Book Review: Judicial Fortitude: The Last Chance to Rein In the Administrative State

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Federalism & Separation of Powers and Financial Services & E-Commerce Practice Groups and the Regulatory Transparence Project, was recorded on Friday, October 19, 2018 during a live teleforum conference call held exclusively for Federalist Society members.       

 

Wesley Hodges:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is Judicial Fortitude: The Last Chance to Rein In the Administrative State, the newest book written by Peter Wallison. My name is Wesley Hodges, and I'm the Associate Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the expert on today's call.

 

      Today we are very fortunate to have the author here with us. His name is Peter J. Wallison, and he is a Senior Fellow at the American Enterprise Institute. Previously in his career, he served as White House Counsel for President Reagan in '86 and '87. And he also served as General Counsel for the Treasury Department from 1981 to 1985, both of which were covered in previous books by the author as well. We invite you to check those out. Thank you very much for sharing with us today, Mr. Wallison. The floor is yours.

 

Hon. Peter J. Wallison:  Thank you very much, Wes. And good afternoon, all. I'm delighted to talk to you today about my new book which, as Wes indicated, is called Judicial Fortitude: The Last Chance to Rein In the Administrative State. The book focuses on the uncontrolled growth of the federal administrative and regulatory agencies, generally called the administrative state—why does this happen, how to restrain it, and what could happen if this growth remains uncontrolled.

 

      By federal administrative agencies, I mean all the agencies, from the Treasury Department to the independent agencies like the SEC. The recent confirmation of Brett Kavanaugh, I believe, brings the book's proposal for action by the Supreme Court closer to implementation. I assume all of you who are listening today are lawyers, or almost all of you, certainly, so I won't discuss the basics of the Constitution or the separation of powers but go directly to the principle arguments in the book, which is built on five major propositions.

 

      First, the Framers of our Constitution believed that one of the principle responsibilities of the judiciary in the tri-parte structure that they had designed would be to preserve and protect the separation of powers. This would've required the courts to determine when Congress has unconstitutionally delegated legislative authority to the executive branch. But since the New Deal, the Supreme Court has failed to perform this role. In fact, as I will outline, it has gone the other way, enhancing the ability of administrative agencies to go beyond their authority from Congress.

 

      Second, although the Framers also expected that each of the three branches of the constitutional structure would act to protect its own authority, Congress has essentially abandoned its powerful role, and instead become an adjunct of the presidency.

 

      Third, Congress has now realized that it can avoid controversial legislative fights and politically difficult votes simply by enacting legislation that only states goals, like clean water or clean air, leaving to administrative agencies the major decisions to implement these goals, like who bears the costs and who gets the benefits.

 

      Fourth, the 1984 decision in Chevron v. NRDC in which the Supreme Court directed the lower courts to defer to administrative agencies' interpretation of their own statutory authorities has further expanded administrative power, especially by allowing agencies to interpret old statutes in new and more expansive ways.

 

      And fifth and probably the most important point of the book, if this process continues, we're in danger of losing our democracy and with it the government's legitimacy. I'll discuss each of these parts in greater detail as we go through the argument in the book.

 

      The central thesis is that the administrative state has grown excessively large, powerful, and intrusive because the courts have failed to fulfill their role as envisioned by the Framers of the Constitution to keep the elected branches within their assigned areas of responsibility. But the book's title, Judicial Fortitude, refers to a statement by Alexander Hamilton in Federalist 78 that the Constitution gave the judges lifetime appointments so they would be what he called "guardians of the Constitution." But that, he argued, they needed fortitude to intervene when the elected branches are acceding to community pressure by changing the way the constitutional structure is supposed to function.

 

      What the Framers actually feared was that the President or the executive branch would, like the English king, acquire the power both to make laws and enforce them. This would clearly make tyranny possibly and threaten the people's liberties. So they thought to prevent this by making sure that all the lawmaking authority was held by Congress. But there was always a danger that Congress might delegate that authority to the executive branch undercutting the Framers' efforts.

 

      For example, if Congress decides for whatever reason that it will give the president the authority to amend existing statutes, that would be a clear violation of the Constitution's separation of powers, under which only Congress can make and amend laws. Of course, this is an easy example of a violation of the separation of powers. But how to determine whether an act by Congress contains and unconstitutional delegation of legislative authority is the thorniest question the courts can face. It would be understandable that the judiciary would not want to tackle it. Yet, the question is inescapable. The Constitution says flatly, and for good reason, that "all legislative powers herein granted shall be vested in a Congress of the United States." Accordingly, there must be some way to define the line between legislative action that is reserved to Congress, and administrative action that is the role of the executive.

