fact, would punish a school for not meeting it. It’s that imperative, and it’s that appeal to higher authority that is going to make any arguments I have as to why this is actually a bad thing. This is actually counterproductive to force people to go through this sort of training, and this sort of education is going to take away any ability to dispute that.

I think that what we’re seeing at many universities, certainly at Cornell and at Cornell Law School, is to even apply for a job, you now have to submit a DEI statement. It’s an ideological screening mechanism. Now, of course, if you read -- you could submit a statement saying, “Well, I am coming here because I want to be the only outspoken conservative, and you need more of those voices.” You won’t get hired. Everybody knows that. So there’s this aura of DEI mandate, this aura of DEI statements, and it is very ideological, and it is narrowing. And students feel the pressure. Students feel the pressure. Many law schools -- law reviews have now required DEI statements and have minimized the impact of grades and things like that. So my concern is that this is taking a bad situation of ideological uniformity and that you are going to get like you do at colleges—Kennedy-style trainings, which are, in my view, counterproductive.

But whether you think those are good or bad, why is the ABA Council doing this? That’s the issue that I have. Why is the force of their accrediting power behind this? They could have let it alone and let law schools figure it out. I think cross-cultural competency is valuable. I think there are many things that are valuable. After 22 years in private practice before joining Cornell, I think if you’re taking courses in psychology would be extremely helpful in dealing with colleagues and clients. It would be a good thing. But it’s not mandated. So there are a lot of good things. And nothing I’m saying is that people shouldn’t be allowed to take the courses. So if you want to take a course in law school on critical race theory, fine. If you want to take a regular ABA’s programming on critical race theory, which is offering a whole program now, fine. Take it. It’s the mandating that I have the issue with.

Hon. Trevor N. McFadden:  Nick, you’ve got an interesting perspective. As I’ve alluded to, you’ve not only gone through law school, you’re also a medical doctor and have some insights into how the medical profession has regulated itself. I’d love to hear what -- is there an ABA equivalent in the medical community, and are there similar efforts to bring such standards in the medical community?

Dr. Nicholas Lawson:  I’m glad you asked me that, Judge McFadden. Yes, there are. So the equivalent is the Liaison Committee on Medical Education. So it is the sole accrediting body for MD schools. Its parent organizations are the AMC and the AMA. So they have -- it’s easy to—I don't know if this is going to be on the camera—but they have this data collection instrument and their equivalent -- sort of roughly an equivalent to Standard 206. So they let medical schools pick mission-appropriate diversity categories. So they pick their own categories for medical students, faculty, and senior administrative staff, and you can pick different ones for each.

So now, with respect to the faculty -- so here they say, pick your diversity categories, provide the specific diversity categories, medical students, faculty, and senior administrative staff. So now—this is my opinion—that for faculty and senior administrative staff -- that this is inappropriate. So academic medical centers -- they’re federal contractors, so they’re legally required to be engaging in affirmative action of placement goals or hiring benchmarks for people with disabilities, racial-ethnic groups, women, and veterans. Now, if you’re in medical school, I don’t see how you can say, “On the one hand, I don’t consider disability to be one of the specific diversity categories that guide recruitment and retention activities for my employees, like faculty and senior administrative staff,” but at the same time say, “Yeah, I’m complying with my obligations to take affirmative action to recruit, hire, and promote and retain employees with disabilities.”

Well, the LCME does give academic medical centers a choice in terms of defining diversity categories. So the reality is that the targets of their programs -- so it’s African Americans 97 percent of the time, Hispanics or Latinos 90 percent of the time, women 74 percent of the time, individuals from a low socioeconomic status 53 percent of the time, LGBT 41 percent, disabilities 29 percent according to data. So this is just one of the consequences -- way things look like if you gave choice to folks. Historically, the LCME and these entities, they do give hints about the diversity categories that should be included. They do have an equivalent to Standard 303. So they require schools to provide “opportunities for medical students to learn to recognize inappropriately and address biases in themselves, in others, and in the healthcare delivery process,” as well as “courses and clerkships that prepare students to be aware of their own gender and cultural biases and those of their peers and teachers.”

Hon. Trevor N. McFadden:  Great. Thanks, Nick. And we are going to give folks an opportunity to ask questions in a minute here. I’ve got more questions, but if you’ve got one, want to hear from you in a moment. Before I open it up to the floor, though -- Derek, we are at the Executive Branch Review Conference. Several of you have mentioned the role of the Department of Education, Department of Justice. If there was a Republican administration or frankly any administration—it sounds like the Clinton administration brought an antitrust suit against the ABA back in the ‘90s that shared some of Bill’s concerns—is there much that the executive branch could do unilaterally, or is kind of the horse out of the barn?

Prof. Derek T. Muller:  I mean, it’s pretty tough. There are a lot of rules. Again, it’s like standards about standards that are in the Department of Education guidelines because they want to make sure that the accrediting bodies—because there are dozens of accrediting bodies in the United States, right, so it’s not just for the ABA—that these accrediting bodies have procedures in place for how they accredit their schools. They’re maintaining high quality. They have adequate staff to supervise and so on. Again, there was this tension back in 2016 about whether or not the ABA was doing its job adequately within that framework. And there was actually agreement in the Department of Education saying like, “You didn’t comply with these things. You’ve got 12 months to get your ducks in a row.” And the ABA did and sort of demonstrated compliance with it.

But it’s very hard, I think, under the existing regs to exert significant pressure to say, “Well, the specifics of what you’re doing, or the substantive guidance you’re giving to these law schools is inappropriate.” I think that that becomes a much trickier thing for the Department of Education to do. So I think it’s very difficult to unwind that, at least in the Department of Education side, without affecting a host of accrediting bodies and how they go about their work in the United States.

And again, the major question is, when the Department of Education made this decision in the ‘50s and ‘60s, it was, “We are not developing the rules because we’re the federal government and shouldn’t be developing these dictates. Right? These are things that these accrediting bodies are doing, and we’re just making sure they’re okay with it.” So if you want the Department of Education to have a lot more power that way -- well, I mean, maybe it depends on who you think is running the Department of Education any given year about whether or not you think that’s a wise move.

Hon. Trevor N. McFadden:  Thank you. Scott.

Hon. W. Scott Bales:  I just wanted to add a few points to that great overview. The Department of Education today, actually, accredits 60 different accrediting agencies. And I’m not sure what the rationale was for its choice to accredit the accreditors rather than to itself accredit institutions beyond the fact that there are a lot of higher education institutions in the United States. And as Derek said, if you’re thinking about alternatives, the prospect of the Department of Education directly accrediting institutions, to me at least, isn’t very appealing, and it’s also very not -- it’s not very practical.

But the Department of Education actually has, as you’d expect, pages of regulations in the code of federal regulations that are the requirements for the accrediting agencies generally. And it doesn’t purport to give the ABA, or the American Psychological Association for that matter, or the board that accredits medical schools -- it doesn’t purport to give them a monopoly. I mean, someone else that wanted to jump through all the DOE hoops could try to qualify as an accreditor. But again, you’re then duplicating the production of what, in essence, is a public good in terms of the accreditation, collection of information, and that process. And it strikes me as not very feasible. I’ll stop at that.

Hon. Trevor N. McFadden:  Yes, ma’am.

Questioner 1:  I will preface this by saying I’m a young female lawyer. I am aware there’s work to be done. I have friends who have the stories of going to the depositions and being asked by the older male partners to pour the coffee, even though they’re the ones about to take the deposition. On the other hand, I’m also really aware of the unintended consequences of this. I likewise have female friends who have been told they are only being staffed on cases because they are female or who have issues getting mentorship from older male partners because everyone is hyper-aware of any sort of appearance of impropriety.

And so, my concern, while I think some of this is well-intentioned, is how does the ABA implement this rule without stifling free and fair thought and debate? I advise a lot of FedSoc chapters on law school campuses. A lot of them have horror stories about working with the current DEI administration and being hauled in front of them even though they’re the ones being attacked by other student groups. And as a lawyer, it’s essential that we’re able to debate and test ideas. So for those of you who favor or oppose it, what are the concerns about implementation, and how does the ABA go forward with this and still protect an atmosphere of free thought?

Hon. Trevor N. McFadden:  Great question. Scott, do you want to…?

Hon. W. Scott Bales:  Well, I’ll try to answer that in both a specific and a general way. The 303 interpretation specifically say—or maybe I’m confusing it with 206; I think it’s 303—specifically says that -- yeah, now that I’m thinking, it’s the proposed 206 comments where there’s reference to the diversity and inclusion programs and disclaims any suggestion that it’s meant to dampen the ability of people to speak on controversial topics. And that goes to the more general point about academic freedom, which I think also Bill, in his comments, touched on.

I think there’s a legitimate concern for academic freedom in the context of law schools and higher education more generally. I think we -- there’s a tendency sometimes to think of academic freedom too narrowly as something that belongs just to law faculty as opposed to the broader educational community. And I think, on the other hand, there’s sometimes a tendency to think of academic freedom too broadly as suggesting that a professor ought to be entitled to teach whatever they want in whatever class they might be offering. People recognize it doesn’t really mean that. And I think the ABA has other standards that are now tied to faculty that relate to academic freedom. And they tend to be cast in terms of, well, we need to require tenure or security of position in order to protect academic freedom.

And my own view, at least, is that, as we’re looking at the standards, we should think more broadly about academic freedom as extending also to students and others in the law school community. And we need to think about how you protect people from being punished for stating views on controversial topics. And I think that’s been under some tension from groups on both sides of the ideological spectrum, and that’s something we should be concerned about.

Hon. Trevor N. McFadden:  Thank you. I’m going to skip out of turn here because I think what you said is really very relevant to a question over here. Mr. Shapiro.

Ilya Shapiro:  Ilya Shapiro from Georgetown Law, sort of.

[Laughter]

So not about DEI specifically but picking up on this academic freedom and free speech point -- I’ve been, obviously, speaking on a lot of panels lately, FedSoc and otherwise, about freedom of speech on campus. And several deans have approached me in good faith and asked for suggestions on how to better inculcate the values of free speech and academic civil discourse and what have you. I don’t know whether the ABA can or should be playing a role in that, but do any of y’all have suggestions for -- similar to how law school deans have been inculcating DEI values, free speech, and civil discourse values can be transferred to the next generation of law students?

Hon. Trevor N. McFadden:  One of our two professors want to chime in there?

Prof. William Jacobson:  Well, yeah, I mean, I don’t think this is specific to the ABA Council accreditation issue, but I think one of the most negative thing -- developments, particularly post-George Floyd, is the propensity of deans and presidents of universities to denounce people and to enforce an idea --.

Ilya Shapiro:  I wouldn’t know anything about that.

