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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

Event Transcript

Nate Kaczmarek:  Good afternoon. Good afternoon. I never was able to get that whistle, that loud whistle. I need it now. Good afternoon. Thank you for joining us for lunch. Welcome to those of you watching via the livestream. My name is Nate Kaczmarek. I am Vice President and Director of the Practice Groups. I’d like to thank The Federalist Society staff for their efforts in pulling together today’s Tenth Annual Conference. Our gratitude, as well, to the Federalism and Separation of Powers Practice Group, who helped arrange the lunch and panel, which we are about to enjoy, titled “Administrative State on the Brink?”

We’ve got an excellent conversation teed up, and a moderator who is certainly well-suited to it in the Honorable Judge Neomi Rao. Judge Rao was appointed to the United States Court of Appeals for the District of Columbia in March 2019. She is a graduate of Yale and the University of Chicago Law School. She has served on all three branches, including clerking for Justice Clarence Thomas, working as counsel for the U.S. Senate Committee on the Judiciary and as a special assistant associate White House Counsel for George -- President George W. Bush and later, of course, as the administrator of OIRA. For 11 years, she taught as a law professor at the Antonin Scalia Law School at George Mason University. And in 2014, she founded the Center for the Study of the Administrative State.

We’ve been fortunate over the years to have her join our programs on several occasions, and it’s certainly safe to say that we’ve always learned a great deal from her as a result. So please join me in welcoming Judge Rao and our wonderful panel.

Hon. Neomi Rao:  Great. Thanks so much, Nate. It is really a pleasure to be here at the Tenth Annual Executive Branch Review Conference. I can’t believe, Dean, that it’s been ten years that this has been going on. It’s an event I certainly look forward to every year, and, so, it’s great to be here. And I’m very happy to be moderating this panel with two friends and excellent colleagues.

So today we’re going to be discussing on this panel this question, “Is the administrative state on the brink?” And that made me think, “What exactly are we on the brink of?” I think there was some suggestion in the panel description; maybe we’re on the brink of the Supreme Court cutting back on the Delegation Doctrine or minimizing judicial deference or some like that. So maybe that’s one brink. I think from recent developments another brink might be that perhaps the administrative state is going to simply dominate all of our social and economic life. That could be another brink that we are at.

But, in any event, to discuss the topic, we have two leading experts. And I’ll just give them a brief introduction. We have Sally Katzen, who is professor at NYU Law School, where she focuses on at administrative law and regulation. She has served in numerous positions in the government, including, most importantly, in my view, as administrator of OIRA, i.e., the Regulatory Czar. She had that position in the Clinton administration. And I just like to note that Sally is primarily responsible for the content of Executive Order 12866, which governs regulatory review and has really been a seminal document, setting out the principles of what good regulatory practice should look like. And that E.O., unlike many E.O., continues in effect today.

And then, we’ll be hearing from Philip Hamburger, who is Professor of Law, Columbia Law School. He is one of the nation’s preeminent scholars of administrative law and many other topics. He has argued in numerous books and articles that the administrative state is unconstitutional and a serious threat to our civil liberties. He’s also put much of his scholarly work into practice. He established a Center for Long Liberty at Columbia Law School, and he also founded the New Civil Liberties Alliance, which is a non-public -- which is a non-profit, public interest law firm in Washington D.C. I think we’re really lucky to have such an interesting duo to discuss the question before us.

And, so, we’ll have some opening remarks from each of our panelists and then a moderated discussion. We’ll be opening up the mic for audience questions as we go along. So let me turn it, then, over to Philip to get us started.

Prof. Philip A. Hamburger:  Thank you. It’s a great pleasure -- oops. I need this, don’t I? It’s a great pleasure to be here, and the knowledge assembled in this room is far greater than you would find on any faculty in the United States, perhaps all of them put together. So it really is an honor to be here.

Change. Change is inevitable. It’s generally inevitable, and it’s certainly inevitable for the administrate state. And for many of us in this room, that’s not a bad thing because we are on the side of change. We’re often told, “Don’t fixate on the Constitution because change is inevitable.” Well, what goes around comes around.

Change is also coming for the administrative state. You could view this talk as being about the living Constitution for the administrative state. And I think there are both practical and principled reasons why the administrative state is going to undergo some change. How and exactly when, I don’t want to speculate on. I hope this term. If not this term, the next and so forth.

But it is coming. And it’s important to understand why it’s coming, why it’s beyond the control of any one justice or any one academic or other scholar because, only then, can we see what sort of changes will be necessary, where the pressures will be. So let me focus, at first, on practical reasons. The administrative state now increasingly affects individuals, no longer just corporations. Now, individuals are bossed around in the way that used to be commonplace only for corporations, not individuals. Examples? Well, Obamacare, bum stocks, COVID regulations, especially vaccine mandates.

All of this make us feel that power as individuals, not merely third-party observers, watching it happen to corporations. Another reason why I think change is inevitable is increasing diversity of the nation. Federal administrative power developed to evade the nation’s diversity. Woodrow Wilson was very candid about this. He worried that progressives, such as himself, could not persuade a diverse public that progressives need to influence and -- forgive me. I’m going to quote language that’s disagreeable.

It’s his language, not mine. He said that “We need” — we, meaning him and his friends — “need to influence the mind, not of Americans of the older stocks only, but of also of Irishmen, of Germans, of Negroes.” And he said — again, this is a quotation — “It was difficult to influence,” he complained, “the minds cast in every mold of race.” So you understand what he was saying. So he and his fellow progressives, therefore, tried to shift legislative power out of Congress into the hands of people, well, like themselves. In other words, they’re trying to avoid diversity and establish a homogenous set of law makers -- educated, upper types like themselves.

Well, that sort of racism no longer pervades the administrative state. But the administrative state is still a means of circumventing the diverse tastes of a diverse nation, and that cannot stand. That just, inexorably, is not going to be plausible. Yet another problem, practical problem, with the administrative state is that it elevates expertise over science. The two are very different. There’s a tremendous attempt for the last hundred years to assimilate the two.

Expertise is practical science. Science really is expertise. Not really. And by the way, I got into all of this, you should know — not because of some predetermined animus against the administrative state — because of science, because my friends were being censored. The administrative state crushes science. That’s -- so I care about this, in particular.

Regulatory expertise is knowledge that is settled enough to justify regulation. Right? It consists of known answers to regulatory problems. That’s the authority of regulators. Cutting-edge science is the opposite. It involves questions about the unknown. Science has no fixed truths. It’s about showing error, unsettling theories, and disestablishing truths. If you’re in any way knowledgeable about the literature on science in the past century, you’ll know that there’s a debate about exactly what science is.

And Karl Popper, as well as some of his critics, recognize that the only thing we can really know is proof of error, not of truth. And that should be illuminating about the administrative state. The implications are that expertise tends to be out-of-date science. But bureaucrats need expertise because that’s what gives them authority. Yes, their authority from an act of Congress, but the real, underlying authority comes from the claim of knowledge, of expertise. And, so, they tend to elevate expertise over science.

And by posing -- imposing expertise, they usually impede science and science-based businesses. This has long been evident, just to name a few agencies, from the FDA. Right? It’s also evident, and this is where I got into this, from HHS and, in particular, it’s use of IRBs to regulate academic inquiry. It’s a lethal thing when you suppress scientific [inaudible 11:04] medical knowledge. And then, of course, there’s the shear arrogance of the administrative state, an arrogance that even reaches above the law. Just to take one example, the CDC defied the Supreme Court precedent -- recent Supreme Court precedent -- to extend the mortgage moratorium. As put by Maxine Waters, “Who’s going to stop them? Who’s going to penalize them?” One can only imagine what the justices, especially Justice Kavanaugh, thought about that.

And then, there’s political conflict. We’re all painfully aware that political conflicts have become rather intense, ugly, disconcertingly so. The administrative state is said to avoid political conflict. It was said to be all about taking issues out of the realm of politics — that nasty area, dirty area — put it in the hands of bureaucrats who are above politics. But actually, it has intensified political conflict. I don’t want to put all the blame on the administrate state, but it has a lot of the blame to bear.

The power in this country once rested on widely distributed elections, state and federal elections and different House and Senate elections, many, many elections of many, many different people. But policy is now centralized in the federal government, and it is concentrated in the bureaucracy, so vast power now rests on presidential elections, not the election of representatives, state or federal. And that means that the contest over power, through the contest over the presidency is an all-or-nothing battle. Politics, therefore, necessarily becomes warfare because everything rests on one election. And this is significantly, even if not entirely, the fault of the administrative state. And then, last of -- I’m sure there’re many more practical reasons why this change is inevitable, but I’ll mention one more, which is alienation.

Alienation is growing in this country, particularly from government. But it’s not so much against the United States. It’s alienation, in particular, against that amorphous sort of U.S. government, which isn’t really its government, the administrative state against unelected, autocratic, arrogant, and unaccountable control. Maybe people don’t clearly differentiate between the administrative state and the constitutional government, but, to the extent they do, it’s the administrative state that’s the problem. The administrate- -- representative law lawmaking has many virtues, but one of them is its design to secure buy in from the public. When the public get to participate, they feel included.

It’s what Albert Hirschman called, “voice.” Right? If you want -- if you run a firm, you want everyone to have voice, even if they don’t win. The administrative state is designed to evade, not only consent, but also voice. Yes, you got notice and comment but as Justice Kagan said, “That’s just a charade.” So administrative power is inevitably alienating, and the nation, I think as we all know, can no longer afford this sort of alienation, so change needs to be coming. I want to close by moving away from the practicalities to the principled reasons for change, and it -- in fact, I just want to focus on one.

I’m sure there are others, but the main one, the one that really needs emphasis is that the administrative state is a civil rights problem. Now, this is a new vision of the danger. The old vision was about separation of powers. But administrative power is also a threat to civil liberties. I think it is actually currently the leading threat to civil liberties. Now, I want to give just two examples. There’re many, many more. And the two examples, of course, are ones that are on the plate of the Supreme Court.

 

First, delegation doctrine. The non -- non-delegation doctrine -- the non-delegation doctrine is a civil rights issue. Yes, yes. It is a separation-of-powers problem. It shifts legislative power to the Executive. But it’s also a voting rights problem. It dilutes voting rights. Administrative power takes power out of the hands of the voters. Oh, yes. We can still vote, but we don’t elect our most active lawmakers. It dilutes. It diminishes the significance of those votes. This is wholesale dilution of voting rights. Now, of course, we mostly pay attention to the retail dilution of voting rights, and we all care about that and should. But administrative power is a wholesale dilution of voting rights, and we need to care about that. It’s exceptionally dangerous.

And then, there’s the problem of judicial deference. Deference also is a threat to constitutional rights. Separation of powers is involved. Yes, it does involve, again, the shift of lawmaking to agencies. But it’s also a due process problem. Traditionally, people thought about deference in terms of the relationship of the Court to the legislature, but what one has to think about is what’s happening in a courtroom in a particular case, and in cases, it alters the relationship of a judge to the parties. It requires judges to be biased to one of the parties, the largest and most powerful of parties, and against all other parties. This is systematic judicial bias required by Supreme Court precedent. It’s a flagrant [inaudible 16:12] of due process, perhaps one of the most persistent in our nation. So I think the civil rights problem cannot be ignored. It is central.

So, just to sum up, I think both practical and principled reasons lead me to think that change has to come. If it doesn’t come, we’re going to see a lot of other problems that maybe greater than the administrative state. And I -- my feeling is that the Supreme Court gets this too. Will they act this year? Will they act next year? I don’t like to predict -- what is the old joke? Predictions are difficult, especially about the future.

[Laughter]

Prof. Philip A. Hamburger:  So I’m not going to go down that line, but the sooner we get change, the better because this is just too dangerous. Thank you.

Hon. Sally Katzen:  Well, good afternoon. And it’s a pleasure to be here. I think it was my idea that Phil go first, and that was unfortunate because he’s so knowledgeable and erudite and persuasive. A hard act to follow but I do see things differently than he does. I agree with his prediction. Change is coming. But I see it coming in ways that I think will not make us all happy campers.

I’m going to leave the generalizations to the end and focus on some of the specific changes that I see coming. And I’ll start where he was talking about the non-delegation doctrine. And this has been something that the Court has grappled with for over 200 years. Now, I will acknowledge that Article 1 says all legislation. Congress has the power to make all laws. And “all” generally means all, and the proponents of the non-delegation doctrine, I think, have put a lot of weight on one word, even for devoted textualists.

But passing that, how specific did Congress have to be and the president who signed the bill? Well, Justice Scalia, in a 9-0 decision in 2001 in the Whitman case, said, “It’s okay if they provide an intelligible principle.” Now, I want to acknowledge that Justice Thomas wrote a concurring opinion, saying, “Wait a second. Intelligible principle is nowhere to be found in the Constitution.” True, but Justice Stevens, who also a concurring opinion, said, “And nowhere in the Constitution does it say that Congress cannot delegate.” I think the latter is useful information, particularly so long as Congress retains the power of oversight and the ultimate power to enact a law changing the delegation. Now, a lot of law reviews have -- articles have been written, debating on whether in fact there was any delegation at the outset by the first Congress on the theory that the first Congress consisted of many of the people who were present at the creation of the Constitution and, therefore, their interpretation would prevail.

I think it might be interesting and useful to know that. But is that really the only question that we would be asking? Now, recall that in 1789 in Philadelphia, we were still 13 struggling, former colonies, hanging by our fingernails on the Eastern Seaboard with mostly agrarian interests. I guess I shouldn’t have said, “we,” because the decision makers then were mostly men — white, Christian men, at that. I would argue that more important than 1789 for our present purposes is the present and the future because the non-delegation doctrine rests on the proposition that Congress shall make all laws. Congress is having a hard time doing anything. Congress cannot even pass the annual appropriations bills.

We have sadly reached the point where people are running for and getting elected to office on a platform of, “I will not compromise. I will not agree to anything the other side wants.” Or most famously, an incoming majority leader of the Senate, “My number one agenda is to make sure that the sitting president is not reelected.” This hardly bodes well for Congress making decisions of any sort. Actually, this is driven in large part by the political parties, which, to use a quaint phrase from the Federalist Papers, is what Madison was referring to in Federalist 10 of factions. And I think he’s -- I think he’s right. And Dean always enjoys the fact that I cite the Federalist Papers when I’m talking to this group. He should know that I cite the Federalist Papers when I’m talking to other groups as well.

[Laughter]

              Now, the truth of the matter is that many of our politicians are not acting like the statesmen envisioned by the Founding Fathers. Congress is not functioning very well, let alone at the level to resolve the far more complicated and complex issues that are confronting us today, compared with those that the first Congress struggled with. So, as long as Congress has made the fundamental decisions and given guidance, general as it may be, to those with expertise and experience in the Executive Branch, we might well continue thriving as a nation. And I would remind you that for over 200 years, at least 100 of which we’ve been in the arms of the administrative state, we have indeed thrived. But what would it mean if we were to adopt this view of Congress’ role and the concomitant, constricted view of what the agencies cannot do in this day and age?

              Now, it may make a difference if the resurrection of the non-delegation doctrine is to send a message to Congress so that, in the future, if and when — more if than when — it is able to enact legislation. It will be more specific and answer all possible questions, those apparent and those that even people with clear foresight might not predict. Does that portend for fewer laws? Hmm. Some would say that’s a good thing. Would that be? It’s a question for you all to consider, given the fact that we have not stood still. We continue to innovate. We continue to have different types of issues: drones, electric vehicles. [Inaudible 24:57] free. That’s one option.

The other possibility is that by resurrecting the non-delegation doctrine, we are inviting a reexamination of all of the statutes assembled by Scalia in the Whitman case, all of which were held by the then-Supreme Court to be fair and well-grounded. And we would now reexamine, and we would now throw out those that say, “You shall regulate in the public interest. Oh. Oh. It’s not clear enough. It’s not detailed enough.” If we are going to look back at the laws that were enacted in the ‘30s, ‘40s, ‘50s, ‘60s — you get my point. There’s a great deal of uncertainty and a great deal of concern. And since a lot of what we need depends on some confidence and stability, it may be a difficult matter.

So let’s look at Chevron, which is the other doctrine that Phil talked about. And the cries of outrage that it’s an abdication of judicial power by the courts to the Executive Branch and, as he said, makes the federal government an even more formidable opponent in litigation against the citizens. I don’t see it. I really don’t. As you all know, since you’re all basically well-schooled in this area, you do not get to the question of deference unless the agency has been granted authority by the Congress to make determinations with the force of law and has issued its interpretation of its authorizing statute in the course of using that authority. You will also recall that you do not get to the question of deference unless Congress did not address the issue, or what it said was ambiguous, i.e., step one of Chevron. And that decision is a decision made by the court, not the agency.

The court decides if Congress provided an answer. And if the court decides that Congress did provide an answer, that’s the end of it. There is no delegation. There is no deference to the agencies. And if you get to step two so that the agency’s interpretation is going to be considered, it has to be reasonable. And who do you think decides whether or not it’s reasonable? It’s the courts who have to decide that it’s reasonable.

Now, on the whole, I think if I had to choose for purposes -- most purposes, between -- on the one hand, a dictionary or a series of dictionaries and, on the other hand, an agency, an agency which sees not just this phrase or this section but the context in the act, as a whole, indeed, sometimes, in a series of acts. And the agency has been providing technical advice and assistance to the members of Congress who have been drafting the bill. I think I’d go with the agency. And I would ask each and every one of you, particularly the practicing lawyers, when you’re asked for an opinion by a client, do you go straight to the dictionary and stay at the dictionary and never, ever consider anything else? I would doubt that. At least, that’s not the way I practiced law in my old-fashioned days.

So what if the critics do win the battle? As I expect, they will, and Chevron is either tightened, like Auer was with Kaiser. I’m dropping names of cases. You all probably are familiar, and, if not, I’ll be happy to provide cites. Or if Chevron were eliminated altogether, will we revert to every judge and her dictionary as the deciders of things?

Now, I would like to read from Madison 37. This is for you, Dean. Madison 37, “All new laws, though penned with the greatest technical skill and passed on the fullest and most mature deliberations, are considered as more or less obscure and equivocal until their meaning be liquidated and ascertained by a series of particular discussions and adjudications. Beside the obscurity arising from the complexity of objects and the perfections of the human faculties, the medium through which the conceptions of men are conveyed to each other adds a fresh embarrassment. The use of words is to express ideas. Perspicuity, therefore, requires not only that the ideals should be distinctly formed, but that they should be expressed by words distinctly and exclusively appropriate to them. But no language” — I’m still quoting — “but no language is so copious as to supply words and phrases for every complex idea or so correct as to not include many equivocally denoting different ideas.”

I do like the Federalist Papers. This is not a slam at textualism, I would say. It’s simply an acknowledgement that it may only get you so far, and you need other aids in determining what a phrase or a means -- a word means. In any event, another way to ask the question of what happens if Chevron is overruled and we’re no longer deferring to an agency’s interpretation is what do you think most generalist judges will do? Actually, I’m going to predict — even though I smashed my crystal ball in 2016 — I’m going to predict that it will likely be a little bit like what we have with legislative history these days. Legislative history was given a bad name and scorned by some jurists, but it is included in a lot of briefs, and judges and justices read those briefs.

They may not be impressed or may wish to unread what they have read, and they’ve similarly discarded references to the purposes of legislation, but they do get exposed to it. So I suspect that agency interpretations may well be disfavored, if Chevron is gone, but not ignored by most judges who will be looking for whatever information they can to help them in their decision-making. On the other -- the other point that I just want to raise in terms of Chevron is, when you talk about an agency’s interpretation of its rules, not all rules are the same. Some are highly technical, some more pedestrian, some relatively insignificant, some really big deals. Recall what Justice Scalia said in Whitman — and I’m quoting — “The degree of agency discretion that is acceptable varies according to the scope of the power Congressionally conferred.”

While Congress need not provide any direction to the EPA regarding the manner in which it is to define county elevators, it must provide substantial guidance on settling air standards that affect the entire national economy. Now, I think Judge Rao will agree with me and confirm that I’m saying that not all rules are the same, and one size does not fit all. The decision with respect to accepting or relying on agency interpretation does not have to be uniform, but it should be informed by the circumstances. In any event, there are lots of other areas that perhaps we will get into, such as appointments, removal, civil service, whatever. But I think for now, I thank you.

Hon. Neomi Rao:  All right. Thank you both so much. You obviously both come at this from, I think, very different perspectives, so maybe it’s a good idea to just let you both respond to what’s been said. Philip, maybe you want to say something about some of the practical concerns that Sally has raised in terms of, well, what do we do in a complex society where Congress is unable to do its job.

Prof. Philip A. Hamburger:  Thank you. And it was very interesting. Will you forgive me if I actually say -- I want to comment on three things very quickly: non-delegation, incompetence of Congress — which I think we can at least agree on — and on Chevron. First, very quickly, as to non-delegation, there’s long been a concern that there is no non-non-delegation doctrine. Cass Sunstein, my former colleague, pointed this out too. But it’s actually useful to look at the text.

The word, “all,” does introduce it very nicely but then, goes on to say, “Shall not be vested." If it had just said, “vested,” as in all legislative powers are hereby vested, that would transfer the powers but not limit their transfer beyond Congress. Right? That’s conveyance of land, and you can -- the recipient can convey it further. But it doesn’t do that. It says, “Shall be vested in.” In other words, it doesn’t just transfer. It also has a mandatory local for these powers.

That’s rather revealing. So I think the text actually is more full. The -- but I think it’s -- we can’t just rest it on text. I like text, but I’m not a textualist. I think we should look at the full range of issues here, and I think that is to include the racist origins. I don’t think we -- any more live in a society where we can ignore the racist origins of the administrative state. And nor, can we forget the vote-diluting consequences the non-delegation doctrine is currently understood by the court. If people are deprived of the efficacy of their vote across the board, that matters. Now, it’s not the same as discriminatory vote dilution. That’s bad, and that’s the new traditional analysis of vote dilution. But there is a generic vote dilution that’s also serious and that it was based in class prejudice, even when it wasn’t racist.

Second, as to the incompetence of Congress, yes, let’s agree on this. Congress is incompetent, but that’s not an accident. These are all smart people. They’re just paying attention to the wrong things, and that’s because they’ve been infantilized. And the best way to understand this is Judge Rao’s scholarship. Judge Rao is the expert on this. Right?

And it’s not an accident that they are incompetent. There’s nothing inherent. Right? It is based in the structures of the administrative state that allows them to get away with all this stuff. And what legitimizes these structures? The Supreme Court. So I’m inclined to blame not Congress but the Supreme Court. The Supreme Court has accepted a structure that is not our government. And that is profoundly dangerous, and it does lead to a host of the problems that you discuss. Now, Chevron.

[Laughter]

Prof. Philip A. Hamburger:  First of all, I just want to put aside the dictionary caricature. I don’t think any judge just looks at dictionaries. There’s useful, but they’re of limited use. It’s just one of many considerations. We have a whole canon of construction that we’re all familiar with, and how it’s used can vary from case to case. But the key point is, when a judge faces an ambiguity, one possibility is just to run to Chevron and say, “You, agency, you decide it.”

Another possibility is for the judge to decide it. There is a third possibility though, which is very important, which is simply to do nothing. If the ambiguity is so substantial that the canons of construction cannot help you and if you’re unwilling to defer to an agency, there is the possibility to just say, “There is no law here. It doesn’t tell me what to do, one way or the other. Congress has to fix this.” And by the way, I’m not the only one to think of this. I think John McGinnis has discussed this, and Frank Easterbrook has discussed this in very interesting articles.

This is a common understanding, and judges have no constitutional duty to decide a case, come hell or high water. They can just walk away and say there’s no law here. Now, I want to close simply be getting to the judicial bias question because I think many defenders of the administrative state, particularly Chevron, want to pretend this is not a problem. The awkwardness is this the logic of Chevron is one of interpretation. Where there’s ambiguity, the ambiguity needs to be interpreted, and then, it gets shoved over to the agency. You can try to justify Chevron in terms of delegated lawmaking, but the reality is it’s an interpretation problem that’s the key logic underlying the case.

And interpretation belongs to the judges, that is saying what the law is, and that is peculiarly the province of the judicial department. And, so, I think it’s difficult to escape. As an aid to understanding Chevron though, I brought along something. Hold on. So here we have a judge. This delightful little thing, it’s called, “Doing the Deference.” And this is a product of the new Civil Liberties Alliance.

[Laughter]

Prof. Philip A. Hamburger:  And you see, if you give a little push, just like this, just a little bit, you get Skidmore deference, bowing to government in cases, which you shouldn’t do. You should be impartial between the two parties. Right? A little bit more, you get Auer deference. And you give a good shove, full Chevron deference, bowing to the Executive and agency. For a suitably generous contribution to the NCLA, you can have one of these too.

[Laughter]

Prof. Philip A. Hamburger:  But what -- I actually give this to you, Sally, as a present.

[Laughter]

Prof. Philip A. Hamburger:  So you can understand the bias involved in Chevron deference. Thank you.

Hon. Sally Katzen:  Actually, I would urge you all to go on to, I think, YouTube has it, but the students — my students — at NYU Law School did a Chevron two-step dance to -- it was before Hamilton, but you -- it was the same idea, and it’s really quite funny with all of the kids in the classroom, leaping around doing the Chevron two-step. But, if you can’t find it, again, do reach out, and I’d be happy to let you know where it is. Neomi -- Judge Rao, did you have a question?

Hon. Neomi Rao:  Yeah, I was wondering, Sally, if you could maybe address -- you said, at one point in your remarks, that the Constitution of 1789 was not the one that we should be most concerned with. We should be concerned with thinking about the Constitution for today, for the present, and for the future. And, so, I guess I’m wondering what is the purpose of a constitution if it’s not fixed at some time? Do you believe that a constitution contains a non-delegation principle but that it has come not to matter so much in the present, or that it just doesn’t contain such a principle at all?

Hon. Sally Katzen:  I think, Judge, you’ve asked three questions.

Hon. Neomi Rao:  Oh, maybe. Okay. Well, you know, I’m used to --

Hon. Sally Katzen:  Let me -- in -- you’re used to it, and I have not done oral argument for quite a while, so forgive me.

Hon. Neomi Rao:  Oh, sorry.

Hon. Sally Katzen:  But let me let start with the third. I do not think it bars delegation, all and the rest of the syntax of the sentence notwithstanding. I do not think it bars, and I do actually -- was impressed by the literature in the law reviews that go back to the early days when there appears to have been some delegation other than fill-in-the-blanks or fact-finding as a predicate for it, which is the basis that is being used by Justice Gorsuch. The second question that you raised is don’t I think that the -- do I think that the — you weren’t leading question — do I think that the Constitution is fixed?

Yes. I can pick it up. I can read it. It says things. I think they are critically important, but I don’t think that words tell all. And I think you can interpret the Constitution while respecting it greatly. And I do respect it greatly.

And, so, I think the third point was that you suggested that I said that the Constitution is now meaningless. We shouldn’t -- we -- you thought I said — let me try this again. You thought I said that we should almost ignore the Constitution and focus on the present. I didn’t intend to say that, and to anyone else who heard that, no. I believe we should start with the Constitution, just like I believe we should start with the text of the statute. But I think that the Constitution, even as amended, reflects two centuries ago and a very different world.

The values that it embodied are forever living, in my mind, in this country. The virtues that they speak of in the Federalist Papers are the ones to which I would aspire, and I would hope that our elected officials would aspire. This is what I see for our country. Over 200 years ago, we set off on an experiment that was phenomenal, and the Constitution is the basis for it, and I respect it tremendously. But we’re several hundred years later, and we’re facing different issues, so let us be informed by the thoughts that they had, the words that they used, and the purposes they were trying to accomplish. They did not want a situation where political parties — factions — shut down the Congress. It’s not that they’re incompetent.

They’re completely competent. They just are much more interested in who will win the next election. That’s the only thing they care about. That’s what -- they’re here -- they are as much a part-time legislator as they were back in 1789. Then, they went back and tilled the fields. Here, they go back and dial for dollars.

Hon. Neomi Rao:  So do you --

Hon. Sally Katzen:  I’m sorry.

Hon. Neomi Rao:  Oh. Do you think then -- to something that Philip alluded to, I think, at the beginning? Is it only -- can the modern administrative state only be justified with a theory of living constitutionalism? Without living constitutionalism, can you have the modern administrative state?

Hon. Sally Katzen:  That’s a really good question, and I think I would say I’d like to think more about it, but I think you could have an administrative state without a living Constitution but then, again --

Hon. Neomi Rao:  Maybe not.

Hon. Sally Katzen:  I think the Constitution lives.

Hon. Neomi Rao:  Well, I think it’s interesting the original progressives, the early 20th century progressives, were much more candid about the --

Hon. Sally Katzen:  Oh, I’m candid. Come on.

[Laughter]

Hon. Neomi Rao:  Well, no. But they were very -- well, no. You are candid. Sally’s nothing if not candid.

Hon. Sally Katzen:  [Crosstalk] for years.

Hon. Neomi Rao:  Of course, yeah. No, no, but they were --

Hon. Sally Katzen:  Candor is one of my high points.

Hon. Neomi Rao:  That is true. That is true.

Hon. Sally Katzen:  That and my hair. Right.

Hon. Neomi Rao:  Absolutely.

[Laughter]

Hon. Neomi Rao:  But I -- they were very, I guess, forthright about saying that what they were trying to do in creating the modern administrative state was directly at odds with the original Constitution and its commitment to individual liberty and private property. And, so, they recognized that there was a very -- there was a serious tension, and they were okay with that because they thought the modern administrative state -- that the administrative state they were creating was important. But they -- they were very, I think, forthright in saying, “This is not consistent with the Constitution.” But I think today we don’t talk about it that way.

Hon. Sally Katzen:  Well, no. I take your point, and I think it’s valid, just like these independent regulatory commissions are out there. These are these little animals that used to be -- they were multi-headed, staggered terms, equal representation of the two parties based on expertise. And the idea was that they should be independent of the president because you just didn’t want politics messing around with some of these matters. And there was always this debate about IRCs, independent regulatory commissions. What branch of the government are they in?

Well, I personally, relying on the Constitution, see three branches. They’re not in the Congress. They’re not in the courts. I think they are in the Executive Branch. But they exist. Although, right now, it’s not clear what -- after Selya law and Collins, it’s not clear that you’ll have any that aren’t multi-headed, but -- oh, God. The next one is the Social Security Administration. I love my checks. I really don’t want that one to be politicized. I’m really worried about that, by the way, in case you think I’m joking.

Prof. Philip A. Hamburger:  Well, thank you. I must say, that among all the possible interlocutors, I really do think that you’re more engaged in good faith with the Constitution than many. And, so, I’m very grateful that we’re able to have this conversation. And I appreciate what you say about the independent agencies, that we can agree that this is really problematic because many people don’t care about the different parts of government, and you do. And, so, I think that’s wonderful. Maybe you’ll join us in a brief on this subject in the near future. Really. Why not? Why not?

On non-delegation, I can -- it’s not in published literature yet. I have a piece called, Non-delegation Blues, that’s on SSRN, at least. And there I go through the textual argument — and the text doesn’t matter, as we both agree — but also the living Constitution argument, the principles, as it were. And I think non-delegation suffers on both accounts. It cannot be justified -- the current doctrine, that is. The Constitution in its very text locates legislative power in Congress by saying, “Shall be vested.” But it’s not just text. I agree with you. One has to go beyond that.

And here we get two principles in the nature of our society. Our society was founded in a revolution, seeking consensual government, and not just consensual government but representative consent. A representative in London wasn’t the same thing, particularly if you don’t vote for them. And we have a similar sort of problem with a distant administrative state. You may think that notice-and-comment cures this, but that’s a very academic response. People don’t feel that.