 

      As early as 1823 in a case called Wayman v. Southard, Chief Justice Marshall was faced with the question whether Congress had delegated its legislative authority. In that case, it had authorized the judiciary to determine how writs of execution should be enforced. Marshall decided that although the Congress had the authority to decide the question, the matter could be delegated because it was not what he called important. In other words, it was a detail that could be decided and implemented by the judiciary. On the other hand, if Marshall had concluded that this was an important authority, and therefore legislation in nature, the grant to the judiciary would've been unconstitutional.

 

      Clearly, the distinction between important and unimportant is circular. But Marshall added some clarity by noting that an agency receiving such authority may act within, and I'm quoting here, quote "within the great outlines marked out by the legislature in directing the execution," close quote. In other words, the legislature must supply some substantial limits within which the administrative agency is authorized to act.

 

      Sadly, in almost 200 years since the Supreme Court has not given the issue significantly more thought than this. Although the Supreme Court has worked to define interstate commerce and search and seizure and even standards for vagueness in criminal statutes, it has not yet tried to define with any clarity what is a legislative action. Over the years, the Supreme Court has avoided the delegation issue by saying that all that is necessary for a proper delegation is that Congress include a, quote, "intelligible principle," close quote. This, unfortunately, is a meaningless and infinitely malleable idea. It needs to do more. The Court needs to do more than this, than what they are doing which is simply evading the issue.

 

      In the book, I note that legislation has certain clear attributes. It is arbitrary and wholly discretionary, taking significant benefits from some parties and giving them to others or imposing costs on one group while exempting others, as long, of course, as Congress is acting within constitutional constraints. Legislative actions, then, are essential for settling the most controversial questions in our society.

 

      If we are to make clear what the Constitution means by all legislative authority, I argue that it is time for the Supreme Court to give some content to what has been called the nondelegation doctrine. In other words, a jurisprudence that defines what legislation is and how it differs from administration in specific cases. Only then will we have a standard for determining whether administrative agencies have or have not been granted legislative authority. And as I will show, if we don’t have such a standard, we have no hope of limiting the scope of agency activity even if the Chevron case is ultimately modified or overturned.

 

      In two 1935 cases, Schechter Poultry and Panama Refining, the Supreme Court made a stab at defining legislative action for the first time, declaring that powers given to the president in these cases were legislative in nature. These decisions and others that struck down New Deal legislation were highly controversial. And when FDR won a landslide election victory in 1936, he seemed to retaliate, proposing to add 70 justices to the nine-member Supreme Court. Although this proposal, called the "court-packing plan," was rejected by Congress, it appeared to cow the Court. The Court never again challenged a delegation of legislative authority. In 1937, the justices in the 1935 Court began to resign. By 1941, FDR had replaced all the 1935 justices with justices who would support his policies.

 

      The judicial policies that then were put into effect favored administrative power and foreshadowed the 1984 Chevron decision. As a result, in the last 25 years although the amount of actual legislation has been relatively sparse, the agencies of the administrative state have issued over 3,000 regulations in every year and a total of 101,000 regulations over all. Although the Chevron decision, as I will detail later, allowed administrative agencies to expand their authority, it is doubtful that the administrative state would've grown as much as it has if Congress had not been willing to hand much of its legislative authority to the president and the executive branch. This was a result of the development of political parties I believe—something the Framers seemed not to have anticipated.

 

      Political parties gave Congress an incentive to provide extensive powers to a president of the same political party. In the wrenching period of the Depression, followed by World War II, the president's role as national leader grew substantially, especially as radio and television increasingly focused on the president as the nation's leader and FDR was elected to four terms. In the midst of this, Congress increasingly saw itself as supporting the president's policies rather than establishing the policies the president must follow.

 

      Although the Framers probably assumed that Congress would husband its power by passing tightly drawn legislation, during the New Deal and afterward, Congress began to enact legislation that directed agencies to meet very general goals. The FC9C, for example, was to regulate access to the electromagnetic spectrum, quote, "in the public interest," close quote. And later the EPA was directed simply to assure that clean air and clean water occurred with very few standards. Members of Congress also came to realize that they could avoid controversy and taking unpopular votes by simply leaving the major decisions involved in legislation to the agencies. When constituents complained about agency actions, members of Congress would avoid accountability by saying, "That was the administrative agency. I never voted for that." Constituents seldom understood that Congress had authorized what the agency was doing often without any limits.

 

      By 1984, the New Deal idea that administrative agencies needed broad authorities had become so widely accepted that the Supreme Court's unanimous decision in Chevron was not even seen as particularly controversial when it occurred. In holding that the lower courts should defer to the interpretations of the administrative agencies on the scope of the powers they had been granted by Congress, the Chevron Court, in effect, handed these agencies a blank check. It also substantially reduced the ability of courts through what is called judicial review to determine what Congress had actually intended by legislation. Reducing the scope of judicial review is not only inconsistent with the Administrative Procedure Act but it ignores Chief Justice Marshall's statement in Marbury v. Madison that, quote, "it is empathically the province and duty of the judicial department to say what the law is."

