New SEC Climate Rules Are Burdensome – But Are They Constitutional?

Abusing power to strangle farms and the economy.

by John Klar | Apr 7, 2024 @ Liberty Nation News Tags: Articles, Climate Change, Opinion

Controversial new SEC Rules compel corporations to report the climate impact of each step of the supply chain. It’s complex, convoluted, and confusing at best – but is it constitutional? That was the question asked during a powerful hearing on March 18, 2024, before the House Subcommittee on Oversight and Regulations. SEC Chair Gary Gensler is accused of overstepping constitutional bounds in his zeal to weaponize the Securities and Exchange Commission to regulate greenhouse gases, a far stretch from the agency’s mission to protect investors and ensure financial integrity in markets. Burdensome new rules do the opposite, threatening to inflict net-zero business profits in a kamikaze effort to achieve impossible net-zero emissions of carbon dioxide.

In a divided 3-2 decision on March 2, 2024, the SEC issued the controversial new “climate disclosure” rule as an 886-page amendment to S-K, which governs required disclosures in Form 10-Ks and other public filings. The rules purport to improve investor awareness, instead feeding the fantasies of climate ideology over investor concerns and imposing billions of dollars of compliance costs on businesses for a hazy effort to track every aspect of climate impact in each step of businesses’ complex supply chains. An even more ambitious plan under proposed “Scope 3” disclosures was curtailed.

An Unconstitutional Climate Regime

The US Constitution (Art. 1, § 1 and § 7, cls. 2) provides that “All legislative Powers herein granted shall be vested in a Congress of the United States.” The SEC was given the power to oversee financial markets, including “material” investor disclosures. The question in dispute is whether this extends to high-cost compliance efforts that will increase consumer costs for products and even close many businesses – including down-chain farming operations – that are already struggling with weak margins. This rule change is just one of many so-called climate initiatives under the Biden administration that exceed traditional administrative authority as defined by the courts.

Tennessee Republican Andy Ogles expressed this at the hearing:

“[W]e’ve seen these regulatory regimes come in and essentially function as members of Congress, as the body of Congress, by creating legislation and burdens by rulemaking …[through] SEC’s climate rules, which play to the tune of the administration’s obsession with the climate change religion, and that’s what it’s become, is a religion. Simply put, this rule will bully publicly traded companies into reporting environmental information that has no relevance to the financial concerns that matter to investors.”

The POTUS defied SCOTUS when he bypassed Congress to erase student debt, signaling that he seeks to escape the surly bounds of the Constitution and representative democracy in favor of tyrannical edicts and executive orders. The list of such episodes grows daily, including stricter EPA rules for gas emissions and expanded rules for wildlife protection that undermine farmers. Another sneaky initiative would create an international building code applicable to the entire nation, drafted by an unelected organization governed by “industry stakeholders” rather than We the People.

An Attack on Farming and Food Supplies?

The Scope 3 disclosures originally proposed by Chairman Gary Gensler would have dramatically impacted farmers economically downstream from publicly listed companies subject to its provisions. California now seeks to impose Scope 3 rules in the SEC’s stead, a back-door assault on states’ rights akin to its Proposal 12 governing pig farming.

The legal term for a government or corporation exceeding its authority is “ultra vires” – Latin for “beyond the powers.” It describes an act requiring legal authority but done without it. The Scope 3 disclosures – abandoned for the moment by the SEC but eagerly embraced by California – are precisely that. Their impact on farming operations was summarized at the hearing by third-generation Tennessee tomato farmer Renea Jones, of Jones and Church Farms:

“Scope 3 emissions – as proposed in the original rule – are emissions which are the result of activities not owned by the company but are in its supply chain. Naturally, this includes family farms as most farm products, including the tomatoes grown on my farm, end up in the value chains of these companies….

“To comply with Scope 3 reporting requirements, we would need to hire a legal consultant and a chemist to keep up with all that would be required of us. Looking across the entire tomato supply chain, there are approximately 6,000 inputs involved in the growing of one tomato. On average, my farm produces 38.5 million tomatoes every growing season. From a record-keeping standpoint, my small family farm operation would have to hire extra staff just to keep up with the data the SEC is asking for. A rule with requirements this extensive would cause us to consider closing our doors. Profit margins for farm operations are already tight due to inflated input costs, and hiring extra help to navigate these requirements would make those tight margins even tighter, if not nonexistent.”