So we have this division in our society that’s not going to be cured with academic talk about notice-and-consent. We no longer have representative government for most of the laws that are made, mainly the regulations that come out of the agencies. And this matters especially because it’s a diverse society. We have had little homogenous societies; eighteenth century Connecticut, my home state, is an example. In 18th century Connecticut, although there was representative government, there was great trust amongst everyone because everyone had this belief they were descended essentially from the same few families, and everybody was interrelated. There was some truth to this, at least in 18th century.

But that’s changed. Connecticut is now a very diverse society. And what happened as it became more diverse — and it’s true already in early 19th century and then increasingly thereafter — is that people don’t trust each other when they say, “Don’t worry. I’ll take care of your interests.” Well, maybe. Maybe not. And that point, you want to vote for the people who are making the laws. You want to be involved in the lawmaking.

And, so, I think the very nature of our society requires that we go back to our fundamental principles of representative consent. The same is true of independent judges. We need independent judges, precisely so that we have folks we can trust to resolve differences. So, yes, it’s not just the text. I think we’re in agreement on that. But the very principles of our society and our exigent circumstances, I think, drive the conversation.

Hon. Sally Katzen:  I’m moved by what you say and would very much like to embrace it. And I do not want to trivialize it. But I do want to note that there’s a traffic light at the corner of L and Connecticut, right outside this building. The light is red. The light is green. And surely, when it turns red, it’s an infringement. It’s -- it can be burdensome. It can be costly, if you’re late for a meeting. And it certainly impairs your freedom not to just be able to go down Connecticut Avenue. So you want it to stay green longer. How much longer? Well, that might depend on whether you’re on Connecticut or on L Street, heading up to the Capitol.

Now, as I said, I don’t want to trivialize it, but our life is such — and this is, in part, an answer to Judge Rao’s question — we are living in a world that is extraordinarily complicated and very complex, and we need rules. And no one who lives in the District of Columbia has much say over how long that light stays green. Of course, we have no say over anything. I live in the District of Columbia. I’m not in state. I have no representative. Representation without taxation -- or, no, it's taxation without representation.

[Laughter]

Hon. Sally Katzen:  That’s my problem.

Hon. Neomi Rao:  Representation without taxation would be pretty great.

[Laughter]

Hon. Sally Katzen:  I’d give up paying -- no, I wouldn’t. But, in all seriousness, we do not have the kind of representative government. And you talked about dilution of the vote. I have no vote whatsoever. I do have a representative in the House of Representatives, and she may speak sometimes, but she can never vote. I have to correct that. She can when it’s a thing of the whole but not otherwise.

But, in all seriousness, rules are not well received by anyone when they pinch, when they cost money, when they are difficult. We all would like to have free markets. We all would like to have a state in which you can do whatever you damn please. And that’s understandable. But, in today, I just don’t think it makes much sense. And, if we want clean air, which by the way crosses state lines, or clean water or safe food or civil rights or any number of things, we need those concepts fleshed out, and that is done by the administrative state. And you don’t like the administrative state very much, and I guess I’m a little fonder of the administrative state than you are. But I think we should be able to agree that, at least in some places at some times, rules make sense.

Hon. Neomi Rao:  I’d also, as we continue this discussion, I’d like to invite anyone to come to the microphone if they have questions. But I think Philip --

Prof. Philip A. Hamburger:  May I just say a little bit about --

Hon. Neomi Rao:  -- yes, of course.

Prof. Philip A. Hamburger:  I don’t want to go into great length here. Yes, I agree. Rules make sense. But I like laws more than rules. And it seems to me that, if the rule’s part of a law, then we’re less disagreement. You see to be assuming, I think mistakenly, that everyone in this room is against more regulation.

I can’t speak for others. I’m not a libertarian. Many of my friends are libertarians, but I’m not a libertarian. I’m not against regulation. I can think of a lot of regulations I’d like to see adopted that won’t be under the current regime. One of the dangers, of course, is that agencies do not control industries but are controlled by industry, and that is a serious problem.

So don’t assume motivation here. D.C. D.C., you said, should have voting rights. But at least we agree on the principles of voting rights. So we’re moving here. This is good. As for the traffic on Connecticut Avenue, you’re right it doesn’t move.

But I think it’s because of too many cars, not those stop lights. There is no problem, by the way, with administrative power in municipalities. It has always been the power of municipalities. It’s at the state and the federal level that one runs into constitutional problems, so there may be room for agreement here. We’ll see. Thank you.

Hon. Neomi Rao:  Yeah, yes. If you could just state your name and ask a question, not make statements, we’d appreciate it.

Gideon Rappaport (sp):  Sure. Thank you so much. Gideon Rappaport, and my question is you raised the issue of methods of interpretation as well. Justice Scalia once said that we need to interpret things reasonably. Although for him, reasonable was probably more strict than other people. What about judges interpreting the law honestly? Even if one method is not objectively the most correct or the most practical, isn’t there an inherent value in having one that makes the judicial decision-making process transparent and gives judges the least opportunity to smuggle in their own personal preferences or to collude with other branches of government, possibly with the agencies themselves, to secure certain outcomes? For example, in energy cases and pipelines but completely opposite outcomes, following the same basic procedural reasoning in other cases. Thank you.

Prof. Philip A. Hamburger:  May I take this? So I could not agree more. I devoted eight years of my life to writing a book called, Law and Judicial Duty, the gist of which is along these lines. And this was understood, by the way, in the late 18th century, not just by those on Supreme Courts but on county courts, justices of the peace who weren’t even lawyers. They all understood that they held an office in which they were accountable to God to be truthful about the law, to do their best, however difficult, to discern the law. When they couldn’t discern the law, they were to stop.

Where they could discern the law, even a justice of the peace sitting on a county court, on an inferior court, was to hold the law unconstitutional without any judicial activism or any judicial restraint — those terms have been much misunderstood in our century — but just forthrightly, candidly. I can’t help thinking -- I wasn’t going to discuss this, but I’m glad you raised it. I held back because I think it -- the language is too strong. But I’ve been thinking a lot about Solzhenitsyn’s “Live Not by Lies.” The day he’s thrown out of the Soviet Union, 1974, he published this little [inaudible 59:34] essay, which I recommend to all of you. It’s online.

It takes ten minutes to read, “Live Not by Lies.” Now, his circumstances were far more exigent than anything we face and is a very deep personal commitment, more than even most dissidents could face. That’s why Havel, Václav Havel, writes “The Power of the Powerless,” which has a much more moderate vision of resistance. But it’s relevant; we cannot have a society -- law, let alone a society, built on untruths. And, so, it’s essential for judges to struggle, however difficult it is, to get the law right. And in science -- I think a lot about science and scientists.

Scientists are actually brought up in an understanding of modesty. I know most scientists are immodest, but they’re committed to scientific modesty, namely that they may be wrong. And, so, scientists struggle against the prejudices, just as a judge should do. It’s the same intellectual model. And they’re accustomed to error because error is what science is all about. People are always trying to prove the theory wrong.

And, so, when there’s an error, they’re accustomed to saying, “Yes, I was wrong. Now, let me try to do it better and get it right.” And I wish we had judges along the lines you suggest who are not afraid of saying, “Yes, I was in error.” Our Supreme Court -- there’s no appeal from our Supreme Court except to us, and we make our -- we exercise moral and political judgment and legal judgment in judgment on their judgments. But that appeal to the people has no formal expression. But we are judging them all the time, and they have to be aware of that. We’re looking for their honesty, their candor.

Somebody may get it wrong, but we don’t want the game-playing. There’s no room for that. And, so, yes, I hope our judges can live up to these ideals. We’re in trouble if they can’t. Thank you.

Hon. Neomi Rao:  Let me just say as a judge I highly recommend Philip’s book on this. No, it’s really an excellent historical and very compelling account of what the judicial power entails.

Prof. Philip A. Hamburger:  It will help you sleep well.

[Laughter]

Hon. Neomi Rao:  Okay. Another question.

Greg Dolin:  Yes. Hi, Greg Dolin from the University of Baltimore. I wanted to ask a question about this notion that was brought up that, look, the Constitution doesn’t explicitly forbid delegation, and therefore, there’s no warrant to prohibit in Auer judication. And since society evolves, we need administrative state. I guess I just wonder how far does that logic extend because the Constitution doesn’t explicitly say that, “Look. If -- you can’t delegate halfway — right? — as we did in INS v. Chadha. Right? So you can delegate some but reserve the power to veto in Congress. So I guess the question is does your theory then potentially call into question INS v. Chadha where Congress can say, “Look. We’ll delegate some but we’ll still hold -- we’ll hold your hand in there.” Or is it a all-or-none proposition, and if it’s the latter, why only the latter? Why has -- does it have to be all or none?

Hon. Sally Katzen:  I take it that’s addressed to me. Yes. Thank you. And thank you for your question. It’s not my theory. It was Justice Stevens’ theory, but I did repeat, and therefore, I suppose I will claim some ownership from it rather than walk away from it. And I guess the answer is not all or nothing.

I think there are variations in the way one can look at these kinds of things. The Constitution says some things. It doesn’t address other things. That’s why you have a Necessary and Proper Clause in Article I, Section 8. It’s why you have very vague languages, a Take Care to -- Take Care Clause. Yes, I know the end of it. At least, I used to know the end of it.

In any event, those are open-ended, and I think the Constitution — this is what I was saying earlier — embodies certain attributes that I adhere to. But I think for us to be as, if you’ll forgive me, obsessed as we are about restricting the delegation based on a reading of the Constitution is overblown.

Hon. Neomi Rao:  Go ahead. Next question.

Alexander Evans:  Thank you. Alexander Evans, Baruch College. Thanks for a very interesting panel. My question is also -- Professor Katzen, for you asked us to consider, if I understood correctly, policy considerations of revisiting the non-delegation doctrine, and I was a bit confused about the way that fit into the argument. Suppose that actually you’re 100 percent right, and, if we were to revisit the non-delegation doctrine and constrain the administrative state, it would be disastrous. It would just be terrible. The traffic would be awful. It would just -- I wouldn’t be able to get this tie. The food would get worse. Everything would be worse in every possible respect.

Isn’t that an argument for amending the Constitution so that the non-delegation doctrine isn’t there anymore? If the law says that, even if the policy outcomes are really bad, then that’s what we have to do, and the Constitution provides amendment as recourse for bad policy. How does the policy argument fit in here? Thank you.

Hon. Sally Katzen:  I think you’re absolutely right. I think definitely splashed in a bit of policy there. I had, at first, started with the text as I thought I should, and I did go through the -- I didn’t think it was compelling enough to preclude. I also said that I thought that I would not persuade anyone or at least not six of the current Supreme Court justices. I was not posing an argument or even a brief to the Supreme Court on this issue. Although I would note that in virtually every major divisive case that lands at the Supreme Court, there’s always a policy discussion.

There’s always the question — it used to be from Justice Scalia — there’s always the question with, “If we do this, then how do you distinguish that, and what would that lead to?” because it is one thing to say, “We’re going to read the letters,” and it’s another to say, “What are the implications of that?” I did merge them. And I don’t regret it. And it’s quite perceptive of you to pick up that I did slip into that, but I think those who champion what I think is a very cramped view should recognize that, if you prevail -- be careful what you wish for. It may come about, and you might be unhappy with the result.

Prof. Philip A. Hamburger:  May I join in here? One of the standard arguments against getting rid of the administrative state, or even tempering it a little bit, is that, yes, the world will fall apart. The sky will fall. Maybe. I’m not convinced. The sky doesn’t fall that easily. The reality is we don’t have to get rid of agencies. I’ve actually proposed that we should double the pay of everyone working in an agency as long as they act lawfully.

[Laughter]

Prof. Philip A. Hamburger:  And we can keep those agencies. I don’t think they have as much expertise as they believe. I don’t think expertise is the same as science. But we could, if you want, keep those agencies, and they can continue to propose exactly the same rules. They just should send them to Congress. If Congress is so inclined, it can enact those rules faster than they can be adopted under the EPA.

But Congress usually will not be so inclined, and with good reason, because then there’ll be accountability to the diverse quality of our society. If our society is a hierarchical society dominated by the class that’s well-represented in this room, then you can leave things to agencies. You cannot do that in a fully egalitarian and diverse society. The trouble that will follow from an administrative state, dictating to a diverse people, is nothing any of us want. So, even if you didn’t believe in consensual government, even if you don’t want independent judges, even if you love the administrative state, you might hesitate. You won’t get what you want. Right? If one’s worried about the fractures in a society, you should worry about the administrative state.

Hon. Neomi Rao:  Philip, if I could just ask you a question about this. If we -- taking all of your points that there’s a real urgency for there to be change, do you think that the American people want that change? Right. Maybe it’s essential for all the reasons you say to have a more egalitarian society, to respect diversity, to have better democratic accountability and voting rights. But do we see evidence that this is what people want?

Prof. Philip A. Hamburger:  I don’t have a neat answer to that. I suspect that many people are not fully conscience of this, but actually that’s part of what troubles me. If people feel uncomfortable being bossed about but they don’t associate that with the administrative state or something unlawful but rather associate it with our government as a whole, then we’re really in trouble. So I hope people think this through. The danger is, as Sally mentioned, that we resent something when we feel it, when it’s imposed on us. And it may be, therefore, that many people haven’t thought this through sufficiently.

I don’t think, in any society, you’ll always get full unanimous understanding on any policy, but I do think there’s growing understanding of this. And for that, we have to thank, not us in this room, but we have to thank my former colleague Barack Obama, who went around saying, “Look. I can do it with a phone and a pen.” Well, when you put it that brazenly, we learned; this current administration has been a good education in this regard too. But I think Republicans are often as bad as Democrats. When presidents like to rule from above, we begin to want governments from below. I don’t know if that answers it, but . . .

Hon. Sally Katzen:  Judge Rao, our data on the point that you asked about, Pew has done a lot of studies, as has others, and the two clear answers are, one, people think there are too many rules. Two, people cannot decide which rules they want to go because they love them all. And, so, people will say, “I’m against rules. But I want clean air. I want safe food. I want this, that, and the next thing.” And this has been studied again and again. And the interesting thing is that it doesn’t seem to change from administration to administration. It seems to be very consistent. People don’t want rules, but they don’t want to get rid of any that they have.

Prof. Philip A. Hamburger:  May I just come back on this, which is that data alienation is more sobering. Right?

Hon. Sally Katzen:  I’m sorry?

Prof. Philip A. Hamburger:  Data alienation is more sobering. There is growing alienation of society. You don’t have to be a social scientist to figure that out. And, so, there’s a larger set of concerns here, which I don’t think we can put aside.

Hon. Sally Katzen:  Oh, and I completely agree with you on this, Phil. And it is very, very troubling. I worry that some of it comes from some of our leaders, not just the, “I rule with a” -- and he didn’t say, “I rule with,” but I could use the pen and the pulpit. But we have had government bashing since Ronald Reagan, who said the government is not the solution; it’s the problem. We’ve had people running for office who have criticized the government up one side and down the other. We have had any number of candidates and elected officials who have, not only, bureaucrat bashing but even fellow political bashing. And that has led, as you say, to enormous alienation and distrust of the government, and that is extraordinarily worrisome. I join you in that.

Prof. Philip A. Hamburger:  I worry about attributing too much to particular politicians. A lot of this is, I think, from a sociological point of view, inherent in a system when people have very little voice in the rules that govern them. We used to govern ourselves in small communities, and we have destroyed that through federal law, federal rules, and federal conditions. We used to know the people, therefore, who represented us. That’s a derived connectedness that we have to allow back into the system. And, so, it seems to me, we need to return to federalism. We need to return to lawmaking made by our representatives, and we have to distinguish between anti-government sentiment and anti-administrative sentiment. Being opposed to the government that is not ours really matters. Being opposed to the U.S. Government is another matter altogether. I pledge allegiance to the United States of America, not to the administrative state.

Hon. Sally Katzen:  Okay. That was not fair.

[Laughter]

Hon. Sally Katzen:  But I think this is a debate that you and I could have at another luncheon, if they will sponsor us, but, for now, there’s still a queue.

Hon. Neomi Rao:  I’d say those -- Sally, you -- in Executive Order 12866, that recognizes principles like the government shouldn’t act unless there is a need or private ordering fails. Right? So you are not all pro-regulation across the board, either. Right?

Hon. Sally Katzen:  No, of course not. I stand by every word that President Clinton signed.

[Laughter]

Hon. Neomi Rao:  But that document is pretty -- I don’t know --

Hon. Sally Katzen:  Brilliant.

Hon. Neomi Rao:  Well, it’s brilliant, of course.

[Laughter]

Hon. Neomi Rao:  But it puts a real thumb on the scale of private ordering, at least how I read it.

Hon. Sally Katzen:  It is. And I don’t back away from anything in that.

Hon. Neomi Rao:  Yeah.

Hon. Sally Katzen:  And I’m not saying -- and I hope none of you walks away with the impression that I think we don’t have enough rules, that we need more, double, triple, whatever. No. I’m just saying that I believe that some of the attacks on the administrative state are unfair and unfounded and that even speaking of the administrative state is problematic because, just as there are different rules and there are types of agencies, the administrative state is not a unitary thing. It’s composed of lots of different agencies doing lots of different things. And, with respect to Executive Order 12866, if you can nip it in the bud when it’s first -- a new rule is being proposed and ensure that the benefits will justify the costs, etc. etc., then I think that may well inure to the benefit of the country as a whole.

Hon. Neomi Rao:  Next question.

Dan Epstein (sp):  Hi. Dan Epstein. My question is for Professor Katzen. You’ve mentioned a lot about — and 12866 is a great example of this — of administration or the administrative state as a rule-making state, regulation through rules. But I think, as practicians have known for decades and finally scholarship is catching up with this — you can see this with Rory Van Loo’s work — most regulators don’t act through rules. They act through Requests for Information, audits, examinations, investigations, all of which are subrule or not subject to rulemaking. And, so, I guess, my question for you is would you say that the administrative state should not act in ways that aren’t clearly established via rules, even rules of jurisdiction? Or is your view that it's a good thing that regulators can act with discretion outside of rules, outside of rules that govern both their authority and their jurisdiction?

Hon. Sally Katzen:  That’s a very interesting question. I guess I go with the latter. But it’s not outside their jurisdiction. I think that, when the IRS has a provision and it’s April 14th, I’d like to be able to call somebody and get a human being on the other end of the phone and respond to a question I have. And he or she may be relying on guidance. He or she may be relying on their own interpretation of the statute.

I thought you were going to go in a different direction though. I thought you were going to say, “Rules are only a part of it. There’s also all this judication out there.” There’s formal judication, and there’s all sorts of informal judication, if you’re talking about the administrative state. Student loans, who’s eligible, who isn’t. Disability insurance, who’s eligible, who isn’t. Veterans' benefits, who’s eligible, who -- these are all things that are decided in adjudications, usually be an administrative law judge but not necessarily.

And that’s part of the administrative state as well. I don’t think that the rules are paramount. They’re just the most visible. But, for human beings living in this country, I think they’re likely to run into an adjudicative issue before they run into a rulemaking issue, but that’s surmise only.

Prof. Philip A. Hamburger:  So I think Dan’s point is tremendously important. I discuss this a little bit in my response to Adrian Vermeule years ago. The defenders of the administrative state, Adrian and thousands of others, will always retreat to rulemaking, Notice and Comment, and ALJs when defending this fairly formal, seemingly innocuous structure. But that’s the way it actually works. Most of the controls and intrusions come beneath those rules and often in the form of extortion, in overt threats, which are sometimes very, very ugly. And, so, we -- when we talk about the administrative state, there’s the formal administrative state, and then, there’s a rather grim reality.

It reminds me of Trollope’s novel, at least the title. The Way We’re Governed Now is the way I would put it. ALJs are a good example of this, and she mentioned them. ALJs, we’re told, “Oh, they’re neutral. They’re carefully chosen by a merit board. Blah, blah, blah.” These are not judges. They don’t operate with juries.

They operate with a different burden of proof than we’re accustomed to in real courts. What’s more, their decisions typically are finalized, reviewable by the agency heads, which means they’re always looking over their shoulder to make sure they get it right so they don’t get overruled by a political body. This is a profound constitutional problem. These ALJs, however virtuous and well-meaning they may be personally — and they’re not all well-meaning, as we found out at the New Civil Liberties Alliance — but however well-meaning 99 percent of them may be, they structurally are incapable of decision-making in accordance with due process because they are reviewable by political bodies. And this is ugly. Right? And we should have no doubts about that.

Then, finally, I want to get back to the early part of the conversation. OIRA serves many valuable purposes. It constrains a lot of regulatory making and nipping it in the bud. I think that’s admirable. I just want to point out we have two very different visions about how to restrain power. One vision is an -- not quite an economist but a econometrics vision of limiting power, that the administrative state will control itself by having economic measures of what can get through and what cannot. In absence of other controls, it’s highly desirable.

So thank you. At the same time, it seems to me we have another vision of control, which are legal limits. Different spheres of authority allocated different parts of government and between government and the people, and those legal limits are the ones that, I think as lawyers, we should be standing on. Thanks.

Hon. Neomi Rao:  Next question.

Myron Ebell:  Myron Ebell, Competitive Enterprise Institute. I’m persuaded by the principled arguments against Chevron deference, and I understand that many people are not convinced. But I would like to ask whether you both could agree that the principle, practical consequence of Chevron deference is that, in at least 99 out of 100 instances, the regulators’ interpretation serves to expand the regulators’ authority and power over those being regulated. And it seems to me that the discussion here or the debate is actually because people on the right don’t like that, and people on the left do like that.

Prof. Philip A. Hamburger:  Yes.

Hon. Sally Katzen:  No.

[Laughter]

Hon. Sally Katzen:  No. I don’t think it is 99.9 percent. The agency is winning and expanding its jurisdiction. There are, if I’m not mistaken, more Republican presidents than Democratic presidents in the last 50, 75 years, and their minions — and I don’t mean to be disparaging — but their people were definitely, often invoking their interpretation of the law to restrict or constrain the agency’s jurisdiction. And there are a number of instances where this occurs. We just had four years of this, if you have a memory that goes back seven years.

Prof. Philip A. Hamburger:  If I can just be more serious for a minute --

Hon. Sally Katzen:  I’m serious.

[Laughter]

Prof. Philip A. Hamburger:  I just want to note — no -- not where you were more serious than I was earlier — which is simply that the concern about Chevron deference is all about principle. I think many of us in this room -- all of us are dedicated to independent judiciary. It’s not the robes that make a judge — right? — not sitting on a bench. What makes a judge is a certain mental stance. It’s hard work, dedication to being independent of all precommitment. And when the Supreme Court imposes on all judges a requirement to give up one’s independence and be precommitted to the interpretation of one of the parties, it’s not just about policy, and it's not just about the particular case and those defendants who lose.

It corrupts the entire legal system. I don’t think the Supreme Court quite understands the degree to which they have corrupted themselves. In order to make way for the administrative state, they have destroyed the judiciary’s own independence, and that is fatal. By the way, the judges in the 1630s in England did this. It took them a century to recover their reputation. The judges, especially the justices of the Supreme Court, need to understand that their own reputation is at stake. They have bowed to the administrative state, and they should bow to no one.

Hon. Neomi Rao:  Okay. I think we have time for one final question, Mark.

Mark:  This question’s for Professor Katzen. I don’t think we’re going to persuade you on Chevron deference, but I wonder if we might persuade you on Brand X deference. You suggested that once the courts have decided on the meaning of a statute that that’s it. But, as I’m sure you know, that’s not really true. An administrative agency can come along behind that, reinterpret the statute with a Notice and Comment regulation, and then, when that same issue gets back to the court, the court under Brand X deference doesn’t recur to its own prior precedent on that question. It has to take the interpretation of the administrative agency. So, with a little doll there, the judge is actually bending over backwards, giving deference to the administrative agency in that context. And Judge --

Hon. Sally Katzen:  You’ve obviously -- yeah.

Mark:  One little quick point. Judge Rao’s former boss, Justice Thomas in his --

Hon. Sally Katzen:  That’s what I was going to refer to.

Mark:  Okay.

Hon. Sally Katzen:  The Burwell decision -- no -- it --

Mark:  Baldwin.

Hon. Sally Katzen:  Baldwin decision in which he dissented from the Court’s not taking a case from, I think, the Ninth Circuit, which would have enabled them to rethink Brand X, ab initio. And he said, “I wrote Brand X, and I disagree with it, and I think we should take it.” And it was a very well-written, well-thought-through opinion by Justice Thomas on that issue. When I teach Brand X, I am not unreservedly enthusiastic about it, which is a way of -- and I try to keep it straight with the students, rather than wear my D jersey.

[Laughter]

Hon. Sally Katzen:  I find Brand X troubling, particularly -- well, I can -- I’ll just stop there. I found Brand X troubling. And it shocked me that the Court didn’t want to take that case, given what they’ve been doing with Auer deference and given what, I think, they’re going to do with Chevron deference. Why didn’t they take that one? And that’s surprised me. But I did find Justice Thomas’ decision to be very interesting. Can I make a closing comment? Because I know the time is right. I took Administrative Law in the 1960s. It was so boring. We read FERC cases, FERC rate cases. It was horrid.

[Laughter]

Hon. Sally Katzen:  I don’t think Administrative Law is the same today. I think it’s pretty exciting, pretty interesting, and I thank you all for at least listening to some of my thoughts.

Hon. Neomi Rao:  I’d just like to say I think, in Washington, we are very lucky to have had such an erudite, engaging, and congenial discussion on this topic. So, if you could please join me in thanking our panelists.

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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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

Event Transcript

Jeffrey H. Wood:  Good afternoon. And welcome to the Executive Branch Review Conference breakout panel on "Climate Risk as a New Regulatory Risk? Implications for Financial Regulatory Control of the Financial System." My name is Jeff Wood. I'm a partner in the Washington D.C. office of Baker Botts. I previously had the honor of leading the Justice Department's Environment Division for the first two years of the Trump Administration. And I currently chair The Federalist Society's Environmental and Property Rights Practice Group, which is a co-sponsor of today's breakout panel, along with our other co-sponsor, The Federalist Society's Financial Services Practice Group. We're really grateful you're here, both, in person, and those of you joining us virtually.

              It's my privilege to introduce our distinguished panel, and to moderate a vibrant discussion about the legal policy and economic merits of the Biden administration's whole-of-government approach to harnessing financial regulatory measures to spur reductions in greenhouse gas emissions, enhance corporate governance, and to drive energy transition in the private sector.

              Under new approaches adopted since January 2021, the federal financial regulatory agencies are taking aggressive action to address climate-related financial issues. These government initiatives build on, and, in some respects, compliment non-governmental ESG programs, a key focus of some activist shareholders, and, increasingly, forcing closer corporate scrutiny of climate-related concerns, and to focus on broader societal goals, as well.

              One of those societal goals, as expressed by the Biden Administration, is a commitment to net-zero emissions by 2050, a commitment shared by many companies and industries as well. And many of these financial measures target what some see as material systemic risks to the financial system as a whole, and to individual companies as well. So that is certainly subject to much debate.

              For example, the Financial Stability Oversight Council is taking steps to incorporate climate-related financial risk into regulatory and supervisory practices. We'll be hearing more about that today. The SEC has proposed to require publicly traded companies to disclose company-wide greenhouse gas emissions, including emissions far up and down the supply chains. The SEC proposal would also require disclosure of corporate governance, of climate-related risk 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 CFTC, the Federal Housing Financing Agency, and the Treasury Department's Federal Insurance Office, just to name a few. To help us better understand these new initiatives and their legal policy and economic merits, we are joined by a distinguished panel of leading experts from both inside and outside government.

              Our first speaker will be Graham Steele. Graham, welcome. He's the Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury. He is an expert on financial regulation and financial institutions. He's a graduate of the George Washington University Law School. And he's held senior staff roles at the Federal Reserve Bank of San Francisco, the Senate Banking Committee, and the Office of U.S. Senator Sherrod Brown. I believe we overlapped on Senate staff around the same time.

In his current role at Treasury, Mr. Steele works for Treasury Secretary Janet Yellen on policies related to the regulation of activities of banks, securities broker-dealers, asset management companies, and other financial institutions doing business in the United States. He was nominated by President Biden, and confirmed by the United States Senate in November of 2021. So thank you for being here with us today, Assistant Secretary Steele.

              Our second speaker is Professor Christina Parajon Skinner, Assistant Professor of Legal Studies and Business Ethics at the Wharton School at the University of Pennsylvania. Professor Skinner received her law degree from Yale Law School. She's a highly-regarded expert on financial regulation, with research focusing on central banking, the financial markets, separation of powers, corporate governance, and law and macroeconomics. Prior to joining the faculty at Wharton, Professor Skinner served as legal counsel at the Bank of England, in the Financial Stability Division of the bank's legal directorate.

              Third, we're joined by Jeremy Kress, Assistant Professor of Business Law at the University of Michigan's Ross School of Business, where he's also the Co-Faculty Director of the Center on Finance, Law and Policy. Professor Kress graduated from Harvard Law School, and from the Harvard Kennedy School, where he was a presidential scholar. His research currently focuses on bank regulation, systemic risk, and financial stability. His written work has appeared, or is forthcoming, in Duke Law Journal, Northwestern University Law Review, Southern California Law Review, and elsewhere.

              And, finally, we're honored to be joined by Dr Paul Kupiec, a Senior Fellow at the American Enterprise Institute. Dr. Kupiec holds a Doctorate Degree in Economics from the University of Pennsylvania. His work at AEI focuses on systemic risk, and the management and regulation of banks and financial markets. He also follows the work of financial regulators such as Federal Reserve, and examines the impact of financial regulations on the U.S. economy. We're really pleased to have such a distinguished group of speakers this afternoon.

              With those introductions, let's begin the discussion. Each speaker will provide some brief opening remarks, and then we'll have time for moderated Q&A, as well as audience Q&A. So begin thinking about those question you might have for our panelists. With that, let me turn it over to Assistant Secretary Steele.

Graham Steele:  Thanks very much, Jeff. Thanks for having me here. Thanks to The Federalist Society for hosting this important conversation. So I'm going to -- I'm looking forward to the discussion we have after the presentations, but I'm just going to sort of start with some of the initiatives that Treasury is undertaking in the space of climate finance, just so you have a sense of the work that we're doing, and how we're thinking about this issue, and how climate change intersects with the work of the nation's finance ministry. I think a lot of people don't find that connection necessarily intuitive. But I just want to quote from the Secretary when she spoke at COP26 in Glasgow, which is, she said, "Climate change is not just an environmental issue. It is not just an energy issue. It is an economic development and market destabilizing issue. And I would not be doing my job if I did not treat it with the seriousness warranted."

Now, I know we can debate whether folks agree on that set of statements. But that is how the Secretary very much thinks about the role of the Treasury Department, within the context of climate change. I think Professor Kress is going to talk a little bit more about some of the specific risks that can arise from climate change, and how they impact the financial sector, be it acute or chronic physical risks, the risks of the transition to a clean economy. But we believe that those are some of the sources that intersect with our roles and responsibilities at the department.

And I would say we're going to talk a lot, I think, about risks, today. We also view the transition as an opportunity, as a chance to use our innovation and our technology to move away from a carbon-based economy and to innovate into new areas of the clean energy transition. And I would note that we are not alone in this view. Financial institutions with assets of over $130 trillion have made voluntary commitments to become net-zero by 2050, and to achieve strong, science-based interim targets for emissions reductions by 2030. So private-sector actors very much view this transition as an inevitability. And we're trying to work with them to further that process.