 

      Under Chevron, existing statutes should be reinterpreted as authority for new rules -- could be reinterpreted as authority for new rules, some of which went well beyond what Congress might have authorized. One example covered in the book is what has happened with the 1972 amendments to the Education Act. There, Congress required that schools receiving federal funds must provide educational resources to women as well as men. This would clearly cover admissions, sports, and educational facilities. But the Education Department has used this statute, which applied only to the actions of schools, to establish rules on student-to-student sexual harassment or sexual assault, specifying the amount of evidence necessary and classifying such things as telling dirty jokes as sexual harassment even though it is probably protected by the First Amendment. This has gone on even though it is beyond question that the 1972 Education Act applied only to schools and Congress had not given it thought to cover student-to-student sexual harassment. Schools have probably knuckled under because they are afraid of retaliation by the Education Department.

 

      Yet, if an agency of the executive branch goes beyond what Congress authorized, it is both making law in violation of the Constitution and combining both legislative and executive authority, which are the powers Congress had tried to separate in the interest of preserving liberty. It is important to recognize that without standards for a nondelegation doctrine even elimination of Chevron will not prevent the continued growth of the administrative state. This is so because the tendency of Congress to enact what I call "goals legislation" – that is setting a generally popular goal in legislation but leaving it to the administrative agency to make the tough decisions. If Congress continues this pattern, there's no way for the courts through judicial review to intervene in the process. With goals legislation, there are no standards or limitations for the courts actually to review.

 

      The problem with all of this is that the American people will eventually recognize that the government is not under their control; that the rules they are required to obey are not emerging from an elected Congress but from an unelected bureaucracy in Washington. They don’t reflect the priorities of the American people but those of the Washington bureaucracies. As I noted earlier, this will raise serious questions about the government's legitimacy. That is its moral authority to demand obedience to its laws.

 

      Something like this has already happened in Britain where a majority of Britians defied the elites and choose to withdraw from the EU. The leaders of the so-called Brexit movement often cited the excessive number of rules that originated in Brussels over which the English Parliament had no control. A signal of this restlessness may already have occurred here: Donald Trump's surprise election in 2016 in what has been called a populist uprising.

 

      To stop this process, the courts must step in, as the Framers expected they would, to restore the balance between the Congress and the executive branch. This would be done by abandoning or modifying Chevron so that the lower courts were no longer required to defer to agencies' interpretations of their statutory authority. The courts would then be the arbiters as Marshall said of what the law is, and thus have authority the agencies were given by Congress and only that authority. The effect would limit the range of agency rulemaking to what was, in fact, specifically authorized by Congress. This will have to be combined with a serious effort by the Court to create a nondelegation jurisprudence in which the Court is willing to give -- to hear challenges that a rule involves an unconstitutional delegation of legislative authority.

 

      With the recent of addition of Justice Brett Kavanaugh, it now looks as though there are five members of the Court—Roberts, Alito, Thomas, Gorsuch, and Kavanaugh—who could favor some step along these lines. Whether they have the fortitude to do it is the question. If they step up to this responsibility, it would force Congress to assume its own responsibility for changing the laws. In 2015, then-Judge Kavanaugh dissented from the D.C. Circuit's refusal to reconsider a three-judge panel's approval of the FCC's net neutrality rule, which as you know has now been superseded by the new group at the FCC. But in this dissent, Judge Kavanaugh stated, quote, "if an agency wants to exercise expansive regulatory authority over some major social or economic activity, an ambiguous grant of statutory authority is not enough. Congress must clearly authorize an agency to take a major regulatory action," close quote. If four others join him in this position, it would go a long way toward reining in the administrative state and Congress would once again become the sole lawmaker for the United States as the Framers intended.

 

      There will undoubtedly be opposition to this. Many people like the policies that are coming out of the agencies of the administrative state. But there is no escaping this fact: even if we like some of the polices that the agencies produce, we will not have a democratic government if its principle decisions and polices are not made by the representatives of the people but by a group of unelected officials in Washington.

 

      That's the summary of the book, and I'd be delighted to take any questions. Thanks very much for listening.

 

Wesley Hodges:  Thank you very much, Mr. Wallison. While we wait for any audience questions, Mr. Wallison is there any other part of the book that you'd like to highlight? Perhaps a story from your time that you'd like to share to highlight the points you were just making?

 

Hon. Peter J. Wallison:  I don't think there's anything from my background that highlights this issue. But we can see some things that have been done in recent years during the Obama administration that point to the importance of having some kind of control over these administrative agencies. During the Obama administration, there was an effort on the part of the Justice Department to restrict and probably end certain kinds of unpopular activities. This was labeled Operation Choke Point, and the Justice Department attempted to use the powers of the bank regulators to kill off certain businesses, such as lending to individuals in what is called the cash lending or payday lending, which has a very high interest rate but is necessary for some individuals to meet daily expenses.

