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Living under Executive Federalism

Last week, I visited Boston College for a discussion of the Supreme Court’s recent decisions. Herewith an abbreviated version of my remarks. Comments etc. most welcome because the thoughts (some old, some new) are embryonic: I’m working on a more serious, grown-up presentation.

We are living in an age of Executive Federalism. That form of government has some deeply disturbing features, including several that should prompt a judicial response. So far, the Court has given no indication that it has a clue.

The federalism we have inherited from the New Deal is commonly called “process federalism.” It does not come from the Constitution; it comes and goes at Congress’s pleasure. Nowadays, though, nothing comes from Congress—except the occasional convoluted statute that hands an unwieldy program to the executive. This drift toward executive government is pervasive. But since so many domestic programs are federalism programs, it has huge federalism implications. And there are reasons why the tendency is particularly acute in the federalism arena.

Localism. Over time the federal government’s ambitions have become more local: land use, education curricula and services, etc. At first impression that looks like an expansion of Congress’s power—but it really isn’t. For one thing these programs have to be implemented by local agents, who have a million ways to shirk. If you want to keep them in line and try to make the programs work you need a branch that’s in business 24/7—the executive. All of these programs effectively dis-empower Congress.

Sectionalism. Political polarization is everywhere. In the federalism dimension it plays out as sectionalism—divisions between cohesive blocs of states, over salient and recurrent issues, that can’t be overcome through compromise (for example, by bribing states into a minimum winning coalition). Congress cannot really handle sectional politics, which explains why national policy on abortion or gay rights has to come from the Supreme Court. Sectionalism now has engulfed economic as well as culture-war issues: labor policy, health care, health insurance, global warming, energy policy, immigration. It’s always the same blocs of states opposing each other (in Congress, in the regulatory process, and in the courts), and the questions are existential. Federalism isn’t between “the states” and the feds; it’s between and among blocs of states—one demanding federal intervention, the other telling the feds to bug off. The executive has to manage the conflicts.

Over the decades the Executive has developed powerful tools to run its federalism. The Obama administration has been very aggressive in deploying them. But the trend is secular, and robust to partisan politics. (It began under the Reagan administration and has accelerated since.) Herewith, six features of Executive Federalism:

Centralization. Executive federalism is highly centralized. The key decisions are made by high-level political appointees, usually in close cooperation with the White House. The basic m.o. isn’t rulemaking by bureaucrats and administrative regularity; it’s political. The trend to “Presidential Administration” cuts across a wide range of issues (think net neutrality); but again it is particularly pronounced in the federalism arena. Deferred action for undocumented aliens wasn’t some bureaucrat’s idea; it was the President’s.

Vast discretion. The prototype of modern legislation isn’t “big delegation,” as under the New Deal. It’s “big waiver”: Congress writes a highly prescriptive programs but then authorizes the Executive to waive big pieces. Medicaid, education, welfare, and other programs work  that way .

Asymmetric federalism. Executive federalism is highly asymmetric: federal program requirements are worked out or waived for individual states, and the differences are huge. Medicaid is an example. There are fifty different Medicaid programs, and they have only one thing in common: not one of them has anything to do with the statute. It’s all done through Section 1115 waivers.

Federalism by Deal. Executive federalism works through dealmaking, not rulemaking. Medicaid’s operation is governed through MOUs (Memoranda of Understanding)—without notice and comment, without anyone at the table except the state bureaucrats and people from HHS and CMS, and without any opportunity for arbitrary and capricious review.

Federalism by Settlement. Over the past decade multi-billion dollar settlements with corporations that are accused of wrongdoing have proliferated. Settlements in the financial sector alone clock in at well over $120 billion. A good chunk of that is off-budget government agency finance. But over one-third is so-called restitution (for example, for mortgage debtors). These payments are privately financed grant and benefit programs, and they are federalism programs. The best example is a 2012 agreement between five big banks, the feds, and states. $5 billion went to a gaggle of federal agencies, state agencies, and “fair housing” groups; $20 billion were earmarked for “restitution” for underwater borrowers—mortgage relief, short sales, etc. Congress considered but rejected a program like that; the administration ran an embryonic (and failed) program with some money it found under a rock; the settlement is the real deal. And it’s federalism: the fund allocation is by state, and the program is run by an ad hoc committee headed by a former banking commissioner and composed of federal and state officials.