So there's not just the Secretary that thinks that Treasury has a role to play with climate change. We take a lot of our direction from the president, and several of the executive orders that he has issued since taking office in January of 2021. The first is Executive Order 14008, tackling the climate crisis at home and abroad. And I think that this is sort of what Jeff was referring to when he says that the administration is trying to deploy and organize the full capacity of all of its agencies to combat the climate crisis and implement a government-wide approach. So, essentially, the president is saying agencies think about what your role is here, and the role that you have to play.

I would also point out Executive Order 14030. That is the climate-related financial risk EO that specifically directs the Secretary to engage with the members of the Financial Stability Oversight Council, or FSOC. And it instructs the Federal Insurance Office, or FIO, to address climate financial risks. The last EO I would point out is 13985, which is advancing racial equity and support for underserved communities through the federal government. That sets forth a number of racial equity goals and support for underserved communities, but calls out the climate crisis and the impacts that it can have in exposing and exacerbating inequities within our society.

So, with that sort of framework, it is coming from the president, on down to the Secretary, and then down to the respective offices within Treasury. I'm going to name a few of those specific offices and the workstreams they've undertaken in this space, so far. The first is the FSOC, which was directed by that EO to work with its constitutive member agencies. And it produced a report last fall on some of the risks involved from climate change, from a financial perspective. And, here, I want to be very clear that there is a role for the Treasury to interact with the financial regulatory agencies, in their capacity as FSOC members. However, those agencies are independent agencies. They are independent regulators. We take that distinction very seriously between the political agencies that are in the cabinet, and the independent financial regulatory bodies.

So, let me give you some high-level conclusions from the FSOC report. The report has over 30 recommendations for members, across four broad categories. The first is assessing climate-related risks to the financial stability. The second is enhancing climate-related risk disclosures. The third is improving climate-related data. And the fourth is building capacity and expertise at state- and local-level entities.

So this is very much a capacity-building and measurement exercise to better understand what the risks are and how the agencies think about those risks. Following the release of the report, we have created a Climate-Related Financial Risk Committee, or CFRC, that includes representatives of all 15 agencies. And, through that committee, they're working on enhanced regulatory coordination, additional climate-related data, scenario analysis, and risk assessments.

FSOC is also in the process of setting up a Climate-Related Financial Risk Advisory Committee, or CFRAC. The advisory committee will report to the CFRC to help the council gather information and analysis from a broad array of external stakeholders as well. So it's not just governmental agencies taking part. We're accepting consultation from the public as well.

Next, I'll turn to the FIO. So FIO has been working to assess climate-related issues, or gaps in the supervision and regulation of insurers, thus assessing the potential for major disruptions of private insurance coverage in U.S. markets, particularly those that are vulnerable to climate change impacts. And, third, it is increasing its engagement on climate-related risks with the industry itself, to better understand how insurers are measuring and understanding what climate-related risks are, and how they feel that implicates their businesses.

In the fall, FIO published a request for information, or RFI, seeking public input on these priorities, to better inform the work, going forward. The RFI received significant input from numerous stakeholders, with over 50 unique responses from over 5300 individual signatories, representing over 95 different organizations. So, again, we take public input very seriously. We have put some of these priorities out for public comment. Taking in the input that we have gotten, we have formulated a climate-related plan of action for 2022, to advance the three priorities that I laid out before about gaps, about looking at vulnerable markets, and about increasing engagement.

Number one, we plan to issue a report by year end, focusing on insurance supervision and regulation, with an eye towards an assessment of the gaps in supervision regulation. Second, we're going to begin a quantitative analysis of the transition risks of insurance investment portfolios, and the physical risks of their underwriting of liabilities from property and casual and other climate-related exposures.

And, third, we will increase our engagement with the sector. We have a federal advisory committee on insurance that has industry members. And we are working on hearing, again, from them, on how they view these risks and what the private sector and public sector can do to address those risks. So that is our plan for 2022, going forward: a report, an assessment of the risks, and sector engagement.

Another piece that I will call out is the Office of Consumer Policy, which leads a 23-member agency commission, and is the Financial Literacy and Education Commission, or FLEC. It was a body that I was not aware of until I joined the Treasury Department, but, I assure you, it exists. The FLEC is looking at climate-related financial risks to households, specifically, in particular, in low income and historically disadvantaged communities.

The goal there is to understand which communities are particularly vulnerable to climate change, the risks of climate change, and also look at the communities that are most vulnerable from an economic and financial perspective, and, essentially, to try to map those two different geographies on top of one another to understand how specific regions will be impacted by climate change, both from a physical and transition perspective. And, from there — again, this is very much a stock take — an understanding, an attempt to quantify what these risks might be. We hope that that will inform other policy processes, both within the Treasury Department, and across the government, thinking about what tools might be brought to bear to better increase community resilience.

The last thing that I will note is the Office of State and Local Governance and Local Finance, because we know that there are a lot of states and municipalities that are going to be particularly impacted. And climate change will not impact the nation as whole in the same way, in a uniform way. Specific regions will be impacted differently, both from a physical and transition perspective. And so the Office of State and Local Finance has worked with municipalities to understand how they view the risks to their municipal finances, from both physical and transition risks, and how Treasury can do a better job of supporting them through municipal funding markets and otherwise.

So, again, this is kind of a laundry list of the work that we're doing. But, hopefully, it gives you a sense of how the Department's looking at climate-related financial risks. I look forward to continuing the conversation with the other panelists.

Jeffrey H. Wood:  Thank you, Assistant Secretary Steele. Professor Skinner, for those of you joining us today, you'll actually hear, again, this evening, if you're attending the dinner on the SG panel, where Professor Skinner is also participating. So we're especially appreciative of your support at the conference today, and look forward to hearing your remarks.

Prof. Christina P. Skinner:  Well, thank you. And thank you to everyone for being here to take part in this incredibly important conversation. And thank you very much, Graham, for that very insightful perspective from inside the administration. So it's great for us to have that baseline to have a conversation. Now, in my remarks today, I want to focus, specifically, on the Federal Reserve, the U.S. Central Bank. And why the Fed, in particular, sits quite uncomfortably, within a whole-of-government approach to addressing climate change that has been articulated and advanced by the Biden Administration. So let me give you a little bit of context first.

              So, for many years, while central banks around the world had begun experimenting with various ways to deploy their policy tools to tackle climate change, the Fed had, largely, held back. But, increasingly, in the face of tremendous public, and then, later, administration pressure, the Fed, eventually, waded in. So it has now joined the Network for Greening the Financial System, which is a consortium of central banks that have dedicated themselves to thinking through how they can deploy policy tools to address climate change.

The Fed has issued financial stability reports, indicating that it's open to considering how climate change is a financial stability risk, in a way that would impact its mandates. And it's established two new supervisory committees, both on a microprudential, or firm level, and macroprudential, or system-wide level, to think about how supervisory tools of the Fed might be deployed to address climate risk.

 But, as I've argued in some of my research, it's far from clear that the Fed, in particular, has a legal mandate to proactively use its various policy tools to address climate change, within the four corners of the mandate that Congress has given the Fed, within the Federal Reserve Act. And I think it's helpful, to make this legal point concrete, to think through the three main statutory responsibilities that the Fed has, in the arena of monetary policy, regulation, and supervision.

So, first, where monetary policy is concerned, the Fed is charged with pursuing price stability and maximum employment. But climate change doesn't really fit in, right now. So climate change is not presently impacting price stability, and it's not presently impacting employment. And, although the Fed's monetary policy can, at times, slightly trail developments in the economy, it cannot, or should not chase or anticipate hypothetical changes to future price levels. Congress did not delegate to the Fed the power to do that.

              Now, the Fed is also a bank regulator. It has the power, in particular, to set capital requirements in this respect, especially in regard to institutions that could pose some financial stability risk, given the institution's size, and mix of activities. And some suggest that this regulatory authority to set capital requirements could be used to try and move dollars away from brown businesses and, potentially, toward green ones. But, as I've argued, I think it's difficult, at least in the case of U.S. banks, and U.S. bank holding companies, specifically, to demonstrate that financial stability risk is tied to climate change, at least, not in the specific way that we've been using that term in the past ten years.

              So risks to financial stability generally come from some kind of credit risk that is lurking on a big bank's balance sheet that, if and when that risk materializes, it so damages the bank's balance sheet that their fundamental solvency comes into question. And this, of course, is what happened in 2007, 2008, and motivated some of the provisions in the Dodd-Frank Act. But in order for this kind of moment to happen, to result from climate change, a number of bad things would have to happen first, which presently makes the risk so attenuated that it may well sit outside of what we've been thinking of as an actionable financial stability risk.

              So, in particular, we need to think about the ways that U.S. banks are so incredibly geographically and sectorally diversified, that it's hard to see how any given physical manifestation of climate change, like a storm series, for example, could pose this kind of solvency risk. Regarding transition risk, policy changes that could drive certain borrowers out of business, well, again, those policy changes would have to be so sweeping and so sudden that a huge swath of corporate America and households would be unable to plan or adapt.

              But, ultimately, when we're thinking about bank solvency, what really matters is looking at the bank balance sheets, themselves. And when you do this, you see that their exposure to the biggest carbon producers is quite a small proportion of their balance sheet, precisely because these banks are so diversified. So, in the U.S., for these banks, their wholesale loan exposures, again, to the big carbon producers, ranges from seven percent at the top level, to two percent at the bottom range. And we know that banks are, every day, moving away from lending to these kinds of borrowers. And, meanwhile, their equity capital, that loss-absorbing capital, is two or three times that amount. So, again, this analysis is very specific to U.S. banks. And, of course, it could always change. But I think it's something that we really need to incorporate into our conversation about financial stability risk.

              Okay, so, putting that to the side, then there's supervision. While the Fed, certainly, no question about it, has the legal authority to supervise banks for all manners of credit risk, including climate risk — to the extent that climate risk is a bona fide credit risk for any given asset — we also need to have in the conversation these important due process concerns. Given how inherently opaque bank supervision can be, there's always the risk that the line between an identifiable credit risk becomes blurred, with an aversion to the borrower's business lines. And then legitimate supervisory actions can cross over into politically motivated ones. So we have to be on guard for that as well.

              All right. So, if Congress has not assigned to the Fed a legal role to proactively address climate change, what exactly are the implications for a Fed that pushes beyond the limit of its statutory remit? So I want to suggest there are three things to consider, in this regard. First, there are some potentially concerning implications for the democratic order. If there is an end-run around Congress, this is difficult to square with democratic legitimacy. Climate change poses questions that are polarizing. There isn't a social consensus about what the state should do about climate change, and certainly not about what the Fed should do about it. If there were, Congress would write new laws, giving the Fed new goals to tackle climate change, but it hasn't.

So we really have to wonder, is this economic engineering, which Congress has not given the Fed a mandate to engage in? And it also suggests that when Congress is inert, the Fed can respond to the president's wishes in the interest of expedience. But that's a very slippery slope to slide down. If you give the Fed the power to identify new financial stability risks, for example, with no limitations on the hypothetical character of the risk, or the time horizon along which we're examining risk, any number of things could fall into that bucket. This kind of ballooning of a mandate will certainly become ripe for political abuse in a future administration which has different kinds of priorities. That administration may well ask the Fed to focus on trade or immigration policy as financial stability issues.

              So, second, pushing ahead with climate initiatives could erode the separation between monetary and fiscal policy — which we traditionally have — which raises delegation questions, and, ultimately, can threaten the independence of the Fed. The point here is that if central banks start to allocate credit to different sectors, or to lean in to try and affect the allocation of credit to certain sectors and not others, well, this looks and feels a lot like fiscal policy or credit policy. So, to put the point a slightly different way, major structural transformations of the economy, or policies that function like a tax on certain activities, well, those are fiscal functions, again, that have not been delegated to the Fed by Congress.

              Now, why should we be concerned about conflating monetary and fiscal policy? Well, the reason is because unelected central bankers should not be making the kinds of value judgments that are inherent in fiscal allocation. They involve making decisions about tradeoffs and resource allocations in society. So when Treasury implements these policies, we can hold the president accountable. When Congress implements policies through law, we can hold Congress accountable. But, like the Supreme Court, the Fed suffers from a democratic deficit, and should not exercise its judgment in the place of democratically responsive institutions.

So I think it's worth noting here, and, potentially, discussing on our panel, the interesting development where the FSOC, which is housed within Treasury, now has the ability to influence the Fed by issuing recommendations. And it does sort of fly in the face of a long and notable decades-long history of insulating the Fed from pressure from the Treasury, and, hence, the presidency. So, can the FSOC become an avenue for the president to influence the allocation of credit in the economy? And could this be in the direction of politically favored, or away from disfavored sectors? And, if that is what eventually happens, that would be an unfortunate outcome for central banking, regardless of who the president is.

              Now, third and finally, I think it's worth asking whether we're simply giving the central bank too much to do. So much time, focus, and energy has been spent on the question of the Fed's role in climate change, while the Fed's primary, its core mandate of price stability, has gone insufficiently attended. Now this is not to say that central banks cannot or should not multitask. But there is some inelegance in falling down on one Congressional mandate, while chasing other goals that Congress has not asked the Fed to do. So thank you. And I'm sure we will, no doubt, have a lively discussion about all of these points.

Jeffrey H. Wood:  Thank you, Professor Skinner. That was very enlightening and helpful. Professor Kress, you've come the furthest, all the way from Michigan. We look forward to hearing your response. I suspect you might have a different perspective than Professor Skinner.

Prof. Jeremy Kress:  Thanks, Jeff. And thank you all for having me. It's a delight to be here. Believe it or not, I think today is the first day that I've put on a tie in the past two-plus years. So thank you for giving me the initiative to explore a part of my closet that's gone neglected since the pandemic. As Jeff mentioned, I come from Michigan. I'm an Assistant Professor of Business Law at the Ross School of Business. Before that, though, I was an attorney at the Federal Reserve Board here in Washington. I worked to implement the Dodd-Frank Act, in the wake of the 2008 crisis. And my experience with the 2008 crisis really influences how I think about these issues that we're talking about today.

Shortly before 2008, there were a handful of policy-makers and advocates who were warning about potential risks in securitization and derivatives and sub-prime mortgage lending. And they were advocating for stronger oversight of those instruments. Regulators largely ignored those calls. And we all witnessed the consequences of what happened in 2008. Today, there are important questions about whether, and to what extent, climate change poses risks to financial institutions and to the financial sector, more broadly. I'm sure we have varying opinions on this panel about the answers to those questions.

For my part, I am convinced by the evidence that climate risks, whether physical risks or transition risks, are issues that financial regulators should pay attention to. And, given the magnitude of the potential problem, I think a precautionary approach is appropriate for policy-makers to try to safeguard financial institutions, the financial system, and investors, from the potential tail risks of climate change. No doubt, we'll have time to discuss and debate, today, the extent of those risks, and the potential policy responses. But I just wanted to take a few moments today to tee up how I think about these issues, the frame through which I see the topics that we're discussing today.

In my view, this is not about financial regulators trying to stop climate change. This is not about financial regulators trying to allocate capital. This is not about financial regulators trying to cut off funding to any particular industry or set of industries. This is about financial regulators doing their jobs, that is, ensuring the safety and soundness of individual financial institutions, of the financial system, more broadly, and protecting investors.

              So I want to make two broad points before I hand things over to Dr. Kupiec. The first is just to make the base case for why climate risk is a risk that financial regulators should pay attention to. Assistant Secretary Steele mentioned the two types of risk that we think about in this context. Climate change poses these risks to borrowers, and, therefore, to the banks that borrow from them. First we have physical risk. Physical risk is the risk of acute or chronic weather disasters, whether it's flooding, or drought, or chronic sea-level rise, that could impose losses on, cause damage, to property or to companies that operate in high-climate-sensitive regions.

              The second risk is transition risk. This is the risk of changes in consumer behavior or changes in government policy, in response to climate change. So you could imagine consumers no longer wanting to live in coastal areas, as a result of climate change. That could cause coastal property values to drop, imposing losses on insurers, or banks that hold mortgages on those properties. Those two risks, physical risk and transition risk, are very real, and they're economically meaningful. We know that they're economically meaningful, because the market reacts to them. We've seen bond spreads rise, yield spreads rise, for companies and for countries that are highly exposed to climate risk.

Depending on which of the academic studies you look at, bond spreads are somewhere on the order of 100-200 basis points for issuers that are highly exposed to climate risks. And credit-rating agencies respond to climate risks as well. Issuers, whether it's companies or countries that are highly exposed to physical or transition risk, have been downgraded by all three major rating agencies, because potential future climate change, and policy response to those climate changes, renders the issuers creditworthiness in question.

              So climate risks are real. But there is reason to be concerned that banks and other financial institutions may not always internalize those risks. This is the case for having government oversight for financial institutions, with respect to climate risk. And it's pretty similar to the base case for government oversight of finance, in general. Banks and other financial institutions benefit from a whole host of government support, in the form of government subsidized deposit insurance, other implicit or explicit government backing. And, therefore, we think that financial institutions do not internalize the full costs of their risk-taking.

I think that worry about moral hazard is particularly acute in the climate change context, because, if the worst-case climate projections materialize, there's a non-zero chance that financial institutions will not have to internalize all of those costs. Some of those costs could be offloaded onto the public sector in a worst-case climate scenario. So I think that is the high-level case for why this is something that financial regulators should pay attention to. And we can talk about what form that government oversight might take. That brings me to the last point I wanted to make before turning things over, which is really just to contextualize the steps that the Biden administration and the independent financial regulators have taken, to date.

              Assistant Secretary Steele listed a lot of the initiatives earlier. And, with all due respect to him, I would like to suggest that these are pretty modest steps, so far, at least in respect to what some other countries are doing, and what some independent financial coordinating bodies are doing, things like the NGFS, the Network for Greening the Financial System that Professor Skinner referenced before. What the U.S. agencies and the Treasury Department are doing so far is, largely, along the lines of climate risk management oversight. The OCC and the FDIC have proposed climate risk management guidance for large bank boards. We've also seen initiatives and executive orders that Graham ran through, about data collection, coordination, reporting on potential risks. We also have the SEC climate disclosure proposal. That, again, is about generating information and disclosure.

These initiatives do not go nearly as far as some other countries that are doing binding stress tests of their banks that would set capital requirements for climate-sensitive exposures for banks, does not go nearly as far as central banks like the bank of Japan, that are proactively providing financial incentives for their banks to green their portfolios. Those types of initiatives are simply not on the table in the United States right now. So I think that context, and comparing where the United States is to other countries and to other international coordinating bodies is just helpful background to set the stage for today's discussion. So, with that, I'll hand it over. And I'm looking forward to further conversation. Thanks.

Jeffrey H. Wood:  Thank you, Professor Kress. As he mentioned, he served as an attorney at the Federal Reserve Board of Governors here in Washington, D.C. Dr. Kupiec, before joining AEI, had served on staff at FDIC, as well as IMF.

Paul H. Kupiec:  And a decade at the Federal Reserve Board.

Jeffrey H. Wood:  And a decade at the Federal Reserve Board. So we've got a lot of experience here on our panel. I suspect you also have some disagreements with what you've heard so far. So we look forward to hearing your presentation.

Paul H. Kupiec:  I think they're just all great ideas. Thank you. I'm glad you invited me. It's very humbling to be a mere economist on a panel of distinguished legal minds. In a 2020 article, published in the Cornell Journal of Law and Public Policy, my distinguished colleague on today's panel, Graham Steele, described a detailed plan to use federal financial regulatory agency powers to implement a new national industrial policy, without legislation. The plan was to use the powers of the financial regulatory agencies to restrict the flow of credit and capital to firms and activities that produce greenhouse gas emissions.

The outlined plan uses the Financial Stability Oversight Council to declare climate change as a systemic risk, which, in turn, requires FSOC members to use their Dodd-Frank regulatory powers to impose new regulations to mitigate the alleged climate change systemic risk threatening the financial system. Climate change regulations would take the form of heightened capital requirements for banks' loans to greenhouse-intensive firms and activities. These higher-capital requirements would be justified by claiming that climate change factors elevate the future credit-risk profile of targeted borrowers.

According to Mr. Steele's article, to limit greenhouse gas emissions, regulators would also increase minimum collateral haircuts and margin requirements on capital market transactions, and place new regulatory caps on the total amount of greenhouse gases that could be emitted by firms whose security are held by mutual funds, pension funds, public investment companies and insurance companies. These caps could require divestitures.

              These new heightened regulatory restrictions would be applied to counter-parties from specific targeted industries. As it turns out, time has revealed this plan to be the actual blueprint for implementing an important component of the Biden administration's net-zero policies. A cardinal rule of financial regulation is you can't regulate a risk unless you can measure it. The measure, in this case, would be provided by the SEC.

Its March proposal requires all public companies to periodically disclose their Scope 1, 2, and 3 ESG greenhouse gas emissions, using the GHG protocol. Public companies' Scope 1 and 2 emission estimates, and, eventually, their Scope 3 estimates, must be certified by an appropriate third-party climate-change consultancy. This is marketed as a measure to satisfy the information needs of confused ESG investor community. But the rule only focuses on GSG gas emissions, and neglects other ESG investor causes championed by ESG investors.

              This plan uses the ambiguous language and the poorly drafted Dodd-Frank Act to highjack financial regulatory powers to disrupt non-financial companies that are disfavored by the current administration, as a means to implement a new national industrial policy. The plan is an abuse of executive power. It usurps powers vested in the duly elected representatives in Congress. Following the 2008 financial crisis, the Dodd-Frank Act created new financial regulations designed to mitigate financial systemic risk. But, by oversight or design, the act never defines systemic risk, notwithstanding the fact that it's mentioned 39 times in the 849-page legislation.

              The act requires the Federal Reserve to impose new regulations to mitigate the systemic risk created by large, complex, financial institutions designated in law as systemically important financial institutions. It also allows that, by virtue of their corporate structure, activities, or practices, other financial institutions could be sources of systemic risk, if so deemed by the FSOC. By never defining the term "systemic risk," the act creates ambiguity the FSOC can exploit to designate institutions, activities, or practices as a source of systemic risk, a designation that requires federal financial regulatory agencies to promulgate new regulations to mitigate the risk.

              True to plan, the administration has capitalized on this loophole, by having the FSOC conclude that climate change is a systemic risk to the financial sector. Keep in mind that Congress never granted the executive branch or independent financial regulatory agencies the power to regulate non-financial firms. The systemic risk provisions of the Dodd-Frank Act apply to federally regulated banks, financial institutions, and to non-bank financial institutions, designated to be systematically important by the FSOC.

The latter must be non-bank companies predominantly engaged in financial activities. The FSOC report on climate change risk essentially argues that the companies emitting greenhouse gases are the ultimate source of systemic risk. But these companies are predominantly non-financial in nature, and, consequently, not subject to the provisions of the Dodd-Frank Act. The administration circumvents this problem by arguing that they have not designated the emission-intensive firms as systemic, but, instead, have determined that these firms carry heightened credit risk, as a consequence of so-called "climate-change transitional risk."

Transitional risk is a hypothetical credit risk multiplier linked to greenhouse gas emissions.

Transitional risk is the risk that a firm's revenues or costs could be negatively impacted by future government policies or regulations, or because of diminished demand, as a consequence of changing consumer preferences. The ambiguous concept of transitional risk is wholly conjectural and not based on specific historical experiences. The concept of hypothetical transition risk could be, and can be, applied to any firm to justify any political goal.

As I mentioned, I have ten years working in bank regulation at the Federal Reserve Board, ten at the FDIC, where I was Chairman of the Basel Research Task Force of the Basel Committee on Bank Supervision. And I spent five years in the IMF, in the bank supervision department, where I did stress tests throughout the world, including for the FSAT exercises.

It turns out that weather-related events -- first of all, they're the business of insurance companies to manage, so I'm not sure why weather-related events are something we ought to focus on right now. There are numerous studies that show that weather-related events do not cause bank insolvencies. They might cause temporary losses in banks, but they're typically made up when new loan demand to rebuild the area that the weather-related event has happened generates profits for the bank. And the newest study on these things are by the New York Federal Reserve Bank, economists at the New York Federal Reserve Bank.

Climate change stress tests are the favored regulatory tool of those who fear Greta Thunberg's ire and hypothetical climate change transition risk. In these stress test exercises, regulators force banks to estimate the losses that they might accrue in the distant future, should climate change somehow catalyze the modern-day equivalent of an Old Testament plague unleashed on the Egyptians, and then, that event, in turn, would trigger government policies or demand changes that would limit GSG-intensive industries' ability to continue operations.

The Fed — an institution that, time and time again, has proven it cannot forecast the inflation rate or GDP growth over the next three months, let alone years into the future — gets to decide what level of individual bank losses are accurate in these hypothetical climate apocalypse scenarios. The Fed is also the judge of whether the banks will have sufficient capital in the future to absorb these fictional losses. Banks cannot dispute the assumptions of the Fed's imaginary catastrophic scenario, nor can they dispute the accuracy of the Fed's bank-specific loss estimates, because, as a practical matter, the stress test exercise is repeated on a periodic basis, and, in the next round, the Fed will still be that bank's regulator.

If, as a matter of legal convention, we do not convict alleged speeding violations when the traffic radar measurement has not been certified accurate, how can we convict banks of regulatory transgressions, based on estimates from a Fed-run econometric simulation exercise whose accuracy cannot be objectively verified? Common sense suggests that such rules invite arbitrary and capricious exercises of power, and, indeed, the courts have upheld this commonsense view.

In 2014, the FSOC designated MetLife Inc. a systemically important non-bank financial institution, based on a hypothetical stress-test analysis. The FSOC argued that, should MetLife policyholders experience a loss of confidence in MetLife, MetLife could experience a bank-like run among its policyholders. The run could trigger MetLife's bankruptcy and create widespread losses for other financial institutions. Despite the fact that there was no historical evidence that any insurer similar to MetLife had ever experienced such a calamity — because insurance company policyholders don't run like bank depositors— the FSOC insisted that this narrative provided conclusive evidence that MetLife posed a systemic risk to the financial sector. MetLife fought the designation, using the administration Procedures Act, and successfully prevailed when the court found the determination to be arbitrary and capricious.

The use of climate change transitional risk to impose extra-legal regulatory sanctions on specific industries and activities repeats a previous Democratic administration's abuse of financial regulatory powers. In the illegal Operation Chokepoint, the Obama administration's DOJ teamed up with the FDIC, under Chairman Gruenberg, to pressure banks to cease doing business with, among other industries, gun shops, payday lenders, and legal purveyors of fireworks and pornography. The justification was that such businesses had a heightened probability of being involved in money laundering and other fraudulent activities. Authorities argued that when these activities are discovered, a bank will suffer damage to its reputation, which could negatively impact its business, as well as invite regulatory sanctions for violating anti-money-laundering regulations.

When the legality of Operation Chokepoint was questioned by Congress, the DOJ abandoned the operation. A group of payday lenders subsequently sued the FDIC, arguing that the FDIC illegally used regulatory guidance, regarding reputational risk, and I quote, "As the fulcrum for a campaign of back-room regulatory pressure seeking to coerce banks to terminate longstanding mutually beneficial relationships with all payday lenders." A D.C. federal court denied the FDIC's motion to dismiss the suit, and the plaintiffs won a settlement in which the FDIC admitted that certain employees acted in a manner inconsistent with FDIC policies, with respect to payday lenders. It looks like Chairman Gruenberg may be a repeat offender.

Like this historical abuse of the ill-defined concept of reputational risk, using climate change transitional risk as a justification for choking off lending and capital to companies involved in activities that are legal, but disfavored by the current administration, is an abuse of regulatory power.

Just to sum up quickly, there are three ways that, if they happen to do this, it might be overturned. One is to use the Congressional Review Act. I think you guys probably know what that is. Another way is, if the Republicans carry the midterms, the next Congress could pass a law. Unfortunately, both of these approaches would have to be signed by the president. They'd have to carry both the House and the Senate, and be signed by the president. And I doubt President Biden would go along with that. But, as MetLife demonstrated, an FSOC systemic-risk determination can also be successfully challenged under the Administrative Procedures Act. This, of course, takes time, imposes significant costs on the plaintiff, and requires a plaintiff to have legal standing. I will leave it to the experts to argue who might have legal standing in this situation. Still, the point remains that the FSOC can be beaten. Thank you.

Jeffrey H. Wood:  Thank you so much, Dr. Kupiec. That was very insightful. And I appreciate the remarks of our entire panel. We'll now turn to Q&A. As I said at the outset, I'd encourage the audience to begin considering questions you might like to pose to our panel. We'll have time for audience questions here, shortly. But, to start, let me ask our panel. And, perhaps, Assistant Secretary Steele, I'll start with you, and ask Professor Kress to supplement the response in any way he'd like to.

              Let me begin with this question on legal authority. We've, I think, heard from most of our panel members some questions about the underlying legal authority for a host of these actions. Assistant Secretary Steele, when you look at the financial regulatory tools in the toolbox that the Biden administration is deploying, do you worry that some, or even all of them are on the outer edges of current legal authority? I know you're at Treasury, so you may be limited in how many other agencies' powers you can speak to. But what do you say to those who argue that Congress has not authorized Treasury to use its authority to address climate change in this manner?

Graham Steele:  The short answer is yes, we feel very comfortable with our legal position, particularly in the actions that we've taken so far. You're right, I won't opine about the independent regulatory agencies and what their authorities are. But I'll sort of go through what FSOC's allowed to do under Dodd-Frank. Its statutory duties include collecting information from member agencies, monitoring the financial services marketplace for threats to financial stability, making recommendations to enhance the stability of U.S. financial markets, recommending supervisory priorities to regulators, and identifying gaps in regulation that could pose risks to financial stability.

This is, essentially, what the FSOC is doing: asking for information, trying to get an empirical foundation for what the potential climate-related risks are that are out there, and then, potentially, making recommendations to these independent agencies that might consider pursuing additional steps to address those. But we feel well within the bounds of what Dodd-Frank permits the FSOC to do, on that score.

Also, talk about FIO for a minute. FIO's authority is to identify regulatory gaps that could contribute to a systemic crisis in the insurance industry, to consult with the states regarding insurance matters of national importance, and to advise on major international insurance policy issues. Again, what FIO is doing is asking for information, doing public engagement, trying to actually measure what are the risks, what do they look like, to then asses what the magnitude is, and what might be done about it. So it is very much in a data-gathering empirical-foundation-laying stage, right now.

And, I assure you, there is no predetermined outcome in our minds about where people want to go with this. It very much is a scoping exercise. And, again, I want to emphasize, the private financial sector is already doing a lot of this work themselves. In some cases we are supplementing them. In some cases, they have actually affirmatively asked us for reliable data in a standardized format that market participants can actually examine to better understand the risks themselves, because some of them just aren't in the position to get this information and make rational decisions about what the risks are that are out there. So, it is very, we feel, number one, that it is very much within the bounds of our statutory authority, at least in the Treasury Department, and that we are very much in line with what is happening in the marketplace, as well.

Jeffrey H. Wood:  Professor Kress?

Prof. Jeremy Kress:  I think I would just add when I think about these issues, I go back to something that Senator Brain Schatz used to say when he was on the Senate Banking Committee, which is, "Risk is risk, wherever it comes from." In this case, it happens to be coming from climate change. I am sure that there are folks sitting at the Federal Reserve and at the other banking agencies and the Treasury Department today, who would prefer not to be thinking about climate models and what happens if we hit two degrees warming. I'm sure they'd rather be thinking about bread-and-butter financial issues. But we live in a world where risk is risk. And climate change has become a risk that banking regulators and other financial regulators have to be cognizant of, in order to fulfill their statutory mandates to ensure the safety and soundness of financial institutions and the financial system.