 

      So what the Justice Department attempted to do was to take the powers of these bank regulators and to tell them to stop making loans to payday lenders—in other words, to stop them from allowing payday lenders to operate. This was clearly unconstitutional. Congress did not want to control payday lenders. They had the power to do it, but they had never decided to do it. But here was the Justice Department using what was essentially a very broad legislative power that bank regulators have to eliminate a completely legal business.

 

      So that shows, I think, that this whole idea of allowing the powers of Congress – the legislative powers of Congers – to be given to an administrative agency is a dangerous process that the Framers actually understood from the beginning and had structured something in the Constitution that would prevent this kind of thing from happening. Fortunately, in the case of Operation Choke Point, the industry – the payday lending industry – brought a case against the Justice Department and the bank regulators, and a court in the District of Columbia held that they had violated the Constitution. And as a result, the banks were then taken out of this Choke Point objective and were allowed to continue financing companies that engaged in payday lending, which is still occurring.

 

      So I guess one of the things you learn from this is that if the court in the District of Columbia did not have the lifetime appointment that the Framers gave them but was instead subject to appointment or removal by the Justice Department of0 the executive branch, it probably would not have made a decision to declare what the Justice Department had done during the Obama administration as unconstitutional. So the Framers really had developed a very good plan here to protect the liberties of individuals by giving so much power to the courts to stop breaches of what the Constitution was intended to prevent.

 

Wesley Hodges:  Thank you, Mr. Wallison. Just a question for you from me, regarding the, I guess, Congress's delegation of these powers to the executive branch—I think it's unjust delegation. Let's assume you assume the mantel of Congress. What from the legislative perspective would you do to counter these inclinations or that movement?

 

Hon. Peter J. Wallison:  I think what you would do from the standpoint of Congress is to begin to make legislation to assure that legislation contains very specific grants of authority to executive branch agencies instead of saying, "You are authorized to take whatever actions are necessary to make sure that the waters of the United States are clean and safe, or to make sure that the air is pure," you would have to decide at the Congressional level who actually is going to bear the cost of this and how far it will extend within the United States – to what kind of people and to what kinds of businesses and so forth. These are questions that were not resolved by Congress but left to the administrative agencies to do.

 

      And when you think about it, there's unlimited activity that agencies can undertake with these very broad grants of power. And what they are able to do is to impose their own priorities – the priorities of people in the Washington area who are the bureaucrats in these agencies – on the rest of the country.

 

      And some of us may like what they are doing, and that's fine. It's good that they are doing things that we like. But the question is whether the rest of the country feels the same way. And if they don’t, if they think they are being ignored by the government and the agencies of the government, we will have the same kind of problem that they have had in England, where the people voted to withdraw from the EU because the EU had, in effect, lost its legitimacy because it had failed. It was failing from the standpoint of the people in England to observe things that they thought were important, or rather things that the EU Commission that was making these regulations that bound the English was ignoring the views of the people of England, and there was no way for them to make their views felt at the Commission level in Brussels.

 

      So that's what we are -- we should be worried about here in the United States if this goes on long enough.

 

Wesley Hodges:  Thank you, Mr. Wallison. Seeing no questions, Mr. Wallison, do you have any closing thoughts for us today?

 

Hon. Peter J. Wallison:  Well, I hope that -- yeah, I do have some closing thoughts, and that is I hope that people will see the importance of this issue. And it's necessary for lawyers especially to understand the importance of this issue because if we allow things to go on as they've had, not soon, not within the next few years, of course, but over a longer period of time there will be a loss of legitimacy for our government. And that will have very serious consequences for all of us. And lawyers in particular have a responsibility to make sure that the Constitution functions as it was intended by the Framers, where the decisions are made, the major decisions for society are made by Congress, and the administrative agencies are given the authority to implement those decisions. But they do not have the authority to make the major decisions themselves, simply to implement what Congress has done.

 

      So we ought to be on the watch for cases where Congress is adopting legislation like that and try to inspire the courts—so bring cases before the courts—that will make them look into in some more detail than they have whether what Congress has done is to delegate legislative authority to an administrative agency. This is a very, very important question that the Framers obviously understood, and I think in our time, we have to carry on that idea if we are constitutionalists.

 

Wesley Hodges:  Well, thank you, Mr. Wallison, for the work that you do to preserve federalism and the separation of powers. Everyone, the book title is Judicial Fortitude: The Last Chance to Rein In the Administrative State. We invite you to check out the book yourself. You can find it on Amazon as well as on The Federalist Society website. Thank you all very much for joining. On behalf of The Federalist Society, I'd like to thank our expert for the benefit of his valuable time and expertise today. We welcome all listener feedback by email at [email protected]. Thank you for joining. This call is now adjourned.

 

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