Prof. William Jacobson:  Yeah. We both don’t know anything about that. And that’s one of the most negative things I’ve seen that all a dean needs to say is, “This is within the professor or the scholar’s academic freedom, period.” Not include a denunciation, and it’s been taking place in many different institutions to varying degrees. So I don't know that that has anything to do with ABA accreditation, but it does have to do with the culture of weak administrators who would rather placate what, in many cases, are internet mobs or students feeding off of this and don’t play the role of adult in the room and just want to placate people. Again, I don’t think that has anything to do with the ABA Council or the standards that have been proposed, but it’s one of the most disturbing things I’ve seen in the last two years.

Hon. Trevor N. McFadden:  Derek, did you have anything to add?

Prof. Derek T. Muller:  This is a really hard question because -- which is why you asked it. I mean, I think one of the things that has been most valuable to witness—and unfortunately, I’m not sure that this is growing, and if anything, it might be shrinking—is to see faculty members on the faculty engaging with each other publicly and disagreeing in good faith in front of the student body. So we have faculty workshops where you can see that often happening at a very high level, but that’s an intimate experience in the college of law faculty. It’s not going to be something that the students see. But to the extent that students can see engagement on different issues with faculty who disagree substantively on things in front of that student body, sometimes, they’ll see it at a Federalist Society debate, but it’s usually somebody from outside the school who’s brought in, or sometimes it might be a moderator.

But I think that’s another way of helping to think about what civil discourse looks like, what people on the faculty who can disagree and maybe in some surprising ways look like, and again, patterning that for students. But again, I don't know how much of that is sort of valued as much in institutions or even among many faculty members. I think it’s a question about what that commitment looks like.

Hon. Trevor N. McFadden:  You all have been waiting patiently over there. Let me get you.

Greg Dolin:  Thank you. Greg Dolin from University of Baltimore and to take a brief opportunity in saying that it doesn’t -- as a shoutout to my own dean, who’s a liberal and Democrat in good standing, former DOJ official in the Obama administration, who’s taking a very hard stance for freedom of speech and, when we did have the flareups, he actually sent emails to the faculty. And it does help. We haven’t had those flares. But here’s my question mostly dealing with this idea of ABA monopoly.

Given that most law schools tend to lean to the left, imagine a hypothetical world where there are two or three accrediting bodies in competition with another, all of whom would be -- accreditation from anyone would be sufficient to sit for the bar, right? There would the ABA and some conservative bar association and whatever else. Given that, again, the faculties and the deanships in law schools tend to lean left, how many of them would you think choose to be accredited by this habitat of conservative bar association as opposed to by the ABA? In other words, is the monopoly really a problem if it would persist on a voluntary basis?

Hon. Trevor N. McFadden:  Bill.

Prof. William Jacobson:  Yeah. Well, I think that raises the issue of what would come after the ABA. I think where this probably needs to start is at the state level. The states could -- and in some states, it’s the state supreme court. Some, it’s a special board of bar overseers. It varies state by state. But if they were to loosen the requirements—if they did not require that a student graduate from an ABA-accredited school but perhaps graduated from a law school that is accredited by at least one other state or by one other recognized authority—that would be a good first step. I think it’s a very viable step.

People still need to pass the bar exam. They still need to graduate from law school. That’s a whole other discussion. And so, I think this is something that could be amenable to state action because nothing’s going to change for -- at least until 2024/2025. But states could act now. States could loosen the requirements, and I think that would have a positive effect. And whether somebody can create a viable alternative accreditor, which would have the quality standards of the ABA but be a competitor, is something we’d need to see. But doing nothing just because it’s been done this way forever, I don’t think, is the right approach.

 

Hon. Trevor N. McFadden:  Nick, did you…?

Dr. Nicholas Lawson:  Well, so I was going to chime in, not on your point, but I do agree that there is some uncertainty about what reduces bias. So there’s a lot of debate in the disability community, especially in terms of mental health stigma. So there are people who persist in this thinking that knowledge reduces stigma, that there are people who, for example, would argue that teaching people that schizophrenia is some biological condition, and -- people have all sorts of conceptions about what it is that’s going to reduce stigma. That actually makes things worse. There are things about -- knowledge about mental health and other disabilities that exacerbate stigma. So there is this uncertainty.

Now, at the same time, we do have a framework that there has been a lot of thought that’s been developed in the affirmative action federal contractor context. People have thought about these things a lot. And I guess it still sort of befuddles me that the ABA wouldn’t look to those models. So for example, one way that you can show, as an institution, that you are -- to reduce -- to make people more likely to come out as having a disability is—and this is in the regulations—is you put on your website a picture of Bill Treanor, Dean of Georgetown Law, shaking hands with a provost in a wheelchair. The provost says, “Hey, people really like me here, and they recognize that we are vital to this community.” Or you have a provost or an associate dean saying, “I grew up with autism, but I’m okay.” There’s stuff that people have thought about.

And these regulations also recognize that inclusion and data on inclusion is a gold standard in terms of stigma reduction. So I agree that there’s uncertainty. And in terms of what reduces bias, I don’t understand why people wouldn’t look to these existing frameworks because people have thought about this stuff a lot.

Hon. Trevor N. McFadden:  Thank you. Kind of a final question maybe to you, Scott -- a number of us have been following the Supreme Court’s case in the affirmative -- the Harvard affirmative action case, Students for Fair Admissions—going to be up next term. Obviously, none of us knows what will happen with it, but there are certainly suggestions that, perhaps, the Supreme Court would invalidate the Harvard affirmative action program. Would that have any implications for Standards 206 and 303, or do you think that’s completely different issues there?

Hon. W. Scott Bales:  Well, and coincidentally, the opening brief, I think, was just filed yesterday. And now, there are two cases—one from Harvard, one from the University of North Carolina—and it’s basically an argument that the Court ought to overrule Grutter v. Bollinger, the case that allowed universities to consider race in admissions on the view that diversity is a compelling interest and that, so long as race was considered as a factor in a holistic review of an applicant’s credentials and there was no less restrictive alternative, then it be permissible. So that’s what at issue in that case that will be argued next year.

The Council, when it approved the revisions to 206, recognized that that case was on the horizon and decided to proceed, noting that if the case law changes in a way that would require revisions to this standard, that will happen. And that’s consistent with the approach under the existing standard and under the revision that basically says, “Look, if a state prohibits the consideration of race, for example, the standards aren’t suggesting that a school has to violate applicable law.” But I think it’s unlikely that whatever the Supreme Court does, that it’s going to affect the standard. And I say that in part because, as I noted, the revisions don’t require schools to expressly consider race if they’re in a jurisdiction like California that bars that as a consideration in admissions or employment. And the Council hasn’t interpreted existing 206 or the proposed revisions as mandating quotas or racial balancing. So the standards will evolve to allow schools to -- or the standards will evolve so they don’t suggest schools have to act contrary to law, which they couldn’t do. But I doubt that that case is going to have an impact.

Hon. Trevor N. McFadden:  All right. Well, as a trial judge, I’ve learned to try to keep the jury happy and know not to stand between them and lunch. So it’s top of the hour. Please join me in thanking the panel for a great discussion.

 

10:40 a.m. - 12:00 p.m.
Breakout Panel: American Investment in China

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation • Foreign Policy
Chinese Room
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Event Video

Description

For many years, the “Washington consensus” was that investing in China—either directly by contracting for goods and services and opening subsidiaries there or indirectly by acquiring shares of Chinese companies, would encourage the Westernization of China, and bring it closer to democracy.   More recently, questions have been raised whether US capital inflows into Chinese companies are supporting a repressive regime, creating national security risks or in the extreme--empowering the enemy.  The Trump Administration imposed financial sanctions and trade restrictions on some Chinese companies, which were continued (and expanded) by the Biden Administration.  In December 2021, the SEC finalized rules to implement the Holding Foreign Companies Accountable Act (enacted in 2020) in response to the inability of the PCAOB to inspect the audits of China-based, U.S.-listed firms. Pursuant to this law, the SEC will ban companies from trading in the U.S. securities markets as of 2024 if the PCAOB is unable to inspect the audits of such companies for three consecutive years.  The Chinese government in efforts to control its data and economy has triggered significant sell-offs of Chinese public companies, and the SEC has essentially halted new IPO listings of Chinese companies by amping up disclosure requirements.  Yet, there are institutional investors and others who maintain that a diversified portfolio must necessarily include investments in China directly and Chinese companies given its GDP ranking in the global economy.  These same investors believe that if the US were to block or otherwise limit US listings, investors will simply make their investments directly on Chinese exchange, through Hong Kong or otherwise.

This is the debate—where is it going and what tools does the Executive Branch and Congress have to advance or retard this financial decoupling?   Our panelists will discuss the background and state of play, and why progressives and conservatives may agree on limiting or blocking capital flows into China and counterarguments as well.  

Featuring:

  • Amb. Kelley Currie, Adjunct Senior Fellow, Indo-Pacific Security Program, Center for New American Security; Senior Advisor, Krach Institute for Tech Diplomacy, Purdue University
  • Mr. Alex Dimitrief, Partner, Zeughauser Group
  • Dr. David Dollar, Senior Fellow, John L. Thornton China Center, Brookings Institution
  • Mr. Ivan Kanapathy, Senior Associate, Freeman Chair in China Studies, Center for Strategic & International Studies
  • Moderator: Hon. M. Miller Baker, U.S. Court of International Trade

Speakers

Event Transcript

Nate Kaczmarek:  Good morning. My name is Nate Kaczmarek. I am Vice President and Director of the Practice Groups for The Federalist Society. It certainly is a pleasure to be here with all of you in person for EBRX here at the Mayflower, and greetings to our audience joining us on the livestream. Our theme for this breakout panel is “American Investment in China.” We’re pleased to have an insightful group of experts up here and grateful to the Honorable Judge Miller Baker for moderating this conversation.

Before Judge Baker was appointed as a Judge of the United States Court of International Trade in December of 2019, he had a long and distinguished career. He told me just to say that he was a lawyer, but I can’t get away with that. I’ll give you a little bit more of his background. But certainly, his complete bio is available on our website. Judge Baker is a graduate of Louisiana State University and Tulane University Law School. He clerked on the U.S. District Court for the Western District of Louisiana and then on the U.S. Court of Appeals for the Fifth Circuit. He served in the Justice Department and was later counsel to the late great Senator Orrin Hatch on the staff of the Senate Judiciary Committee. For nine years, he was a naval reserve intelligence officer and received an honorable discharge. In private practice, he has argued before the Supreme Court, 9 of the 13 federal courts of appeals, and appellate courts in 3 states and the District of Columbia. With that, thank you all. Judge Baker, the floor is yours.