 

Jeffrey H. Wood:  Professor Skinner, what do you think? Are these modest initiatives by these financial regulators? Or are these sort of on thin ice?

Prof. Christina P. Skinner:  A really good question about the nature of the legal authority. And interesting responses, so far. I think there is an important issue to disentangle, which is the question of whether there is legal authority. And I spoke, mostly, about the Fed. And I'll probably limit my remarks mostly there. And then, also, whether the delegation, itself, is proper, which is more of sort of a rule-of-law question, and whether Congress has some of the blame, here. So I guess three points to add on this legal dimension.

So we talked a little bit about -- we've talked a lot about financial stability risk. Paul questioned where is the definition of systemic risk. And, likewise, I think, from a legal authority standpoint, I think we're challenged to find where, in the Dodd-Frank Act, the Fed actually has a financial stability mandate. So, that doesn't. It's been sort of implied from its historic role, but that means that it's been able to balloon a little bit. And so that's a question where I would say legal authority taken on the basis of a financial stability risk. There's this factual question that I went through, in terms of the balance sheet. But then there's also where is the expressed authority? And, if it's not there, do we have to worry about sort of creeping or ballooning authority?. And I think that's a real problem. And I think that Congress and the Fed really need to wrestle with this.

If you look at other central banks, like the Bank of England, they do have an expressed financial stability mandate. So we can argue about whether certain policy initiatives taken, pursuant to that mandate, are wise or not. But, nevertheless, they have the clear legal authority. So, when you compare the actions taken between the two central banks, it's quite a different posture that we're arguing about. So that's financial stability risk.

Then there's the question of the FSOC's authority to recommend actions on the basis of the financial stability risk to the Fed. So, there, there is legal authority. That's written into the Dodd-Frank Act. That's how the FSOC works. Nevertheless, I would say that we, potentially, have a rule-of-law problem. And maybe we should ask whether Congress made a mistake, because, against this sort of backdrop of this very longstanding history, the concerted effort to make the Fed statutorily insulated from pressure from the Treasury, because, before 1950, when the Treasury could pressure the Fed, things didn't really work very well.

So that's a question where there's legal authority, but there's, nevertheless, a question of whether it's proper in this broader sort of constitutional and historical sense. I have more to say, but I think I'll stop there, for now.

Jeffrey H. Wood:  Thank you. Dr. Kupiec, did you have anything you wanted to add? I will just ask, of the suite of financial measures that are being deployed, are there one or two that you find to be most legally problematic?

Paul H. Kupiec:  I would rather tell a story.

Jeffrey H. Wood:  Okay.

Paul H. Kupiec:  You know, economists tell a lot of stories. In summer of 2008, things were smooth, subprime crisis was kind of brewing, but Chairman Bernanke at the Federal Reserve Board said, "This is contained. It's not going to cause a recession." That's the same federal board -- a few months later, Lehman fails. The whole world falls apart. This is the same federal reserve board that's going to decide whether transitional risk is a problem 20 years in the future, and then allocate capital today.

I think it is folly to think that any financial regulator has the ability or the power to -- and I'm a modeler. I have published many academic peer-reviewed articles on stress testing. And I've done it for the IMF for many years, and been a consultant, and oversaw the operations of the FDIC, where we looked at banks' risk and stress-test models. There is no way that -- we're fooling ourselves if we think we can accurately assess the credit risk caused by so-called transitional risk, that the government might do something to outlaw some greenhouse gas activity in the future, and that's going to create -- what do they call them? Assets that are no longer useful. There's a term.

Prof. Christina P. Skinner:  Stranded assets.

Paul H. Kupiec:  Stranded assets. Thank you. So, just think back to the last financial crisis and just the Fed's performance in forecasting inflation in the current environment. Give you a lot of confidence? Do you think this is a good idea?

Prof. Jeremy Kress:  Can I ask a question, Paul? Paul, I'd be curious, what level of precision or accuracy do you think would be necessary to intervene? I'll just say that when I think about these issues, I don't think about the middle of the bell curve, the most likely outcome. I think about financial regulation from the perspective of tail risks.

Paul H. Kupiec:  I think I've heard of that before.

Prof. Jeremy Kress:  I'm sure you have. It seems to me that, when thinking about projections, we should be thinking about those tails, and not the middle of the bell curve. What do you think?

Paul H. Kupiec:  Well, if you're kind of thinking about cost/benefit here, so that the question here is, well, we really don't know, maybe we ought to be conservative. The estimates, using the EPA's model, are if the Biden administration hits a net-zero policy, that in the year 2100, according to the EPA's model, the average global temperature will be .017 degrees Celsius less than it would be otherwise. That is, essentially, background noise. The variability in the average temperature, year-to-year, right now, is .11 degrees Celsius. So we're going to do all these massive things to impose all kinds of new things to choke off capital to industries that are productive, and that people need the resources from.

People need fossil-fuel energy. And we're going to do that based on the best estimates that said that the temperature is going to decline a very tiny amount, as a consequence of all these things, even if all our estimates are correct. So, you're putting a lot of faith in some kind of tail estimate that doesn't, isn't really there. You can't quantify these things under the current science, in any degree at all, to a degree that would justify these kinds of rules.

Jeffrey H. Wood:  Professor Kress, do you have a response to make?

Prof. Jeremy Kress:  Yeah. I guess I'm less interested in the delta on the temperature change, about what happens whether we enact policies or not. You were talking about .17 degrees, if we enact policies versus if we don't. I'm asking what happens in 2100, regardless of whether we enact mitigation policies, or not, and how does that effect borrowers, and what happens to the financial system, as a result?

 

Paul H. Kupiec:  But if the temperature outcome is, essentially, unchanged, whether you put all these regulations in place, where we trust unelected officials to decide who gets capital and who doesn't because they're guessing credit risk, at some point in the future, might be elevated, and that might be a problem, but they really don't have any solid evidence, one, I don't see how you could defend something like that in court. And, secondly, I don't see why you would, as a common-sense individual, decide that that's the right way to go.

Prof. Jeremy Kress:  I think we're talking about two different, dependent variables. I think you're talking about temperature. And I'm talking about risk to the financial system.

Paul H. Kupiec:  But if you're not mitigating the risk --

Graham Steele:  Can I help you here for a sec, and, actually, Jeff, take it back to your original question, which I think was, is this stuff legal? not, is it hard? Because the law says we're supposed to think about what the emerging risks are, whatever source they're coming from, try to anticipate it. Try to make recommendations about how to mitigate those risks. And, yeah, it's hard to figure some of this stuff out. That's why we're asking for all the data that we're asking for. That's why we're working, both with independent financial regulators, but also other agencies like NOAA and EPA that have background in some of this stuff, to try to better understand what the climate modeling looks like. That's why we're asking for all the data we're asking for. That's why we're writing all these multi-hundred-page reports. It's because it's actually hard to quantify and figure out.

But the law says we have to do it. And so that's what we're doing. And so I take your point. Yeah, it's hard. I think the way we look at it is we've got to get our arms around it, then, not, we just sort of throw up our hands and say, "Well, life is pointless. Whatever's going to happen to us is going to happen to us." So, to get back to your original point, the law tells us we've got to think about emerging risks. That's what we're doing. We feel like we're on a solid legal foundation to do that.

Jeffrey H. Wood:  Professor Skinner?

Prof. Christina P. Skinner:  Okay. So I want to offer a couple of points that might sort of help us be concrete in a different direction, and maybe give us a framework for thinking about this issue of credit risk and tail risk and emerging risk, and so on, and so forth. And, I think, to do that, it's helpful, in some ways, to compare 2008. Because, also, this sort of simultaneous drop in the housing market was also what we would have considered a tail risk, as well. And there are a couple of reasons why I think climate risk is distinct from that economic environment and that shock.

So the first is that if you looked at bank's balance sheets, their exposure to mortgage-backed securities and mortgage-backed security-related products was there. You could see it on the balance sheets. And there was a lot of it in some of these financial institutions. The issue with climate risk is more difficult to discern. You're either looking for banks' exposure to the heavy carbon-emitters, and then, the exposure looks quite small, or you have to adopt the philosophy that climate risk is in everything. But if that's the position you want to take, then I think it's very difficult to suggest that climate risk is distinct from any number of potential risks, like nuclear war, or immigration, or, frankly, banks' exposure to malls, for example.

So, that, I think, is different. We can wrap our arms around that. The other thing that we have to factor in when we're thinking about credit risk is also the banks' resilience and their ability to withstand credit shocks. So there are lots of credit risks that we might not know about, right now. But, ultimately, what we need to think about is how resilient are the banks to those shocks, in terms of what is their loss-absorbing capacity through capital. And banks are much more capitalized, much more resilient than they were before 2008. And so I think it's smart of regulators to think about this question of how resilient are banks to any risk: climate risk, or any other.

And then, finally, I think it's important, also, to parse out banks' incentives to manage a particular risk. So Graham was talking about how the private sector, in some ways, is leading initiatives. And you're sort of on par with them. And I think that's also really distinct from pre-2008, because you do see the private sector thinking about this. And banks are not blind or uncaring about their credit risk. They are, and need to be, prudent risk managers, too. And you see them trying to prudently manage climate risk as best as they can, which is not what was happening before 2008. So I think that this doesn't answer the questions, but the relative comparison is maybe something to think about.

Jeffrey H. Wood:  I wanted to ask, companies have, for a long time, had to disclose a range of risks, including environmental risks, a whole range of environmental risks and regulatory risks that may be out there. How is this different? You have an administration or government that may be focused on adopting a whole range of new regulations that could present financial or economic burdens on industries, or drive energy transition. How is this kind of risk different than those? And, Professor Kress, maybe I'll start with you.

Prof. Jeremy Kress:  With the caveat that I come at this, largely, from a banking angle and not a securities law angle, the way I think about this is large investors, many investors, are saying that this information is relevant to them and they would like issuers to disclose this information. And when I took securities law back in law school, the definition of materiality was would a reasonable investor consider this information important when making a decision whether to invest? I think that when you've got particularly significant institutional investors saying that they want this information, that's something the SEC should take into account when directing issuers what to disclose. So that is my banking law take on a securities law issue.

Jeffrey H. Wood:  Anybody else on the panel want to take that?

Paul H. Kupiec:  Yeah. The notion that 1.3 trillion investors, or whatever -- there's a couple of large groups that are really advocates of ESG investing, and they got signatures from a bunch of people. And that's where the 1.3. trillion comes from. They're the managers of a bunch of groups. I don't think there's individuals out there in the world that, individually, would demand the ESG data. Do you read the disclosure data that comes in your mailbox now, on your investments? I throw mine out. I don't know about you. So we're going to have another whole bunch of -- does anybody here read their disclosures?

Graham Steele:  You're asking the wrong crowd. I actually do. Yes, sorry.

Paul H. Kupiec:  I don't think so. I'm an economist, and I don't read them. And we're going to have more of them now. And they're going to be very specific on greenhouse gas emissions. Are how are they going to affect the way I invest? Not at all. But they're part of a bigger plan, I think. And I think you laid it out, Graham, in your 2020 Cornell -- thank you for writing that. You just had the whole roadmap, there. I just read it too late, that's all.

Jeffrey H. Wood:  Again, I'll invite audience members to come to the microphones, and we'll be glad to take some questions. Let's start with the gentleman in the very back.

Questioner 1:  First, I thank all the panelists. I've learned something from every one of you that I didn't know before I walked in the door. Thank you very much. My question is really to Mr. Steele. Thank you for being here and laying out what the administration is doing. My question about all this, the problem I have with it, and the question I have about doing all this is if you had the science exactly right, and you had the risk exactly right, and you made sure that the banks didn't invest in the coal plants and the digging out the coal and all the various things, it strikes me that because your remit to use the word Professor Skinner used is only the United States.

I think that China and India, they're not going to stay poor. They're going to build all those things. And so we don't change the actual structure of whether there's global warming or whether there's risk or not. Because, even if you're not invested in those, and governments turn against those, if we're not in them, it doesn't stop the climate problem that you're saying is starting the risk. In other words, I don't think the lever changes the level of what you're trying to affect.

Graham Steele:  Well, let me start by just questioning the premise of your question, itself, which is, this is not a lever that we're trying to pull to make anybody do anything. Again, this is a risk-focus exercise, trying to understand how climate change, how we think it might come to fruition, itself, then, what the potential financial transition mechanisms are of that, so then, sort of how the risk will materialize. So there's no lever being pulled. It's sort of what is our response going to be if there are climate-related financial risks, I would say. And then, on your point on international coordination, we are actively engaging in places like the Financial Stability Board on these issues; at IOSCO, the securities regulators; at IAS, on the insurance front. So there is very much an international coordinated effort, here.

Again, I think Professor Kress said it, that a lot of these other, in the E.U. and other places, number one, they have different legal mandates, so they come at this issue differently. They have different legal authorities. And we are very much behind them in the way that they are thinking about these issues. So we are really trying to catch up. A lot of them have really been doing this work for a number of years before we have been doing them. So there is an attempt at international coordination. But, again, all this comes back from the statutes that we are subject to under U.S. law, so we can't implement any of that stuff. We may now be able to implement some of those pieces of it, but, fundamentally, it's got to go through U.S. law, be subject to judicial review, AP review, all those sort of different things, as well.

Prof. Jeremy Kress:  If I could just build on that really quick, because I do think the international context is important. And it is something that I worry about with other countries, some of which have different legal mandates taking more proactive steps to limit climate financial risks in their jurisdictions. Could that lead to climate financial risk migrating across borders to the United States? Does the U.S. financial system become the go-to source of financing for climate-sensitive borrowers? If we don't catch up, I think that is a potential outcome. And it's something that I would worry about if I were sitting in Graham's seat right now.

Questioner 2:  Two quick facts, then a question. I work in the securities market, so I am very cognizant of what's going on in financial regulation. Now, first, Warren Buffet is a well-known Democrat. He is certainly no tool of the right. He was asked, within the last two years, if there was anything on the climate change menu that was affecting insurance rates at Berkshire Hathaway, and his answer was, "No." And he is the gold standard, as far as I'm concerned, and someone I'm much more ready to put my faith in than the federal government or the Fed.

So that makes me wonder that when you go into all these companies, for example, the banks that depend on having a federal charter, and you "ask them" for information about climate risk, whether that's really a good-faith interest in getting the facts, or whether you plan to twist their arms off to produce those facts, much as we've heard several stories about how you twist the banks' arms off to prove that they are racially discriminating.

              The second point is that what's going on in Europe, since you're all very interested in the international context, listen to any speech given by Christine Legarde, and you realize you don't have to look back to counter past examples about making errors, or about inflation in the United States. All of her speeches are about how the failure to take into account the need for fossil fuel is strangling the European economy and is going to put them into a recession, which will be a depression if they have to cut off the use of the fuel from Russia.

So here's the question. We have two ways of looking at the current menu of activity that you've put on the table. One is as good-faith effort by regulators to determine knowable risks. And the other is as a sort of religious political effort by a group to change the scope of government, dramatically. And I'll ask Mr. Kress, can you honestly say that we should accept the former as the explanation of what's driving all of this, rather than the latter?

Prof. Jeremy Kress:  I didn't come here today with the expectation that I would change anybody's minds. But I can tell you that, from where I sit, I believe that physical risk and transition risk is real. I look at market signals including bond spreads, yield spreads, credit rating and I think that there is something there that is worthy of financial regulators' attention. I lived through Operation Chokepoint that Dr. Kupiec referenced, and this is not about reputational risk. This is not about allocating capital. This is not about curtailing funding to any particular companies or industries. The modest steps that Assistant Secretary Steele ran through are about risk identification and risk management, at this point.

Prof. Christina P. Skinner:  Could I just add on to that, briefly? Not on which version of the history is right, per se, but I would say that maybe the market signals are not as clear as one might think they are. Because there is a decent amount of noise, I think. And it's worth noting that I think a lot of the market signals that we're referring to are, themselves, institutions that could be part of a viewpoint that we should be lending to certain industries and not others. And I think credit-rating agencies is an example of that.

So rating agencies come up with their own metrics by which they judge the riskiness of assets. And that may or may not be sort of like a pure market signal, so to speak. I'm going to talk about this a little bit later, at the dinnertime panel. But, while it's worth crediting market signals and what institutions are doing, they're operating in the context of a lot of regulatory attention and energy in one direction. And so it's hard, sometimes, to know whether institutional action is leading, or whether it's responding to regulatory pressure. And I think you could say the same thing about rating agencies.

Jeffrey H. Wood:  Up front, here.

Questioner 3:  If there is nothing wrong with Treasury, the SEC, and the Fed branching out into climate policy, and, in fact, it's so important they have to do it, will there be anything wrong in the future, when EPA, or NOAA, or any other government agency decides their issues of the moment are so important, they have to branch into banking and securities regulation?

 

Jeffrey H. Wood:  I'm going to ask Professor Kress if he'd like to answer the question.

Prof. Jeremy Kress:  Being the one of us who's not in the administration, I feel like I'm getting picked on. I also noticed that they put Graham and me on opposite ends of the panel, so we can't pass notes to one another. I'll say, number one, I'm happy for anybody who wants to get interested in financial regulatory policy to get interested. My worry is that not even financial regulators have been paying attention to financial regulatory policy, recently. So I think my concern is not enough, rather than too many.

I guess I'd be interested in what, exactly, the hypothetical is, how NOAA or EPA might get involved. I think there's ample room for coordination that I'm sure Treasury is thinking about. There should be more climate scientists talking to financial regulators, and the other way around. But, I think, without a more concrete hypothetical on the table, I'd hesitate to speculate on the propriety of any particular government agency getting involved in specific ways.

Jeffrey H. Wood:  Anybody else want to speak to that topic? No? Let's go to the back, and then Myron (sp) will come up --

Paul H. Kupiec:  -- I'll say a word. I can't tell you about the EPA. But I can tell you, and I think we all know, the state governments are pushing back. There 's a very nice letter, written, drafted by Utah representatives. And I think you've probably seen that in the press, where they really push back on ESG ratings, which is all part and parcel of this, and how they don't think rating agencies have any business of, they call them political ratings, and not have anything to do with credit risk. And I think that's evidence that some other government agencies might not be so happy about sharing this kind of, or even living under, this kind of regime.

Jeffrey H. Wood:  In the back.

Questioner 4:  Thank you. So, in terms of looking at the yield spreads, which is, I suppose, a fairly objective measure you can use, isn't there the problem that risk is really just of the government imposing incredibly burdensome, and, potentially, completely unjustified regulations? And so, you're actually just forcing them to take into account the harm that you will do in the future. And, to the point of other potential danger events that I think Professor Skinner raised, like, what about nuclear war? Maybe you could argue that that affects some industries worse than others, or it affects all the same.

Would you, for example, take in a scenario where the United States could face hyperinflation because of the climate policies that collapse, and the energy supply, which will still be hydrocarbon-based, rolling blackouts, abolition of the police, instruction of children in elementary school in psychosexual disorders like pedophilia, expropriation of property. Would you take that into account, basically a democratic sweep in 2024, that companies should have to see what their risk exposure to that is? And isn't that much more likely than some kind of climate apocalypse 100 years from now, or 80 years from now?

Jeffrey H. Wood:  Dr. Kupiec, I think, in your remarks, you got to this point of the lack of definition of systemic risk. I think that gets to the question that's been asked here. Do you have any thoughts in response?

Paul H. Kupiec:  No, I didn't really follow the question. I couldn't really hear.

 

Jeffrey H. Wood:  It could be a host of a variety of global phenomena, and issues and concerns that could come up and could create risk for the financial markets. Where does it end, basically?

Paul H. Kupiec:  Be careful if you say nuclear war is a systemic risk. They'll get a capital requirement for it to increase it.

Jeffrey H. Wood:  Any other comments from our panel?

Graham Steele:  I just want to clear, nuclear war is a hypothetical. Climate change is a thing that is currently happening. And so I would sort of put those two things in different buckets.

Paul H. Kupiec:  NASA, if you look at the NASA website, this so-called browning of the planet, it's greener than it's ever been. That's on the NASA website. They have pictures from the satellites that show that the planet is actually greener now than it was a few years ago, with the higher greenhouse gas emissions. So this whole notion that we're witnessing climate change in real time, I think, is fake news. Maybe the Homeland Security can take that up, false information.

Jeffrey H. Wood:  Our questioner here, up front, Myron. The microphone's yours.

Myron:  My question actually is, in some ways, an elaboration of the previous question. I think there's -- what we're talking about here is two incommensurate risk fields. Climate change, if you read the reports, the IPCC reports, the National Climate Assessments, not the summaries, but the actual chapters if you read them, you will see that the climate change risk is over a very long period of time, a hundred years. Some of these models go out to 2300 to come up with scary numbers about, well, that can't possibly affect current financial institutions. There's no risk there. What the risk is is what you, Dr. Kupiec, called transitional risks, that is, energy policy, energy rationing policy.

Those risks are political risks. If a company can't see those, or a financial institution can't see who won the election, and what the EPA is doing, and what the Congress is doing, I don't think any amount of disclosure is going to help them. They're going to go bankrupt, because they're not paying attention to the political environment. So all of these regulations seem to me, and I would just put it as a statement, just seem to me to be useless. They're going to be very expensive, but they're not going to help anyone

Jeffrey H. Wood:  Professor Skinner, you made the point, I think, in your remarks, that we may be asking federal regulators to do too much. And maybe they take their eye off the ball on other topics. Maybe it's a little bit to the question.

Prof. Christina P. Skinner:  I think that's certainly a relevant part to the answer. And, when you were phrasing your question, I think it's part of what you're getting at is that climate risk, like some of the other risks that have been mentioned, is unlike risk that regulators have been dealing with, and are used to dealing with. It's in the realm of tremendous uncertainty. And even as human behavior changes and adapts, we'll continue to compound that uncertainty. And the problem is that regulators are trying to use their existing authorities and policy tools to address this manner of risk, which does not sit comfortably with either the legal framework or the rule of law.

And, so, really, a question is how regulatory bodies deal with uncertainty and uncertain risks. And it's a little bit like -- because these current policy tools, like disclosure and capital requirement, they're sort of forfeits as a policy matter. And then you've got this legal challenge, which is sort of confounding, as well. And it's, as I started to say, it's sort of like some of the problems that the FSOC encountered when it tried to think about insurance companies like they were banks. It's a different sort of thing. And I think that's a little bit of what's going on here, and why you keep hearing this discomfort with treating climate risk like any other sort of problem that we've been dealing with.

Jeffrey H. Wood:  Question up front.

Questioner 6: Thank you. I want to make a couple of points, first. References to Europe and the different mandates that they might have, that's completely ignoring the fact that Europe is facing serious geopolitical risks from its dependence on Russia. And the rush back to fossil fuels to provide people with what they need is what is facing Europe right now. But I want to move on to a different point, which is my actual question. Part of the SEC rule refers to the fact that companies should also be able to state their transition away from fossil fuels to other sources of energy.

This, for many companies, will be an impossible task, because there is, at present, no alternative, unless one wishes to use nuclear power, which most of those proponents of climate change have no desire, whatsoever, to do. So I leave that aside. There is no alternative source of continuous energy supply. And the transition that Assistant Secretary Steele should seriously be considering and funding is what are you going to provide, by way of continuous energy supply, which is needed, not only by banks, not only by certain companies, but also by the provision of public services, such as drinking water, such as required by hospitals, particularly, perhaps, for a surgeon in the middle of an operation, knife plunged into your body, and the lights go out.

Hospitals, at the moment, are able to fall back on their own generators immediately, which are run by diesel oil. So I think what we should think about very carefully, before asking companies to report on an impossible transition, and not considering the risk of no transition to continuous energy supply being available as a substitute, that that actually makes these regulations impossible to impose and absurd to impose.

Jeffrey H. Wood:  So the question is to the SEC proposed rule that's still under review, and its requirement that publicly traded companies disclose their energy transition plans. Any of our panelists want to comment on that?

Prof. Christina P. Skinner:  I'll just say that I'm glad that you asked that question, because it's something that I've been meaning to state in my remarks, and I haven't had the chance to. I agree, entirely. I think one of the big elephants in the room is what, exactly, are we asking banks to do? If we ask them not to lend to fossil fuel producers anymore, in the absence of an alternative reliable energy source, it's not clear what the outcome will be. So my view is that we're far better off trying to direct governmental resources toward researching the technologies that, then, the market could, in turn, bring to market and to scale. But I don't want to preempt a lot of my remarks tonight. So I have to delicately separate them.

Graham Steele:  I would just say, my understanding of the topic of the panel was sort of narrowly cabined to some of the financial regulatory aspects of climate risk. I didn't touch on a number of what other departments are doing, other sort of fiscal programs, investments in different kinds of technology. As I said at the outset, the president's executive order says, "A whole-of-government approach," so, I think the administration's not putting the eggs for all climate-related issues in the basket of the Treasury Department, just to be clear about that.

Paul H. Kupiec:  I would just chip in that the requirement that you have to discuss your plans for transition, to deal with transition risk, presumes that they have to have a plan. And I don't -- is this now a new law? Everybody has to have a plan to transition, or you can't be a public company? What happens if you is say, "I don't believe in transition risk. I don't have a plan"? What's the SEC going to do? So, does it presume that you have to have a plan?

Graham Steele:  I think you disclose that.

Paul H. Kupiec:  I don't know how they're going to deal -- they have to discuss how they're going to deal with transition risk. And that presupposes they're going to do something. Maybe they don't --transition risk is the risk that the government will change the policy on you, basically. And, who knows? Do firms have to have a plan for transition risk?

Jeffrey H. Wood:  It sounds like comments to submit to the SEC. Our last question, and we're out of time. I apologize. Hopefully, we'll be able to get to robust answers. If not, we can talk afterwards.

Victoria Guido:  Victoria Guido with Politico. My question's for Assistant Secretary Steele. I wanted to ask about, you mentioned scenario analysis as what the FSOC is doing. And I was just wondering if you could elaborate a little bit about, is that coordinating across the agencies on scenario analysis? Is the FSOC considering doing its own scenario analysis? Just kind of curious where that's at right now.

Graham Steele:  I think I mentioned, in the context of the climate-related financial risk committee, I think a lot of what is happening there is just a conversation about how to think about that as an issue, amongst a broad variety of other issues around data standardization, coordination on various regulatory measures. So, my understanding is there's no specific plan right now about what to do on that front. It's more of a conversation about how different agencies are thinking about the role that that might play at some point in this process.

Victoria Guido:  Thanks.

Jeffrey H. Wood:  Thank you. As an environmental lawyer who has engaged on the question of EPA's authority to regulate this area, I welcome our financial regulatory colleagues to this complicated question of climate change, and what to do about it. Thank you for your attendance here today. We really appreciate it. And please join me in a round of applause for our distinguished panel.

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

Event Transcript

Nate Kaczmarek:  Good afternoon. Good afternoon. We’re going to get started. We’re very excited to get this breakout panel discussion started. Our Religious Liberty Practice Group has selected a great topic, Religious Liberty and the Department of Defense. Before we introduce our moderator and the panel, we are thrilled that Senator James Lankford of Oklahoma could break away from his schedule on the Hill to kick off our session with an opening address. He has indicated that he’s happy to take one or two quick questions after his remarks as well.

 

            It’s certainly an honor to introduce him now. Before Congress, the Senator served students and families for more than 20 years in ministry, including 50 years, excuse me 50, 15, 15 years as the director of student ministry for the Baptist Convention of Oklahoma and Director of the Falls Church, Falls Creek Youth Camp. He was first elected to Congress in 2010, and he served four years in the House. He was later elected to the U.S. Senate in 2014. His tenure has been noted by many for his support of lower taxes, limited government, economic, and religious freedom. He currently serves on several committees including the Committee on Finance, the Committee on Homeland Security and Governmental Affairs. He’s the ranking member on the Subcommittee on Government Operations and Border Management, and he also serves on the Committee on Energy and Natural Resources as well as the Committee on Indian Affairs.

 

            As I have mentioned previously, I had the good fortune of working for Senator Lankford on his Regulatory Affairs and Federal Management Subcommittee. I could go on at length about his many fine qualities as a leader, but I’ll state that it’s rare in this town to meet public figures and still have a positive view of them once you’ve been around them for a little while. With Senator Lankford, I can honestly say that it’s quite the opposite. Over the years, my deep admiration for his principled statesmanship has only grown. Please welcome Senator Lankford.

 

Hon. James Lankford:  Well, good afternoon everybody. Everyone’s favorite position is to be anything immediately after lunch. To be able to be in this conversation, let me tell you thanks for your engagement on this issue. There are not many people that are engaging on the issue of religious liberty, but it is vital in our conversation. Those of you that are here know that. Those of you that are dipping into it, I have to say maybe you should check this out more and understand that this first principle dealing with religious liberty as we export that value to the world, we remind the world that again, 200 and some odd years ago everyone thought this would never work.

 

But we make it work all the time, and it actually continues to be able to strengthen us. And it’s something we need to continue to be able to press into to say it’s entirely reasonable to not have individuals in the country be compelled to have the same faith as “it’s rulers”, that individuals can choose to have any faith they want to have, change their faith, or have no faith and that all be protected. That shouldn’t be a challenge for us as Americans, but for whatever reason, it’s become more and more challenging. And the latest feature of that is in the United States Military.

Every person that’s in the United States Military -- and probably several of you that are here that have served in the past -- starts in the same way. You start by raising your right hand, and you say I, and then you state your name, do solemnly swear or affirm that I will support and defend the Constitution of the United States against all enemies, foreign and domestic, and that I will bear true faith and allegiance to the same and that I will obey the orders of the president of the United States and the orders of the officers appointed over me according to the regulations of the uniform code of military justice so help me God.

 

I don’t read anything in that that says and I also surrender all of my constitutional protections. Though, for whatever reason, it’s become an interesting dialogue to have this conversation about do members of the miliary surrender their religious protections at the same time.

 

Now, if I back up 10 years ago, in my conversation with leadership in the Pentagon, I would always hear the same answer from them every time we’d talk about the issue of religious accommodations. Any time it was always they would say back to me oh, yes, but we need to make sure we keep good order the discipline. And good order and discipline became the catch all equivalent to the commerce clause for everything else where it's just basically if you want to make sure the federal government can do it, throw in the commerce clause and we can actually pull it off. Good order and discipline became that for the United States military to say if we want to actually take someone’s constitutional protections away even if it’s their religious liberties, we can just call it good order and discipline and throw it into that bucket, and no one can challenge us.

           

The problem is that’s not actually so, and you and I both know it. Individuals in the United States military stand up for others to be protected in their constitutional rights, but they do not surrender their own rights at the same time.

 

We’ve chipped away at this over the last several years, issues like how long your beard can be which for me is a non-issue, but for others is a longer issue. It becomes a religious thing for them. That expression of their own religious faith is also extended in their beard. There could be a turban to say it’s a part of my religious accommodation. It could be an individual saying a certain thing that I need to be able to wear based on my faith. Over the past several decades, we in the United States have continued to be able to work through that process to be able to honor individuals who choose to be able to practice their faith and how they actually display their faith personally, whether it be with their beard, whether it be through a turban, or whether it be something they need to be able to wear.

 

We’ve learned to be able to honor that. And then came, as my wife and I affectionately call it, the COVID. When the COVID came, it suddenly was like everything was thrown out the window. And it became a challenge in the past year for individuals to be able to live their faith because we had to get rid of the COVID. And to get rid of the COVID, everyone needed just to be able to submit to the vaccine for the COVID. And the acceleration of this really was breathtaking and was focused in on this issue of religious liberty.