Scope 3 requirements would ensure net-zero carbon emissions for Jones when tomato production hit net-zero. This is not just throwing the baby out with the bathwater; this is shoving its head underwater in the name of a rescue effort.

On the other side of the climate-nut food-attack spectrum, New York’s now-infamous Letitia James has sued JBS Foods (the world’s largest producer of beef) for fraud for claiming it is implementing GHG-reducing regenerative agriculture policies. This “damned if they do, damned if they don’t” insanity is insouciantly ignored by fearmongering alarmists who have their regulatory cake and eat it too. The complexity of the case against JBS displays the near-impossible reporting burden being foisted on companies by the SEC’s new 886-page rule.

Hiding Elephants in Mouseholes

Subcommittee testimony from Whitney Hermandorfer, an attorney and Director of Strategic Litigation with the Tennessee Office of the Attorney General & Reporter, laid the SEC out in legal lavender, invoking constitutional protections and extensive case law to aver that the new rule lacks statutory authority, distorts existing “materiality” principles, and imposes undue compliance and speech burdens, all accomplished through a flawed process of enactment. Hermandorfer claimed Congress never granted broad power to the SEC or unelected Gensler, especially in such clear derogation of reserved states’ rights, and that the rule’s “ambiguous statutory language” will harm consumers and the economy:

“Under the Supreme Court’s major-questions doctrine, an agency must come forward with ‘clear congressional authorization’ before using a rule to settle an issue of great ‘economic and political significance.’ This principle reflects the commonsense presumption that Congress ‘does not…hide elephants in mouseholes’ when delegating agency authority.

“The lack of clarity around what it means for climate risks to be material will no doubt subject companies to costly litigation that would detract from innovation and investor value—thus harming rather than helping consumers on balance.”

Dogmatic Policies Eclipse Common Sense

Climate policies have interfered with power grid maintenance, creating grid fragility even as the electric vehicles that will spike demand are touted as salvific. Corporations have been granted massive tax subsidies to “store” liquid carbon dioxide underground with little hope it will stay put, while billions of dollars are “invested” into other corporate winners who manufacture renewable energy darlings that are presented as inflation-reducing but are regressively pumping up the national debt. This corporate favoritism is unavailable to small and mid-sized farms compelled without subsidy to comply with a Kafka-esque panoply of vague or burdensome regulations. Americans cannot eat solar panels, heat pumps, or EVs, no matter how much they are subsidized.

 

Read More From John Klar

A Revolution Against the Administrative State

Daniel Greenfield July 10, 2022 @ Sultan Knish Blog

 Four days before Independence Day, the Supreme Court fired its own shot at the modern tyranny that has dismantled the Constitution and runs our lives to a degree King George III could never have imagined and that the Founding Fathers would never have tolerated.

The shot fired at the administrative state was almost missed in the fury over the Supreme Court’s abortion ruling. While the amateur liberals who live on ActBlue, wield blue checkmarks on Twitter and inhabit blue states raved over the fall of Roe v. Wade, the professionals of Washington D.C. were much more worried about another Supreme Court decision.

“Supreme Court climate case might end regulation,” E&E News, a Politico green energy site, warned. That may be excessively pessimistic for big government proponents or optimistic for conservatives, but there’s no question that big government has suffered a serious shock.

West Virginia v. EPA wasn't just a victory for the coal miners of Appalachia, it sent shudders through the vast infrastructure of the D.C. administrative state. Dobbs v. Jackson was a cultural blow to a post-everything feminism that discarded women, but retained abortion, that felt like an earthquake, but changed surprisingly little, while West Virginia v. EPA is the real revolution.

S&P Global warned that the decision would "complicate FCC, FTC rulemaking processes". Net Neutrality now appears to be dead all over again. And Americans have new tools for challenging the unaccountable administrative state wielding power over every aspect of their lives.

The implications of West Virginia v. EPA go far beyond environmental regulations. If abortion was the cultural third rail of politics, West Virginia v. EPA is the third rail of government.

Liberalism has taken it for granted that abortion ought to be easily accessible and that government bureaucrats ought to be able to do anything they like. Abortion may be a moral evil, but the administrative state is the root of all evil. Its members made up the “resistance” who sabotaged Trump administration policies, as they did those of his Republican predecessors.