Constitutional Hardball. When Congress goes AWOL, the Executive will tend to push its authority to the outer limits, and beyond. Examples spring readily to  mind: immigration; executive waivers for states that have decriminalized marijuana; a clean power plan for which EPA plainly lacks authority; and so on. Some states welcome these escapades, sometimes; others fight back.

Should we worry? A “National Federalism” literature (emanating from the New Haven metropolitan area) says, no. States can shirk, and they can participate in the regulatory process. So all is in good federalism order. I’m not sure. For one thing, Executive Federalism is debt-financed federalism (which helps to explain why we are now extracting the needed funds for the programs and even just running the federal agencies from private entities). We’re now bailing out Puerto Rico. Admittedly that’s not a state but as goes Puerto Rico, so goes Illinois, and in its trail any other state that relies on federal transfers to support a failed business model.

My larger worries are about lawful government. Executive federalism happens in the shadow of the law, and sometimes the bright sunshine of patent illegality. And the federal courts have nothing consequential to say about it.

Historically the Supreme Court has played a formative role in federalism; and even the modern Court prides itself of safeguarding federalism’s “usual balance.” Most of the time, however, courts don’t get to see Executive Federalism at all. Big waivers are usually unreviewable because no one has standing. A few big settlements are reviewed; the vast majority aren’t (not even when the deal is cut, let alone the implementation). MOUs are effectively unreviewable. Even some agency rules have become practically unreviewable. EPA routinely proposes rules that are strictly in terrorem: draconian, arbitrary and capricious, in excess of statutory authority. They’d be struck down in any court. But that will take four years, and utilities and investors and state commissions cannot wait that long. They figure something will happen, and so they move in EPA’s direction and then EPA counts those upfront investments as “benefits.” If a court eventually invalidates the rule, the agency has gotten most of what it wanted. The D.C. Circuit is a paper tiger.

Another example: during the financial crisis Secretary Paulson did not do anything he wouldn’t have done at Goldman Sachs: Buy. Sell. Low-ball them. Be long and be loud. Above all be unpredictable. Even when he had a legal basis for his actions he declined to invoke it because that would suggest he’d do the same thing in the next case, and there goes the leverage. That is now the ordinary operation of our federalism: it’s how the ACA is being implemented, and how the clean power plan is being implemented. There ought to be some law or doctrine to control the basic operation of our government. For the life of me I can’t think of one. If an agency cuts deals with 30 states and then says “no” to the 31st, is that arbitrary or capricious? Abuse of discretion? Who knows?

Even when courts do get to look at Executive Federalism in action, constitutional constraints are exceedingly weak; and that includes federalism constraints. There is the anti-commandeering rule; but for the most part, the Executive has found ways to commandeer states without running afoul of the rule. There is the made-for-one-case Medicaid holding of NFIB fame; but no one has ever identified another statute to which it might apply. There are various federalism canons and presumptions; but no one has figured out how those should operate in administrative law cases. And that’s the crux. The federalism stuff that the courts do see is Administrative Law stuff; and unfortunately, the Court appears at sea both about AdLaw itself and about its interplay with federalism.

By “the Court” I mean the nominally conservative majority. The four liberals justices have concluded that administrative acts need no legal basis: whatever is not directly prohibited is permitted. (Case cites available upon request; the justices’ dissent in UARG v. EPA is a good start.) On that assumption, administrative law becomes easy, and so does federalism. The conservatives, in contrast, still struggle—and they struggle to resolve even the most basic questions of Executive Federalism.

Consider the “executive” part of the equation. Nowadays, agency rules at the outer boundaries of an ambiguous statute will come from the White House. (Agency “expertise” is the art of making up some numbers.) Does that progeny make a rule more suspect, or less? Should we favor “accountability” (and it doesn’t get more accountable than the President), or should we insist on administrative regularity and protection against politics? The case law provides no clear answer. It does not even present an open acknowledgment of the problem.