 

Now I have to tell you, for any of you that have been in the military, you know full well that your first day in the United States military you sat down in a chair, and they gave you about 13 shots. And they told you later what they were if they told you at all. That’s like welcome to the military. We’re going to poke you 13 times because we’re going to make sure that you’re ready to deploy.

 

This is different with the COVID vaccine. Individuals stepped up and said hey I have a concern about what I’ve read or where it’s from or how it was produced or whatever it is, and I have a religious request on this. And it suddenly became a battlefield. And the battlefield got ugly because it immediately turned into a battlefield of are you religious enough to request this. Now we’re in very different territory in the United States.

 

Now we saw this in the executive branch, and I know we’re talking about DOD at this point, but the executive branch at this point for the first time where the executive branch individuals literally put out a six-point test that if anyone in any of the agencies wanted to request a religious accommodation, this six-point test is what their leadership would actually walk them through to validate if they’re religious enough to be able to request a religious accommodation.

 

Myself and leadership on our team, we immediately challenged that and said it is not the role of the federal government and agencies in the USDA to determine if their employees are religious enough to be able to make this request. So they submitted to our challenge to that and changed their six-point test to a three-point test, each having two parts. I wish I was kidding you. And then they resubmitted it to us and said now we fixed this. This is no longer a six-point test to evaluate it. But it’s still left in exactly the same spot.

 

We challenged that immediately. And so then they did what they have done with the United States military and with other individuals that they just shelved it and said we’re going to think about it. And they told individuals we don’t know what we’re going to do with your job, but you’re in non-compliance. So they hung that issue over them like a sort of Damocles and said we’ll get back to you on what we’re going to do.

 

The United States military, they worked through the entire process. Now the military does have a longstanding process for determining religious accommodation. It’s a more formalized process because they’ve done it for a long time. They have chaplains as they go through the process, and the chaplains are there to be able to help with that process as well and making decisions. But even in this case, chaplains requested a religious accommodation, and they were instructed they’re not religious enough to be able to receive a religious accommodation.

 

Just think that through with me for a second. The thousands of individuals that requested religious accommodation, the vast majority of them have never received an answer other than they are not being promoted, not being transferred, and told they’re not going to be activated until they consider. And the reasons why is we visited with the surgeon generals in each of the branches and we visited with the chaplains corps in each of the branches is they have to be deployable.

 

Here’s the ultimate irony in they have to be deployable. Right now, the Biden Administration is looking to be able to lift the Title 42 restrictions on our southern border. And if you read through their document saying why they’re going to lift the Title 42 restrictions on the southern border, it’s because the vast majority of individuals have either already had the vaccine or they have infection induced immunity. That’s natural immunity. So we no longer have to have those same restrictions on our southern border because they have infection induced immunity. But they won’t extend that same thing to members of the military. In the military, you have to have the vaccine or it doesn’t count, even if you request a religious accommodation for it.

 

So we’re pushing for the most basic of things. This group knows full well the balancing test that’s set up in the Religious Freedom Restoration Act to be able to determine is this the right thing to be able to do for the government, for the individual, to be able to have that balancing test. It’s not a requirement that every time I say it’s religious they have to cave to it. But RFRA applies to members of the military just like it does to every other person in life. It needs to be protected.

 

But it’s also something that we guard very, very carefully in that balancing test. Is it least restrictive? Right now for members of the military that have already had COVID and have recovered and have infection induced immunity, as the Biden Administration calls it, compelling them to have the vaccine when they have a religious request, is that the least restrictive? Well if you’re on the border, no. But if you’re on base, maybe yes.

 

It’s an interesting challenge that we have to be able to confront this simple issue as we work through this. My challenge back to the administration is this is not just a COVID issue. This is a religious liberty issue. This sets a precedent just like it does with all the agencies. If they set a three-point test and give to leadership in each agency the responsibility to determine if their employees are religious enough to be able to ask for that, that sets a precedent that doesn’t go away at the end of COVID. This COVID vaccine and the challenge for exemptions will continue to be an issue for decades to come because it sets a new precedent. That’s why it’s so incredibly important.

 

Several of the cases that have been put forward, especially dealing with the Navy SEALs and others as they continue to be able to work through this process to do determination now, I assume they’ll be some super smart folks sitting up here on the panel that will walk through some of these legal issues with you in the days ahead for those cases, so I’m not going to go into some of those details. But I will tell you this is not just a COVID issue. This is a religious liberty issue in the United States military, and it is worth fighting about, talking through, and trying to be able to push the administration to be able to set precedent that doesn’t bite us in the days ahead so the members of the military don’t lose their constitutional protections while they’re fighting to protect ours.

 

Let me pause and see if I can take some quick questions. If they’re hard, I’ll give them to staff. If they’re easy, I’ll take them.

 

[Laughter]

 

Host:  We have mics at both ends. Questions from the audience? I guess one question I had, Senator, is what is your assessment of your colleagues on the Hill with regard to these issues? Do you have a sense of -- obviously you’re pushing back against the administration, but do you have an idea of what your colleagues are thinking on the topic?

 

Hon. James Lankford:  Nate, it’s really interesting. When you talk about the issue of religious liberty and where my colleagues are on it, and this is going to sound more partisan than I want to make it sound, but if I talk to a lot of my Republican colleagues, it’s like immediately they push back on this and say this is absurd. This is crazy. When I talked to some, not all, of my Democratic colleagues, they’ll immediately say well, COVID is so serious and then fill in the blank after that.

 

That’s when I say time out. That’s why we have constitutional protections because if at any point the federal government can step in and say but this case is different, there is no, as I explain to people, no asterisk at the end of the First Amendment that says with these caveats and exceptions on it. It becomes an issue that we have to as a community have to be able to look at and to say can a leader at any point just declare that or how does that actually work through the legal process.

 

Obviously, long, long time ago, we determined free speech does end if you’re screaming fire in a crowded theatre. But who got to make that declaration? That wasn’t just the executive branch laying down their opinion and saying it’s an emergency so I’m going to declare it. We had to work that through the courts. We had to work that through our system to be able to make sure that if we’re going to be able to clarify the constitutional protections, they’re really clarified.

 

            What else? Yes, sir?

 

Questioner 1:  Yes, sir. Thanks for coming. One of the Republican senators, Marco Rubio, filed an amicus brief in support of workers denied for a lot of these religious objections to the vaccine. Could you explain how that 100-person per -- company that was ruled by the Supreme Court 6-3 decision differentiate from the federal civilian and military case that's still -

 

Hon. James Lankford:  - Yeah. The case that’s still pending. It’s a great question on this. So the question is obviously September 8 of last year President Biden announced I’m losing patience with the American people. It’s time to get vaccinated. And so I’m going to lay down all these mandates. Then over the course of the next several months, he announces five different mandates that he’s going to put in place, federal workers, anyone who works in healthcare, any federal contractor, members of the military, anyone in a business with 100 people or more.

 

You’re immune from COVID if you have 99 or less. There was built in immunity based on the size of your company. COVID couldn’t find you because you were too small. But if you had 100 people, COVID would come after you. So there was all those dynamics.

 

            The federal workers and the civilians obviously could challenge. They go into the court, but the court didn’t decide at that point to be able to say no. It just said they’re not going to do the emergency speed on this. This is going to have to work through the whole process. So that’s why that’s still being challenged in the days ahead. They didn’t give any kind of emergency status to be able to deal with it. They said let’s work this through.

 

The challenge that we have in this is pretty simple on it. An individual when they work for the federal government, again, doesn’t lose their rights on it. And you can’t just say because you have some income based on the federal government then suddenly the executive branch can declare anything they want to do. If you’ve read some of the decisions from the court, which I assume a lot of you did, it was a simple I can’t control your private life. And you go and you get a vaccine in your private life, based on the fact of just who your employer is to be able to track that.

 

So what Senator Rubio is doing and several of us continue to be able to push on the amicus briefs is to be able to settle this because even if we are “post-COVID” and this becomes less and less of a push, it’s still setting a precedent for the days ahead that we think is incredibly important. And the administration, they still have not answered the question for federal employees and federal contractors that haven’t got the vaccine whether they’re going to fire them. They keep saying it’s undecided. That can’t just hang over you.

 

I’ll tell you, I’ve talked to people in my state, and some of you have talked to others as well. When I talk to people in my state, month after month, them saying to their boss, okay, have I got an answer yet on my religious accommodation or on my request for a medical exemption, whatever it may be. And they’ll say no decision yet. We’ll get back to you on it. But you haven’t got a vaccine yet, so we don’t know what we’re going to do with you yet. So month after month, they’re just living out there as I said with a sort of Damocles over them. At any point Biden could decide okay now we’re going to actually impose all this, and you’re all fired.

 

The people that are supervisors don’t like it either because they’re having the same challenges hiring people. And they’re having to say can I hire people that haven’t got the vaccine or not have the vaccine or if they request religious liberty, what does that really look like for an accommodation? Where does that actually fit? There’s just a non-answer for it. And a non-answer is chilling to all these agencies long term. And we’ve got folks that are retiring.

 

One more thing on the military side, and then I know I’ve got to head back. They’ve called a vote at 2:30. And that’s not me just trying to escape, by the way, it’s like oh, gotta go. We’ve got to vote. Let me just say this to you. For the National Guard -- this is a good example -- within the Pentagon, when they announced the COVID vaccine requirement, every branch of the military had different deadlines, every one of them. So Navy was treated different than Army, but it was even worse than that. Airforce was treated different than Air Guard. Army was treated different than Army National Guard.

 

Army National Guard, their deadline to receive the vaccine is June 30 of this year. They haven’t hit their deadline yet. Everybody else has already hit their deadline. The Army Guard hasn’t hit their deadline yet. But if you’re in the Air Guard, it was last December. In fact, if you requested an accommodation for that, you were given a deadline to be able to make a decision. That was a couple of months ago, and over the course of the weeks that happened leading up to April 1, we started having senior members of the Air Guard retiring, retiring, retiring because they had never received an answer.

 

We, as the United States, spend millions of dollars training pilots, investing in them. They organize their life and their time based on serving in the United States Air Force Guard. They left. They resigned before April 1. And now we’re in pursuit of pilots, and we’re in pursuit of individuals because the federal government wouldn’t answer their question about religious accommodation. They just left it unanswered. So the legal argument on this is where does a non-answer fit with a deadline based on giving an answer, based on giving an answer on a religious accommodation, based on trying to allow someone to say you’re not religious enough even if you’re a chaplain to be able to warrant this.

 

So it’s a big issue and I’m glad y’all are spending some time talking about it. And I’m sure some super smart folks are going to have the opportunity to be able to solve all this. I’m going to slip out and vote. Y’all resolve it. Thanks for inviting me to be able to be a part of this today.

 

Host:  Thank you, Senator Lankford. I’d like to invite our panel up. Thank you, Senator Lankford. You’ve given us a lot to discuss. Please come on up.

 

So now we’ll introduce our panel moderator, the Honorable Judge Justin Walker. Judge Walker was appointed to the U.S. Court of Appeals for the D.C. Circuit in September 2020. He is a graduate of Duke University and Harvard Law School. And he clerked for then Judge Brett Kavanaugh and Justice Anthony Kennedy. He previously served as a judge on the U.S. District Court for the Western District of Kentucky. Judge Walker, we are pleased to have you with us. Thank you to you and to our panel for this very interesting discussion. The floor is yours.

 

Hon. Justin Walker:  Thanks so much. Is it on now? It is on now. Well, thanks very much. It’s an honor to be here. It’s an honor to be on this panel. It’s an honor to get to talk with the panelists and with the audience about this important topic. And it was a real treat to hear from Senator Lankford who I’m especially grateful to him for two reasons. He voted for my district court nomination, and he voted for my circuit court nomination.

 

            I thought I would share just a couple minutes of thoughts on the topic and then get out of the way so that you can hear from, as the Senator said, the super smart people who are to my left and to my right. And so a couple minutes of thoughts and then I’ll introduce them.

 

            If you go back to the early '90s, there was something of a consensus or at least the appearance of a consensus that the courts had a robust role to play in protecting the religious liberty of traditional religions and non-traditional religions. And the consensus kind of culminated in the Religious Freedom Restoration Act vote which was almost unanimous. It was 97 to 3 in the Democratic senate and signed by Democratic president. If you look at the signing ceremony for RFRA, you'll see three people front and center. And they're not, as the far left would say, religious radicals. There is Bill Clinton signing the act, and behind him is Al Gore, and next to him is a much younger and less gray Chuck Schumer.

 

            So that was the state of affairs in the early '90s, or at least that was the appearance of it. And then since then, and particularly in the last 15 years, you've seen a growing hostility towards traditional religion. And that hostility has come from different quarters, but one of the places it's come from has been at times sectors of the government itself.

 

            The Supreme Court has played a pretty active role in pushing back. Since 2010, the Supreme Court has never heard a religious liberty case that was fully argued on the merits and then ruled against religious liberty. There was a 12-year record with 15 to 20 cases in there. You'll have to go back to Christian Legal Society in 2010 before you'll find that.

 

And the reaction to this has been at least three different camps. One camp says bravo. A second camp which is very critical of it from a -- well, the second camp I don't want to label them. I'm just going to describe them. They accuse the Supreme Court of making religious liberty something of a favored right, kind of like the favorite child of a parent. And then there's a third camp that is critical of the Supreme Court, but from the opposite perspective. And it says yes, there's this 12-year winning streak but each victory, most of the time, most of the time, has been pretty minimal and arguably even at times superficial. And so in the wake of this wave of hostility, you've seen from the Supreme Court, this camp would argue, the equivalent of rearranging deck chairs on the Titanic.

 

            I'm going to leave it to the panelists to say which of the three camps they think is right or maybe it's more of a spectrum and, in particular, do so in the context of religious liberty and the military which Senator Lankford described the vaccine case in a really thorough way.

 

            So our first speaker's going to Eric Baxter, and you'll forgive me. Eric is Vice President and Senior Counsel at the Becket Fund. And before that he was a partner at Arent Fox. At the Becket fund and before then, he has spent years litigating on behalf of religious liberty and I'm grateful to him for being here today.

 

After he speaks, we're going to hear from Gene Fidell who has taught military justice at at least Harvard, Yale, American, and NYU, where he is an adjunct professor. He's of counsel at Feldesman Tucker Leifer and Fidell. And he has literally written the book on military justice, the case book, that is.

 

Third will be Mike Berry who's Vice President of External Affairs, Director of Military Affairs, and Senior Counsel at First Liberty. Before that, he was a marine and he's still a Marine Reservist. And I support even after that, once a Marine always a Marine. I think that's how it goes. Mike also teaches at the Naval Academy as an adjunct professor.

 

And I'm happy to be here with him and with Gene and with Eric. So with that, I'll turn it over to Eric.

 

Mr. Eric Baxter:  Thank you, Judge. It's good to be with you and thank you for your public service and for being here with us today. I'm grateful to be here. I was glad to hear Senator Lankford's remarks. We've appreciated a lot of his work on behalf of religious liberty.

 

It's one thing to talk about enforcing the limits of the executive branch, but I think it's especially pertinent to think about it from the other side. With the Department of Defense has so much control over the lives of so many individuals that really enforcing the limits of the executive branch is synonymous with protecting the core rights of our soldiers, sailors, and airmen and women who have committed so much to give to our country that it's the least we can do to make sure that their rights are protected as far as they can, consistent with their military duties.

 

            And that's really why I thought I would talk a little bit about the history of protection for service members and how that's led to the regime we have today under RFRA. And I think my overall thesis if I had to put into a few words would just be that RFRA works. We've learned a lot of lessons historically. And now we -- those lessons have been captured in the Religious Freedom Restoration Act. And so it's our work at the Becket fund and along with many of our allies to encourage the courts to just let RFRA do its job in protecting the rights. It incorporates inherently this balancing of interests that makes sure that national security and other interests are protected while preserving the rights of our individual service members.

 

            I wanted to just touch on three focal points. The first being the creation of the chaplaincy. If you think about the founding, we often kind of simplify it into many of our founders came for religious freedom. But in their minds that was for many of them a very different concept than we have today. Think of the early pilgrims, the Puritans, who first left England to escape persecution and went to Holland. And there they experienced the flip side of persecution, which was so much tolerance that they felt like their children and many of their members were led away by the temptations of the world. And so they were really seeking here not just religious freedom but the ability to build a community where they could enforce their community standards and build a community that adhered to their religious beliefs.

 

            So some of the first things they did when they got here were to establish churches, impose restrictions for people who went to different churches, restrict political activity to people who belonged to the Puritan tradition. And as early as 1624, they excluded an individual, an Anglican preacher who had come not as part of the group but under the direction of the financial backers of the organization and was wanting to form his own Anglican meeting space with a few of the other members of the community. And he was expelled from the community.

 

And that was really the tradition that existed in many of the colonies and settlements early in the founding of and the settlement of the United States. We saw that in Virginia. It really had recognized the Anglican church as the established church. You could be punished by losing rations, whipping, hard labor for not attending twice daily services. And it wasn't until 1776 when Virginia got rid of its established church and in 1833 when the last state Massachusetts got rid of its established church.

 

So in that context, the military really stood out as a unique place within the United States, within the colonies where there was true religious pluralism. In as early as the French and Indian war, Jefferson, I'm sorry, George Washington saw that Virginia's regiment included both Baptists and Anglicans. And so he asked Virginia to provide chaplains to serve the Baptist members of the regiment. And Virginia, to its credit, provided even though in that same time period, from basically 1760s through 1775, we know of at least 30 Baptists who were imprisoned or horsewhipped because of unwanted evangelical enthusiasm.

 

So the military was really one of the few places where American settlers could experience religious pluralism to the extent that it existed at that time. It was of course mostly Christians of different denominations with a smattering of Jews throughout. But that tradition really took hold and during the continental period of the continental army, George Washington made sure that ever regiment could have a chaplain that shared that regiment's religious sympathies. So you would have for Massachusetts Congregationalists a chaplain of their faith persuasion, for Maryland Catholics a chaplain of their persuasion and so forth.

 

And we see that today in the chaplaincy in the military where in the words of the Army regulations, chaplains are required to perform and provide, meaning that they perform services according to their own faith tradition, they pray according to their own faith tradition, they serve members of their own faith tradition. And then for those soldiers and service members of other faiths, they provide access to the resources that those individuals need. They can't provide the rites or the rituals for those individuals, but they can make sure that they have the literature or the religious items or access to other clergy.

 

And so I think it's fair to say the chaplaincy really set a tone and example of religious pluralism and how it could exist. As those service members who serve in the continental army returned to their colonies, they could take that example of how we live in a pluralistic society.

 

Another example is of course the handling of conscientious objectors which issue that arose in the late 1600s in the different colonies as there were military skirmishes. Several colonies, Rhode Island was the first, North Carolina, Maryland, they all recognized a right to conscientious objection. New York didn't. Interestingly, New York, unlike the other three, didn't have a free exercise clause in its governing charter, which Rhode Island, North Carolina, and Maryland did, perhaps providing impetus for their more liberal approach.

 

The continental congress in 1775 passed language encouraging a liberal approach to those who could not, consistent with their faith, participate in military service. Of course at the time most military action was controlled at the state or colonial level and not at a federal level. And it wasn't until the Civil War when we had our first conscription laws that Congress passed protections for conscientious objectors.

 

And the history of that is really interesting. You can see how they were dealing really with different issues not so much trying to figure out how to deal with pluralism. But how do you -- when everybody has an impetus to try to avoid war, nobody really wants to go, not very many people really want to do to war, how do you police the line between their religious objection and just political or ethnical objections? And you can see over time the different draft acts that were passed from the Civil War through World War II, that Congress definitely was protecting religious objections.

 

The courts, in cases you're familiar with Seegers and Welsh and others, the courts sometimes were more generous than what Congress may have intended, but there was a -- you can see a development of how do we define? Early acts, for example, required that you belong to a well-recognized sect that opposed military action or war. Then the language changed to you had to have an objection by reason of your religious training and belief. The last version in 1948, the last major revision, defined religion as having some relation to a supreme being and involving duties superior to those arising from any human relation. So you see an effort to figure out where do we draw this line with religion versus ethical, political objections.

 

            And the also what do you do with those people who object? Do you just trust their word that they have an objection? Do you require them to engage in other forms of community service? Or do you just -- and how do you balance those kinds of interests between compelling government interest and national security, for example, and the religious rights of service members? And over time that process became more refined. The line law became more refined and sensitive to those issues. And you can see that development.

 

            The last one I would just mention is issues that are going on today. I would say starting with the Goldman v. Weinberger decision in 1986 when  Jewish airman wanted to continue to wear his yarmulke even when he was in uniform which was not allowed then in the regulations. He sued. The Supreme Court said oh wow, we could never second guess what the military's needs are regarding uniformity, and so we will just defer to the military.

 

Congress almost immediately passed a law in the 1987 National Defense Authorization Act that authorized the use of -- or authorized service members to wear religious garb as long as it didn't interfere with the performance of their duties and as long as it was neat and conservative. The legislative history suggests that Congress was considering turbans for Sikhs, hijabs for Muslims, or a wide range of religious clothing. But the military has always construed it very narrowly allowing essentially yarmulkes and not much else.

 

            So we, in the last six years, have brought a number of lawsuits on behalf of Sikhs, Muslims, and Orthodox Jews who need beards, turbans. They have religious requirements that require them to maintain a beard, to wear a turban. And for many years, they were able to -- we have evidence at least from World War I that Sikhs, for example, were allowed to serve with their beards and turbans in the military. In the early '80s in an effort to tighten up military discipline after the '70s, Vietnam, the Reagan administration imposed higher standards for order and uniformity. And so for the last 30 some years, Sikhs and some Muslims have been excluded from military service. In the last six or seven years, we've gotten the Army to change its policy. We currently have lawsuits pending against the Navy and the Marines on these issues. And perhaps I'll have some more time to talk about them going forward.

 

But I think what we've seen is that the military, like any government agency, while it has a hugely important role regarding national security, it's also prone to overreach. In 1997, DOD told chaplains, military chaplains, that they could not encourage their congregationalists to support partial birth abortion ban. And they claimed that that would threaten the stability of our democracy and the unity and esprit de corps of the uniformed service members.

 

            And under RFRA, the Supreme Court struck that down. RFRA simply tells the courts you need to ask the military to look carefully at what they're doing, make sure that what they're doing is narrowly tailored to fit the actual compelling interests of the government and in a way that cannot be accomplished through any less restrictive means. So I think history shows that we can do this. The current history reinforces that. And so we are really just seeking to have Department of Defense really live up to its RFRA obligations.

 

Hon. Justin Walker:  Well, thanks so much, Eric, for that illuminating kick off to our discussion. And thanks also for remembering what I forgot to mention which is we'll shoot for about five to eight minute opening statements, which was -- you were right on target, so grateful to you for that. And I'll give a gentle reminder to Gene or Mike if we get past eight minutes or so. So over to you, Gene.

 

Prof. Eugene R. Fidell:  Thanks a lot, Judge. When I was in college, I had a professor of philosophy who -- is that on, yeah -- who would begin every single lesson saying that he would like to offer a few footnotes, comments, and observations. So I'll offer a few footnotes, comments, and observations.

 

            This is an extraordinarily rich, complicated subject with a lot of moving parts. They're moving while we're having this panel. So we can't possibly do justice to it, but we can at least point to parts that are worthy of our time and effort as participants in democratic society.

 

            Any veterans in the group? Great. This is an incredible country, just to build a little bit on Eric's walk through history. I come from Queens, New York. There's not much left of pre- revolutionary Queens. There's a little though. And the oldest house, I believe, in Queens County is something called Bowne house. It's in Flushing. Flushing is now a Chinese neighborhood. And Bowne House -- Flushing was the seat of a Quaker community in the 1600s and 1700s. And there came a time when the Dutch -- you remember the Dutch. They owned New York until 1664, I think. The Dutch cracked down on the Quakers.

 

And so the Quakers gathered at Bowne House in Flushing and wrote something called the Flushing Remonstrance. And it was basically a letter to the syndics of the Dutch East India Company, Dutch West India Company, to tell the governor on the Island of Manhattan to knock it off, that they too had religious rights. So here, right in my own backyard, basically, a knife throw from where I grew up, was one of the major developments.

 

When I went through Naval justice school in Newport, I was a knife throw from the Touro Synagogue. And some of you may remember the famous letter that then President Washington wrote about reassuring the leaders of that congregation that Jews had every right to be in the country.

 

I now live most of the time in New Haven. And New Haven has a very interesting history too. The New Haven Colony was founded by people who left Boston because they thought that the folks who were running the Massachusetts Bay Colony had gotten a little lax. They weren't tough enough. They weren't firm enough about matters of faith. And therefore they moved first to Providence, and then they decided well, the people in Providence weren't tough enough, so they moved to New Haven. So that's where I live now. And when I'm not there, I live in Stockbridge, Massachusetts which was founded as a mission to the then Mohican Indians, who now of course live in Wisconsin, as we all know.  So religion and religious issues are everywhere. And it shouldn't surprise us that they're in the armed forces.

 

A few actual experiences, just drawing on my own -- and I should mention by the way that I have had the privilege of representing a number of clergy over the years, military clergy. They're interesting representations. I can't tell you the details, obviously, or the private parts, but clergy typically have very strongly held views about things. Religious issues abound with respect to chaplains and with respect to other people of faith and people not of faith in uniform. There are collisions everywhere.

 

From my own experience, I can remember when I was in officer candidate school, it happened that Passover fell while I was there. And observant Jews have to avoid leaven bread as I imagine everybody here knows. And we make up for it by having matzoh. It was announced at officer candidate school, "There would be no Jew food in the dining hall." That was a very bad sign, and I've never forgotten it.

 

I can think of a case where a Navy enlisted sailor, who happened to have had a Jewish name, has her loyalty threatened, dual loyalty between the U.S. and Israel. It happened that that sailor was a Messianic Jew. The whole episode made no sense whatever. And I can report that the matter was resolved. There was an effort to lift her security clearance. The matter was resolved when Senators Warner and Nunn became involved. And that sailor received an apology.

 

I know of a case where an officer who was a -- he wouldn't mind my saying this -- he was a lapsed Episcopalian -- got in trouble with his boss because the boss was a person of, let's say, greater religious fervor than he was. And this officer declined to attend services when the ship would pull into port, thereby creating friction with the command.

 

I could go on. I have a limited time, as I've been reminded. But I don't think the light has quite gone on yet, has it, Judge?

 

Hon. Justin Walker:  Three minutes.

 

Prof. Eugene R. Fidell:  Okay. But my point is to suggest that that there are issues and points of friction, that's actually not news. But things continue to manifest themselves. And it shouldn't surprise us because we happen to be in a period in this country of increasing religious fervor. That's a fact.

 

Now, I just want to throw out some facts and wrap it up with very current developments. What we're talking about when we talk about what I'll call the COVID issue is not unique to the United States. The litigation is not unique to the United States. A case was brought in New Zealand where people who objected to mandatory vaccination in the defense force and, I think, in the police service won a victory in the high court. And that case is now going to the Court of Appeal which is the highest court of New Zealand.

 

            Yesterday, the Supreme Court of India handed down a hundred-something-page opinion rejecting the COVID mandate, not as applied to the Indian armed forces but as applied through the states of India on the ground that it wasn't proportional to the need. Proportionality is something we don't actually -- that's kind of a foreign concept to us. It's hasn't, I think, taken root here as much as it has elsewhere, but again, an exemplar.

 

And also of considerable interest, on April 22, the Swiss Administrative Supreme Court sustained the Swiss armed force's mandatory vaccination program in a case involving members of their special forces, people who have to deploy in a great hurry. And I'll just share one thing. I'm going to do this in English rather than the French that I attempted to read. But the test that they -- they put off to another day the question of how you would examine an individual's claim. Basically it was enough for this particular decision to say that the policy was well founded and seemed to make sense when you're talking about people who have to deploy, footnote one, see the SEALs. And the test the court refers to is they say that it's application would depend in particular on the coherence and credibility of the claims of the individual. They didn't reach that, but those are the handholds that they're looking to, coherence and credibility.

 

So maybe as we continue the conversation, we can talk about whether you can in fact make some of the individualized determinations that we have made in related context in the past in the contest of mandatory vaccination. Is the light on yet?

 

Hon. Justin Walker:  It's perfect.

 

Prof. Eugene R. Fidell:  Great.

 

Hon. Justin Walker:  Well, thanks so much. That was very educational and wonderful. I'll tun it over to Mike.

 

Mr. Michael D. Berry:  Thank you, Judge. And thank you to The Federalist Society for allowing me to be here and participate in this panel today. Senator Lankford opened us up with some remarks. And he mentioned this concept of good order and discipline. And the purpose of good order and discipline is to help the military accomplish its mission. In other words, good order and discipline is what makes our military more capable. It makes us able to do the things that we have to do as a military.

 

            And I submit that the faith -- and I use that term generally -- faith of the American service member is a force multiplier. And if you will indulge me, I'm going to read to you from a report that was submitted to the president of the United States. This is several years ago now, going back to the early days of the cold war, so actually several decades ago. But if you listen to the words of this report to the president the purpose of the report was to evaluate the role of faith, religion, religiosity, spiritual fitness as we might call it today in our armed forces and whether it still continued to serve any valuable purpose in our military. And so again, if you'll please indulge me, I hate to read, but there's no way I could memorize this or do this from memory.

           

            So this is what the report says, "One of the fundamental differences dividing this world today likes in the field of ideas. One side of the world, to which we belong, holds to the idea of a moral law which is based on religious convictions and teachings. The fundamental principles which give our democratic ideas their intellectual and emotional vigor are rooted in the religions which most of us have been taught. Our religious convictions continue to give our democratic faith a very large measure of its strength. The other side of the conflict has organized its idea upon a rejection of moral law and individual dignity that is utterly repugnant to any of our religions. Indeed, it has been necessary for totalitarians to attack and stifle religion because such faith represents the antithesis of everything they teach. It follows therefore that if we expect our armed forces to be physically prepared, we must also expect them to be ideologically prepared. A program of adequate religious opportunities for service personnel provides an essential way for strengthening their fundamental beliefs in democracy and therefore strengthening their effectiveness as an instrument of our democratic form of government."

 

            So again, I submit faith is a force multiplier. It strengthens our effectiveness as a military. A military that honors and respects religious freedom is a stronger military than one that does not. And you don't have to take my word for it. Department of Defense data shows that Americans who identify as highly religious are significantly more likely to join the military than their non-religious counterparts. And even today, nearly three in four service members continue to identify as people of faith. So if we as a nation fail to protect religious freedom for our service members, we will pay a dear price.

 

And the recent litigation involving the COVID vaccine mandate, I think, bears this out. I did some research. And in my research, again, using Department of Defense's own disclosed data, this is what I've discovered. It costs the American taxpayer, each of us, or all of us collectively I should say, approximately $15,000 to recruit one service member. Just to recruit a service members, it's $15,000 per recruit. It costs another $50,000 to $75,000 to actually train that service member. In other words to get them through being a recruit and then ready to perform their job. So I'm a lawyer. I'm not a mathematician, but 15,000 plus 50, 75,000, we're already in the $65,000 to $80,000 price range just to have one ready service member.

 

            Now, according to the United States Navy, there are over 8,000 sailors who are currently unvaccinated. So over 8,000 are unvaccinated. And according to the Navy, they have a shortage , a shortfall of over 5,000 sailors. Again, I'm no mathematician, but I can see where you can probably find your 5,000 shortfall and fill in the gap. But the Navy has declared that those who are unvaccinated will be separated involuntarily. So if we were to separate all 8,000 of the unvaccinated sailors from the Navy, that will cost the American taxpayers somewhere between $120 million to $600 million if we separate every single one of them.

