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De Omnibus Dubitandum - Lux Veritas

Thursday, May 26, 2022

A Chink In The Armor Of The Progressive Administrative State

@ Manhattan Contrarian 

The great mission of the early twentieth century Progressives was to transform our constitutional order without ever amending the Constitution itself. The intellectual leader of the movement was Woodrow Wilson. The fundamental idea was to replace the messy and contentious system of separated powers and slow bi-cameral lawmaking with a cadre of supposedly apolitical administrative “experts” who could run the country smoothly and efficiently.

The idea sounded rather benign to most people at the time, and probably still sounds benign to most people today. Who could be against having “experts” to run significant government agencies? But a hundred-plus years into this project, we have seen cancerous growth of vast administrative bureaucracies, outside the constitutional structure, and exercising great powers, but accountable to no one but themselves — the very antithesis of the constitutional structure that our founders attempted to bequeath to us.

Last week the Fifth Circuit Court of Appeals in New Orleans knocked a significant chink in the structure under which many of these agencies operate. This chink may be only the first of many to come. But we have deviated very far from the original structure, and the process of conforming the agencies to the constitutional structure will be a long and difficult one. It is not moving quickly, and likely never will. In this post I’ll try to give readers some perspective on where we are and where we may be headed, drawing in substantial part on a long post I previously wrote back in 2017.

The basic structure of our Constitution (and I highly recommend reading the whole thing, which is remarkably short) is that it divides the powers of government into three types and delegates each type of power to one branch exclusively: all legislative powers to the Congress, all executive powers to the President, and all judicial powers to the federal courts. Thus the people who make the laws can’t prosecute you for violating them, and neither the legislators nor the prosecutors can adjudicate you guilty.

The Wilsonian vision is so much, much more efficient. An archetype of the Wilsonian vision is the Federal Trade Commission, created in Wilson’s first term by the Federal Trade Commission Act of 1914. Section 1 of the FTC Act (15 USC Section 41) creates a “Commission” of five members, who serve seven year terms (thus extending well past presidential elections that may have changed both the person and party in control), and who can only be removed for cause (thus meaning that a new President is stuck with his predecessor’s selections for several years, maybe even extending through and beyond an entire first presidential term). So the voters, by voting the President out, can’t vote the FTC Commissioners out. And just what are these Commissioners empowered to do? Well, a key item is Section 5:

Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.

And how are we to know exactly which “methods of competition” are “unfair or deceptive”? The Commission will tell us (via regulation not needing approval of Congress) — and then also prosecute those that it deems to have crossed some line:

The Commission is hereby empowered and directed to prevent persons, partnerships, or corporations . . . from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce.

And thus the FTC went off and started creating some reams of regulations purporting to outlaw this or that trade practice as supposedly “unfair” or “deceptive” without getting any nod from Congress. It can create rules for your conduct free from the Congress, and it can prosecute you free from the President. In 1935, in a case called Humphrey’s Executor, the Supreme Court upheld the part of the FTC Act that made the Commissioners immune from discharge by the President other than in very limited circumstances. Humphrey’s Executor has not been overruled to this day.

The FTC was only the beginning of an explosion of creation of such “independent” agencies and otherwise un-separated powers in the federal government. The Federal Reserve was created about the same time (actually 1913), and things really took off during Roosevelt’s New Deal, with agencies like the FCC, SEC, and NLRB. Over time many of these agencies got judicial (or maybe it’s “quasi-judicial”) responsibilities as well, via Administrative Law Judges that are not part of the federal court system. And the phenomenon of combining rule-making authority, prosecutory authority and administrative law judges in the same agency also has exploded in the departments under direct presidential control, a notably dangerous example being the EPA.

That brings me to my post of November 18, 2017, which I want to quote at some length:

When I began this blog in 2012, one of the things I had been pondering for years was the extent to which much to most of the operation of the U.S. federal government ran directly counter to the Constitution. Every federal officer, on taking office, swore to uphold the Constitution; and then from day one proceeded to ignore it completely. Good friends of mine would go into jobs where everything they and everyone around them did was obviously unconstitutional, and yet nobody would so much as mention the issue. It was taboo -- like in The Emperor's New Clothes. Without going into detail, the three biggest issues then and now were (1) the combining of powers into agencies that would enact, and also enforce, and also adjudicate regulations (directly contrary to the Constitution's separation of powers into three branches of government); (2) agencies enacting regulations with the force of law on their own say so (contrary to the Constitution's requirement that all laws be passed by both houses of Congress and presented to the President for signature); and (3) many agencies claiming to be "independent" of the President (contrary to the Constitution's vesting all "executive power" in the President).