Consider the “federalism” piece. The most foundational AdLaw canon is Chevron; the most foundational federalism is the clear statement rule. How do they go together? They come and go, usually without explanation. The foundational clear statement case is Gregory v. Ashcroft (1992). It’s a Chevron case as well, except there’s no mention of it in the opinion. City of Arlington (2013) is a federalism case, and the question of when—as opposed to whether—jurisdictional provisions command deference stares you in the face. The Court brushes that aside: it’s all Chevron metaphysics. If the justices cannot make the foundational canons hang together, they cannot hope to organize this universe.

I conclude with two premises that need examination if one wants to get this right. The first is about AdLaw; the other is about the states.

Regulation, the Courts, and Congress. In the 1970s, Administrative Law was about a “partnership” between Congress, agencies, and the courts. That is no longer so: the Court now thinks it has to ensure regularity and accountability. It’s a check. Is it?

Maybe—except when it matters. The Court thinks it can monitor the government’s mechanics, even as its objects or its legal basis remain beyond judicial purview. Regulation must go on. The leading examples are global warming, and the ACA. (Mind you: both are federalism examples.)

Mass v. EPA (2007) says, EPA must regulate GHGs under the Clean Air Act (not quite, but close). The CAA, everyone knows and the Court knew at the time, isn’t built for greenhouse gases. Sure enough, EPA re-writes the statute, including its numerical thresholds. The Court says, “we will not let EPA embark on this voyage.” (UARG v. EPA). Who is we? The Supreme Court? The D.C Circuit? The courts are supposed to pilot an agency that no longer gives rip about judicial review? Shamefacedly the majority opinion then says, we are giving EPA 83 percent of what it wants. We just have a point about statutory interpretation. Thank you.

This year’s decision in King v. Burwell is yet more astounding.  The IRS—an agency we rarely associate with federalism—makes a decision that shapes the federal structure of the entire ACA. It does this with a rule that looks like something from the 1950s: no legal analysis, no response to comments. It does this in the teeth of a statute that quite plainly seems to say the opposite. The administration’s legal defense is so lame that the Court doesn’t even bother to mention it, let alone rely on it. But the justices waive this thing through.

Had King involved any other statute, the case would have gone the other way. But the show must go on.  The Will of Congress Must Prevail: That’s the rock-bottom premise of modern AdLaw, and of modern “process” federalism. It now conflicts with the reality that there really is no Congress with a discernible will. In the ordinary case, the Court fakes its way through and cites Chevron. And in big cases, when even that acknowledged fiction won’t do, the Court simply makes it up, on terms that lets the system grind on. And it’s not just the ACA or the CAA. The Court’s decisions on the “waters of the United States,” and securities fraud, and civil rights have the same structure: unleash a firestorm, and then pretend that the Court is standing watch. It’s a partnership after all.

Federalism is about “the States,” versus the feds. That’s the Court’s paradigm: you see it in every case. But the Court hasn’t had a case that pits “the states” against “the federal government” in a very long time. Usually the states oppose each other. So who, in those cases (about energy, or health insurance, or antitrust) is the authentic representative of federalism—and who is being opportunistic? Could it be the case that private individuals are the only ones who can be trusted, federalism-wise? You need a theory, which the justices don’t have.

Some legal fictions are good or at least useful. These aren’t: they’re counterfactuals to manage a world that’s dead and gone, and they are no match for an Executive that does as it pleases. To borrow a line from a great thinker: the Supreme Court’s law is Neronian in nature. The Court fiddles, while Rome burns. It is excused by two facts: it does not know that it fiddles, and it does not know that Rome burns.

Reader Discussion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.

on November 06, 2015 at 09:23:39 am

Tonic. Thank you.

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aez
on November 06, 2015 at 10:13:43 am

Thank you, I think, for a wonderful and sad opinion piece. Original federalism maximized freedom and encouraged competition among the states. See "The Upside-down Constitution." The Civil War and 14th, 16th and 17th Amendments, along with the New Deal courts killed original federalism. Given the dramatic increase in the range (far beyond enumerated powers) and size of central government (permitted by the income tax) along with the withering of state power as a state at the central government level (17th Amendment), we now have a species of zombie federalism (or a Principate if you recall your history). There is no way back because the fundamental structures of our governments have morphed beyond recognition.