 

            Now, my conclusion is that you would actually -- or my hypothesis is you would actually have to double that number. And why is that? Because it's going to cost the same amount to replace a sailor that you've just removed, you've just kicked out. You now have to spend the second 15,000 to recruit them, the second 50,000 to 75,000 to train them. That's just the financial injury to our nation and to our military.

 

            I think what's even worse than the financial injury is the moral injury to our nation, right, the moral injury to our Constitution, to the rule of law. And the moral injury results from the loss in trust. In order to serve in the military, in order to carry out and execute an order to assault a hill, to take out a machine gun nest, to do whatever it takes to accomplish the mission to keep the American people safe, to do the very things that Senator Lankford recited at the beginning of this remarks when you raise your right hand and swear that oath, there has to be a special bond of trust and confidence between the leader and those who are being led. So that when the leader issues an order, those who are carrying out that order know and believe that the leader is giving the order because he has the best interests of the country and the best interests of the service members at heart. And when the service members begin to suspect that leadership no longer has their best interests at heart, then that special bond is shattered.

 

Just in the Navy SEALs case, in which my firm represents -- initially we represented 35 Navy SEALs. It's now been expanded into a class action. But the Navy SEALs that we represent, again, think -- we're talking about Navy SEALs, all right. These are -- I don't think you need me to explain who Navy SEALs are or what they do. But there is evidence that we presented in court that one of our clients had received a -- I don't know if you call is a prescription or a recommendation or a directive to attend a traumatic brain injury clinic to receive treatment for a traumatic brain injury that he suffered. Those orders were canceled and rescinded because of his vaccination status. He was told he was no longer able to receive treatment for traumatic brain injury purely because he was unvaccinated.

 

            Others were ordered to remove lint out of Velcro because the Navy couldn't find anything else to do with them, and they told them to clean the lint out of the Velcro in the uniform locker. Others -- one of them was ordered to go to the medical clinic, sit at the front desk, at the reception desk at the clinic, and take people's temperatures to ensure that they don't have COVID symptoms as they're entering the clinic. But he's unvaccinated, that's the part still boggles my mind.

 

            And again, this isn't just the harm to these individual SEALs. This isn't just the financial harm. Think about the loss to our nation because these 35 SEALs collectively have more than 350 years of military experience, more than 100 combat deployments among them collectively. That is leadership and experience that you cannot replace. Congress could not appropriate enough money to replace the leadership and experience that those SEALs have that our nation desperately needs in the military.

 

            So again, I'll just wrap up my remarks by saying that religious liberty is a national security issue. And if we get it wrong, we're going to harm our nation. We're going to harm national security, and all of us will suffer. Thank you.

 

Hon. Justin Walker:  Thanks, Mike, very much for that contribution. I thought before we turn to questions, I'd give each panelist just a minute or two if they have any response or thoughts on what the other panelists have said. And if you don't, that's okay too. It will, at the very least, give the audience some time to think of some questions that they want to ask. And I have plenty if you don't. But I would love to hear and I'm sure the panelists would love to hear what questions you have.

 

Prof. Eugene R. Fidell:  I think we've all been on such good behavior we should open the floor to questions rather than --

 

Mr. Eric Baxter: That's fine by me.

 

Mr. Michael D. Berry:  That's fine by me.

 

Prof. Eugene R. Fidell:  We're playing so well together.

 

Hon. Justin Walker:  All right. Who would like to start? A former boss of mine said you should always be careful about the first person to ask a question. They are usually trouble. And I think there is a microphone somewhere. It's in another zip code, but --

 

Questioner 2:  Why do you think is it that the military has a hard time just saying no? Why can't -- it seems to be pretty anti-exemption, but why won't it say no [inaudible 01:01:06].

 

Hon. Justin Walker:  Well, the question -- I'll repeat the question, especially because there wasn't a microphone, but I might also ask you to for a little bit of clarification. So your question was why does the military have such a hard time just saying no, no exemptions. So I think you mean when someone in the military asserts that they have a religious exemption or are entitled to a religious exemption, the military rather than saying yes or no delays and gives a non-answer. That's the premise of the question, not endorsing or rejecting that. So, Gene, you look eager to answer the question from our first eager questioner.

 

Prof. Eugene R. Fidell:  Right. So there's a great deal wrong with the way the Defense Department has handled this issue. There are issues underlying the mere administration, but administratively, it's been really a horror show. The fact that different deadlines applied to different branches of the service or even related branches, like the Army National Guard and the Air National Guard, or within a single state, it's absolutely indefensible. And it had the effect of depriving the larger decision of the kind of coherence that generates public confidence in the administration of a program if you see things going in so many different directions. So that's one problem.

 

Another problem was simply not having answers. If you think back to the early COVID mutiny that we saw in the National Guard, one of the problems was that the National Guard Bureau didn't have an explanation of quite what the federal responsibility and power was vis-à-vis the National Guard. It's the 21st century. You'd think -- it's complicated, but it's not so complicated that you couldn't explain it in a way that would make sense to the listener. That never actually happened. So those both an oddly disparate set of deadlines which shattered confidence and then a mealy mouthed or failure to provide a rational account of what the policy -- how the policy would play out.

 

There was also a reluctance -- and this goes to the point that Mike made about not getting answers -- I think Mike made this or maybe the Senator did. You look like a senator. Why is it that you don't get an answer in a reasonable period of time? I don't understand that.

 

Now, as far as whether the administration was on good ground in even offering exemptions, that's a whole other level of issue. If you look at the jurisprudence -- and I bet we're going to hear about it -- life would have been a lot simpler for the Pentagon had they not provided for any exemptions. Now what we're not addressing is the substantiality or not of religious claims. That's another part of the conversation. But let me stop there. But that's by way of response to your question.

 

Mr. Eric Baxter:  Yeah. I have just a few comments. I think there's a tendency -- and maybe lawyers are more skeptical, but there's just a general tendency in the population I think to see bureaucratic agencies and if your parties in control you just have a lot of trust that they're going to do the right thing. And people forget about just the bureaucratic ineptitude that's inevitable in any organization. And I think in the military it's compounded by the fact that you have civilian control and there's military brass line of control.

 

So for example, on uniform accommodations, grooming accommodations, we get feedback from political appointees in both parties that they really want to allow these. They think it's great. It makes a lot of sense. These are individuals who are great service members. But tradition runs very strong in the military, the sense of we all come in and give up our identities to serve as one which is a gross overstatement of what actually happens in the military, but that tradition has been very deeply instilled in people. And so you have this tension between the civilian branch or the civilian side and the military side. And I suspect on the COVID cases, there are other dynamics, the politics and things like that that come into play. And so I was just -- when you have an organization that large, there's just a lot of bureaucratic ineptitude.

 

The branches have all been very effective at adopting the right policy. All of the DOD and each of the branches have each incorporated into their individual policies the principles of RFRA, that you cannot substantially burden a service member's religious exercise without a compelling government interest that cannot be met by any less restrictive means. And so the language is there. The procedures are there, but in practice, just like in a lot of big organizations, the politics and the bureaucratic sloth that comes in and really makes it hard to get things done, I think, so.

 

Hon. Justin Walker:  Mike's -- let me ask a related question and then you can answer that question and the related question. But I think you may be in a somewhat unique position to answer it based on your experience litigating the case.

 

There's often in these cases a debate about the religious person's sincerity, not even often, but occasionally and what test a court should use to gauge sincerity. And that might be an interesting topic to explore later this afternoon. But what about the sincerity of the government in the case of that you litigated?

 

Because it seems like there are two general explanations for why the process took so long, why some people didn't get answers quickly. And the first possibility -- and they're not mutually exclusive, I suppose -- is, what to a degree Eric and Gene were getting at, that if there's a bigger bureaucracy in the country than the Department of Defense, I don't know what it is. And it's remarkably effective, incredibly important and effective, in spite of the bureaucracy. But bureaucracy could be an explanation. It could be an answer to your question.

 

On the other hand another explanation could be bad faith, that the system for exemptions was set up in a way that was designed to fail the people requesting exemptions. So I don't have a dog in that fight, but I wonder if you do? And also I'd love it if you could respond to the original question as well.

 

Mr. Michael D. Berry:  Yeah. I think that actually dovetails into the two very specific responses I was going to give to your question which is why the delays, right. Why is it taking so long to get these responses? And the first, I would say, is to create the perception that each request is being reviewed and evaluated and that there's a bunch of high ranking officers in a smoke filled room pondering this person's religious exemption when the actual facts on the ground are that it, as one judge described, a rubber stamp process, and they're being done in batches. And it's just -- the metaphor that I use is that when a snake eats a rat or swallows a rat whole, it takes a while for the rat to make its way through the snake. Well, that's essentially what we're seeing.

 

            And the slightly more cynical view is that the DOD itself and through its spokespersons have said that they view this as an information campaign. And they believe that those who are vaccine hesitant or vaccine resistant just simply have not been educated enough on the safety and efficacy of the vaccine, and they just need more time to be educated. And so they don't want to come to a -- make a quick decision because they want to give the service member or service members the opportunity to learn about the safety and efficacy of the vaccine.

 

And the reason that I say that's a more cynical view is because now having interacted with -- I don't know if I'd but the number in the thousands, but in the high hundreds of service member across different branches of service, across officer enlisted, across racial and religious demographic lines, they are some of the most educated people that I've ever encountered when it comes to the vaccine's efficacy and safety, more so than any of Department of Defense official that I've encountered.

 

So but I think that's one of the reasons why we're seeing this long tail on the time from when somebody submits a religious accommodation request to the time until they receive what in legal terms we refer to as final agency action is, one, the law requires that there be an individualized assessment. And so they point to how long it took as evidence, oh see, we took our time on this. And then two, as I just explained, I think that there's also this notion that well, if we just give the person more time, they'll change their -- they'll come to their senses and realize that this vaccine really is the safest and most effective way for them to be protected.

 

Questioner 3:  I love the fact that you believe there's more cynical view than the metaphor of a rat moving through a snake. That's great. I'm intrigued by your statement that religious liberty is a national defense issue. Have you found any traction for that in the jurisprudence anywhere? And secondly, we've now reached the point where there isn't a social spreader of COVID greater than or more intense than the 200 people in an airplane cabin, and even that's gone. When does the civilian progress of band aids catch up with the reality in the Defense Department?

 

Mr. Michael D. Berry:  Thank you. Great questions. And to you first question, I'm not aware of any Supreme Court case that has applied RFRA in the military context. And I would hope that I should know the answer of whether there is one or not because I -- shameless plug right here -- I just wrote a law review article that will be published this month addressing that very issue, the dearth of federal case law applying RFRA to the military. There is pre-RFRA case law, but it's sort of all over the map, if you will. And I think that's why RFRA is such a useful and powerful vehicle.

 

And the first thing I want to say about RFRA though is despite what many of RFRA's critics claim RFRA does not provide outcomes. It only provides a process. It provides a means of analysis and a framework. And I'll also be the first to say that I think the Department of Defense should, more often than not, in the civilian context, the Department of Defense should probably prevail on a RFRA challenge because I do think as somebody who served, who's been in that situation, that the military can often explain a compelling government interest more often than, as you pointed out, in the civilian context like such as on an airplane.

 

So why hasn't the military caught up to what we're seeing in the civilian side? That's a great question that I wish I had the answer to because usually, historically, it's been the other way around. Often on matters of civil rights, we've seen the military actually taking the lead not trailing behind. But in recent years, we've started to see that trend reversed to where the military is playing catch up.

 

And let's use RFRA as an example there. Most agencies, in fact, I can't think of another agency that failed after RFRA was passed to establish and implement regulations, internal, within that agency that incorporate RFRA as the governing standard for religious accommodations and for exercise issues. The Department of Defense, talk about late to the game, it wasn't until 2014 that the Department of Defense finally at least tacitly recognized strict scrutiny as the governing standard. And it wasn't until 2019, or no, excuse me 2020, that the Department of Defense finally said RFRA is the standard for religious accommodations. So think about that, think about 1993 it was passed, and 2020, it finally became the governing standard, at last expressly so, within the Department of Defense. So that's a disturbing trend, I think, that it used to be the DOD was in the lead, and now it's fallen way behind.

 

Prof. Eugene R. Fidell:  So there's a premise in the discourse, that COVID has something to do with religious belief, and I personally would like to better understand that. Efficacy and safety of medications --

 

Hon. Justin Walker:  - Try to move the mic a little closer.

 

Prof. Eugene R. Fidell:  Yeah. Efficacy and safety of medications do not sound in religious belief. Persuade me otherwise. Efficacy, that's one thing. I understand that. I look for a PhD or an MD when you're talking about efficacy. So there's a premise that underlies a lot of the discourse around COVID particularly. And I think that that premise should not be accepted uncritically.

 

In a way the First Amendment is important. It's the First Amendment. I get that deeply. But it is not -- not everything that the First Amendment implies has a religious valence to it. And my concern is that it may be that giving things that valence that do not in fact enjoy that valence may be, in the long run, a very destructive proposition for those of us who take the First Amendment extremely seriously because you're forcing things into it that actually may not belong there analytically.

 

            Now, on the question of sincerity, there are two issues that I think merit comment. And I'm anxious to hear what people have to say about this. So the first is what is the religious content that we're concerned about? And there, traditionally, we have looked to doctrine, more or less accepted practice. And it's a little difficult to see in some of the claims that have been made in opposition to mandatory vaccination any rooting in religious doctrine. The rooting is in autonomy, a different proposition, a proposition that may well fall within the broad range of the First Amendment, just as reproduction falls within the broad range of the First Amendment. Let me finish the thought. So I crave some nourishment on that.

 

            And the other thing is on the question of sincerity. The cases seem to be very skeptical of the ability of officialdom, whether it's executive branch officials, senior officers, judges to gauge sincerity. But I'm here to tell you that we gauge sincerity all the time. Do we gauge sincerity on the basis of demeanor evidence? Do we gauge sincerity on the basis of assertions that are facially deeply implausible? Of course we do.

 

Hon. Justin Walker:  Well, there's a lot there. Let's proceed if we can in --

 

Questioner 4:  - I actually have -- I'm a retired JAG, and I worked with you on a desertion case a long time ago. But anyway, I agree with what you're saying. We're trying to shoehorn exemptions into the religious rubric when it seems to me, and maybe you can explain this or provide insight, as to why wouldn't it be an equal protection issue. Because the military apparently now supports in service transitions to a different gender. So from a readiness perspective, that person who's transitioning is not going to be deployable for a certain period of time. And you also have women who get pregnant, and their deployment viability is limited.

 

So with a vaccine or not having people vaccinated, if they catch COVID, what, they're sick for a week, maybe, not even if they're very healthy and young. It doesn't seem to affect them. So I'm not sure that the religious exemption is the right angle. Why not some other exemption? Because it does go to autonomy and a distrust of the government. This is not -- it's a new vaccine. How can it have been tested and we know for a fact that it is actually harmless and much greater efficacy than it does for any potential drawbacks?

 

Prof. Eugene R. Fidell:  You're assuming that Bolling v. Sharpe is good law.

 

Hon. Justin Walker:  There's now even more to cover, and I don't know that even the next 45 minutes would be enough time for all of those topics. So let's start if we can with what is the religious objection to the vaccines. And, Mike, I know you would know that from litigating it. And Eric, if you have thoughts on that as well in response to the question that Gene began with. And then why don't we start there, and then I'll tick through at least a few of the other topics that Gene mentioned and the questioner mentioned. What is wrong with the vaccine? What do the litigants in the Navy SEALs case say violates their religion by taking the vaccine?

 

Mr. Eric Baxter:  I'll jump in on this. Mike knows more, so he'll give a more specific answer. But I'll just say objections to vaccinations are not new. And the very first matter I took on when I came to the Becket Fund was a Catholic couple who had concerns about the origins of certain vaccinations. They were developed using fetal cells and so forth. So these objections have been around for a long time. It's a relatively -- even the military cases, I think, it's gotten a lot of attention, but it's a relatively small number of people who have these objections, and of course healthcare, all kinds of healthcare, present religious concerns for a lot of people. And many over the last many decades, a lot of -- a large percentage of health religious liberty concerns have arisen in the healthcare context. I don't think there's anything unusual about that.

 

            I do think that there are interesting sincerity questions just like there are interesting sincerity questions in the conscientious objector category. But there's no need to get to those when, as in these cases, the military has made so many other objections. They've been really slow to impose a mandate. It suggests that the military which really has the initial burden here of -- it could challenge sincerity if it wanted up front, but it's chosen not to. And I think it's just in a hard position. Even if it gets through the sincerity issues, it hasn't really justified its action in imposing the mandate in the first place. So that's my initial response, but Mike has, I'm sure, more specific answers about the COVID vaccine.

 

Hon. Justin Walker:  Do you want to add to that Mike?

 

Mr. Michael D. Berry:  I'll try briefly. On the question of sincerity, I guess my response is I hate to answer a question with a question, but it's who decides and by what standard. Who gets to decide whether the person is sincere or not? I don't think that that person deciding should be an unelected, unaccountable -- well, relatively unaccountable, in this context highly unaccountable military commander. And by what standard? Well, whatever standard that commander happens to decide, whatever comports with that commander's own understanding of religion, piety, et cetera.

 

And one quick anecdotal example, I think, that highlights this is when I was a young marine JAG -- I was young at one time, I promise. One of the very first things that I had to do was evaluate a request from two Native American members of our unit. We were preparing to deploy to the Middle East for a combat deployment. And we knew that we would be conducting combat operations. And these two young Native American marines came to the commanding officer with fear and trepidation and submitted a request for religious accommodation.

 

And their request was that they be allowed while they were taking what's known as pre-deployment block leave -- so usually before you deploy, assuming that you haven't gotten in any trouble or anything like that, you're allowed -- you're given two or three weeks or so, go home, spend time with your family, have BBQs, that kind of stuff, don't get in trouble. And these two Native American's asked if when they go home, if they would be permitted to use peyote as part of a ritualistic tribal ceremony consistent with their religious beliefs. Because it was extremely important to them before going into combat that they be able to do that because it signified their transition into a warrior, all right, that if they were to take a life of another human being, that was one component, but then this use of peyote was another component.

 

And my commanding officer, who happened to a protestant Christian, asked, he said -- when you're in the military and you're a JAG, your call sign is usually Judge because it's judge advocate. So he just looked at me, so no offense, Your Honor, but he said, "Judge, I've never heard of anything like this. Peyote is an illegal drug, right? It's a controlled substance." And I said, "Yes, sir. That's correct." And he said, "So that means it's illegal, right?" I said, "Yes, sir. That's correct." I said, "But that's not the end of the story." And he said, "What do you mean? It's illegal. You can't do it." And I said, "But they've requested a religious accommodation."

 

And so to answer your question, Professor Fidell, the commander was really struggling with the fact that he didn't understand their religious practice. And to him, this sounded way out of the ordinary, unusual, unorthodox. But at least he was a good commander. He had the good sense to recognize but that just because I don't understand it doesn't mean the answer should be no because I think they're just looking for an excuse to use drugs while they're home. And he recognized, okay, if they're making the request, that in and of itself is some indicia of sincerity. The fact that somebody's willing to go through the -- again approaching us with fear and trepidation to say sir, we want to use drugs when we go home before we go to Afghanistan.

 

And so again, I respond with I don't feel comfortable putting the authority to decide and by what standard in the hands of a random executive branch official.

 

Prof. Eugene R. Fidell:  So it's the individual -- we have at that point a church of one, basically who's personal solipsistic judgement as to what doctrine calls for is it. Nobody reviews that?

 

Mr. Michael D. Berry:  It's sufficient to satisfy sincerity. But that's only part one of the RFRA anal-, -- of the strict scrutiny analysis. That just gets you in the door.

 

Hon. Justin Walker:  It just occurs to me maybe the first question I should have asked for people in the audience who aren't knee deep in the subject, can one of you just go through the 30 second version of what the RFRA test is. It basically -- we turn to the pre-Smith version but --

 

Mr. Eric Baxter:  - Yeah. I can do the layman's version.

 

Hon. Justin Walker:  My guess is that everyone in this room knows, but there may be someone watching online who doesn't know. So we've been talking about RFRA for an hour and a half, and it just occurred to me maybe we should say what it is.

 

Mr. Michael D. Berry:  RFRA, which is the Religious Freedom Restoration Act, it basically takes what we know as strict scrutiny as lawyers, and I'll explain strict scrutiny, but it essentially applies it to -- well, the Supreme Court later held that it only applies to the federal government, right. And so strict scrutiny is when somebody claims that the government is substantially burdening their sincerely held religious beliefs -- that's where we have this discussion about sincerity, right. The belief has to be sincerely held.

 

And there's a burden on it, a substantial burden, not just any burden. It has to be a substantial burden on it, then -- I had the fact that we use the word burden twice in describing it -- but the burden shifts to the government. Right, so now the claimant doesn't have any -- their obligation is to show that they have a sincere religious belief and that's it's being substantially burdened in some way.

 

Once they've done that, the government now has to show that it has a really good reason -- that's what we call compelling interest -- it has to have a really, really good reason. And then the least restrictive means, it means that there is no other way of accomplishing that really good reason that's not less burdensome on the person's religion.

 

So in other words, if I'm the government, I have to show that, your honor, there's a really, really good reason why I'm not allowing this person to use peyote or I'm requiring this person to be vaccinated or I'm not allowing this person to attend their place of worship, and there's no other way for me to accomplish what I need to accomplish other than what I'm doing to this person. I have no other way of doing it. That's strict scrutiny.

 

Hon. Justin Walker:  Thanks, Mike. Do you remember when do we end? Do you know what time we end?

 

Unknown:  Forty-five.

 

Hon. Justin Walker:  Three forty-five? Two minutes ago. Okay. So we have two questions in the queue, and we're two minutes over, and we're being told we can go maybe five more minutes. Is that what I --?  Oh, we have until 4:00. Even better.

 

And there's kinds of always a dilemma for a moderator. What do you fact check? What do you not? And I err on the -- unlike Candy Crowley, I err on the side of not fact checking from the hip, and it risks being wrong. But two things just jumped out, and if you all disagree with this, feel free. But the comment about airplanes being particularly unsafe, my impression is because of filtration, they are almost unusually safe. And then there was an allusion to if you get COVID you're only sick for a couple days and that's the end of it. And of course it can be much worse than that, and it can be spread to other people, and there've been hundreds of thousands of deaths in the country, so I'll fact check those two, but I'm open to being rebutted if somebody on the panel disagrees. If not, next question.

 

Questioner 5:  Thank you very much. This message is actually for you, Judge Walker. It's actually a fun and practical question.

 

Hon. Justin Walker:  I was told there'd be no math. I was told there's be no questions of me.

 

[CROSSTALK 01:31:53]

 

Hon. Justin Walker:  Fire away.

 

Questioner 5:  I promise you, it's a fun and practical question. I actually did my doctoral thesis. I completed it during COVID in real time, and I wrote it on leadership, what Mr. Berry has been mentioning about. And I did it on the premise of two theories, adaptive and complex. I did it in the era of the pandemic on two subtopics which was public health and public safety, COVID-19 and the riots which was going on simultaneously of 2020.

 

            And let's just call it for what it is. It's been weaponized, and I want to pose the question to Judge Walker being that -- the hypothetical is that if President Trump has been making a lot of remarks about should he come back into office and serve, he could potentially, within the realm, would there a potential to rehire all the vets or the folks that have been dishonorably discharged or whatnot? Is that in the realm of possibility, should that case be brought up to you? I don't mean to put you on the spot here or anything like that but --

 

Hon. Justin Walker:  - You don't have to worry about that because I'm not going to answer that question. But if I understand it right, it might be a question that would be of interest to some of the panelists. So let me make sure I got the question right. You're saying that if there were a future administration with a president who wanted to rehire members of the armed services who have been fired as a result of not taking the vaccine, would the future --

 

Questioner 5:  - Is that in the realm of possibility?

 

Hon. Justin Walker:  - president be able to do that?

 

Questioner 5:  - If it should be brought to you, not just to you, to any judge?

 

Hon. Justin Walker:  So I see Gene nodding yes, but maybe one other question that maybe our panelists can clarify. Are people in the armed services being fired or are they being punished in other ways? Which is not to diminish the other ways they're being punished, I'm just looking for a factual clarification.

 

Prof. Eugene R. Fidell: There has been only the other day, the first trial that I'm aware of at Aberdeen Proving Ground. A junior officer in the Army was prosecuted for refusing to take a test. It wasn't refusal of vaccination. It was refusing to take a test and refusing to work remotely. There was a third charge too. So that's the first prosecution I've heard of.

 

Hon. Justin Walker:  Have there been dishonorable discharges?

 

Mr. Michael D. Berry:  There is an amendment to the most recent National Defense Authorization Act that essentially prohibits dishonorable discharges for vaccine refusal if vaccine refusal is the only basis for separation.

 

So the two possible bases are honorable discharge which is the one everybody wants, right, and then what's called a general discharge. And then a general discharge has several subcategories. There's general under honorable conditions which the best kind of general discharge you can get.

 

The problem is that there is -- if a perspective employer -- because this is what this is really about, right -- for a young -- and most people who are separating particularly due to vaccine refusal are under the age of 27 or something like that. They're pretty young. And they're looking at future employment opportunities. And when they to go a perspective employer with their discharge paperwork in hand and it says general discharge, first of all there's codes on there that if an employer has an HR department that understands anything about the military, they'll know well this code means something wasn't right with your service because otherwise you would have gotten an honorable discharge and not this general discharge.

 

And the other thing is there also can be on -- I've seen discharge paperwork that has basis for separation. And the basis for separation can say what the C-O-S-O, all right, COSO is the military -- we love acronyms in the military, right. And COSO stands for commission of a serious offense. And the serious offense that the person has committed that resulted in their discharge is vaccine refusal.

 

So it's sort of a backdoor way of saying okay, we're not giving the person a dishonorable discharge or what's in the administrative sense an OTH, other than honorable, which is the administrative really bad type of discharge. But the military is still figured out a way to essentially say okay, you get the general or the honorable discharge, but we're going to make sure that there are footnotes in there that your perspective employer will see that says you didn't leave on good terms. You left because a commission of a serious offense.

 

            At the very least, I'll say this. If I were interviewing somebody, and I saw that, I would at least want to sit down with the person and have a conversation and begin asking them what was -- tell me about this situation or the circumstances. And it's probably not a pleasant thing for a young, again, 24-, 25-, 26-year-old person to want to have to explain. Well you see sir, I had a dream of serving in the military for 20 years, but I got kicked out.

 

Questioner 5:  This is good because this is the final part of my comment and question for you.

 

Mr. Michael D. Berry:  It started in six parts, and how it's three parts with two --

 

Questioner 5:  - Well, actually this hit right on the nail because it's very situational. But hypothetically if President Trump was still in the chair today, would we be in this vaccine mandate state that we're in right now. Thank you very much.

 

Mr. Michael D. Berry:  The answer is I don't know. I don't know. I have no idea.

 

Hon. Justin Walker:  So we have time for another question and --

 

Questioner 6:  -  I will make it brilliantly short. I served in the Marines. I served with some brilliant people. I served with some rocks. And I'm thinking the problem with the rocks is  they shirk, and we don't want a military that tolerates shirking.

 

But at the same time, I remember I was first Gulf War era. There were people who manifest their objection to that specific war. And so they were conscientious objectors, not to war itself but to that specific war and the moral grounds on which it was predicated.

 

            And at the time, I was outraged. That's just shirking. Forget that. You can't tolerate that. But as I am older, I look back and say, well, wait a second. If they actually were acting on a sincerely held belief that this specific war was immoral on the grounds that it was advocated for, that's reasonable in my mind.

 

And so I'm wondering on the question of discharges, where do you file them? Do you guys believe that our present honorable, other than honorable, communes with the government that system fits? Do you think that they deserve their own category or religious objector? What do you think would be the best formula to put them in their just place so that they're not compelled to act against their good will, their conscious, but at the same time, they're not getting the same honorable discharge that someone who didn't shirk, for lack of a better word, would receive?

 

Prof. Eugene R. Fidell:  Shirk and shirking loads the question. You mean they simply hadn't availed themselves of an opportunity to leave active duty based on such a claim to put it in neutral terms, right?

 

Questioner 6:  Right. That's fair.

 

Prof. Eugene R. Fidell:  I'll only say this. That's a very interesting question. And the machinery that we have and the categories, the taxonomy that we have for military discharges dates to like the first World War. And we haven't really -- and indeed has roots back in the British Army and the Royal Navy. We haven't really revisited that ever that I know of. We've regularized it. There's a DOD directive on it. But maybe it's time to take a hard look at something that may be an antique.

 

After all, today, there are many people walking around with bad paper discharges who are kept from jobs in law enforcement. The person might not be able to go into law enforcement. Is that a sensible outcome? I don't know. But the idea -- that's opening a major set of issues which I frankly don't think the Department of Defense is going do unless there's some crisis that requires it.

 

Mr. Eric Baxter:  Let me just add I think all of these questions highlight the importance of the RFRA process and the judgement, for example, some people say well a young person they're not going to be affected by COVID. Well, some people have died from COVID, right. And at each stage of the RFRA analysis, courts are allowed to balance these interests, these sincerity questions. You can look at that. When there's a real question of sincerity, courts often do weigh sincerity. In drug cases when a drug runner says well oh yeah, I'm a part of the marijuana church or whatever, judges will question that sincerity and make decisions based on that.

 

            They'll look at the substantiality of the burden. When you're talking about Navy SEALs and COVID, under the compelling government interest, you're going to ask, well, does the government have a compelling government interest in forcing these individuals to be vaccinated? That can depend maybe on their age, on what exactly they're doing for the military.

 

Now let's say some disease that's highly infectious, highly damaging, the court agrees, well there is a compelling interest here. Well, yes, but is discharging them the least restrictive means? Is discharging them with a general discharge the least restrictive means, or is there another position in the mili-, -- I mean we already know there are other positions. There's cleaning the Velcro. But there are probably a lot of other positions that could be filled by service members who would otherwise be discharged that wouldn't -- where the impact wouldn't be as great.

 

So I'm not speaking anything specific to COVID or any other case, but in each of those issues, RFRA really, if courts apply RFRA, they can work through a wide variety of circumstances and do the thing that is most just to maximize the protection of the state of the service member's individual religious freedom.

 

Hon. Justin Walker:  We have one minute, and Mike asked for a quick chance.

 

Mr. Michael D. Berry:  Yeah. Just to sort of bring us back to where we started and that was Gene's question about sincerity. And I answered it with a question. I said who decides and by what standard. And my answer to my own question is, not as an officer of the military, but as an officer of the court, as an attorney I decide. I test sincerity of any perspective client. I evaluate whether or not this person is going to perpetuate a fraud upon the court, right, or and in doing so not necessarily -- I mean, yes, obviously, out of respect and deference to the court, but more so out of a desire to win my case and out of a desire to advance the rule of law and to advance religious liberty. And to bring a client into court who I think lacks the requisite sincerity that I think they should have, I'm actually doing myself and them and the law a disservice, and I'm actually harming religious liberty.

 

Hon. Justin Walker:  Let me just ask what do we do with clients who have attorneys who aren't as -- I don't mean this sarcastic at all -- who aren't as ethical as you?

 

Mr. Eric Baxter:  How about the attorney on the other side? I mean they're also testing that sincerity. The government has chosen not to test sincerity in COVID cases. They could if the wanted to. And then judges make that ultimate determination, right. So again, there is a way for it to happen. The government's chosen not to do that. So in that sense, I think the questions of sincerity in all of these COVID cases --

 

Hon. Justin Walker:  - I meant the comment to be a little broader than just the vaccine cases.