I'm not saying I'm the only one who had noticed these things at the time, and I should definitely mention Justice Clarence Thomas of the Supreme Court and Professor Gary Lawson of BU Law School as examples of canaries in the coal mine.  But very, very few were paying attention, and certainly nobody in the Obama administration.  Left-leaning law professors had nothing but scorn for anyone daring to raise these issues, certainly including Clarence Thomas.

I trace the beginning of a shift to the publication in 2014 of the book "Is Administrative Law Unlawful?" by Philip Hamburger, Professor at Columbia Law School.  That was just over three years ago.  Hamburger raised all of the three issues I identify above, and plenty more, and pulled no punches in characterizing these things as unconstitutional and illegitimate.  Hamburger's book started to get some buzz in esoteric legal circles, but not much outside.

On March 9, 2015, two cases came down from the Supreme Court that contained significant concurring opinions raising these same issues from Justices Alito and Thomas.  I covered those opinions in a post on March 25, 2015.  Most significant was the Thomas concurrence in the case called Association of American Railoads, which included the following passage:

“We have held that the Constitution categorically forbids Congress to delegate its legislative power to any other body . . . but it has become increasingly clear to me that the test we have applied to distinguish legislative from executive power largely abdicates our duty to enforce that prohibition. . . .  I would return to the original understanding of the federal legislative power and require that the Federal Government create generally applicable rules of private conduct only through the constitutionally prescribed legislative process.”

The occasion for that post was that I had just attended a speech given by newly-minted Supreme Court Justice Neil Gorsuch. The main subject of Gorsuch’s speech was commenting on a long Harvard Law Review article by a Columbia Law professor (Gillian Metzger), the article titled “The Administrative State Under Siege.” The author of the article had taken the position that having the agencies adopt and also enforce and also adjudicate regulations just has to be constitutional because it's necessary, and the government is just too big and its meddling in our lives is too important to do this any other way. Justicer Gorsuch’s main point was that it was just fine with him for the administrative state to be under siege.

So after a century plus of extra-constitutional power grabbing by the federal government, there were at least some indications that the winds in the Supreme Court may have begun to shift. But cases move very slowly through the court system, and the Supreme Court cannot issue rulings other than via cases that come up to it properly through the lower courts. We’re still waiting for the first significant Supreme Court ruling on the administrative state issues since the conservatives took a 6-3 majority in 2020.

However, last week a serious marker got thrown down by a panel of the Fifth Circuit Court of Appeals, in a case called Jarkesy v. SEC. The SEC alleged that Mr. Jarkesy had defrauded his customers in various ways. SEC personnel then prosecuted Jarkesy before an SEC Administrative Law Judge, who proceeded to find him civilly liable, and to assess both damages and a monetary fine. Jarkesy claimed that he was deprived of his Seventh Amendment right to have his case decided by a jury, and also that the SEC had unconstitutionally exercised legislative powers when deciding to try his case before an ALJ without having been given any guiding principles by Congress on how to make that decision. The Fifth Circuit ruled for Jarkesy on both points. This decision has the potential to force some significant changes on how the SEC does business. However, Mr. Jarkesy still does have to continue to run a gantlet that will likely include a request by the government for en banc review by the Fifth Circuit, and then a request for review by the Supreme Court.

Meanwhile, there is another case already in the Supreme Court that could have even more significant implications for the administrative state: West Virginia v. EPA. That case was argued back in February, and a decision could come out literally any time. In the case, West Virginia and other states challenge the authority of EPA, under an extremely broad delegation of power from Congress, to essentially transform the entire electricity sector of the economy. Unfortunately this case came to the Court in an extremely complicated procedural posture (too complicated to go into here), so the decision may or may not break any new ground.

But there is definitely a willingness among a new breed of judges and justices take a new look at what the administrative state is up to in light of constitutional fundamentals. So far it’s just a chink in the armor, but sooner or later, the right case or cases will present themselves.


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