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Ron Johnson
on November 06, 2015 at 10:41:23 am

Mr. Johnson, do you have any thought what might be to curb, if not reverse such trends? Or do you believe zombie-federalism is ineluctable?

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BTG
on November 06, 2015 at 10:41:58 am

Perhaps, Prof. Greve's essay should be sub-titled: "Apologies to Mr. Franklin: We could not keep it."

"My larger worries are about lawful government. Executive federalism happens in the shadow of the law, and sometimes the bright sunshine of patent illegality. And the federal courts have nothing consequential to say about it."

I sometimes think that the Court's lassitude in this area is actually quite rational. Were the Court to overturn APA, or at least exercise some *consequential* oversight, would not the Court then be taken on an immense task? Who but the Court would be tasked to review all of these "determinations, guidances, etc" of the Administrative State?
Were the Court to overturn APA (and its progeny) what would be the result / effects upon the Legislative? A case could be made that some benefit would be derived from such a decision but there is equal likelihood that we would be thrown into a period of significant uncertainty or worse. Does the Court fear this? (I would suppose that it does given its current inflated notion of itself as the guardian of the Republic). Should the Court fear this as a) a practical matter or b) as a proper consideration given its constitutionally prescribed role as a reviewer of the law rather than as maker of it.

Greve, as always, presents us with a rather clear and insightful look at what has befallen us both from a legal and transactional perspective. The question remains: What, if anything is to be done about it?

In a previous post, I made what was intended as a jocular suggestion to returb to Andy Jackson's "spoils system." After reading Greve's fine essay, I begin to question the jocularity of the suggestion. The players, or at least the mindset of the players must change. An entrenched burueacracy is populated with far too many "clever" actors to ever effectively fall under the rule of law even if propounded by the Black Robes.

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gabe
on November 06, 2015 at 10:45:27 am

Oops, forgive the typos throughout.

BTW:

Prof. Greve: Are you planning on expanding this in the form of another book? Could be quite interesting.

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gabe
on November 06, 2015 at 14:14:57 pm

I see no indication that the trend to an ever larger federal government is slowing. Listen to all the Republican candidates with eleven point plans, who is going to execute them?The central government of course. Even Reagan could only slow the growth. Libertarian candidates go nowhere. Will the budget ever be cut in real terms? Is the administrative state receding? Do the voters give any sign that they really want federal spending cut?

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Ron Johnson
on November 06, 2015 at 16:43:00 pm

"Perhaps, Prof. Greve’s essay should be sub-titled: “Apologies to Mr. Franklin: We could not keep it.”"

That strange noise you hear in the background is me, chortling. ;)

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Scott Amorian
on November 06, 2015 at 16:45:28 pm

For a while I've had a vague notion in my head of a judicial standard of review that might help stem the advancing tide of the administrative superstate. The idea is that, absent explicit statutory language, administrative agencies ought not to have the power to preempt state legislatures. If EPA issues a rule that has a profound impact on a state's economy, and invalidates some of its laws, and demands the enactment of others, shouldn't it be true that some legislature, somewhere, voted for this?

It could be described, I suppose, as a limited form of the nondelegation doctrine, restricting the application of the Supremacy Clause to only those laws enacted by Congress. Or it could find support in the Guarantee Clause: "The United States shall guarantee to every State in this Union a Republican Form of Government, and shall protect each of them against Invasion; . . ." Neither of those lines of argument is very promising, I recognize. But a state government that is the fiscal and regulatory puppet of the federal Executive can hardly be described as "a Republican Form of Government."

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Bucklander
on November 06, 2015 at 16:49:28 pm

Seriously, in the grown-up version will you address why you call this "executive federalism" and not "executive nationalism?"

The latter seems more descriptive.

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Scott Amorian
on November 06, 2015 at 17:19:43 pm

I think we are looking at deep constitutional reform. That means beginning reform at the level of state government to prove that specific reforms will work effectively before trying to apply them at the federal level, as happened with universal sufferage.