 

Mr. Michael D. Berry:  Yeah. I would explain to that person, to that perspective client, that it actually serves their interests, maybe not their acute interest in that particular case or controversy, but it serves their broader interest to not be a plaintiff in that particular case. That if you file this case, whether it's because of the jurisdiction, because of the issues because of the facts, if you bring this case, you're going to do more harm than good to yourself and others. Whereas if you -- and I'll be the first to admit, I advised, or not advised, I explained to many service members that very point, that you are not the ideal person.

 

Hon. Justin Walker:  I guess my question though is I agree with all of that. And what do we do -- what is a court to do with a client who's gone to Mike Berry, and you've said no for good reasons. And then that client finds an attorney who's not as ethical as Mike Berry and that attorney brings that client into a court. What's the court supposed to do then?

 

Mr. Eric Baxter:  I mean I would just say the court is supposed to do what it always does. It answers the question that is before it. If opposing party raises sincerity, puts on evidence, then the judge will apply the law to determine the sincerity of that individual and can make a ruling on that ground. If the issues not before the judge, the judge shouldn't do anything with that question.

 

Prof. Eugene R. Fidell:  The concern I have -- that's very interesting. What is the role of the lawyer? Suppose a client comes in and says I sincerely believe that the doctrine in my faith group forbids me from getting this vaccine. And it turns out that his faith group or her faith group is the Catholic Church. And the head of the Roman Catholic Church says get the vaccine. What do you do with that? That's a sincerely held view, but it's a view that's basically a mistake of fact.

 

Hon. Justin Walker:  We are over time, but that case has arisen, and you've probably litigated that case, or if you haven't Eric probably has, so I think it's worth a quick answer to Gene's question. And then we'll end there.

 

Mr. Eric Baxter:  Yeah. These are individual liberties, and the courts have pretty much unanimously recognized that you're not bound by the religious doctrine of your denomination or your church. Most Americans find the church that best fits their religious belief, but they don't necessarily subscribe to everything their church says. And so the courts have recognized that that's -- and this was the problem -- this was Scalia's concern in the Smith v. Department case when he said, well we'll have anarchy if we just allow every individual to bring their own religious [inaudible 01:47:38].

 

Well, we've had now thirty years under RFRA, and we haven't seen anarchy. In fact, what we've seen in the courts very ably assess sincerity, assess compelling interest, assess least restrictive means. It's mainly minority. One of my colleagues did a law review article looking at all of the religious freedom restoration cases in one of the circuits. And it's overwhelmingly minority faith believers whose rights are protected in ways that are pretty unremarkable. We haven't really seen anything that's threatened the safety of our nation, threatened the order of prisons or anything like that.

 

I think we have a long track record of recognizing individual religious freedom and protecting it to the greatest extent possible.

 

Prof. Eugene R. Fidell:  I have to respond with one footnote. And the footnote is this. There is a case -- I'm sure you're familiar with it -- of two Jewish inmates in the Michigan prison system who claimed mistakenly that Jewish doctrine requires that on the holiday of Shavuot, which is revelation, they are required to have cheesecake. And the U.S. Court of Appeals sustained that claim because they sincerely, incorrectly, had that understanding. Well, that's a preposterous outcome.

 

Hon. Justin Walker:  Well we could end there, but I'm going to end just by connecting what Eric said last to what Mike said earlier. And Mike, I thought you were so right when you said that RFRA is a process not an outcome. And I think that's what Eric was getting to with his answer as well. RFRA provides a process for that inquiry.

 

Mr. Eric Baxter:  And judges might get the rare case wrong, but that happens in all kinds of areas of the law.

 

Hon. Justin Walker:  Yeah. Every now and then. [Laughter] I want to thank our panelists.

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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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

Event Transcript

Hon. Kenneth L. Marcus:  -- former Assistant Secretary of Education for Civil Rights. But, before I do that, a word about the panel and our topic on "Selective Enforcement of Civil Rights Laws." It has been a pleasure, throughout the day, to hear aspects of this topic, more generally. I will say that, for me, having previously headed OCR during two Republican administrations, it's a topic that's been very much on my mind. For example, during the prior administration, OCR advanced cases involving racial preferences in higher education, involving transgender issues in women's sports, involving racial segregation of affinity groups.

And in each of these cases, the incoming administration is not advancing them, raising questions of whether the prior administration was over-enforcing, whether the current administration is under-enforcing, or whether the difference is an appropriate response to changing administrative priorities, or whether it's an abdication of law. At the same time, while I am aware that this administration has been harshly criticized by some for not pursuing certain claims available to it, it's also the case that prior Republican administrations have also been criticized.

For example, I certainly was publicly criticized for focusing on certain issues, like racial preferences in higher education or hostile environments for Jewish students, and not focusing on pursing claims against people who had not violated any laws. Here again, the question is, is this an appropriate response to limited budget, to changing priorities, or to the fact that some cases may seem more compelling, based on the evidence, than others?

In the case of my prior agency, the bulk of these cases were ones within a mandatory jurisdiction, that is to say, these were not cases that were pursued in a proactive way, but, rather, were a matter of enforcing cases brought to the agency by others. But, here again, the administrations take different views of what's required, whether a particular complaint states facts, which, if true, would violate the law or not. And there are different positions on this.

So I'm particularly interested today in different views on the question of selective enforcement, which could mean overenforcement, it could mean underenforcement, or it could mean rather dramatically changing enforcement, based on considerations that might be appropriate or might not be. And then there is the question of whether there are principled, non-politically-substantive criteria by which we must ask whether administrations must go after certain kinds of claims or not.

I'm pleased with this panel. I think we have three outstanding panelists. And I'm very proud, on behalf of the Civil Rights Practice Group, to introduce them. I think it's a balanced and complete panel. I've been asked to mention, though, that, if it is, in fact, a perfect and complete panel, that is the result of failure by The Federalist Society to entice certain other people. Because, just as Dean Reuter mentioned earlier today that there were some 50 progressives who had declined invitations, I will acknowledge that there were some 18 of them that we had asked if they would join this group, in an effort to have more progressive voices than we have here. And I mention that number, because I think that, once again, we have — through that number, 18 more than any other practice group — defeated the Litigation Practice Group, the Antitrust Practice Group, and the Administrative Law Practice Group. And that's really what it's about. So, well done, Civil Rights Practice Group.

In all seriousness, I want to commend the members of this panel for their willingness to participate in this and to model civil discourse. I have been proud of The Federalist Society for its, not just willingness, but eagerness to attract diverse voices and different perspectives on issues, which I think is very much for the benefit of our membership and our audience.

So, without going further, I am going to introduce our panelists today. Hans von Spakovsky is a Senior Legal Fellow and Manager of the Election Law Reform Initiative in the Edwin Meese Center for Legal and Judicial Studies at the Heritage Foundation. He was formerly a member of the Federal Election Commission, and was Counsel to the Assistant Attorney General for Civil Rights. Hans asked me to mention that he will need to leave somewhat before the end of this event, in order to catch a flight. For those of you who would otherwise be inclined to mob him for autographs, I have been authorized to sign his name to anything, including bar bills up to $100.

Samantha Harris is an attorney, a founder and a partner at Allen Harris, who has dedicated her career to protecting free speech and civil liberties. Her advice has guided students, faculty, and administrators on issues of free speech and due process on campus, for more than 15 years.

Professor Renee Landers is a Professor of Law at Suffolk University Law School in Boston, and former Chair of the Section of Administrative Law and Regulatory Practice of the American Bar Association. She served in senior positions in the Clinton administration, including as Deputy Assistant Attorney General in the Office of Policy Development at the U.S. Department of Justice. All of these panelists, as impressive as those credentials are, have a much wider list of accomplishments, available on various websites, including The Federalist Society. We will begin with our first speaker, Hans von Spakovsky.

Hans. A. von Spakovsky:  Thanks, Ken. And thank you, Samantha and Renee, for coming. Renee, I should tell you, I do have a sister-in-law who went to Suffolk Law School. She does not share my political beliefs, but she did like the school. Look, we're talking here about selective enforcement of the Civil Rights Act. And I want to make two points about this. There is selective enforcement. And there is also an abuse of governmental power, under those same civil rights statutes.

The selective enforcement is due to the pervasive one-sided bias that exists, not only in the Civil Rights Division of the Justice Department, but also in the so-called civil rights organizations that have been around now for a long time. And what is the reason for that selective enforcement? Because they do not believe that the statutes, the Civil Rights Act, the Voting Rights Act, should be enforced the way they were written, which is on a race-neutral basis.

Both of those laws protect everyone from being discriminated on the basis of race. But, neither the career lawyers inside the civil rights divisions, except for a tiny percentage, believe that to be true — and I have personal experience with that — and neither do the vast majority of these civil rights organizations.

The abuse of power that also goes on is the same, for example, Civil Rights Division, using its supposed authority under those statutes to go after jurisdictions for things that aren't really violations of the law. But, instead, they are engaging in that, using the power of federal law enforcement — endless resources, in comparison, particularly, to individuals in small towns and counties — to achieve what I consider to be partisan political purposes. It certainly is not a lack of resources. Civil Rights Division today is, I think, the biggest it's ever been, has more employees than it's ever had.

You can see this in the education area. It is blatantly clear that the Ivy Leagues like Harvard, Yale, Princeton — even, unfortunately, my old school, MIT — are discriminating on the basis of race in their college admissions. They're doing it openly. As you know, there's a case before the Supreme Court about this. But it's also public schools like the University of North Carolina, which is also there. And this extends, now, down into the high school ranks. We just had a federal court decision against the Thomas Jefferson High School for Math and Science, which is considered one of the top schools in the country, where, by the way, my daughter graduated, years ago. And yet, the Civil Rights Division refuses to do anything about this.

Now, one of the main reasons for that is that the individuals who are in the career ranks — and, by the way, I was a career lawyer, not a political appointee, there — they do not believe in the race-neutral enforcement of the law. They see nothing wrong with these colleges discriminating to benefit some individuals and to hurt other individuals, in this case, particularly Asian Americans, who are being discriminated against on a massive basis. The current head of the Civil Rights Division has said publicly that she believes in that discrimination. And the moment she came into office, she dismissed the action that the Civil Rights Division had initiated against Yale University, without explanation.

In the voting area, it's exactly the same thing. In 2005, when I was a career lawyer there, we started getting phone calls from individuals in a county in Mississippi called Noxubee County. And these were actually White voters who said they were being discriminated against by a local Black official. Lawyers inside the division refused to work on the case. They did not believe that the Voting Rights Act should protect these White voters down there. And, in fact, when we finally found some lawyers who were willing to go down there, and, including, by the way, an African American paralegal in the department who volunteered to do this, and who was treated with unbelievable contempt and hostility by other career lawyers for being willing to work on this case. When they went down there and talked to the defendant, he basically said, "Well, the Voting Rights Act doesn't apply to me. I can do whatever I want."

And his discrimination was so open and so blatant that eventually a district court judge ruled against him. You should read the order. It's quite something. It was upheld on appeal. But the point was, they did not want to work on it. Now, the most interesting thing about this — and this tells you about the reporting on this — is you will read all these criticisms of the Bush administration, eight years of it, claiming that, "Oh, the only cases they filed to enforce the Voting Rights Act were on behalf of White voters." That is a blatant lie. In fact, the current Principal Deputy in the Civil Rights Division actually wrote a Law Review article some years ago that she published at Duke, in which she basically claimed that the Bush administration hadn't filed any other Section II lawsuits.

So I wrote a law review paper I will refer you all to, published by the University of Memphis Law Review, called, "The Enforcement Record of the Civil Rights Division," basically. When it comes to Section II of the Voting Rights Act — which is a great statute, prevents and bans racial discrimination in voting contexts — the Bush administration filed 16 cases in eight years, only one of which was on behalf of the White voters in Noxubee. All the rest were on behalf of African Americans, Hispanics, Asian voters. The Obama administration filed only four cases to enforce Section II.

Now, on abuse of power, and, by the way, one other quick example in the housing area. Muriel Bowser, the mayor of Washington, just announced on April 1, a $10 million "Black Homeownership Fund." Now that is a blatant violation of the Civil Rights Act to say that housing funds are going to be awarded based on your race. What has the Civil Rights Division at the Justice Department done about this? Absolutely nothing. They filed no action, they have sent no letter, they have made no press announcements, because they are not going to do anything about this.

Now, when it comes to abuse of power, as you all know, this got a lot of attention. Merrick Garland announced a task force made up, of all things, the Civil Rights Division, the Criminal Division, the FBI, and, of all divisions, the National Security Division of the Justice Department. I knew people in the National Security Division when I worked there. Their job is to go after terrorists. And why did he form this task force? To investigate parents who were showing up at school board meetings protesting about the Critical Race Theory propaganda being taught to their kids. He was unable to cite a single incident of violence that would fit within the definition of domestic terrorism, which is what the National Security Division is supposed to investigate, terrorism and espionage.

And it turned out this was all done at the behest of the National School Board Association. The point here is that even if there had been incidents of a parent getting out of hand and attacking a school board member, that would have been a local concern, dealt with by the local police. There was no basis for federal jurisdiction, whatsoever. And yet, he formed this intentionally, basically to deter and scare off parents all over the country. Similarly, I consider due process rights to be a fundamental civil right. The government, when they're going to prosecute you, has to go through very elaborate steps. You are innocent until proven guilty. You have a right to counsel. You have a right to confront your accusers and cross-examine witnesses.

And yet, the Obama administration put out rules going to schools, on campus sexual assault cases, getting rid of all that. These rules were so bad, that the law professors at Harvard University, who are not exactly a cadre of conservatives, protested about this. So did law professors at the University of Pennsylvania, who said that these rules did not afford fundamental fairness. And even the American College of Trial Lawyers protested at this violation of basic due process rights. Because the way they were rewritten was they were telling campuses, "Your new standard is guilty until proven innocent." The Trump administration, fortunately, pulled these back. And the Biden administration is right in the process of putting them back in.

All right. I will finish up with this. Look, I am the first to tell people that the Civil Rights Act of 1964 and the Voting Rights Act of 1965 were needed laws. There was massive systematic discrimination going on, all across this country. But you know the best thing about those two statutes? They're probably two of most effective statutes ever passed by Congress. Mississippi, a state in which, in the 60s, the turnout and registration rates of African Americans was in the teens, if you look at census reports on their last three federal elections, not only did they have a turnout rate higher than New York, but African Americans in Mississippi voted at a higher rate than Whites in Mississippi, and, in fact, voted at a higher turnout rate than African Americans in New York State.

The Civil Rights Act not only outlawed discrimination, so that actual discrimination — the kind that kept African Americans and others from getting an education, earning a living, becoming a professional — has become very rare. And it has become, thank goodness, morally and socially unacceptable in our society, which is exactly the way it should be. That is quite a remarkable change. But all of that success is being endangered and damaged by the implementation and acceptance of discrimination in college admissions, the government hiring and contracting that hurts some individuals and some groups and benefits others, based entirely on their race, their color, and their ethnicity.

Individuals, particularly young students who had nothing whatsoever to do with what happened decades ago and weren't even alive, are now getting a taste of what discrimination must have felt like for Black Americans decades ago. Such discrimination is no less pernicious today than it was then. Those in favor of such biased, unequal, unfair treatment, which includes, unfortunately, the lawyers in the Civil Rights Division that I worked with and all the other civil rights offices within the federal government, are, once again, sowing the seeds of division and racial resentment, something that we have worked very hard to banish from our society. It is a tragedy in the making. Thanks.

Hon. Kenneth L. Marcus:  Thank you, Hans. Our next speaker, Samantha Harris.

Samantha Harris:  Thank you. I think I'm going to speak from here, if that is all right. So, as Hans said, our civil rights laws are supposed to protect everyone from discrimination. So, Title IX prohibits sex discrimination at educational institutions receiving federal funding. And that means those institutions can't discrimination against men or women. Title VI prohibits racial discrimination and other forms of discrimination in programs or activities receiving federal funding. And that means those programs can't discriminate against anyone, based on race. The agencies that enforce these laws are supposed to ensure that they are equally enforced. But what I've witnessed over the past decade or so is that how those laws are enforced often depends on the political pressures of the moment.

              So, to take Title IX as an example, in 2011, following a groundswell of activism and an NPR report around the issue of campus sexual assault, and around the perception that colleges were not doing enough to address sexual assault, the Office for Civil Rights of the Department of Education issued a "Dear Colleague" letter that dramatically changed the way that schools handled sexual misconduct complaints. Now, just to back up a little bit, the reason that peer-on-peer sexual misconduct falls under Title IX is that, through a series of administrative and court decisions, if peer-on-peer sexual misconduct or sexual harassment is known to the school and is not remedied by the school, that can constitute a form of sex discrimination that violates Title IX.

              So at the same time that they issued this "Dear Colleague" letter," the Office for Civil Rights also began aggressively investigating schools accused of not doing enough to address sexual misconduct. And the result was that many schools quickly dispensed with fairness and impartiality, in an effort to appear to be getting tough on allegations of sexual misconduct. And this led to processes that courts found discriminated against accused male students. So, in other words, OCR pressured schools to address discrimination against women, in ways that resulted in discrimination against men. And, in decision after decision, finding that schools had likely violated Title IX in their treatment of accused male students, courts pointed to these OCR regulations, themselves, as a factor.

              I'm just going to read a quote from one judicial opinion. This was a case called Doe v Brandeis, in which the judge wrote, "In recent years, universities across the United States have adopted procedural and substantive policies intended to make it easier for victims of sexual assault to make and prove their claims, and for the schools to adopt punitive measures in response. That process has been substantially spurred by the Office for Civil Rights of the Department of Education, which issued a "Dear Colleague" letter in 2011, demanding that universities do so or face a loss of federal funding."

This dramatic pendulum swing from alleged underenforcement to extreme overenforcement of Title IX was moderated by the Office for Civil Rights in a rulemaking process that culminated in 2020, when OCR issued new regulations requiring institutions to balance the due process rights of the accused with their obligation to meaningfully address claims of sexual misconduct. But that was not before hundreds of accused students brought lawsuits challenging schools' unfair processes, and countless more students saw their lives dismantled, without even a shred of due process, without having a hearing, without knowing what the allegations against them were.

And, what's more, we are very likely to see that balance shift again. The Biden administration appointed the same OCR head, Catherine Lhamon, who oversaw the dismantling of due process under the Obama administration. And Biden's OCR is now going to be issuing new Title IX regulations, which many of us in the field fear will dismantle a lot of the due process protections of the 2020 regulations.

Another area where selective enforcement appears to be at work is in the context of racial discrimination allegations brought under Titles VI and VII. Many employers, in my estimation, have gone too far in their efforts to promote diversity and equity in the workplace, leaving some White employees to complain that they are now being discriminated against, and negatively stereotyped. So, just for example, one employee being pressured to sign a contract that said, "I own that all White people are racist, and that I am not the exception."

Racially segregated social and academic events are becoming more common at universities, university-sponsored events. And yet, despite clearly violating Titles VI and VII, these phenomena have raised little to no concern at the agencies tasked with enforcing those laws. Enforcement of federal anti-discrimination laws, as Hans said, should be evenhanded. Discrimination against one group of people should never be implicitly tolerated, much less, actively encouraged, as a means of addressing discrimination against another group of people. Yet, this is where we seem to find ourselves today, with these very fundamental rights dependent on the political vagaries of these unelected and unaccountable bureaucrats. And I look forward to discussing this more in our conversation.

Hon. Kenneth L. Marcus:  Thank you, Samantha. Our third and final speaker will be Renee Landers.

Prof. Renee M. Landers:  I think I'm going to sit here, too, to be a little bit more comfortable. So, I would agree that -- first of all, thank you for having me here. And I'm the designated foil for all of the other ideas that have been presented so far. But I'm glad to know that your sister-in-law, Hans, learned the lessons well, while she spent her time in Boston at our law school.

So I will say that I've written, recently, an article that's about to be published for a symposium issue at the Saint Louis Law Journal, about the impact of changes in presidential administrations on teaching in various fields, including, I wrote about constitutional law, administrative law, and health law, which are the fields in which I principally teach. I also teach privacy. But that seems a little bit beyond the scope of today's discussion.

But the important thing about the change in administrations, which, as panelists have acknowledged, and Ken did a good job of outlining in his opening remarks, is that, yes, that administrations do come in, depending on their political priority and their general ideological views, with a view about how to enforce the law. And that's what we have elections for, as has been even recognized by the Supreme Court in the State Farm case of 1978.

But the constraint is that, on the discretion that these officials have, is -- there are several constraints. So the first is there are procedural constraints. The Administrative Procedure Act provides procedural constraints. And administrations of both political parties sometimes struggle with adhering to those technical requirements. President Trump, for example, ran afoul, famously. It took several go-rounds to get the travel ban accepted.

The DACA revocation was deficient because of neglect of certain procedural requirements. The census question case, there was a little bit of not getting the timeline straight on what the justification was for adding the question about race -- excuse me, about immigration status, on the census form, and, arguably, a little bit of pretextual misrepresentation to the court, in that regard.

And then, finally, in the litigation over the Trump administration's revocation and enacting new rules to enforce the Section 1557 sex discrimination components of the Affordable Care Act, as the rules were about to go into effect, there was a Supreme Court decision by Justice Gorsuch, interpreting Title VII, actually, and the requirements of sex discrimination. And the agency issued its rules anyway, even though they were in direct conflict with that decision by the Supreme Court.

President Biden recently was tripped up a little bit on the transportation mask mandate case. There's the whole issue about the dictionary definition of sanitation, but that's another topic. But there was also that it would have been prudent to have done some notice-and-comment rulemaking on that requirement.

Then there's also the substance, the legislation that Congress adopts. And this is where some of these ideas that we're talking about today really come into play, because, however appealing, or however much an administration disagrees with particular Congressional enactments, those enactments actually control the broad outlines of how these laws should be enforced. So, for example -- and I'm going to talk about some examples that are not, strictly speaking, civil rights, but I think some economic rights should be considered civil rights, these days.

So, for example, the OSHA statute is about protecting workers, not maximizing profits for employers. And there is significant underenforcement of workplace safety requirements. One of the most recent, important examples was during the pandemic, the failure to enforce workplace safety regulations in meatpacking plants as the Coronavirus was spreading rampantly through the workforce, and racial minorities — largely, Hispanic workers, African American workers — work in those environments, a civil rights impact of that failure to impose those workplace safety laws.

Similarly, with the Voting Rights Act -- and I will address, toward the end, Hans' characterization of what some these civil rights laws are about, but there has been underenforcement. And it will be interesting to see what the Biden administration does about some of these new restrictions on voting: reducing the numbers of voting locations, making it more difficult for people to vote by mail and to use drop boxes, and things like that, significant civil rights implications there.

The Environmental Protection Agency and the environmental laws, the Clean Water Act, the Clean Air Act, they are about protecting the environment. Another example of environment, one of the oldest environmental laws, is the Migratory Birds Treaty Act, which was adopted at the turn of the last century, or near the turn of the last century. And for almost its entire history, it had kind of a strict liability standard for certain actions that resulted in devastation to migratory birds.

The Exxon Valdez, the Gulf of Mexico big oil spill, resulted in liability for the oil companies or the owners of the ships involved. And so the Trump administration took back that interpretation of the law. And the Biden administration has since rescinded it, and has reinstituted that requirement, in the interest of protecting the environment.

I could go on and on about the National Labor Relations Board perhaps taking an attitude that make it easier for people to unionize, and then similar underenforcement of certain Department of Transportation safety laws. The New York Times did an expose about crossing barriers for railroad crossings, which, the underenforcement there definitely had a rural and racially disparate impact.

So then we get into the questions that have been raised about equal rights in education. So, first of all, I want to say that, given my theory that these laws were adopted for a reason, and that agencies should respect the reasons for the Congressional enactments and the purposes of those enactments, that I would like to sort of set a different lens on what some of these laws are about.

In Justice Harlan's famous dissent in [Plessy v Ferguson], he talked about two different concepts of the equal protection, and a component of the Fourteenth Amendment of the Constitution. One of them was an anti-caste theory that really what the amendment was about was eliminating stigmatization by the enforcement and application of laws. The anti-caste theory, it seems to me, offers the potential to have race-based remedies for race-based problems, and gender-based problems, as well. And then his other theory was the colorblind theory, which has been talked a lot about today. But that is not the genesis of the Fourteenth Amendment.

The Supreme Court has consistently pointed out that these amendments had a particular context, which we've expanded somewhat, to protect other groups. But the idea of them is to protect disadvantaged people in society. And the last time I checked, if you look at any metrics of educational attainment, corporate executives, wealth, and household ownership, Black and Hispanic Americans are on the short end of the stick in almost all of those categories. So, having some remedies to address these problems that are deeply embedded in our culture is very important. So it's very interesting that Professor Hamburger said at lunch that the administrative state had racist origins. Well, if the administrative state has racist origins, let's have remedies for those kinds of racist origins.

The Thomas Jefferson High School case is a very interesting case, because the Supreme Court, in the Fisher litigation at the University of Texas, allowed the University of Texas to use this top ten percent plan to try to continue having some component of diversity, which they call the ten percent program, which is a race-neutral program. Thomas Jefferson High School is trying some version of that. And I'm not exactly sure that I agree that that's a race-neutral approach.

But if that is not a race-neutral approach, then we have no capacity for remedying these problems of the really excellent educational resources being available only to certain groups in this society. We have a similar high school in Boston, Boston Latin School, the oldest public high school in Boston, zip code assignments now, and this, of course, this policy is being challenged for the same reasons that the policy at Thomas Jefferson is being challenged. But it will be interesting to see if these race-neutral, at least on the surface, ideas are upheld by the courts.

Just today — then I'm going to move on to healthcare, and I'm almost finished — there's a publication of the Boston Globe that focuses on the pharmaceutical device industry. It's called Stat, very clever. And there's a recent study — it just appeared today, as I was thinking about this panel — that pointed out that states that have no possibility of using affirmative action have fewer medical graduates of color, after those laws go into effect.

There is copious research that healthcare providers of color disproportionately serve populations of color, and that is it very important in healthcare to actually try to build greater capacity in the system among healthcare providers of color. This is a disaster for healthcare, for African Americans and Hispanic populations and other racial and ethnic minorities in the country.

And then, I'm going to close with another healthcare example that goes back to what I said at the beginning about what is the purpose of the Congressional enactments, and how this needs to be taken into account, that administrations don't have completely free reign to exercise their discretion to ignore the purposes of statutes.

So, during the Trump administration, several states petitioned the Department of Health and Human Services — where, by the way, I was Deputy General Counsel in the Clinton administration — petitioned the Department of Health and Human Services, the Centers for Medicare and Medicaid Services to authorize the imposition of work requirements as a condition for having Medicaid benefits in their states. And they had all kinds of reasons that sound plausible. And these demonstration projects in the states, in several states, were authorized by and approved by CMS.

So these approvals by CMS were challenged. And Judge Sentelle — the last time I checked, not one of the weak-kneed progressives on the D.C. Circuit — said that the Medicaid statute was a healthcare statute, that the statute had nothing to do about requiring work in exchange for healthcare benefits, and struck down the authorization for these demonstration projects on work requirements. And this is the [Gresham v Azar] case, which, actually, the Supreme Court recently vacated because the Biden administration has taken back all these authorizations for work requirements. So, again, it's coming back full circle that the discretion can be used, have very different policy outcomes, but, at the root of it is respect for the Congressional statute and the purposes that Congress intends to be fulfilled by the statutes. Thanks so much for listening. I'm sure it was interesting for you.

Hon. Kenneth L. Marcus:  Thank you all for excellent presentations. In a little bit, we'll have time for questions from the audience. I have some questions. But I also want to give you an opportunity, it you had any other comments in response to the other speakers. So let me start with a few questions. And feel free to add on to this brief remarks in response. I'm going to start with Hans. So, Hans, if I understand you, you have argued that one of the problems with the enforcement of Title VI by the Department of Justice is a failure to understand the race-neutral quality of the statutes that they are intended to enforce.

Now, Renee has pointed out that there is another way of looking at those same statutes, Title VI and others. And there may be officials in these agencies who view them under something like a caste theory, as she described, leaving the question, are we just talking about competing theories or understandings of these statutes? In addition, in my experience, there are many career staffers, certainly, but, perhaps, also politically appointed officials, who will say, "My view doesn't matter. Maybe I think it's a caste theory, maybe I think it's a race-neutral theory. But what matters is what is the meaning of the statute, as interpreted by the Supreme Court."

And the meaning, as interpreted by the Supreme Court, is subject to debate. So, for example, there are some in this administration who believe that, under Grutter, Gratz and other precedents, what's happening at Harvard, or UNC, or Yale, or other institutions is in line with these precedents. Now, maybe they're wrong. Maybe they're applying a different sort of standard.

It's also been argued by some that if we are now seesawing so rapidly from administration to administration, not just on the policy, but on what is required by these statutes, as interpreted by Supreme Court opinions, it is a sign that the current doctrinal structure is too vague and ambiguous, and needs to be changed. And that's one of the arguments that's been made, certainly by amici, in the Harvard case.

 

              So what is your view on these Justice Department and other civil rights officials who are not viewing these statutes as race-neutral? And why is it they're wrong? And is it their fault, or is it the Supreme Court's?

Hans. A. von Spakovsky:  The lawyers who work in the civil rights division, career lawyers, they are not legislators. It is not their job to try to look at the intent of the law or change it, in accordance with what they think it ought to or not ought to be doing. Their job, and the job of the executive branch, is to enforce the laws passed by Congress, as written. And those statutes, clearly, are race-neutral. If you want to see the difference, some years ago, California passed a Voting Rights Act. And it is not race-neutral. It only protects certain racial groups. That is not the Voting Rights Act. And this was raised in the Ike Brown case, U.S. v Brown. And the courts and the Eleventh Circuit upheld it. I think the Supreme Court refused to take the case, said, "These laws are race-neutral."

And no one, no one can, I think, legitimately argue, for example, in the case of college admissions, that because of what might have happened decades ago, that the son or daughter of a wealthy family, a wealthy lawyer, a wealthy doctor who happens to be African American or Hispanic, should be given preference over the daughter of an Asian American whose parents were Vietnamese, who fled Vietnam, who were boat people and came to this country with absolutely nothing, and has, again, absolutely nothing to do with what happened in the past. The idea that one group should benefit and the other not, is just fundamentally unfair.

              One other point, if I could make it, that's something that came up. You were talking about this, about how things go back and forth between different administrations, depending on whether it's Republican or Democrat. That is not quite true, and the reason being that, for example, in the Civil Rights Division, 95 percent of the career employees there are extremely liberal. And I saw, when I was there, as a career lawyer — first of all, I was treated with great hostility, because they found out I was a conservative.

But the point is they did everything they could to prevent the White House and the Attorney General and the Republican administration from being able to carry out its priorities. And when I say, "Did everything to prevent it," it included everything from leaking privileged documents, engaging in very unethical behavior. There are numerous examples of that. We just saw something like that happen here. One of the reasons I got --

Prof. Renee M. Landers:  -- But we don't know who did it.

Hans. A. von Spakovsky:  One of the reasons I got promoted was because the political appointees realized I was one of the only lawyers whose opinions they could actually trust to be valid. And the reason for that was that, for example, I caught the chief of one of the sections writing a justification memo. A justification memo is the memo that a section chief at the Justice Department will write, in every division, to the political appointees, saying, "We ought to be filing a lawsuit in this case." And they go through the facts, they go through the law.