Even as its media and political allies shout about a “threat to democracy”, the administrative state spent generations making elections and elected officials irrelevant. Congress might legislate, presidents might sign bills into law, and judges might rule on them, but the actual implementation was left to a massive expanding bureaucracy which had its own agendas.

The administrative state is why elections feel pointless to most Americans. Elected officials, at least if they’re Democrats and especially if they’re leftists, can have some influence on the system, but no matter how many decades they’ve spent in office, they’re still amateurs. The professionals are the careerists who are permanently on the payroll and who can’t be fired.

It wasn’t supposed to be this way.

"That Congress cannot delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution," Chief Justice John Marshall Harlan wrote in 1892.

"Congress is not permitted by the Constitution to abdicate, or to transfer to others, the essential legislative functions with which it is vested," Chief Justice Charles Evan Hughes stated in a ruling against another of FDR's unconstitutional New Deal programs.

The nondelegation doctrine fell victim to the same technocratic forces, the bureaucrats, regulators, experts, and think-tanks driving the New Deal. Eisenhower, the first of many White House Republicans to make peace with the New Deal, oversaw the continued expansion of the government as political elites accepted that the bureaucracy needed a free hand to run things.

Government had become too complicated for self-government, by the people or their representatives.

Reagan became the first post-New Deal Republican president to challenge the administrative state. While he was handicapped by Congress, two administration officials, Clarence Thomas and Samuel Alito, began their long ascents to the Supreme Court. Two generations later, West Virginia v. EPA is a bullet shot into the side of the tyranny the Reagan Revolution was aimed at.

In her West Virginia v. EPA dissent, Justice Kagan made the big government counterargument that agencies ought to hold the real power because "Congress… gives an expert agency the power to address issues — even significant ones — as and when they arise."

What Kagan was really saying is that elected officials can’t handle running the government. And that’s true enough. It’s not just that Congress passes bills without reading them, it has even less idea of what those bills and how they will be implemented. Government has become unaccountable and three Supreme Court justices believe that we should be ruled that way.

Kagan's dissent fumed that expecting agencies to rely on Congress to pass laws would "prevent agencies from doing important work” and lambasted the “anti-administrative-state stance” of the conservative “majority opinion". “Climate change’s causes and dangers are no longer subject to serious doubt how to address climate change. And let’s say the obvious: The stakes here are high,” she wrote, insisting that the manufactured crisis would kill millions unless the bureaucrats were empowered and unleashed to handle the emergency by controlling our lives.

The temporary state of emergency of the New Deal has become a permanent emergency with a rotating list of crises that traditional constitutional authority is incapable of meeting.

"Whatever else this Court may know about, it does not have a clue about... it does not have a clue about how to address climate change," Kagan complained.

That message, always present, has become deafening in the era of the pandemic, the latest in a series of crises which only the experts are qualified to handle while elected officials are told their job is to keep the people from interfering with the delicate business of crisis management.

The highest court in the land, Kagan insists, isn’t qualified to interfere with the EPA’s experts.

A hereditary monarchy has been replaced with hereditary crises and an expert class of philosopher kings who claim to have all the answers and therefore all of the authority.

The Supreme Court could have done far more to roll back the unlimited authority of federal agencies. Chevron deference remains intact and the decision, written by Justice Roberts, is far too narrow, but it’s also a crack of light in the darkness of a free nation that is not actually free.

What has touched off all that fear in the administrative state was merely Justice Roberts, the most liberal Republican appointee on the court, writing that an "agency instead must point to 'clear congressional authorization' for the power it claims."

The fury over that modest proposal reveals how America is really run. And who runs it.

The media narrative seeks to convince Americans that the Supreme Court is radical and seizing unprecedented powers when it’s really the other way around. In the last few years, agencies have seized unprecedented power over every area of American life. The Biden administration has argued in court that the CDC can issue an eviction moratorium and that OSHA can force workers to get vaccinated. Big government was using a crisis to wield unlimited authority with agencies seizing the thinnest pretext of authority to weigh in on entirely unrelated areas.

West Virginia v. EPA is a response to unprecedented power grabs in which the country is increasingly ruled by ‘pen and paper’ executive orders to a vast omnipotent bureaucracy.

It’s not a final reckoning, but it’s a revolution against a tyranny that has virtually eliminated meaningful self-government and the power of the people. And it’s a long overdue revolution.

“He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance,” the Declaration of Independence accused King George III.

The multitude has only increased. And our substance is all but eaten out.