 Hon. M. Miller Baker:  Thank you very much. Our topic today, of course, is “American Investment in China.” And I’d like to go back in time, if I could, to a similar conference that I went to almost exactly 34 years ago in New York City. And one of the speakers was Robert Bartley. Many of you young people probably don’t even know who Robert Bartley was. He was a longtime editor of The Wall Street Journal. And he gave a speech. And this was the last year of the Reagan administration, and it was a very upbeat, positive time in the United States. The Soviet Union was clearly on the path to something that wasn’t positive, and the United States was on the ascendency. Robert Bartley gave a speech about China.

 And he predicted that -- Deng Xiaoping was the leader of China. China, at the time, was a de facto American ally. It was a counterweight. We both had a common interest in opposing the Soviet Union. And Robert Bartley observed that Deng Xiaoping, at the time, was introducing market reforms in China. And he said this is an unprecedented event. But his prediction was that the introduction of markets in China and free markets would bring about freedom and that we were looking as -- to quote Churchill, we’re looking to the bright, sunlit up lens of the future in view of this transformation we were seeing in China and in view of what was happening in the Soviet Union.

 Well, 34 years later, let’s see where we are. China is certainly not totalitarian necessarily, in the sense that political scientists might define it, but it’s certainly clearly authoritarian. And there’s a range—a gradation there—between totalitarian and authoritarian. And we can argue about what it is. But it is, at a minimum, certainly, authoritarian. The Chinese economy, by some measures, is now as large as the United States economy and, by all measures, will be larger than our economy, if it’s not already, in the near future, and the gap between the two will continue to grow given the Chinese rates of growth. The Chinese have also embarked in the last decade in a massive military buildup. Soon, the Chinese navy will be the largest navy in the world, and the Chinese have embarked upon a rapid expansion—a breakout, if you will—of the strategic nuclear forces that is going to put their strategic nuclear forces on a par comparable to that with the United States and Russia.

 Recently, the president announced that the United States—this is in my judgment—I think, probably the last two administrations -- but American policy with regard to Taiwan has changed. It used to be a policy called strategic ambiguity, whether or not the United States would defend Taiwan or not. That has now changed. The president recently said that the United States, in fact, would -- unlike Ukraine, we would actually defend Taiwan. The Chinese, of course, have made it very clear that they view Taiwan as a breakaway province, and it sooner or later will be reunited with the mainland. So with those sobering facts, I’d like to -- that is the changes we’ve seen and the international environment and the domestic environment economically over the last 34 years. I’d like to introduce our first speaker on this topic of American investment in China.

 So our first speaker today is David Dollar. And Mr. Dollar, if I can find his -- is a senior fellow at the John Thornton China Center at the Brookings Institution and a host of the Brookings Trade podcast Dollar&Sense. He’s a leading expert on the Chinese economy and the U.S.-Chinese economic relations. About a decade ago, he was the U.S. Treasury’s Economic and Financial Emissary to China and facilitated macroeconomic and financial policy dialog between the U.S. and China. Before that, he worked at the World Bank. He’s got extensive experience to World Bank that you can see in his bio. He’s taught economics at the University of California in Los Angeles and also has other extensive academic experience. He has a doctorate in economics from New York University and a bachelor’s in Chinese History and Language from Dartmouth College. With that, I give you Mr. David Dollar.

 David Dollar:  Thank you very much. It’s a great pleasure to join the panel. I think the topic of American investment in China is a, obviously, current event but also a very complicated topic. I’m going to introduce three points in the discussion and be relatively brief so we have time to have a good interaction among the panelists and with the audience. So first point I want to make is that when we talk about limiting American investment in China, it’s very important to distinguish between technologies that have national security implications and those that do not. In practice, this may be difficult to make the distinction. But I think in thinking about the issue analytically, it’s important. For some obvious examples of technologies that have national security implications, artificial intelligence, high-end semiconductors, I think that those are pretty clear.

 But keep in mind that we also—we Americans -- we import a lot of stuff from China that are just ordinary consumer products. Right? We import bicycles, clothing, television sets. Those are some classic examples. Those are all exported out of China by foreign investors essentially. So that’s the result of foreign investment in China -- is a whole range of consumer products that come inexpensively to the United States. So the first point I want to make is I think we want to really identify the core technologies and naturally protect those. And that’s going to be true in general. We’re going to want to take a hard look at supply chains that involve those technologies. And I’m a free trader, so I’m in favor. Even with the core technologies, I would hope we would have relations with our near neighbors like Mexico and Canada. But when you think about security, as soon as you put an ocean between us and some of our suppliers—either ocean, Atlantic or Pacific—that’s going to complicate things.

 Now, the second point I want to make is that, for the technologies that do not have obvious national security implications, it’s in our interests to let American firms invest freely in China. I realize in discussing this issue, we could talk either about direct investment—where our firms open factories or buy factories—or portfolio investment. I’m happy to get into portfolio investment in the discussion, but that’s really not the primary focus of my talk. I think the real interesting issue is around direct investment when our companies open factories in China or purchase factories there.

 And the advantage of having an open system where our firms can invest anywhere in the world is that increases the incentive to innovate and that improves economies of scale. There are a lot of talented workers. China’s turning out millions of STEM graduates every year. Frankly, a lot of our firms who make ordinary consumer products are increasing their research activities in China because they can hire talented people and employ them there, and being close to that big market is an economic advantage. Most of that foreign investment is aimed at selling into the Chinese market.

 So you may have this image of factories moving overseas and selling stuff back to the U.S.—and of course, some of that happens—but the vast majority of foreign investment into China is aimed at selling into the domestic market. And it’s a necessary feature of a modern economy if our firms are going to benefit from, as the judge said, what’s now probably soon going to be the largest economy in the world measured at ordinary exchange rates. It’s certainly already the biggest market for electric vehicles and many specific products. And so, the logic of letting our firms invest there is that it spurs innovation, division of labor, efficiency, productivity growth. Eventually, it feeds into living standards in the United States.

 Now, the third point I want to make is I realize that second point is going to be somewhat controversial. And when it comes to national security, you could take a very hard line and say China’s really the only potential serious adversary we have out there. We just want to cut off relations in order to make sure we’re not advancing their capabilities at all. But then the third point I have is -- I want to remind you that our allies and partners are not going to do that. Germany, Japan, South Korea, they’re all much more deeply integrated in China than we are. In general, they have more trade with China than they have with the United States. And they have become cautious about China. And they’re interested in some of the ideas we’re discussing, like Janet Yellen’s concept of friend-shoring, but they’re not interested in radical decoupling.

 So if we go for radical decoupling, we will be isolating ourselves because the other major technology countries—I just mentioned a few of them—they’re not going to pull out of China, basically. They’re going to -- German car companies, Korean electronic companies, Japanese machinery companies, they’re all increasing their investment in China basically because it is a large, rapidly growing market with the characteristics I mentioned. So that’s something we should keep in mind -- is there’s a risk that we isolate ourselves, and we become separated from some of the key technological developments, which tend to emerge from this kind of healthy competition. And I’m going to stop there and look forward to hearing the other panelists. Thank you very much.

 Hon. M. Miller Baker:  Thank you, David. Now, our next speaker is Ivan Kanapathy, Senior Associate, Freeman Chair in China Studies at the Center for Strategic International Studies. During the Trump administration, Mr. Kanapathy served on the National Security Council Staff as Director for China, Taiwan, and Mongolia and as Deputy Senior Director for Asian-China affairs. He staffed the president and the national security advisor and led U.S. government interagency policy development and implementation on relations and engagement with China and Taiwan, including shepherding a significant policy shift toward China by the Trump administration.

 From 2014 to 2017, Ivan worked at the American Institute in Taiwan, representing American interests, and advising on various issues in Taipei. Earlier in his career, he studied in Beijing and was a U.S. Marine Corps foreign area study fellow. He was a naval flight officer, accumulated 2,500 flight hours and served three years in F/A-18 weapons officer and tactical instructor at the U.S. Navy Weapons School, popularly known as TOPGUN. He holds an MA with distinction from the Naval Postgraduate School, a BS in physics and economics from Carnegie Mellon, and has various language certificates. With that, Mr. Ivan Kanapathy.

 Ivan Kanapathy:  Thanks so much, Judge, and Federalist Society for the kind invitation. So I’ll just talk a couple minutes about -- Judge mentioned I worked in the -- well, actually, I worked in the Trump and Biden administration for about six months before I left government last summer. But sort of going back to some of the things we did on this issue—the issue being U.S. investment in China. I’ll kind of start with that and then talk about the thinking behind it.

 And so, it was very incremental. And some of the stuff you may have even missed. One of the early actions -- there’s a lot of discussion, a lot of concern, revolving around some of the things that Judge and David mentioned already. And one of the first things that happened was the administration put some pressure, which you may be aware of, in the form of a letter from the national security advisor and the director of the National Economic Council on the board of Thrift Savings Plan, which is, as you guys know, sort of federal employees. It was some discussion with their savings plan—there was a plan to sort of shift investments in their international holdings to include China—and previously, it had not included China. That pressure, if you will, was ultimately successful, I think, in the eyes of the administration, and that Thrift Savings Plan board decided to sort of shelve that plan. And that was just for federal employees and, going back to what David was saying, pretty much strictly portfolio investment sort of through an institutional investment vehicle. Similar, the next step, I guess, that I recall was the Railroad Retirement Board—also managed through federal entities and similar results. In the grand scheme of U.S. investment in China, we’re talking about extremely small amounts of capital that are being affected.

 But then, at the very end of the administration, we did work on is -- I’m sure all of you are familiar with an executive order. In this case, it was 13959 that, again, targeted portfolio investment. And what it did was sort of leverage something—a list that Congress had mandated—which was a list of -- that DOD produce, which DOD didn’t produce for a long time. But when they finally did, it was a list of companies that are affiliated with the People’s Liberation Army. And what that executive order did is it basically stopped U.S. persons from holding and then acquiring portfolio stocks and bonds and equities in this list of companies. And I don’t recall exact number, but I think there may be 20 to 30 and then eventually maybe up to 40 companies. The Biden administration made some adjustments to that, and so it stands now, still, that executive order as amended, I think, June of 2021. But essentially, that still exists. But again, relative to the grand scheme of things, a very narrow slice and only focus on portfolio.

 So the bigger question obviously -- so that’s sort of where we are today as far as actual federal intervention in this realm as we’re talking about—so again, quite small. But what were some of the concerns that kind of drove that action? Well, there was -- I think it was three years ago—well, it was—it was February of 2019 when The Wall Street Journal broke an article that talked about MSCI. MSCI manages a number of index funds, I’m sure you’re all familiar with. And this, again, becomes portfolio investment but through institutional investment vehicles. And MSCI sort of makes these indexes to a lot of these institutional investors follow, and retail investors too, I think, if they buy into funds.

