Michael Rappaport and John McGinnis respond to Jessie Merriam: the legal turn does not imply a libertarian bias.
(Incrementally) Toward a More Libertarian Bureaucracy
The ambitious proposal reconsidering the foundations of the modern regulatory state that Ilan Wurman outlines in his thoughtful Liberty Forum essay is not an outlier. There seems to be a growing call—primarily among conservatives and libertarians—to return to first principles and rein in the administrative state. And I’m not just referring to Philip Hamburger’s condemnation of the administrative state as unlawful.
Just last year, the Chief Justice’s opinion for the Supreme Court in King v. Burwell reinvigorated the “major questions” doctrine, providing for plenary review of agency statutory interpretations that implicate questions of “deep economic and political significance.” In Michigan v. EPA, the Court per Justice Scalia ruled that the Environmental Protection Agency must consider costs when a statute says to take action that is “appropriate and necessary.”
The Justices’ separate writings from last year go even further. In Perez v. Mortgage Bankers, Justices Alito, Scalia, and Thomas all indicated an interest in overruling Auer deference. In Mortgage Bankers, B&B Hardware v. Hargis Industries, and the Amtrak case, Justice Thomas questioned various aspects of the modern administrative state on separation-of-powers and non-delegation grounds. Then, in Michigan v. EPA, Justice Thomas argued that Chevron deference itself raises serious separation-of-powers concerns.
In contrast to Justice Thomas’s call to reinvigorate the non-delegation doctrine, Wurman proposes that “we must accept the reality of legislative delegation” and then rework a number of other administrative law doctrines, such as reviving the legislative veto and shifting to plenary review of certain agency adjudications. Wurman’s proposal is reminiscent of Kathryn Watts’ recent proposal that we accept Rulemaking as Legislating—though her approach to abandoning non-delegation arguably leads to an administrative state that Wurman would not embrace. (I previously expressed skepticism about the Watts proposal here—much of which I’d apply to Wurman’s as well.)
The Watts and Wurman approaches are bold and sweeping, and neither is likely to be embraced by the Supreme Court or by Congress. My response to Wurman thus focuses on a number of incremental and, I believe, more realistic reforms that would move us toward a more libertarian administrative state. They are by no means exhaustive; what they do is illustrate the types of liberty-enhancing measures we could plausibly pursue via legislative, judicial, or even executive action.
Judicial Review. With Justice Thomas and Professor Hamburger leading the way, the New Chevron Skeptics have begun to question the bedrock principle in administrative law that courts should defer to agency interpretations of ambiguous statutes they administer. It is a bit ironic that right-of-center scholars and judges are attacking the Chevron deference doctrine that crystalized during the Reagan administration to allow for sweeping deregulatory executive actions. No doubt experiences during the Obama administration—an administration that has been particularly effective at lawmaking by executive action—have helped fuel such skepticism.
Despite some cries for the demise of Chevron deference, the Supreme Court is unlikely to entertain them any time soon. To be sure, in King v. Burwell the Court chipped away at Chevron deference by removing from its scope questions of deep economic and political significance. But a number of scholars—myself included—question whether the Court will apply this new “major questions” doctrine outside of the extraordinary circumstances surrounding the Affordable Care Act. We should know the answer soon, as litigants have invoked this doctrine to challenge the Federal Communications Commission’s net neutrality regulations, the Obamacare contraceptive mandate, and the Obama administration’s executive actions on immigration—just to name a few.
Another deference doctrine, however, may be on the chopping block. As mentioned at the outset, in Mortgage Bankers Justices Alito and Thomas joined Justice Scalia’s prior position that the Court should reconsider Auer deference. Auer deference, which is also referred to as Seminole Rock deference, instructs courts that an agency’s interpretation of its own regulation is given “controlling weight unless it is plainly erroneous or inconsistent with the regulation.” Over the years a number of scholars have joined John Manning’s call for the Supreme Court to eliminate this doctrine and replace it “with a standard that imposes an independent judicial check on the agency’s determination of regulatory meaning.”
In three separate opinions, Justice Scalia has outlined his main concerns with Auer. First, “it seems contrary to fundamental principles of separation of powers to permit the person who promulgates a law to interpret it as well.” Second, “deferring to an agency’s interpretation of its own rule encourages the agency to enact vague rules which give it the power, in future adjudications, to do what it pleases. This frustrates the notice and predictability purposes of rulemaking, and promotes arbitrary government.” Overturning Auer deference would constrain the regulatory state—especially its power to reinterpret regulations without going through notice-and-comment rulemaking. As I have discussed elsewhere (here and here), Judge Easterbrook believes he has found an ideal vehicle for the Court to reconsider Auer, and that petition is currently pending before the Court.