And I found that these very liberal section chiefs were basically lying and misrepresenting the facts and the laws in their legal memos. So my point is that, while, yeah, Republican administrations come in and they try to enforce their priorities, they often have a very difficult time doing it. And one of the reasons is that the career ranks, certainly within the Civil Rights Division, they engage in political hiring in the career ranks. And you don't have to take my opinion for this. Pull out the 2013 Inspector General report of the Justice Department on the Voting Section, in which he criticizes them for ignoring the resumes of well-qualified lawyers to hire all of their lawyers from just five organizations, the ACLU, the NAACP, MALDEF, La Raza, and the Lawyers Committee for Civil Rights.

And for anyone who thinks that kind of colluding is not still going on, I would refer you to an article that just came out from John Solomon, in which they have found that in the Georgia lawsuit filed by DOJ, they, apparently, have been colluding with the ACLU, the NAACP, the Lawyers' Committee for Civil Rights, to the point where they are refusing to turn over their documents and communications, claiming it's attorney-client privilege. And this is nothing new.

In the mid-90s, there was a case called Miller v. Johnson. It went all the way to the U.S. Supreme Court, another voting rights case. The department lost it, ended up having to pay $600,000 in attorney's fees and costs to the State of Georgia. You should read the court's opinion, it is scathing, about how the individuals, career lawyers, were colluding with the ACLU, acting as if they were the ACLU's in-house counsel. And there's a particular line in there from the Court, talking about how astonished they were that the Attorney General of the United States did not realize the complete inappropriateness of what they were doing. So things haven't changed.

Hon. Kenneth L. Marcus:  Thank you. So I'm going to continue going around, unless, Renee, did you have anything you wanted to say in response to that. You looked, for a moment, as if you might.

Prof. Renee M. Landers:  No, no. It's fine.

Hon. Kenneth L. Marcus:  Samantha. So, you were discussing Title IX, including the approach of Catherine Lhamon, who has the dubious distinction of having been my successor, before she became my predecessor, before she became, again, my successor at OCR. And I've suggested to her that things may well change in a few years, and she may end up being the head of the Brandeis Center. I don't think she was pleased by that, but who knows.

You pointed out a big change in 2011, and significant due process concerns about some of the cases that arose from that. But let me ask you about another aspect of this. I oversaw Title IX enforcement after and before that. Before that, when people talked about Title IX, they thought that it was a discussion about sports. And they assumed that if I was dealing with Title IX, it's something that would end up on the sports pages. And they weren't entirely wrong. We had, during that period, very few sexual assault complaints being brought to ORC. And ORC, the U.S. Department of Education's Office for Civil Rights, is an agency that, while it does some proactive work, overwhelmingly responds to the 1000s of complaints that come to it.

And since there were very few complaints prior to this, of sexual assault, there were very few handled. Now, some might argue, well, it shouldn't be handling sexual assault in the first place. But others would argue, well, the Supreme Court certainly seems to have decided otherwise. So what should we make of the pre-Obama situation under either the Clinton administration, or the George W. Bush administration, or any of the other pre-Obama administrations? Was that underenforcement of Title IX, if there were very few sexual assault cases? It couldn't have been the case that there were very few sexual assaults in college, or that there were very few instances in which sexual assault was handled by colleges and universities in a way that failed to meet even the most minimum requirements of Title IX. What do we make of the situation, prior to that administration?

Samantha Harris:  Well, I think that there are a few things. First, as you pointed out, it wasn't until 1999 that the Supreme Court conclusively established that peer-on-peer sexual harassment, which includes sexual misconduct, if it's sufficiently severe and pervasive and unaddressed by the school — and a school is what's called the standard, the legal standard is deliberate indifference — so, essentially, if a school is deliberately indifferent to reports of peer sexual misconduct, that that can actually amount to a form of discrimination by the school.

And it's important to, I think, remember, because of the way it's used colloquially, that the Title IX obligation accrues to the school, not to the individual. So, while we hear people say to other people things like, "I'm going to Title IX you," it's actually the school. A person, an individual cannot violate Title IX. It's an institutional obligation. So the standard is this deliberate indifference. And I think, if you think about it, speaking broadly, it makes sense.

If someone sexually harasses or sexually assaults someone in a campus setting, and then that person tries to get it addressed through the school, and that doesn't happen, and then the person has to sit next to someone who assaulted them in class, and I think we can all understand the reasoning behind the idea that that might actually interfere unreasonably with somebody's ability to function in an academic environment, such that, if the school knew about it, and just allowed it to continue, the school might bear some obligation there. So that's the reasoning behind that decision in 1999.

 

But, as you say, it was in the years leading up to 2011, there were 12 years in there where the Supreme Court had already decided that this could be a form of sexual discrimination prohibited by Title IX. Some of it had to do, I think, with greater attention to these issues on a national scale, with "Me Too," with greater reporting. I probably don't know enough to actually say whether there was underenforcement prior to 2011. Certainly, there were indications that schools were not necessarily paying enough attention to it. Whether that was actually being brought to the attention of OCR at that point is not something I'm super aware of.

But I still think that the schools probably don't pay enough attention to it when it benefits them. Because one thing I talk about frequently, when I talk about these issues of fundamental fairness and due process on campus is, I think, more often than not, universities are acting in their own interests. So if their interest lies in sweeping something under the rug, they'll do that. If their interest lies in throwing someone under the bus to appear to be getting tough on sexual assault, they'll do that.

              So, as far as how much of what was happening on campus, and the perceived underenforcement of these regulations on campus was being made known to OCR, prior to 2011, I don't know. I think the dramatic increase in reports of sexual reports on campus, and then reports of campus underenforcement to OCR, certainly picked up during the "Me Too" movement. I think the overlap of those two things certainly had an impact. I feel like I have not really answered your question.

Hon. Kenneth L. Marcus:  I think you definitely have answered it. Although there's still the question, at the end of the day, what do we think? Was there too little enforcement of Title IX, prior to this, or was there not? And, I suppose, if there was too little, maybe it's because of, prior to the "Me Too" movement, as you pointed out, there might have been less awareness. It might have been that wasn't until '99 that opinions started coming up and informing people.

But I think it's at least a question. What do you make of that state, there? Were we in a better position prior to 2011? Or were we in a position that was sort of complicated? There weren't the same violations of due process. But there also might not have been the same available remedies for people who faced what might have been Title IX violations under any of our understanding.

Samantha Harris:  Certainly, if you look at the activism that motivated the 2011 "Dear Colleague" letter, it certainly seems as though there were people who were having, victims who were having very difficult experiences on campus with getting any kind of a response from the institution when they complained about having been victimized. The piece of it that I don't have the answer to is whether, if and when those people went to OCR, and prior to 2011, and said, "my institution is being deliberately indifferent to my claim of sexual assault," whether OCR was then underenforcing. That's the piece that I don't know. But I do think that, certainly, the reports of deliberate indifference by institutions was an issue. And, I think, in some institutions, continues to be an issue.

Prof. Renee M. Landers:  I wanted to say two things. I totally agree that the "Me Too" movement probably was the progenitor of this big increase in complaints and, perhaps, the Obama administration action. One of the other parts of my biography is that I used to be on one of the governing boards for Harvard. And this issue of sexual assault on campus — and I, obviously, have worked at two other universities, as well — has been percolating under the surface for, I would say, 30 or 40 years. And so part of me thinks that, well, I do think that all of this focus on it now is actually very important.

I will say, however, that I agree with Samantha and Ken and others that the due process problems with the Obama "Dear Colleague" letter and rules were very problematic. And I'm not in favor of them. I wasn't in favor, entirely, of the Trump efforts to address them, because they sort of ruled, they said that the universities had no responsibility for what happened off-campus, including off-campus university-sponsored programs, like foreign exchange programs, and things like that. Well, that's just insanity, right? So I think that there is some middle ground here that we need to find. But I do think that the due process protections are very important.

              The last thing I will say on this, though, is that this issue of how to deal with responsibility for sexual assault is one that continues to perplex all of our legal institutions. And part of me feels like the civil justice system, the criminal justice system, as well, which are set up to do these things, these are not the primary tasks of universities, colleges and universities. Yes, they have disciplinary processes and they, in theory, can do them. But, as a society, we need to grapple better with this issue of sexual assault.

Hans. A. von Spakovsky:   Can I say something about this, quickly?

Hon. Kenneth L. Marcus:  Sure.

Hans. A. von Spakovsky:  And I know you're kind of surprised, but I agree with something, what you just said. I wrote a Heritage study about this a couple years ago. And one of the things I did was I talked with former prosecutors, state and federal prosecutors who had specialized in sexual assault cases. And the big mistake that campuses all over the country are making and, frankly, the mistake that both administrations, whether Republican or Democrat, are making, is university tribunals were set up to deal with honor code violations. Sexual assault is a crime.

And administrators and teachers and professors do not have the training or the experience to investigate and hold tribunals on these types of crimes. What universities ought to be doing is when they get a report of a sexual assault, that needs to be referred to prosecutors, the exact same way that, as you all know, every state has laws saying that when teachers in K-12, if they are suspicious that sexual assault or abuse of children is occurring, they have an obligation to report that.

The prosecutor that I know, in particular, who prosecuted these cases, says that the old claims that prosecutors were cavalier about this, that has basically changed. In fact, many DA's offices now have specialized units that deal with this. And not only is this fairer to the individuals involved, but, he said that he has seen cases where the mistakes made by school administrators in trying to investigate this hurt not just the defendant, but, frankly, revictimized the victim in these cases. And that is a big mistake. These kind of criminal violations should not be handled by the universities. They need to be referred to criminal law enforcement to handle.

Hon. Kenneth L. Marcus:  We have a question from the audience.

Questioner 1:  I want to shift a little bit from the universities to the federal government structure. I have been privileged to be an attorney on the Hill, an executive with EPA, and an attorney in the private sector. In each of those roles, we relied heavily on information from "interested parties" that were frequently given to us, not on a confidential basis, but the door was open. Particularly on the Hill and in EPA, people think the government is enormously staffed. You're not. You're almost like a sole practitioner or a one-, two-, three-person shop. So we were seriously reliant on information from others. And it was for us to figure out our way to vet it.

And here's where I'm heading. When I was with the census bureau, I was with the Office of the Director, this one was under Clinton-Gore. Under Clinton-Gore, one of our Division Directors boasted — really responsibly, I happened to like the guy a lot — that he had the fewest White males in any supervisory position than any of the other divisions. And he was rewarded with a significantly higher SES bonus than were his peers within the directorate.

By the same token, when I was with -- I worked with the Rs and the Ds, because I'm, frankly, not particularly political. I just want to get the job done. And we had those same kind of issues come out. How do you balance this informal information? How do you use it? How do you vet it? How do you do what you believe "is the right thing"? And, Dan, for example, was trying to correct for horrendous systemic, institutional racial bias in the census bureau. And I'm calm. You guys can go Google that. It was really, really, bad.

Here's where I'm ending up. I wanted to statement with Hans. But I'm really interested in others. When do you cross the line between having public information -- associations came up, when does it become collusion? And, in the example that you gave that the IG criticized the hires, based on organization, do you happen to know whether there was the predominance of one racial group over another in that series that was criticized?  

Hans. A. von Spakovsky:  Well the IG in that investigation didn't just look at the hires. They apparently looked at the resumes of individuals who were not hired. And so they were able to determine that many individuals who were qualified for those jobs were not hired. And it was clear, because they wanted to only hire from those particular organizations. I don't recall what the racial makeup of it was. But this problem -- and let me be very clear about this. I think discrimination is wrong. I don't care who you are, what your race or ethnicity is, what your gender is, if you're being discriminated against, it's wrong. And you should have a remedy for that, whether it's an individual suit, or whatever.

              But I hate to tell you this, but this problem is about to get worse. The Biden administration has put out their Executive Order on Equity, and has ordered every cabinet department to come up with bringing equity considerations into all its decision-making. I just did an analysis of the equity plan for the Justice Department. And what they're basically doing is they're going to give individuals within the Justice Department what is, in essence, unlimited latitude to take into account the race of individuals, where they reside, in making their decisions about prosecutions, punishment, federal grants, and contracts.

In other words, the White House is giving executive departments a license to violate the Civil Rights Act in consideration of so-called equity. So what you're talking about, unfortunately, is about to get even worse. And anybody who doubts that, pull up one of the equity plans for one of the departments you're interested in, and take a look at it. This is exactly the same, in parallel to what universities have done to get around and be able to discriminate, which is, they all have put in what they call holistic review, which means no standards really. That means they can make these individual decisions that discriminate.

And, for anybody who doubts what's going on, I went, in great detail, through the discovery that was produced in the Harvard case. I wrote a paper about it. And it was very clear that the university was discriminating on the basis of race. They even had one of their research offices do an internal project, which concluded that they were discriminating against Asian American students in the admissions. And then, when the lawsuit occurred, Harvard did everything they could to hide these reports. And the directors of that particular office, when asked about it, suddenly developed amnesia in their discovery, because they just really couldn't recall or know anything about that.

Prof. Renee M. Landers:  So I have two things. One is what we haven't talked about her, or what the criteria should be in making all of these decisions. So we could have criteria that say, let's just say, for example, to go to the Justice Department Civil Rights Division, or to the Census Bureau agencies, you had to have been to an Ivy League school, graduated magna cum laude. You could go on and on and on. Well, that's going to get you a very narrow pool of candidates.

But if you broaden the criteria, perhaps including race and gender, you might get a slightly different pool of applicants who will be equally qualified. No one has said that the fanciness of your resume or the scores on the SAT, within a range, or the people with the top ones, are the best people for any job.

 

              The other point is that all of these places have limited opportunities. Harvard has limited opportunities — 1500 students a year, entering class a year, give or take — a limited number of positions in all of these places. You could probably fill them many times over with people with perfect-on-paper credentials. So the idea that some kinds of subjective considerations or valuing different kinds of qualities other than the paper credentials is never going to come into it is -- we're kidding ourselves.

Whenever I see that someone who is the very best person for the job, well, no, that was the best person that we became aware of who met all of the informal and formal criteria for the position. That is the person you hire. And, so, I think that this is the ultimate problem is with the litigation like the Harvard litigation and the UNC litigation, is that, at some point, other criteria, other than SAT scores and grades and where you went to high school are going to have to be part of the decision.

Samantha Harris:  Yeah. I just wanted to briefly jump in. I was struck, Renee, by what you said about whether or not the Civil Rights Act actually contemplates race-based remedies for race-based problems. And, I think, on the one hand, we can look at it and say, "Yes, the law was passed because we have this particular history of discrimination in our country and we have to remedy that." But, at the same time, I think we have to recognize that the language of it is race-neutral because underlying the acknowledgment that we have this horrible history of racial discrimination is also an acknowledgment that racial discrimination is wrong.

And so I think the things that you're talking about, for example, broadening criteria to look beyond, to take a closer look at people beyond elite schools, because, perhaps, systemic discrimination has led to a lower percentage of minority candidates at those schools, I think that makes a lot of sense. And yet, the problem is that what I actually see happening, and, again, my work is fairly limited to the higher education area, so there may be things happening elsewhere that I'm simply not aware of, but, practically, what we're seeing is people being told behind the scenes, "You may not hire a White person," departments calling off, disbanding search committees when the final candidates do not meet a certain demographic profile.

And so I think the reality is that we talk about these holistic criteria, and I think they sound very nice. But I think what's happening behind closed doors is a lot more explicitly race-based. And I think we have to confront head-on the question of does that violate, does a directive not to hire a White person under any circumstances violate the Civil Rights Act? And I think it does. And I think we have to acknowledge that, at least in certain sectors, that is explicitly happening.

Hon. Kenneth L. Marcus:  Thank you. We'll turn to the next question.

Jim Young:  Thank you. Jim Young, National Right to Work Foundation. And I'm neither a member of the die [sp] cult, nor is it my deity. I'm old enough to remember when you were supposed to judge people by the content of their character, silly, silly me. And I deal a lot with my alma mater, Hampden-Sydney, class of '86. This will be relevant. My son is class of '24. And for those of you who are not familiar with Hampden-Sydney College, A, it's in Prince Edward County, Virginia, where they closed their schools for four years, rather than integrate them, the government schools. And they have a Title IX officer.

Hampden-Sydney is an all-male school. Now, I've never been able to get an explanation for why an all-male school would need a Title IX officer. There are no women students. But, if someone could explain that, it's probably for you, Samantha. And, I guess, as raised by the last answer, I can understand why Black candidates don't want to go on the faculty and move to lovely Prince Edward County, Virginia. Although it's changed a lot, there's a lot of history there, too. So, if someone has an answer for that question, why a single-sex college would need to have a --

Prof. Renee M. Landers:  Do they have employees who are not all male?

Jim Young:  I thought Title IX was directed at students.

Prof. Renee M. Landers:  No.

Hon. Kenneth L. Marcus:  Title IX does also have an employment piece to it. And OCR does have employment jurisdiction. So this could be a reason.

Jim Young:  Okay. Thank you.

Hans. A. von Spakovsky:  One thing I want to say about this is, Renee, I agree with you that acceptances shouldn't be based just on grades and standardized testing scores. But that's not what I'm saying. What I'm saying is that the person's race should not be one of the considerations. In the Harvard case, and this was very clear, what Harvard started doing was the Asian American students who were applying, who were being discriminated against, they were not just math and science drones. That's the terminology a former admissions dean at MIT once used.

              They were heavily involved in extracurricular activities and community activities of all kinds. But in the individual ratings that the admissions officers gave, despite that, they basically repeated what they had done to Jewish students 100 years before. In the 1920s, Harvard started discriminating against Jewish students applying for admission, because they didn't want too many Jews in the student population. And the way they did that, because they all had outstanding grades and extracurricular activities, was to say that their characters, their personalities, were too dull, too defective. And that is the consistent thing that you can see in the Asian American kids who were turned down at Harvard, exactly the same. It's a repeat of what they were doing 100 years ago. And all of this is being done --

Prof. Renee M. Landers:  So, it's totally a different thing. And it's not --

Hans. A. von Spakovsky:  It is -- I'd like to finish.

Prof. Renee M. Landers:  All right, fine. But you have been dominating this conversation. I'm just saying.

Hans. A. von Spakovsky:  Well, I have answers. The other thing about this is all of this is being driven by folks saying, "We have to have diversity on campus." Well, that very concept, frankly, if you want diversity on campus, what you want is a diversity of views and opinions. What you are saying, if you're basing it on race, is you're engaging in racial stereotyping, because you are saying that individuals of particular races and ethnicities, why they have particular views that are tied to the groups that they are members of. And, I, frankly, find that extremely, patronizingly discriminatory. And I want to give you the last word, because I've got to go catch my plane. And I apologize for that. But thank you all for having me. So you get the last word on that.

Hon. Kenneth L. Marcus:  Thank you, Hans.

Prof. Renee M. Landers:  So I think that he's describing and he's painting in this very narrow one-place-at-a-time kind of factor. And I think that if Harvard really intended to make sure that it minimized the number of Asian American students on the campus, they have significantly failed in that exercise, because the proportion is quite large and quite substantial. Some of the other -- actually, I will not defend some of these things he was talking about that came out in some of the discovery about the comments about some of the applicants. But I think that, overall, the process operates very fairly. This year, despite the litigation, despite everything, Harvard had this bumper crop of applicants and the lowest percentage acceptance rate ever in its history. So I do think that students of all kinds see it as an environment that they want to be part of.

Hon. Kenneth L. Marcus:  Thank you. I'd like to ask a question, for whoever wants it, about checks and balances.

Prof. Renee M. Landers:  Back to the law. Oh my God.

Hon. Kenneth L. Marcus:  Law, policy, however you like it. So some have argued, including on this panel, that, to some extent, enforcement has been less than optimal. For some things, over, for some, under, for some, just wrong. What checks and balances are there? And are they working well, or not? Renee mentioned the APA as one restraint. But I have some ideas that I'd first like to turn to you for thoughts on. Do we have checks and balances on civil rights enforcement? And why are they working or not working, and do they need to be different?

Prof. Renee M. Landers:  Go ahead.

Samantha Harris:  Well, I was just going to say, when I think in the Title IX context, I think the courts did provide an important balance there, because, as I said, in the years since 2011, there have been more than 600 of these lawsuits filed. And I think it's not so much that the lawsuits provided an explicit check on OCR in that the parties who were being found responsible for violating Title IX, or for violating due process rights, were the universities. But I think it, ultimately, in a broad scale, provided a check against what OCR, I felt, was trying to do, in terms of encouraging schools just to make it easier to find people responsible. So that's one way in which I think we've seen a check.

Prof. Renee M. Landers:  This relates to one of the points that you made earlier, Ken, which was the point about kind of seesawing from one administration to the next. And I agree that that's a bad thing, because I think one of the things that's important for the law is for people to be able to organize their affairs with the hope of complying with whatever the law is, in some kind of consistent fashion, and that that is not possible if the rules change 180 degrees every four years.

So I think, I don't know, maybe this goes back to some of the things that Sally Katzen was talking about at lunch about really trying to find some kind of reasonable balance in the enforcement of these laws. And then, every administration is going to have its areas of emphasis, but not to really have the sand shifting out from underneath people who are trying to comply all the time.

Hon. Kenneth L. Marcus:  So those are both valuable pieces. Let me throw out some other possible pieces and see what you both think of them, because a lot of people, maybe all of us, I don't know, think that there are times when the administrative state just goes out in the wrong direction, and there aren't checks and balances on them. My experience is that there is an enormous number of checks and balances on federal civil rights officials, simply an enormous number. If you are a civil rights investigator in the field, trying to do something dramatic to improve conditions, you've got a team leader that you're responding to, who's supervising your work. You probably have a regional legal structure to answer to, maybe a regional counsel, or, certainly, a regional chief. Both the investigative arm and the legal arm answer to oversight within the region.

The region, itself, seems all-powerful to some of the investigators. But the regional director answers to a variety of people in Washington, both in an enforcement structure, and a policy structure, that are sometimes aligned, but, often, act as checks against each other. Both of them, the enforcement and policy, will respond to sort of a layer of political oversight, which may report to a director or an assistant secretary, much of whose job is providing checks and oversight and balance. The assistant secretary might seem all-powerful to some of the folks below, but the assistant secretary is often subject to variety of checks and balances that might include, depending on the situation, the Office of General Counsel, it might include the Office of the Secretary, Undersecretary, Deputy Secretary.

All of them have oversight by various components of the White House that might be aligned or not, might be the Counsel's Office, might be domestic policy. Then, the whole thing is subject to various other checks, including the Inspector General's Office, GAO, various Congressional committees, lawsuits, the courts and the various public interest groups, using either legal action or FOIA, Office of Special Counsel, GAO, and so on, and so on, and so forth. Sometimes it seems that much of what you're doing is addressing checks and balances. And, I would, it seemed to me that often, even for a Senate-confirmed person, by the time you hit year two, you're spending much more time dealing with checks and balances than you are dealing with advancing the mission of the agency.

So, maybe you disagree that those aren't checks and balances, but, if there are, how is it that we have such a bewildering array of checks and balances, and yet, we also have various officials who seem to be going in directions that are inconsistent with the purpose of the statute, under under-enforcing, over-enforcing, or what have you. Do we need better checks and balances? What sorts of improvements can we have to make sure that there is something like the approach that Renee suggested, or whatever it is that Sam thinks is optimal?

Prof. Renee M. Landers:  So, I agree with you that there are a lot of checks, formal and informal. The Congressional Review Act, which no one ever thought about very much until 2017, has become more prominent. Oh, IRA -- that was not on your list of oversight agencies, in terms of rulemaking, and maybe has some effect on any procedural approaches to deciding what kinds of cases to bring, and then, despite Hans' disdain for some of the people at DOJ, that is a constraint. When cases, either if agencies don't have independent litigating authority, they need to go to DOJ, and DOJ is going to decide whether it's worth their investment of time. That's a constraint. And, certainly, when things get to the appellate stage, the Solicitor General's Office will say, "We're not going forward," or give you the green light

So I think that those are other things. I think you're right about OIG. And then, the GAO, I would put in the category of part of the Congressional oversight process. That's a serious constraint. People — these officials that you were talking about, who have the decision-making authority — can get called at any time to speak to Congressional staffers, testify at a hearing. That's a constraint. What kind of policy are we willing to defend in that public forum?

And then, finally, I would say that -- and then it depends on what the president's tolerance for controversy is, in some of these situations. Because that's the ultimate check. President Obama told -- I can't think of her name. The woman who was the head of the EPA, in his first term. It'll come to me. That she absolutely could not do the emissions rules before the 2012 election, absolutely no. And then they did them after, right? So, that's a political check. And then, ultimately, I think the answer is people. It all comes down to who the people are, how honorable they are in fulfilling their responsibilities.

There's a great poem by Carl Sandburg — I grew up in Illinois — called "Government," that, basically, the point of it -- I have it quoted in this piece that I'm just about to publish -- "A Government is just as secret and mysterious and sensitive as any human sinner carrying a load of germs, traditions and corpuscles handed down from fathers and mothers away back. Government dies as the men who form it die and are laid away their graves and the new Government that comes after is human, made of heartbeats of blood, ambitions, lusts, and money running through it."  So, it comes down to who the people are.

Hon. Kenneth L. Marcus:  Thank you.

Samantha Harris:  Well, I guess what I would like to do is sort of -- in case it has not already become obvious, I am like the Washington outsider on the panel. I have not served in government. So, in some ways, I am the least competent person to speak to any of these issues. But I also see how it appears from the outside. And then, so, in some ways, having heard what you said, which is really interesting, I'd like to kind of turn the question back to you a little bit, because, from the outside, as someone who is involved, for example, in advocating for changes to the Title IX regulations and everything, a lot of these agencies that you mentioned, these administrators, sound familiar to me.

I know when the final rule came out, you have the OMB review process, which is happening right now under the Biden administration's new regulations. You have that budget analysis to see whether it's okay that way. But, to someone who's watching it unfold, because those are all, seem to be, somewhat, internal checks, like other branch agencies, and things like that, it feels like, once this process is going, once this rule make is happening, or whatever, the train has left the station.

And a lot of it, externally, feels like they're not actually going to come back and say, "No, this isn't justified in the budget, "or, "No, OMB review is not actually going to change anything." So I guess that's the question. Are these checks by other agencies or other branches of the same agency actually functioning as checks and balances, or are the external ones really what's necessary to sort of fight any kind of abuses of the administrative state?

Prof. Renee M. Landers:  Well, I think that people on the inside might differ with you about the fact that once things get to a certain point, it's just the green light all the way.

Samantha Harris:  Yeah. And I'm not saying I'm right. I'm sort of saying what it feels like.

Prof. Renee M. Landers:  I'm just saying, I think it feels differently, sometimes, to people on the inside. And I think both are important. I think the litigation, the external litigation challenging the policies is very important. Progressives have used that tool for a long time. And I think that that's a very important check. But I also think that the internal checks are very important as well.

Hon. Kenneth L. Marcus:  I don't know that the moderator's views are particularly important, but, since you turned to me, I will say, first, I agree with what I think you might have suggested, which is that some of the checks and balances are somewhat illusory. They generate a great deal of paperwork and take a great deal of time, but they don't actually have the incentive or deterrent effect. Second, I think a lot of the answer has to be legal, including better drafted, clearer statutes.

Third, I think, instilling a greater fidelity to law, including statutes and regulations, are important. There probably are other tools that we could develop, that I'm not going to think of here. I think the Congressional Review Act was a great idea, and, perhaps, it could be retooled, somewhat, to be more effective. I do think that there is a need for better tools that don't just create the impression of checks and balances, but actually have a deterrent effect on lawless conduct. We have a, I think, last question.

Questioner 3:  So this question follows on. It's both about external litigation, and about a check. In the Title IX context, one possibility would be lawsuits against Title IX officers who fail to recognize the civil liberties of folks who have been defendants.

Samantha Harris:  I bring those.

Questioner 3:  I do, too. Something that gets in the way of those lawsuits is qualified immunity, oftentimes. And I understand qualified immunity for people who have to make split-second decisions on the front lines. I don't understand qualified immunity for people who have all the time in the world to seek legal counsel and figure out whether or not what they're doing is violating someone's civil liberties or constitutional rights when they're engaging with them. So I guess my question is should we do away with qualified immunity for Title IX officers in the Title IX context?

Samantha Harris:  Well, it's funny, because, after our initial remarks, I was like, "I'm the only person who didn't mention my law review articles." And now I get to mention my law review article, which was actually about qualified immunity reform. And I think one of the things, when I was researching, when I've been researching this issue of qualified immunity, because, also, in First Amendment law, and, of course, this applies to public universities, at private universities, it's a whole host of other things you could maybe go after them for.

But when it comes to these constitutional violations, obviously, we're talking about officials at public universities. And I agree, I do not think we should 100 percent do away with qualified immunity, because I do think there's a value in allowing public officials some room to try, in good faith, to do their jobs, without constantly being subjected to litigation. But I think what I realized, at least, what I've come to believe, and what the law used to be, is that this good faith piece is really important.

What we see time and again is that these officials knowingly violate the rights of students and of faculty for their own ends, whether it's to appear compliant with OCR regulations, or for whatever reason. And it used to be that the standard for qualified immunity was not just, okay, was this a clearly established constitutional right that was violated? It used to look at whether this was an action taken in good faith.

And in my law review article, I actually argued that we want to return to this good faith standard so that it doesn't have to be just, okay is there a case, because right now, it's like, if there's not a case exactly on point, if a cop tases somebody running away from them in the right butt cheek, and the case says it's cruel and unusual punishment to tase them in the left butt cheek, the court will say, "Well, we know that the left butt cheek isn't okay, but we don't know about the right butt cheek." I think that that's -- obviously, that's an exaggeration. But when you read the cases, it really is pretty infuriating, the degree to which it's like, well there's not an exactly factually analogous case, so we're going to grant qualified immunity.

And I would really like to see, because what I am struck by, time and again, when I handle these cases is the absolute bad faith of a lot of these administrators. Now, look, I also deal with a lot of administrators who are trying, in very good faith, to do their jobs. So I'm not maligning everyone. But when they decide not to try, in good faith, to do their jobs, they really do it, and they take people down with them in the process. And I think that this question of, "Was this a good faith action, or was this somebody just trying to serve their own ends?" is a really valid question. And if you look at the case law, there is this opportunity to return to this kind of good-faith doctrine. And that's where I would, personally, like to see the qualified immunity doctrine go.

Prof. Renee M. Landers:  I agree with you about that. It also troubles me that the person sitting behind the desk would get immunity, and the person out on the street, maybe yes, maybe no. I do think the problem with the police is "shoot first and ask questions later" is the real problem. But, anyway, but I am not an anti-police person. So I would say that returning to some standard of good faith is actually really very important. I think the other thing — and maybe this will be a unifying theme in this room — is that one of the problems in agencies for kind of operation officials, and out in the world for people who have administrative jobs in organizations, is the disincentive to getting legal advice sooner rather than later.

And one of the reasons I really liked working for Donna Shalala was that every team that got put together to work on something at HHS had a lawyer from the get-go, because -- and she was not a lawyer, but her view was that you didn't want to get to the end, and then have the lawyers be the naysayers, again, that they needed to be of that process. And so I think that people really need to recognize when they need -- it's like if you're doing a corporate transaction, you need to know when you have to call in the tax specialist to finish the deal so you don't make a mistake. And I think it's the same thing in all of these things. So I think that maybe that's a contribution that we could make to the discussion of getting good legal advice, sooner rather than later.

Hon. Kenneth L. Marcus:  A big thank you to our panelists.

Samantha Harris:  And to our moderator.

Prof. Renee M. Landers:  And the moderator, yes.

Hon. Kenneth L. Marcus:  Thank you also to Ryan Lacey and the other Federalist Society staffers who made this possible. Let me know if you need my help getting Hans von Spakovsky to pay your bills. To everyone else, great seeing you. Thank you very much.

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: 

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