 And the idea was that, behind the story that broke in The Wall Street Journal -- that there was heavy pressure from the Chinese government on MSCI to adjust its merchant markets index to grow the proportion of Chinese companies inside it—which I think was around two percent, and they were planning to grow to eight percent, which I think actually did happen. And so, that’s obviously a concern because MSCI, at the same time, was trying to provide financial services and other kind of -- really get into, as David mentioned, the China market for their own sort of reasons creating, according to this article anyway, a pretty significant, I think, conflict of interest, especially on behalf of the folks that are investing in these index funds. So that kind of stuff comes to light.

 I think more recently – well, you all have seen -- and this is Jamie Dimon a couple months ago said something about -- I think he said JPMorgan would outlast the Chinese Communist Party, and then the next day, he had to apologize. But that’s a signal to us of this issue that, potentially anyway, was raised by The Wall Street Journal with MSCI that we have these folks that we go through, these institutions, that invest on our behalf that maybe aren’t able to act, frankly, I think you would say in accordance with their fiduciary duties because of the pressure that they receive from the Chinese government. I don’t think Jamie Dimon would take back those words if he said them about the Republican Party or the Democratic Party, right? Let’s be honest. But he obviously had to express regret because he did say it about the Chinese Communist Party.

 And if that’s happening at the very top of one of the biggest banks, what do you think the pressure is happening sort of below that level and throughout the industry? And so, again, just sort of understanding what we’re dealing with, that it's not a flat world, it’s not an open market as we would like it to be. I mean, there’s things that we would like to say are true, and then there’s sort reality. And so, I think it’s important to kind of close -- all the things David said are important, I think, but we need to understand what we’re dealing with. And one of the critical points he brought up was technology. Right? Technology—what is a national security concern? What is not? That is a huge question here in Washington and a huge question inside government every day.

 It’s getting harder and harder to say things that are, frankly, technologies—newer ones especially—that don’t have some kind of dual use application. That’s just because of the way technology’s evolving but also because of the way, frankly, warfare’s evolving and the spectrum of conflict. A lot of times, it’s not open conflict; it's cyberwarfare, information, space systems. And so, drawing that line gets harder and harder. And I don’t have a solution to that, but I think that’s something we really need to think about. And if you go even beyond technology, sort of what we experienced in the pandemic and now has affected the discussions in Washington about supply chains -- so what are our critical supply chains where we need to be a little more, again, protective? And these go, at that time—a couple years ago—to masks, surgical masks, where we realized we were dependent on a nation that wasn’t necessarily following our interest.

 So those are all things to think about, whether it’s medical supplies, food supplies, logistics, infrastructure. So it goes even beyond technology, and those are all things I think now that we try to understand—if not are a part of national security, are significantly overlapped in national security. And I’ll stop there, Judge.

 Hon. M. Miller Baker:  Thank you very much, Ivan. All right. Now, it’s my pleasure to introduce Ambassador Kelley Curie. She’s an Adjunct Senior Fellow in the Indo-Pacific Security Program at the Center for New American Security, a Senior Advisor at the Krach Institute for --

 Amb. Kelley Currie:  Krach. I’m sorry. It’s okay.

 Hon. M. Miller Baker:  -- Institute for—thank you for correcting me—for Tech Diplomacy at Purdue University. A great university, by the way. Throughout her career, Ambassador Kelley has specialized in human rights, political reform and development, and humanitarian issues, with a focus on the Indo-Pacific region. She’s currently an adjunct, as I just said, at the Center for the American Security. She’s a member of the board of directors at the National Endowment for Democracy and the board of governors of the East-West Center. She was unanimously confirmed in 2019 as Ambassador-at-Large for Global Women’s Issues and the U.S. Representative at the UN on the Status of Women and served in that position until the end of the Trump administration. Prior to that appointment, she served under Ambassador Haley, as U.S. Representative to the UN Economic and Social Council. She’s served in other senior positions in the State Department and has been -- and served in international organizations and in Congress and various NGOs. She received her JD from Georgetown Law School and her undergraduate cum laude from the University of Georgia School of Public International Affairs. With that, Ambassador Currie.

 Amb. Kelley Currie:  And I will promise to take it easy on you, Judge Miller, about LSU’s season last year in light of Georgia’s national championship, and that’s probably all I’m going to say about that. Thank you for allowing me to join you today here at The Federalist Society. It’s my honor to be with you again and to speak on a topic that I’m really enthusiastic about. And to follow my former colleague in the Trump administration, Ivan Kanapathy, and build on some of the points that he makes about how international -- or national security and economic security have become so intertwined at this point that it’s very difficult to disaggregate them in ways that are easy, that are regulatable, and that are justiciable. Gosh, can’t talk this morning.

 Anyway, I think that when Ivan talked about the TSP issue that happened during the previous administration -- I would like to update a little bit that the board that currently oversees the TSP, the Federal Retirement Thrift Investment Board, the FRTIB—there’s an acronym—has recently announced that it is trying again to find basically a back doorway to allow U.S. taxpayers and the—I’m sorry—former federal employees, current federal employees, former members of the armed service, current active duty armed service personnel to participate in mutual funds that are investing in Chinese equities and in Chinese industries that threaten U.S. economic and national security by opening what they are calling a mutual fund window that will allow investment through the Thrift Savings Plan in 5,000 mutual funds with no screening mechanism whatsoever.

 They’re just going to dump these out there and say buyer beware, figure it out yourself, retail federal investor, with no mechanism for screening whether they’re a Chinese military owned enterprises -- Chinese military enterprises, companies that are on either the commerce entities list or the SDN list for gross violations of human rights, including systemic forced labor problems. None of this stuff -- none of these sanctioned entities or problematic entities or any of these things will be screened out for the investors. And so, we are in the process of looking at this and whether there are either administrative steps that can be taken or legal steps that can be taken to enjoin them from proceeding with this in June.

 But this is the latest version of how this continues to reverberate through problems that we thought we’d solved at one point just keep coming back up through the system. And a lot of this has to do with how -- the main topic that I’m kind of looking at right now, with portfolio investment, in particular -- is how both our multinational corporations and Wall Street, in particular, consistently continue to underprice geopolitical risk. And we’ve seen this with Ukraine over the past four months. And we’ve also seen this bleeding into how some companies -- how some C-suites and some investment firms and investment advisors are starting to think about China as well.

 The supply chain problems were just kind of the beginning of it. But now that geopolitical risk is back with a vengeance, you see people also looking at their exposure on China, not just from a supply chain perspective in terms of day-to-day getting products in, but what if there is a catastrophic event or some kind of geopolitical disruption such as an attack on Taiwan, which is not outside the realm of possibility and certainly lurks out there on the horizon as we all think about China and geopolitical risk. That’s the big one, but it’s not certainly the only one. So I think that we are starting to see even within some of the most staunch defenders of continued investment, unbridled investment in Chinese entities and the ability of China to have full access to invest in the U.S. because that is also an aspect of the investment and how it round-trips. So we’re starting to see a greater awareness about geopolitical risk. But it still remains deeply underpriced by most investment firms and by most multinational corporations when it comes to China.

 We’re talking about trillions of dollars in U.S. retail investors who are not being well-advised by those who are charging them fees to invest their money for them for their retirement. And they’re being unknowingly -- they’re unknowingly invested largely through exchange-traded funds. And that’s the MSCI and the other indexes that drive these funds. It’s very opaque. I don’t know how many of you sit down and read the perspectives -- and we’re all lawyers, and they’re so impenetrable. We’ve never known more about what these companies are doing and at the same time known less about what our portfolios are containing. So there’s a real -- there are real problems with information about how these things are done.

 And what is actually going to, I think, make them worse—and it’s a topic that the next panelist, Alex, will be delving into a little bit more—which is the economic—sorry—the environmental, social, and governance trend that is also colliding with this underpricing of geopolitical risk and the shift on that combined with the emergence of this ESG phenomenon as a driver of investment decision-making of portfolio construction, all sorts of things, and policy decisions at the company and at the investment management level. So you have a lot of things kind of colliding right now that are shaping up to be a very volatile investment environment for people, who -- especially like most retail investors, who aren’t closely following these things.

 And when I think about ESG, one of the biggest problems right now with ESG is it, potentially, could solve this because ESG should highlight, for instance, how human rights abuses at the ground level in a country such as China, the forced labor problem, all those things -- that should be a huge part of ESG ratings, but it’s not. It’s barely even a factor. Instead, ESG is heavily overweighted on the environmental issue. To the extent it deals with social and governance issues, it’s primarily directed at U.S. and Western countries, regulatory regimes, Western companies, hiring practices, their board composition, their positions on social justice issues.

 And then there’s a complete black hole when it comes to China’s vast human rights abuses, their corporate governance problems, things like the law-proof nature of Chinese entities that are listed on U.S. exchanges through VIE structures that are essentially law-proof. Their insiders are law-proof here in the United States. So there are all sorts of social and governance problems in China that are not even really being accounted for in the ESG framework. So ESG is not the solution. In some ways, it’s actually going to be a problem because it’s so unbalanced with the E that you then create greater opportunities for regulatory arbitrage between Western regulatory regimes that regulate companies according to increasingly complicated ESG taxonomies, such as the one in the EU, versus Chinese companies that are not required to do anything.

 And it will be very interesting to see how the PCAOB manages the implementation of the Holding Foreign Companies Accountable Act as well as how the Department of Homeland Security and the Justice Department manage the implementation of the weaker Forced Labor Prevention Act because these are two recent pieces of legislation that are trying to solve some of these problems of regulatory arbitrage as well as the underweighting of human rights abuses in socially responsible investment constructions. And you see -- there’s a lot of fighting going on within the administration. So there’s a lot of regulatory space that’s very competitive and very fraught right now in terms of how the U.S. government, the regulatory agencies that should be protecting investors, that should be helping to regulate investment opportunities, are managing these things.

 And then the final issue that I would just kind of touch on is that it’s not enough for us to be clear-eyed, as Ivan said, about the outbound investment activity and where our investment dollars are flowing into China. We also have to be very mindful, as I mentioned, about the return flows that come back, what I call the small, smart money that’s coming from China into the United States in the form of Chinese venture capital that is investing, taking small pieces of our most bleeding-edge technologies. And if we think about where our economic security lies, it’s in the tech space where we have competitive advantages and where we also have national security implications for this tech space and these bleeding-edge technologies.

 And so, it is absolutely critical to protect those to the extent we can and take the necessary steps to do that. But right now, we’re not doing anything about it. The loopholes in the law, whether it’s on investment or on access to technology, are still almost heated up at some point. And so, we need to really start to look at how we can use the existing regulatory frameworks, tighten those up, shut down some of those loopholes, and really start to protect our critical industries and our critical supply chains. So I’ll stop right there and turn it over to Alex for more on ESG.