Even if the Supreme Court does not take up the challenge to reconsider deference doctrines such as Chevron or Auer, there are two other branches that could. Okay, well maybe just one given that the executive branch is unlikely to constrain its own lawmaking authority. But Congress could. Indeed, as Kent Barnett has exhaustively documented (here and here), Congress has scaled back the judicial deference owed to agency action in at least one regulatory context: In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress directed courts to review under the less-deferential Skidmore doctrine (as opposed to Chevron deference) any decision to preempt state law made by the Office of the Comptroller of the Currency. This “Chevmore” codification, to use the term coined by Professor Barnett, is a powerful legislative tool to restrain the regulatory state—one that Congress should consider using more often.
A common, cynical response to proposals cutting back on judicial deference to agency action is that deference standards do not matter. After all, most empirical studies of the Supreme Court’s administrative law cases suggest that agencies win at roughly the same rate regardless of the level of deference applied. This, however, focuses myopically on the Supreme Court. It should matter more how the lower courts apply the doctrine, and deference doctrines appear to make a difference there. Perhaps more importantly, as I have documented elsewhere (here and here), deference doctrines seem to affect agency behavior regardless of their effect on judicial behavior. In other words, if agency officials believe their actions are likely to be deferred to by judges, they will be more aggressive in their regulatory efforts.
Agency Rulemaking. The vast majority of recent legislative proposals to reform the administrative state focus on agency rulemaking. The Administrative Conference of the United States (ACUS) tracks those legislative efforts (here and here):
In the last three sessions of Congress, Members of Congress from both political parties have introduced a large number of bills designed to amend or overhaul certain aspects of the federal administrative state. Among other things, these bills would increase Congressional oversight over agencies, impose additional procedural requirements for agency rulemaking activities, require consideration of additional factors in analyzing proposed regulations, enhance requirements for cost-benefit analysis of proposed rules (including extending those requirements to independent regulatory agencies), and impose a regulatory budget requirement on agencies (mandating a repeal of one or more preexisting regulations prior to issuing a new regulation). Certain bills, such as the Regulatory Accountability Act, would involve an extensive restructuring of the rulemaking process at federal agencies.
The Supreme Court’s decision last term in Michigan v. EPA may suggest a further emphasis on requiring agencies to consider costs when rulemaking—something executive agencies are already required to do for major rules per executive order. Moreover, proposals to impose similar cost-benefit analysis requirements on independent agencies should be pursued. As my colleague Paul Rose and I have argued (here and here), cost-benefit analysis, when coupled with notice-and-comment rulemaking, has two distinct benefits. First, it encourages more rational regulatory decision-making and more efficient regulation. Second, the increased public transparency enhances democratic accountability and reduces the risk of agency capture in the rulemaking process.
Retrospective review is another proposal that has gained traction—from both sides of the aisle—in recent years. Retrospective review instructs federal agencies to look back on their regulatory actions to assess the positives and negatives and compare those to the initial cost-benefit analyses of the proposed regulations. In 2014, ACUS adopted recommendations that encourage agencies to create plans for retrospective review and to promulgate rules that make subsequent retrospective review easier.
RegBlog has likewise published a terrific series on whether Congress should establish an independent commission to conduct retrospective review—a proposal Congress has considered in recent years. More aggressive approaches to retrospective review focus on mandating via statute or regulation sunset provisions that require agencies to re-promulgate rules after a certain time period. The imposition of a regulatory budget is another means to encourage retrospective review and limit excessive regulatory efforts. Jeff Rosen and others have attempted to reinvigorate legislative debate on these proposals (see, for example, here and here).
Legislative proposals to constrain agency rulemaking efforts are not lacking, but the political will to enact them is another story. That political will may still be lacking in Congress even if the next President has a deregulatory agenda. Executive action, however, could arguably implement many of these proposals.
Agency Adjudication. It is unfortunate that most legislative and scholarly proposals to reform the administrative state focus on agency rulemaking (or judicial review), as the vast scope and breadth of agency adjudication may be the biggest threat to liberty in the modern administrative state.