The central problem is that our form of government is essentially populism let of of the bottle. Its very difficult to put back in. Only the alternations of party dominance in the House, Senate and Presidency are slowing down populist-driven agendas. The alternation only slows down populism, it doesn't stop it. The Court can't stop it, since it is appointed by the populist President and Senate, and its members are selected and approved for their partisan bias.

Basically, someone has to have the power to "just say no" to populist nonsense, while at the same time inviting public involvement in politics, and at the same time being protected from the consequences of telling the political majority that they can't have everything they want when they want it, and at the same time being prevented from becoming dictatorial.

Without that someone, there are no brakes on the system, and the government is, and can only be, a runaway train.

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Scott Amorian
on November 06, 2015 at 19:10:00 pm

Like the first one but i do not hold out much hope for the Court doing this - after all, "all legislative power" is vested in the House AND the Black Robes are apparently unable to "divine" this simple fact.

I would suggest that the Legislative exercise its constitutional grant, while protecting (or even recognizing?) their institutional interest and enact a law that provides for this protection.

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gabe
on November 06, 2015 at 19:11:34 pm

Heck, I heard the noise but I thought it was Franklin moaning!

seeya

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gabe
on November 08, 2015 at 08:23:32 am

Mr. Johnson, do you have any thought what might be to curb, if not reverse such trends? Or do you believe zombie-federalism is ineluctable?

Thank you for your prompt reply. However, I believe it best not to extinguish the light of Hope, no matter how it flicker!

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BTG
on November 09, 2015 at 08:58:37 am

We seem to bumble through things regardless of how dark the problem, so there is always hope. Also, we tend to be a pragmatic lot. Even if I don't like the current political theory, perhaps economic dynamics, see "The Bell Curve," may require a large centralized government and I’m just an old grump.

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Ron Johnson
on November 09, 2015 at 13:46:40 pm

This is an extremely troubling post, particularly coming from Professor Greve. As these thoughts are refined for further presentation it may be helpful to avoid the mixed-use of “—ism” to both connote conceptions and to denote operations and actions.

Begin with Federal-ism, which is the joining of “units,” in which the “units” are most commonly identified as the various jurisdictions of state governments and the extensions of their particular governmental powers and activities.

In using the term Executive Federalism, it is not clear what constitutes the “units” that are federated within executive authority, which is essentially a form of centralized authority conducted through administration. The presentation does identify elements of increasing centralization through administration that extend into areas of other authority including authority vested in state and local governments.

While the presentation does not attempt to track the evolution and development of centralization of governmental powers in the operations of the federal government, it touches upon some events. The “centralizing” effect of war, particularly the War between the States, is noted. However, the political objectives specifically for centralization that seem to have been a major factor in the Wilsonian push for American involvement in the European war, had an even more identifiable impact in the creation of administrative structures and provisions for revenues to sustain them.

The presentation begins, instead, with the legislative activities that began the creation of our current Federal Administrative State (a creation from delegation of legislative powers) funded by the revenue sources created in the Wilsonian push for centralization. Those legislative activities (indicative of a change in the functions of legislators) are noted by Professor Greve as beginning their proliferation in 1961, reaching gale force around 1965 during the period of Lyndon Johnson’s “Great Society.”

Surveying the “-isms” referenced in the presentation, it seems that some of them could be identified as the “units” that make up and Executive Centralization of the units of the Federal Administrative State, which is now extended into areas of previous state and local authority, which had historically been free of centralization.

An ongoing refinement might include the importance of the aspect of funding of the Federal Administrative State, which has made it possible to first, supplement, then replace, state and local policy and authority with centralization,*not* in the constitutional delineations of the Federal Government, but, instead, in the Federal Administrative State (as created by legislative actions).

Thus the state and local units once federated with a constitutionally delineated government, are now conjoined (federated?) with the administrative bodies of the Federal Administrative State, which is directed by the executive power under the Constitution. This executive administrative centralization, while more of a mouthful, may be closer to the intended mark than “Executive Federalism.

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R Richard Schweizter

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.