 Hon. M. Miller Baker:  Thank you, Ambassador. I would like now to introduce Alex Dimitrief, if I’m pronouncing that right --

 Alex Dimitrief:  Sure did.

 Hon. M. Miller Baker:  -- a partner at the—here we go again—Zeughauser?

 Alex Dimitrief:  Got two for two, Judge.

 Hon. M. Miller Baker:  All right. I usually don’t do that -- and former General Counsel at GE. He’s, by definition, as former General Counsel GE -- he’s been a C-suite leader who’s steered various global businesses through complex commercial, legal, and organizational challenges. I’ll say it. Presently at the Zeughauser Group, he advises legal departments and law firms in a broad area of economic and policy issues. He teaches a class at Harvard Law School on the “Corporation as a Citizen” and corporate law at NYU Law School. When he was President/CEO of GE’s Global Growth Organization, he was responsible for driving GE’s growth in 180 countries, presumably China as well. And then he was General Counsel from 2015 to 2018. He has a long, distinguished biography. I recommend that everyone see it, as all the panelists, but he went to GE after 20 years at Kirkland & Ellis, earned his BA from Yale, and his JD from Harvard. With that, our distinguished [inaudible 36:19].

 Alex Dimitrief:  Thanks, Judge. Thank you, Judge, and thank you to The Federalist Society for having me. Just to show I haven’t forgotten all my training from when I was at GE, I would like to say that what I’m going to say today reflects my personal views and not necessarily those of any of the institutions I’ve been associated with because I want to start with a little bit of context and a little bit of a reality check. The lure of China has drawn multinationals to an enormous market for over 100 years, and that’s not going to stop anytime soon, with or without the support of the United States government.

 It’s the biggest economy in the world soon, probably by 2030. It’s the largest consumer market in the world. Depending on which industry you’re talking about, it’s the first or second largest B2B market in the world. It would be hard to exaggerate the influence that China has had on the world since it emerged as a relative bastion of stability during the financial crisis. It would also be hard to exaggerate the degree to which the Belt and Road Initiative that China has initiated has been the most ambitious and far-reaching program of government-sponsored economic expansion that I think any of us have witnessed in our lifetimes. And that also draws companies to invest in China. That’s why companies, including the one where I probably worked for 13 years, have eagerly invested China as much as they could.

 And through the lens that we’ve historically looked at China, issues like intellectual property theft, forced exchanges of property, favoritism towards domestic companies, eavesdropping, and theft from data management systems have all been viewed as a short-term cost of long-term profitability in a great and profitable market. And more broadly, advocates of investing in China—including me, over the years—have also taken a broader perspective that commercial ties facilitate constructive engagement. And the hope has always been that engagement in the business community would foster closing the gap on civil and human rights, steer China toward the rule of law as we see it in the West, and help bridge differences between companies and cultures.

 So how’s that going? And I think you just need to look at recent events in the last five years to see that it’s time for people to rethink how and why they are approaching China, again understanding that the lure of the market is never going to go away. But witness the suppression of civil liberties in Hong Kong. Witness the violations of human rights of the Uyghurs and other Muslims in China. Witness the epic manipulation of information by the Chinese government. Is constructive engagement working the way that we had hoped it would? Are companies seeing improvements in intellectual property theft and selective enforcement of laws? To me, that means that companies have to be more clear-eyed about investing in China—what types of investments, what types of markets, what types of products—taking a fresh look at products with potential dual uses for military technology, and just revisiting the approach to say that the way we’ve thought about this has not panned out.

 And we have a country that has not changed its approach towards the government and hasn’t moved one inch toward the models of transparency and democracy as we had hoped, which leads me to my second topic this morning, which is that the relative silence of multinationals on all these issues raises questions about the consistency and raises questions about cognitive dissonance in the ESG movement. Now, I want to say right up front, I’m more sympathetic to the ESG movement than most members of The Federalist Society. I actually think that principled programs of ESG are consistent with the interests of shareholders because, if they are applied in a principled way, they increase the long-term value of enterprises for the benefit of shareholders as well as other stakeholders.

 With that said, part of having a principled program is having a consistent program. And I want to focus in on the coronavirus crisis, which prevented us from getting together in meetings like this for several years, just to illustrate the point. Now, I do so not to forestall criticism of how this country and other companies were unprepared and didn’t respond optimally to the coronavirus crisis. This isn’t about assigning blame today for why the pandemic happened, at least not from my viewpoint. The question, though, is that the COVID-19 outbreak raises serious questions about President Xi and the regime that currently rules China.

 And I think multinationals have to be honest with themselves and ask questions. Like, does proceeding full speed ahead with investments in China make sense when the government there failed to be transparent about the origins or rapid contagion of the coronavirus, when the government there silenced experts and punished critics who tried to sound the alarm at early stages, when the government there barred health experts from entering the country, when the government and regime there expelled foreign journalists who were trying to get to the truth about what the world was confronting, when the government there delayed in taking actions that might have contained the coronavirus? I mean, who knows?

 But a government that also persisted in reporting suspect data whose unreliability impeded the world’s efforts to come to grips with the coronavirus -- and do major new investments and proceeding in new products and new platforms in China without talking about any of these issues amount to an imprimatur that could encourage the regime to continue behaving in the ways that it has and fuel the propaganda that we’re hearing about President Xi’s supposedly exemplary leadership during the pandemic? I don’t profess to have the answers to these questions, but I do believe they need to be asked.

 To me, when I look at the unprecedented damage inflicted by the pandemic, isn’t this a time for companies to come to grips with the hard but quintessential ESG questions like the ones I just posed a second ago? History is going to judge the unprecedented coronavirus as one of the greatest shortcomings of government in our lifetimes. And if that’s the case, I am disappointed and puzzled that leaders of the ESG investment community have not stepped up to demand the sort of leadership and clarity from the private sector about doing business in China that they had been demanding from CEOs on social issues in the United States and other Western markets.

 And I believe that the sooner that multinationals in the United States and Europe and elsewhere become more consistent on this issue and start to demonstrate that there are consequences to actions that will be applied throughout the world, not just here in the United States, the better business will contribute to all the goals that we’ve aspired to in China over the last hundred years and the more consistent we will have -- more consistency we’ll have towards approaching difficult issues like ESG. So thanks, Judge.

 Hon. M. Miller Baker:  Thank you very much. So we’ll have a back-and-forth with some questions for the panelists. And we’ll ask questions from each other, then we’ll take questions from the audience. I’d like to open this up by -- the question has been, if you will, put on the table, should we -- there’s a hard line which would say that the United States needs to decouple from China economically.  Supply chains -- everything else has to decouple. That’s the hard line. You have varying views on that. The question is -- my question for the panelists -- even if you -- is it too late for that? I mean, is it too far gone at this point to decouple economically from China? All right, whoever would like to go.

 David Dollar:  I’m happy to jump in first. So while we’re having all this conversation about decoupling national security technologies of the future, all of which is very important -- meanwhile, if you look at the data, we actually had more trade between the United States and China last year than ever before. Right? So Americans, our prosperity is—I wouldn’t say it’s dependent—but our prosperity is supported by international trade in general. It’s not just China. Actually, there are a certain amount of supply chains leaving China now for a variety of reasons, the most important being wages are rising in China, so it’s less attractive to do certain things. But then you add in geopolitical risk and the tariffs, et cetera.

 But of course, it’s not reshoring of the United States. It’s going to Southeast Asia, to Vietnam, Bangladesh, where wages are cheaper than in China. Some of it’s going to Mexico, but Mexico’s having a lot of trouble -- has a lot of rule-of-law issues there that undermine its competitiveness. So the reality, that’s kind of like -- the revealed preference of Americans is that we like to import a lot of this stuff. And if we don’t, it is going to seriously cut into our living standards. And we can have a conversation about whether it makes a big difference, whether we buy it from Vietnam or China, but remember, these supply chains are very complex. So a lot of what we’re buying from Vietnam -- there’s median technology inputs going from China to Vietnam. So it’s not necessarily a loss for China. China’s moving up the value chain, exporting machinery to places like Bangladesh and Vietnam. China’s relationship with Mexico has really taken off, basically. So I think that’s the reality.

 Clearly, there’s going to be some pullback from globalization, some pullback from integration with China. I don’t doubt that. We went through a period that economists often to refer to as hyper-globalization, and now we’re in a period we call slowbalisation. So we’re not going backwards, but we’re progressing a lot more slowly. That’s probably cautious and sensible. But the political question for us is, do we want to take a big radical step backwards in terms of globalization? And that would almost certainly undermine our prosperity and our innovation.

 Ivan Kanapathy:  Thank you, Judge. Yeah. So I don’t know if decoupling’s the right word, especially when we talk about supply chains and things like that. I think diversification maybe is more accurate. And again, I kind of go back to some of the experiences we’ve had both at the beginning of the pandemic and then again just recently with supply chains and overreliance, I guess, on a single supplier, country/market, what have you. And so, I think one of the problems that totally – obviously, all the facts that David just laid out, that trade’s increasing and this and that -- I mean, I guess, to me, that points to a problem that maybe we have to acknowledge that only government can fix.

 When the traditional -- the reality that got us where we are is this basis where you have a noninterventionist government on this side of the Pacific and a very interventionist government on the other side of the Pacific. And that’s not a level playing field. And it’s created the outcomes that create, frankly, what I view as tremendous vulnerabilities. And so, the answer we want is to make Beijing noninterventionist. But I think, as Alex said, we tried that for about 30 years, and it’s not working. And so, how do you level the playing field? Do we just throw up our hands and say this is reality? I’m not sure that’s the best solution, I guess. And that’s driving us towards, frankly, where we are looking at industrial policies, looking at more restrictions and investment in both directions, trade in both directions, and things like that. Yeah. I’ll stop there.

 Amb. Kelley Currie:  And to follow on both of my colleagues, I think that the key thing here is that China has a choice in this, too. They’re making policy decisions, and Xi Jinping has been very, very clear that he wants the Chinese economy to be less dependent on trade with the United States and with the West and certainly less dependent on our technology but also less dependent and less needing to trade with us. This is why China is implementing what they call their dual circulation economy. They want their own economy to be more self-reliant and more self-sufficient in every way. So it’s not just about our own choices, but it’s also about China’s choices.