Agency adjudication often involves the power of all three branches of government being exercised by one non-elected bureaucratic actor. The agency adjudicator exerts a form of judicial power by adjudicating claims; exerts executive power by enforcing the law (oftentimes different parts of the agency serve as both prosecutor and judge); and exerts legislative power by establishing national policy in an adjudication that may then be subject to deferential judicial review. Other features of agency adjudication exacerbate the problems of consolidated power. For instance, the process provided in agency adjudications often falls far short of that provided in Article III courts. Individuals regularly navigate the administrative process without legal representation. And the Administrative Procedure Act of 1946 (APA) severely limits the scope of judicial review of agency adjudication, as do the statutes governing any given agency.
Empirical work on immigration adjudication has revealed the stark inconsistencies in rulings among agency adjudicators. Scholars have documented a kind of refugee roulette, with significant differences in outcomes based on whether an individual has legal counsel. Such findings are not limited to immigration. My own work on immigration and tax adjudication underscores the need for more searching judicial review of agency adjudications and for a sustained judicial dialogue with the agency on remand. Such judicial oversight is necessary not only to protect the individual in that particular adjudication, but to reform the agency as a whole, especially in light of the fact that most individuals never seek judicial review of adverse agency adjudications.
So what are realistic reforms to agency adjudication?
Professor Barnett has suggested that administrative judges (AJs) be replaced with more independent administrative law judges (ALJs) to further insulate the adjudicator’s judgment from the agency’s executive functions. With the constitutionality of in-house adjudications by the Securities and Exchange Commission in the news, the U.S. Chamber of Commerce has made a number of recommendations on that front, including that individuals and organizations be empowered to remove the SEC in-house adjudication to federal court. Similar improvements could be made in other agency adjudication contexts.
Another avenue for reform—aimed at helping unrepresented individuals and also addressing systemic issues—is to institute more robust agency ombuds offices. These Offices of Goodness, as Margo Schlanger calls them, play an important role in constraining federal agencies generally. When focused on agency adjudication, they can be powerful protectors of liberty.
The Taxpayer Advocate Service is perhaps the model agency ombuds office. It is an independent organization within the IRS that helps individuals and businesses that have not been able to resolve tax problems through normal IRS channels. The Taxpayer Advocate Service has offices in every state; advocates for taxpayers before the IRS; and is required to report regularly to Congress on systemic issues in tax administration. In light of the serious threats to liberty that agency adjudication imposes, policymakers should seriously consider adopting an ombuds office like the Taxpayer Advocate Service at other federal agencies with heavy adjudication workloads. ACUS has recently commissioned a project on agency ombuds offices, and hopefully the recommendations from that project will spur further reform.
Finally, over a decade ago the American Bar Association recommended to Congress legislation entitled Federal Administrative Adjudication in the 21st Century. This bill, which Congress has not adopted to date, aims to modernize agency adjudication. The APA has certain procedures for “formal” adjudications before an ALJ (“Type A” adjudication), and the Bar Association suggested that those procedures should apply to other agency adjudications where a hearing before a presiding officer is held (“Type B” adjudication). The initiatives include:
- Extend certain APA procedural protections to Type B adjudication.
- Require adoption of ethical standards for ALJs and presiding officers, and protect full-time presiding officers against removal or discipline without cause.
- Clarify the definitions of rule and adjudication under the APA.
- Clarify the circumstances in which newly adopted adjudication schemes will be Type A as opposed to Type B adjudication.
- Clarify the APA provisions relating to evidence.
- Clarify the ability of all adjudicating agencies to issue declaratory orders.
- Clarify the right to obtain transcripts at agency’s cost of duplication.
- Clarify that legislation adopted pursuant to these recommendations will supersede existing contrary statutory provisions.
The American Bar Association’s proposed legislation and accompanying report are worth a close read. And Congress should take up these commonsense proposals for reforming agency adjudication.
We now live in a regulatory world, where the bulk of federal lawmaking takes place at the bureaucratic level. Federal agencies—through rulemaking, adjudication, and other regulatory action—have arguably become the primary lawmakers. This generally has not been a good thing for liberty. And proposals like Wurman’s to rethink the administrative state make important contributions to the debate about the future of American governance.
But we should also consider realistic, incremental changes to curb the administrative state. As outlined above, some of these deregulatory and liberty-enhancing reforms can be implemented by courts, though most require legislative action. Some, however, can be implemented via executive action.
Accordingly, the stakes are indeed high in this next presidential election.