 That said, our choices, I think, need to start with not helping to make the playing field more unlevel in the favor of China. And this is a point that my friend Derek Scissors, who’s at AEI, makes in a lot of his commentary on this. And Derek is a free trader as well. I actually am a free trader, too. And this is really hard for me because I believe in free trade, but I believe in free trade with free nations. And I think that we have to recognize that we’ve been benefiting from trading with China in ways that have helped us keep inflation artificially low for the past 40 years by keeping the price of goods low because of the China price, that we have been able to export dirty industries out of our country and into other supply chains that China is central to and benefit from that. And we’ve benefited from how we have -- we’ve gotten a lot of benefits as a society from this, but there were costs, too. This was not a cost-free proposition. We hollowed out our industrial base, and we’ve offshored critical supply chains that we now are very vulnerable with. So I think that we’re now coming to a reckoning. All of this is coming to a head, and we have to deal with it.

 But the first rule of holes is to stop digging when you’re in one. And I think that that’s where we are now is trying to plug some of the gaps in our laws, in our regulatory arrangements, that have allowed China to engage in regulatory arbitrage and in trade arbitrage, where they benefit from the imbalances and the disambiguities or whatever in our law that allow them to create leverage for themselves and to create opportunities and to be opportunistic about these things. So I would say that that’s kind of where we need to be is -- I think, yes, maybe decoupling is something that happens down the road. But it’s something that happens with all of us because the Chinese are wanting to do it, and the United States and Western countries are also concerned about their own economic and national security. But I think that it’s something where, in the near term, we just need to stop the bleeding, frankly.

 Alex Dimitrief:  So, Judge, I just briefly add that, from my perspective, decoupling is a fascinating theoretical topic, but it’s completely impractical. It’s, again, one of the largest economies in the world. Every analyst says it’s on track to become the largest economy in the world by 2030. When you read the five-year plans that the Chinese government issues, the Chinese government has big plans to take competition to the rest of the world. Multinationals face Chinese companies as their principal competitors now in sub-Saharan Africa, northern Africa, Europe, and South Asia, and that’s not going to change.

 And if I could say one thing to the deans of business schools who are listening right now -- learning how to compete with companies based in China is something that every aspiring leader of a multinational needs to learn how to do because the threat is here, and it’s not going away. To me, the answer, again, remains engagement for the reasons that I mentioned in my opening remarks, but realistic engagement and more thoughtful engagement and more clear-eyed engagement about what the short-term and long-term objectives of that engagement are. But decoupling from such an enormous market and a market that is going to be the largest economy in the world within five to ten years, to me, is just impractical and not smart.

 Amb. Kelley Currie:  Can I just ask Alex a question there because I don’t know how you compete with Chinese companies that can engage in bribery that are prohibited by the Foreign Corrupt Practices Act for U.S. companies, that have access to state financing that U.S. companies couldn’t possibly get access to, and operate in a way that is completely unaccountable to anybody other than the party-state. I don’t mean -- we can’t get down in the mud with them. That’s not going to work. So our choices are to go high, and we’ve been trying that. I mean, we’ve tried with clean networks and with some of the other initiatives to look at high standard development and high standard competition. But that’s not what -- how do you do that when the Chinese companies and the party-state can work together to go in and capture the elite in these countries that are deeply corrupt and are not themselves accountable to their own populations?

 Alex Dimitrief:  So I guess the way I’d answer that question is to make a distinction between competing with China around the world and competing with China within China. Competing with China within China requires a more clear-eyed approach, thinking about the types of products, thinking about the types of risks, and thinking about the types of endeavors that you are going to pursue. And again, I think that if a business is realistic about those short-term costs actually being long-term costs and calling out consequences for the type of behavior that you outlined in the medium term, there will progress on this issue.

 I am encouraged that the rest of the world sees the disparity in the approach that Chinese companies take in many cases—not all cases, but many cases—versus the approaches that Western multinationals take. And I believe that is a strong selling point. That’s been a strong selling point throughout my entire career in terms of honesty and transparency with which companies do business. And I think trumpeting that advantage and, again, going into areas where the Belt and Road Initiative has tried to make great incursions and pointing out the differences in approach between a Western multinational and some of the companies in China who are trying to establish beachheads in sub-Saharan African and South Asia and other challenging parts of the world is one of the most important things that American businesses can do through the type of transparency that I advocated earlier.

 Hon. M. Miller Baker:  Do our panelists have questions for each other? Any questions? So I have a question for Ivan, who served in the NSC. And one of the things that has perplexed me is understanding, actually, in government, in the executive branch, who’s in charge of China policy? I mean, this is a multifaceted, very complex problem, and it seems to me that the rise of China presents a challenge to the United States that is unprecedented. The Soviet Union was primarily a military challenge and an ideological challenge. They had an ideological mission in terms of spreading the revolution, if you will. At least, they had that early on. That’s petered out. But there was a military dimension of the Soviet Union, but it was pretty much that. And Germany and Japan certainly weren’t -- on a worldwide scale, certainly had nothing of the latent power that China has now and will continue to develop. So this is an unprecedented challenge that we’ve never seen anything like it in our historical experience. And in view of that, who’s in charge?

 Ivan Kanapathy:  Yeah, Judge, it’s a great question. I probably -- this won’t be a terribly revealing answer. But there are obviously a lot of equities. The one thing I would say -- I would suggest, is that—I’m not by any means a Cold War historian—but it was a primarily, I think -- viewed as a military dimension, but we had things like the Coordinating Committee, the COCOM, which was basically the predecessor to multilateral export controls that we have today. That came about during the Cold War as a result of that competition that was happening. And there are probably other examples. And so, it still was, I think, the Cold War, more of a whole government exercise. You mentioned the ideology part. And I think we’re still there now. I mean, military’s a part of it. But I’d agree it’s less a part of it, but it’s still quite multifaceted and does include the military still today, obviously. And so, a lot of different departments, a lot of different cabinet members have equities.

 In China policy, I think we’ve seen, historically -- if we go back to what Alex talked about—the years of engagement, if you want to call it that—we sort of allowed the Treasury Department to take a lead as we’ve seen. And I think I would agree with Alex’s assessment that what we tried for decades didn’t work, which again is not a dig just on the Treasury Department. But I think what you’ve seen is a shift definitely starting with the Trump administration but maybe even before that, in the Obama administration, more towards National Security Council and the State Department.

 And really, ultimately, you’re right that Secretary of State is responsible for U.S. foreign policy. And so, if you want to look at something as a whole, as a country, the State Department is supposed sort of integrate all that. And obviously, the NSC helps the state department do that. So that’s the theoretical, I guess, answer. I think, to kind of close out, that a lot of times it becomes, at the highest levels, frankly, sort of personality and relationship dependent. That definitely has an impact. I’ll stop there.

 David Dollar:  Can I defend the Treasury Department?

 Hon. M. Miller Baker:  Absolutely, yes.

 David Dollar:  I’ve represented Treasury in Beijing for four years—from 2009 to 2013. And if you remember, the main headline in [2009] was the global financial crisis, the collapse of housing prices, and the U.S. bailing out the U.S. financial system. So when Tim Geithner went to China, his instructions from the White House were -- the key issues were we had large -- China had a large overall trade surplus, undervalued currency, and we needed China to do more in terms of stimulating domestic demand. Well, actually, China did all those things during the four years that I was involved. And I’m not taking credit for it. I’m just saying factually, their currency appreciated more than anybody else’s on a trade-weighted basis. Their current account surplus went from – I think it was up around, yeah, it was above ten actually, and it went down below one within a few years, which was pretty remarkable. And they had this massive domestic stimulus program—they probably overdid it. But actually, it was really good for the rest of the world. It stimulated imports and commodity prices, etc. So the agenda that Geithner was sent to work out with the Chinese, they largely followed through on. And so, I don’t -- engagement is definitely somewhat disappointing. I can endorse that. But the notion that it failed completely, I think that’s ahistorical.

 Alex Dimitrief:  I agree with that, in particular when it comes to investments that multinationals have made in employees in China who have been incredibly talented. And I always think it’s dangerous to conflate a government with the people that it represents. And I will say that in my encounters with the citizens of China over the course of my business career, I’ve met some incredibly talented people with amazing integrity. And so, when you look at engagement, you always have to say what would the alternative have been, and how would things have turned out for the last 40, 50, 100 years had we not engaged? I think the answer there is not necessarily better than they have now. I think there are many strong attributes that come from engagement. My point is really that now’s a good time to do a process check and say, "Do we need to refine our approach?” But we definitely have to have an approach.

 Amb. Kelley Currie:  So can I just talk about the State Department’s role in this too because I worked at the State Department in 2007 and 2008 when we were headed into this financial crisis and experiencing it, and then I worked at the State Department again in the previous administration. And to say that the Overton window has shifted is an understatement. But what I can really say is that where we now are is that we are taking a much more realistic and holistic look at China and that it’s not just this -- I mean, human rights issues have become part of our policy in a way that they were not during the Bush administration and the Obama administration. And the ideological aspects of the competition has been thrown into stark relief by the Xi Jinping administration. It was always there. I mean, China was a Marxist-Leninist regime in 2009, just like they are today. But they were operating under the Deng Xiaoping hide and bide maxim, and now they are in not hide and bide mode. It has merely just been with Xi thrown into high relief that this is a Marxist-Leninist regime whose ideology is fundamentally hostile to U.S. interests and our way of life.

 Now, yes, it is always a mistake to equate the party-state with the people of China. And I actually believe that by talking about human rights—which the Treasury Department hated to do and basically stopped us from doing all the time—we are talking about the Chinese people. That’s whose human rights we’re talking about when we defend them. And so, having such an unbalanced China policy that was so about economics and so dependent on economics to drive political change, which in hindsight was not a great idea and was not a realistic one -- and I don’t think that it’s not a choice between -- I don’t think it’s a choice between engagement or not engagement. This is a huge country—1.4 billion people—with a massive military and a massive economy. We have to engage with them.

 But how we do it, with whom in their country we do it, and to what purpose -- engagement is not a policy. It’s a policy tool. And I think for too long, the purpose of the relationship became to keep the relationship going. That’s a terrible policy construct. And it was not in our -- it’s proven to not be in our interests to have done that, but here we are. We’re going to have to make difficult adjustments over the next few years to try to get to a place where we do have a more realistic policy, whether it’s on economic security, national security, on a whole host of how we do people-to-people engagement. They’ve cut off a lot of that. I mean, let’s be honest. Again, I keep saying this, we do what we do, but they have agency in this, too, and they make choices, too. It’s not just about what we do that shapes the relationship.

 Ivan Kanapathy:  And just to clarify -- obviously, I think I agree there. I think the Treasury Department did an astounding job. I think the thing I was calling into question was really more the decision to put the Treasury Department in the lead. Right? That’s really what we’re getting at because that means certain equities and certain issues go to the forefront and, by default, others go to the background.

 Hon. M. Miller Baker:  Unless our panelists have any questions for each other, I’ll take questions from the audience.

 Questioner 1:  Thank you. First of all, thank you very much for this excellent panel. The experience is really very broad, and I really appreciate that. It’s very valuable. I served as a general counsel for a manufacturing company, not quite as large as GE, of course, but we had hundreds of millions invested in China, a number of factories, maybe 25 other countries across Europe and around the world. But as far as manufacturing, COVID shut down -- and the COVID shutdowns brought about a significant increase in automation of manufacturing. Automation is another word for robots, as you know. That has brought down the labor cost as a factor. And so, my question is, do the panelists believe that the increased automation that we’re going to see and have seen and the decreased focus on the cost of labor will slowly move manufacturing out of China and in a similar way that manufacturing significantly moved out of the U.S. to other cheaper countries? If that happens, will that blunt China’s economic power in the near and the distant future?

 David Dollar:  Well, that’s a great question—a really tough question. I guess I would point out China has 25 percent of world manufacturing value added right now. And that’s not the kind of thing that’s likely to change quickly, maybe slowly over decades. They have a terrible demographic problem because of the decline of fertility encouraged by one-child policy, so their labor force is basically peaked and is going to start to decline. So they’re actually putting more robots on the line than any other country. They’re actually taking the lead in introducing robots, and I think that’s one factor that’ll keep them certainly a significant manufacturing powerhouse. But I do think the demographics -- that’s ultimately a big disadvantage for them. Maybe there’s some high-tech areas where you can replace people with robots, but there are lots of other jobs where you’re not going to replace people with robots. And I think that policy accelerated things for a while. Now, they’re going to pay the price.

 And we have the potential -- a couple of times, we referred to China as likely to emerge as the largest economy. But if you look out toward the end of the century, the U.S. could very well come back as the largest economy, but it will depend critically on immigration. China’s population will decline below a billion, and we have the potential to add hundreds of millions of people to the United States if we have the political will. I always remain optimistic about the United States in the long run. But I think China -- they’ll introduce the robots, and they’ll be a major manufacturing player for sure. But the demographics are a real problem for them.

 Ivan Kanapathy:  That’s right. Yeah, the only thing I would add is labor’s only, obviously, one input. And I think China’s seen this. Both demographically and just the rising wages, they’ve seen this coming. I mean, they’ve been watching it. They’re obviously trying to move a market themselves with higher skill, higher education, and all that kind of stuff, so themselves trying to rely less in the supply chain on labor. And so, you’ve got all these others advantages that China has with subsidies, loose environmental regulations/enforcement, economic espionage. So there are other factors that I think will continue to sort of keep them at a distinct advantage, I guess.

 Alex Dimitrief:  I’ve seen manufacturing plants in China that deploy robotics as well as any place in the world. And I think that trend is going to continue. I think you’ve identified a broader policy question that is taking place around the world. I don’t think it’s going to disproportionally affect China or its desirability as a location for manufacturing. But I do think it’s a serious question that governments around the world have to address in cooperation with business.

 Questioner 2:  Well, thank you to the panel, all very interesting. And sort of apropos Judge Baker’s question, who’s in charge? I know it’s interesting -- one chronic problem which really hasn’t been adequately addressed is hundreds of billions of dollars in theft of intellectual property, business secrets, other things, which are bemoaned every year by the U.S. Trade Representative, nothing really that much happens. At the same time, China is drastically ramping up its issuance of patents, giving favorable terms to parties, certainly to anyone from the judges who invest in China. And at the same time, the United States is weakening patent rights, very arguably, and threatening to undermine antitrust laws, which have served the United States well for decades.

 So there’s certainly the argument about domestic economic decisions. And national security, for example, was raised by the Justice Department in a brief in Qualcomm a few years ago pointing to the fact that the proposal’s basically to strip Qualcomm to make it redo its contracts would have destroyed its intellectual property. It would have been a major beneficiary for Huawei. So I guess the bigger question I’m getting at is, is there a sufficient understanding—do the panelists think—about the effects of domestic U.S. policy towards innovation and the effects on China, which is very interested in creating -- being nanotechnology innovation leaders and so forth? Thank you.

 Amb. Kelley Currie:  Well, I think that we, both Ivan and I, have seen—and David too, I’m sure—have seen how chaotic our policymaking process can be. And between the executive branch agencies and Congress, our legislative and regulatory structures are hopelessly ill-suited to the current challenge. I cannot emphasize enough, they are overcomplicated. They don’t capture things that they need to. Our agencies, our processes are terribly ineffective in dealing with the challenges that we face. And it’s been that way for some time. The need for administrative reform on some of these things, on who owns which issues, on how to make policy more effective and more streamlined, is urgent, and nobody’s talking about it. I mean, not since Al Gore talked about reinventing government have we really had a serious look at how our sclerotic, bureaucratic processes are a huge competitive disadvantage for this country.

 The only thing that really is keeping us from being completely destroyed by it is the fact that the EU is worse, the fact that they are even more bureaucratic and more ridiculous. So we’ve got to deal with that. As lawyers and as people who work in public policy, it’s a huge imperative that I think is an underappreciated aspect of our need to -- if we’re going to be competitive, if America is going to come back and retake its position and maintain its position as the largest economy in the world and the most competitive economy in the world and the best place to do business in the world, we’ve absolutely got to deal with the fact that our regulatory and bureaucratic systems are an absolute mess.

 Ivan Kanapathy:  The thing I’ll add to that, not to sound flippant about who’s in charge of China policy, I think it’s -- the person that’s in charge is the president. And having worked as a career official in both administrations, this one and the previous one, I can tell you that policymaking is much easier when you get very clear direction from the top. So leadership makes a difference on so many issues.

 Alex Dimitrief:  I think you’ve asked a question that we could spend the rest of the day on because there’s pluses and minutes. I can think of many times when U.S. government policy was tremendous assistance. That hasn’t always been the case. And so, again, it’s balancing the pros and cons. But I want to hasten and add to the ambassador’s point because what businesses have to understand is it’s not just U.S. policy anymore. MOFCOM has become very assertive within China. The EU has become incredibly assertive out of Brussels. There are regulatory authorities around the world who no longer wish to defer to the United States on the types of issues that we are talking about.

 And so, a multinational business that’s making investments in countries like China and sub-Saharan Africa needs to understand those competing regulatory objectives and make the decisions appropriately. And ultimately, when you’re evaluating the short-term cost of doing business with China against the long-term benefits, the leaders of a company are responsible for the wisdom of the investments they make. And my point today is it's time to sit back and think about whether traditional approaches still make sense as we hit the halfway point of 2022.

 Max Castroparedes:  Hey, good morning. My name is Max Castroparedes from Harvard’s Belfer Center. This has been an outstanding panel, drawing from experience from the corporate state, NSC, and Treasury. My question is, how do you balance U.S. capital investment opportunities investing in China while also making sure they’re not investing in companies that harm our national security? I think I would really enjoy listening to all of you, I know, just briefly, but that’s my question. So thank you.

 Hon. M. Miller Baker:  David?

 David Dollar:  Well, I just want to endorse the ambassador’s comment that watching the functioning of the U.S. government up close is a scary thing. So when we start talking about some department, maybe it’s the Commerce Department, that should be investigating each technology and deciding whether or not U.S. firms can invest in China, that just really scares me. And I’m not a small government person—I’ll just be very frank—but I think there’s certain types of regulatory things that our system just does very, very poorly.

 Ivan Kanapathy:  So I think it’s a hard question to answer, but I think, ultimately, what you’re asking about is sort of, “How do we get around the opacity of the system in China?” And I think -- I don’t have an answer in how to get around it, but I think it’s important, to Alex’s point earlier, that we are factoring it into our investment risk decisions. And I just don’t think -- that’s why I brought up the MSCI, the Jamie Dimon stuff -- that maybe not just retail investors, but FDI investors aren’t really getting an accurate picture. And I just last week, you had this huge private equity guy, Shan Weijian, out of Hong Kong, and he got caught saying -- well, he said it quietly, but he recorded is what happened. He is typically, openly a huge pro-invest in China guy. And the things that he said—I think you guys can look it up—were quite the opposite.

 When you have instances like that -- and it’s quite clear, I think we would admit, that he's close to the regime in Beijing. And then, you had this week Hong Hao from the Bank of Communications, one of the top five banks in China, he said some things on his WeChat that were kind of bearish on the market. And his WeChat account got shut down. And so, you talk about intervention by the state -- I mean, we’re talking things that are, frankly, in my view, worse than insider trading. Right? And is that being programmed into people’s investment risk decisions? So that, I think, is the question that we need to be asking because trying to actually figure out how all the supply lanes connect and this and that and who’s going to the PLA and who’s not is one-resource intensive to the point that I don’t think we can really do it.

 Amb. Kelley Currie:  As I’ve kind of alluded to before, I think, first, we got to stop the self-inflicted wounds. We’ve got to stop disadvantaging our own critical industries vis-à-vis what the Chinese are trying to do. And a lot of that has to do with regulatory reform, dealing with some of our internal inconsistencies and the way that we allow regulatory arbitrage to -- not even just allow it, but encourage it to take place. And also, continuing to just push this issue of getting investment actors to accurately price geopolitical risk and including the geopolitical risk of authoritarian governments and understanding that authoritarianism is a risk factor. It’s not a benefit, which is how it has been perceived previously by investment firms. And I want to underline that if you were talking to Goldman ten years ago or maybe even ten months ago, they would have told you that Chinese authoritarianism is an upside risk, not a downside one. And I’m hopeful that people are starting to reverse that thinking about authoritarianism itself as a downside risk factor.

 And then leveraging our comparative advantages -- we can’t out Chinese the Chinese, and we can’t get in a race to the bottom with them. We’re never going to be able to do what they do, whether it’s the way they do Belt and Road by capturing elites in these countries or the level of state -- of unaccountable state finance that they provide to national champion industries. We’re just never going to be able to do those things. We have a different kind of society. Our society and our politics are organized in a completely different way. So we’ve got to figure out how to take advantage of that. And that means looking at what has made America successful. It’s the trust principles that our businesses operate on, accountability, contractual obligations being met, transparency, the fundamentals of why American companies succeed. And we have to try to find ways that allow for the kind of flexible, accountable regulatory regimes that will encourage high standard of growth in this country and high-quality growth while making us more competitive globally.

 And that is hard. It is really, really hard stuff to do. And we have put it off, and we’ve ignored it. And we’ve not invested in those things for the past 40 years because we could just offshore everything and keep inflation down by buying cheap Chinese products and driving the price of goods down that way. The reckoning is happening now, and we’ve got to make hard decisions. And we’ve got to do things differently, and it’s going to be very ugly for a while, I think.

 Alex Dimitrief:  To me, the answer in addressing tradeoffs, like the ones that you articulated, is to promote a culture of corporate integrity from top to bottom, where doing the right thing isn’t just a slogan but is actually a principle around which you organize how the corporation runs. That’s a unique characteristic of American companies that I believe we can be very proud of. The great companies have great integrity, and they create environments where employees from top to bottom can openly discuss these types of issues without fear of retaliation or intimidation and get to the right answer. And promoting that candor, promoting that integrity is ultimately the answer to every type of tradeoff of the sort that you just identified.

 Hon. M. Miller Baker:  Thank you. I have a question I’d like to close this out with. So I opened up by looking backwards to 1988 at the very end of the Reagan administration, and it was morning in America. I want to look forward now to 2050, 28 years from now. I’d like to ask each of our panelists, which country will be the leading, the preeminent country in the world -- and I know there are three dimensions to that, but let’s combine them—economic, military, and political? Mr. Dollar.

 David Dollar:  The U.S. will be the preeminent country. The dollar will still be the leading reserve currency. China might be the largest GDP just because they have four times as many people, but we’re the technology and institutional leader.

 Ivan Kanapathy:  I agree.

 Amb. Kelley Currie:  I would rather have our problems, as I’ve just outlined them, every day of the week and twice on Sunday than Xi Jinping’s problems.

 Alex Dimitrief:  I believe the United States will continue to be the predominant force because we are organized around principles of integrity that often serve us well. And our problems are really assets because we own up to them and address them at panels like this. So I think as long as we have open conversations of the sort that this panel had today, the United States is going to continue to do incredibly well, and the strengths that have led us to where we are today will continue to be a huge asset.

 Hon. M. Miller Baker:  All right. Well, thank you. And that upbeat note will close us out. Thank you.

 

12:00 p.m. - 12:20 p.m.
Lunch

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation
State Room
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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12:20 p.m. - 2:00 p.m.
Luncheon Address & Panel: Administrative State on the Brink?

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation
State Room
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, D.C., DC 20036

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Event Video

Description

Over the past 85 years the administrative state has been a dominant feature in the American legal landscape, with important aspects of governance at the federal level having shifted from Congress to the Executive in the form of agency decision-making through rules and orders that touch on every aspect of American life.  Nowhere has this been seen more vividly in everyday life than the patchwork of orders and rules that issued over the past two years in the context of the COVID-19 pandemic.  Even prior to the pandemic, there was a recognition in both legal scholarship and jurisprudence that our democratic constitutional system was not designed for sweeping decisions to be made outside of the legislative process.  And, although still reluctant to find constitutional “nondelegation” violations, courts have increasingly invoked the “major questions” doctrine or resorted to a “Chevron step zero” analysis to consider whether—as a matter of statutory interpretation—Congress could have possibly intended to delegate certain kinds of decisions.  With growing discomfort about Chevron deference, as well as so-called “experts” making decisions the Constitution entrusts to politically-accountable elected officials, is the administrative state finally on the brink of a major overhaul?  We will look at recent and upcoming Supreme Court cases—ranging from vaccine mandates, to environmental rulemakings, to foundational challenges to agency structure—to discuss the future of the administrative state.

Featured:

  • Prof. Philip A. Hamburger, Maurice and Hilda Friedman Professor of Law, Columbia Law School; President, New Civil Liberties Alliance 
  • Hon. Sally Katzen, Professor of Practice and Distinguished Scholar in Residence; Co-Director, Legislative and Regulatory Process Clinic, New York University School of Law
  • ModeratorHon. Neomi Rao, U.S. Court of Appeals, D.C. Circuit

Speakers

2:15 p.m. - 3:45 p.m.
Breakout Panel: Climate Risk a New Regulatory Risk? Implications for Financial Regulatory Control of the Financial System

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation • Environmental & Energy Law • Financial Services
Palm Court
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Event Video

Description

Deploying a “whole-of-government approach” to climate change, the Biden Administration has sought to disincentivize the production, generation, and use of fossil fuels in the United States and globally, with an eye toward achieving “economy wide net zero emissions by 2050.” While geopolitical dynamics – including the war in Ukraine – now threaten to derail some of those plans (at least temporarily), the Biden Administration is pressing ahead with a variety of measures to accelerate the transition away from oil, natural gas, coal, and other fossil fuels. Financial levers and economic metrics are emerging as key tools for achieving the administration’s targets.

Last year, President Biden issued Executive Order 14030 on “Climate-Related Financial Risk,” which directed a variety of financial regulatory agencies to address climate-related financial issues. For example, Executive Order 14030 instructs the Financial Stability Oversight Council (FSOC) to take steps to incorporate “climate-related financial risk into regulatory and supervisory practices.”  Most recently, in March 2022, the Securities and Exchange Commission (SEC) proposed new climate mandates to require publicly-traded companies to disclose company-wide emissions (including emissions up and down their supply chains). The SEC proposal would also require disclosure of corporate “governance” of climate-related risks and relevant “risk management processes,” along with climate-related financial statement metrics, targets, and “transition plans.”  Climate-related actions are also being taken at the Federal Reserve Board, the Commodities Futures Trading Commission, the Federal Housing Financing Agency, and the Treasury Department’s Federal Insurance Office.  Even more broadly, the President has directed federal agencies to restore the use of an Obama-era metric known as the “Social Cost of Greenhouse Gases” for a wide range of agency decisions and programs.  These government initiatives build on non-governmental ESG programs – a key focus of many activist shareholders -  that are forcing closer corporate scrutiny of climate-related concerns.

This panel will debate the legal, policy, and economic merits of efforts to use these and other financial measures to address climate change and drive energy transition in the private sector. Are these measures lawful? Has Congress authorized them? Are financial regulators equipped to engage in these areas? Do market failures justify these interventions? What are the costs and benefits of these new measures? And how will the courts as well as the investment community respond and react?

Featured:

  • Prof. Jeremy Kress, Assistant Professor of Business Law, Michigan Ross; Co-Faculty Director, Center on Finance, Law & Policy, University of Michigan
  • Mr. Paul H. Kupiec, Senior Fellow, American Enterprise Institute
  • Prof. Christina P. Skinner, Assistant Professor of Legal Studies & Business Ethics, The Wharton School, University of Pennsylvania
  • Mr. Graham Steele, Assistant Secretary for Financial Institutions, U.S. Department of the Treasury
  • Moderator: Mr. Jeffrey H. Wood, Partner, Baker Botts; Former Acting AAG, Environment and Natural Resources Division, U.S. Department of Justice

Speakers

2:15 p.m. - 3:45 p.m.
Breakout Panel: Religious Liberty and the Department of Defense

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation • Religious Liberty
Grand Ballroom
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Event Video

Description

The Department of Defense is the largest employer in the nation, and its policies significantly affect the daily lives of over one million service members. Many of these service members are religious, holding a variety of religious beliefs from different denominations. All are guaranteed the freedom to do so, and they do not leave this freedom behind when then they join the military. But the military has a particular interest in uniform rules and regulations, so perhaps has less latitude for exemption-making than other organizations. The proper relationship between the DOD and religious liberty, as well as recent conflicts including the vaccine-mandate lawsuit on behalf of Navy SEALs, will be discussed in this program.

Featured:

  • Address: Hon. James Lankford, United States Senator, Oklahoma
  • Mr. Eric Baxter, VP & Senior Counsel, Becket
  • Mr. Michael D. Berry, Vice President, External Affairs, First Liberty Institute
  • Prof. Eugene R. Fidell, Adjunct Professor of Law, New York University School of Law; Of Counsel, Feldesman Tucker Leifer Fidell LLP
  • Moderator: Hon. Justin Walker, U.S. Court of Appeals, D.C. Circuit

Speakers

2:15 p.m. - 3:45 p.m.
Breakout Panel: Selective Enforcement of Civil Rights Law by the Administrative Agencies

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation • Civil Rights
Chinese Room
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20063

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Event Video

Description

There have been numerous pieces of civil rights legislation that have been passed by Congress and signed into law by the President.  These laws attempt to be, with varying degrees of success, a bulwark against discrimination and oppression in many areas of American life, from voting to education to criminal justice.  These laws, however, are only as effective if the government agencies and officials that are tasked to enforce them do so effectively. 

If an administration disagrees with a law, or with its application to particular circumstances, but lacks the political capital to change the law, officials sometimes appear to underenforce or ignore the law, reinterpret its meaning to avoid enforcing it, or enforce it differently than Congress intended or the plain language demands.  

Our panel will discuss the ways that administrations and administrative agencies can, have, and have not selectively enforced the laws designed to protect civil rights in the United States, and what consequences this discretion has on society and the polity. 


Featured:

  • Ms. Samantha Harris, Partner, Allen Harris Law
  • Prof. Renée M. Landers, Professor of Law and Faculty Director, Health and Biomedical Law Concentration and the Masters of Law: Life Sciences Program, Suffolk University Law School
  • Mr. Hans A. von Spakovsky, Manager, Election Law Reform Initiative and Senior Legal Fellow, Meese Center for Legal and Judicial Studies, The Heritage Foundation
  • Moderator: Hon. Kenneth L. Marcus, Founder and Chairman, Louis D. Brandeis Center for Human Rights Under Law

Speakers

4:00 p.m. - 4:30 p.m.
Closing Address

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation
Grand Ballroom
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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4:30 p.m. - 6:00 p.m.
Closing Reception

Tenth Annual Executive Branch Review

Topics: Administrative Law & Regulation
East Room
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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6:30 p.m. - 9:00 p.m.
Freedom of Thought Dinner & Panel

Public and Private Regulation: What's Driving ESG?

Grand Ballroom
The Mayflower Hotel
1127 Connecticut Ave NW
Washington, DC 20036

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Description

We recognize the risks of agency overreach when rulemaking seeks to impose ESG considerations on business.  But to what extent have private banks and institutional investors also been able to leverage their economic power to shape firm behavior on climate and other ESG questions – outside of the democratic process?  And if we worry that the administrative state lacks political accountability for contentious policy choices, should we also be concerned about the role of private economic influence?

Join us for a dinner at the Mayflower Hotel as our panelists discuss these questions and more. Dinner tickets will be available when purchasing conference tickets at a discount to logged in members. Login or Join today!

Featuring: 

  • Christina Parajon Skinner, Assistant Professor of Legal Studies and Business Ethics, The Wharton School, University of Pennsylvania 
  • Julia Mahoney, John S. Battle Professor of Law, Univeristy of Virginia School of Law 
  • Matthew Stoller, Director of Research, American Economic Liberties Project 
  • Hon. C. Boyden Gray, Founding Partner, Boyden Gray & Associates 
  • Moderator: Hon. Gregory G. Katsas, Judge, United States Court of Appeals, District of Columbia Circuit 

Reading Materials: 

Speakers

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