Daniel Greenfield is a Shillman Journalism Fellow at the David Horowitz Freedom Center. This article previously appeared at the Center's Front Page Magazine.

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About Daniel Greenfield
Daniel Greenfield is a journalist investigating Islamic terrorism and the Left. He is a Shillman Journalism Fellow at the David Horowitz Freedom Center

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New Civil Liberties Alliance Pushes Back Against Administrative Overreach

May 30, 2022 Francis Menton @ Manhattan Contrarian

Last week I had a post titled “A Chink In The Armor Of The Progressive Administrative State.” The post discussed a recent case out of the Fifth Circuit Court of Appeals, Jarkesy v. SEC, where the Fifth Circuit ruled that an SEC prosecution of Mr. Jarkesy before its own Administrative Law Judge violated the Constitution for, among other things, denying Mr. Jarkesy his right to a jury trial, and giving the SEC unfettered discretion to decide which of its prosecutions can avoid federal District Court jurisdiction.

In the Jarkesy case, a relatively new organization called the New Civil Liberties Alliance played a significant role as amicus. Founded only five years ago (2017) by Philip Hamburger, a constitutional law professor at Columbia Law School, the NCLA has quickly made a big mark for itself in the field of constitutional litigation. Hamburger was the author of the 2014 book Is Administrative Law Unlawful?, which, although perhaps addressed to a somewhat narrow audience of nerds such as myself, nevertheless has created shock waves in the complacent world of federal bureaucrats who had for decades engaged in rampant unconstitutional practices without effective challenge.

The NCLA specifically focuses its efforts on areas where the administrative state has somehow until now managed to insulate the most blatantly unconstitutional practices from judicial scrutiny. If you start looking at these things, it is truly amazing what the bureaucracies have been able to get away with for years and often decades. The NCLA does not confine itself to filing amicus briefs in important cases, but also in many instances acts itself as lead or co-counsel to many of the parties challenging unconstitutional administrative actions. For today, I’ll highlight just three recent matters where the NCLA itself acts as counsel to the non-government parties:

• Cochran v. SEC. As in Jarkesy, Ms. Cochran is being prosecuted by the SEC before its own Administrative Law Judge. Why does any defendant tolerate being subject to such an obviously unconstitutional procedure? It turns out that, under a provision of the Securities Exchange Act of 1934 and the doctrine of “administrative finality,” multiple of the courts of appeal have held that a defendant prosecuted by the SEC in such a proceeding cannot go to court to enjoin the proceeding, but rather must go through the proceeding to the end, and suffer the inevitable loss in this rigged forum, before he can have access to a court. The NCLA took on Ms. Cochran’s case, and took it to the Fifth Circuit Court of Appeals, which had not previously ruled on the issue of whether a defendant in an SEC Administrative proceeding could challenge that proceeding in court before going all the way through to the end. In an en banc decision in December 2021, the Fifth Circuit ruled that Ms. Cochran has the right to challenge the constitutionality of the administrative procedure before undergoing the full administrative adjudication. In light of the split among the circuits, the Supreme Court granted certiorari in Ms. Cochran’s case on May 16.

• FDRLST Media v. National Labor Relations Board. FDRLST Media is the entity that publishes the Federalist website, a right-leaning site that is home to some excellent reporting on issues that have recently including such things as the Hunter Biden laptop and the Fairfax County parents’ protests against their school board. In June 2019, after media reports that reporters at left-leaning site Vox had walked off the job during union contract negotiations, Ben Domenech, executive officer of the Federalist, tweeted “FYI @fdrlst first one of you tries to unionize I swear I’ll send you back to the salt mine.” A member of the public with no relationship to the Federalist promptly filed an “unfair labor practices” complaint with the NLRB — and the NLRB staff in response initiated complaint against Domenech, again prosecuted before its own ALJ. It appears that the NLRB staff thinks its mission includes silencing conservative speech critical of unionization, particularly anything that might involve humor. In November 2020 the ALJ ruled that Domenech’s tweet constituted an unfair labor practice under the National Labor Relations Act, because it was “an obvious threat” to the employees. NCLA represented FDRLST Media and Domenech in taking the case to the Third Circuit Court of Appeals. On May 20 the court ruled for FDRLST and Domenech. The court held that the complainant was not “aggrieved” within the meaning of the NLRA, and also that the best reading of Domenech’s tweet was that it was humor rather than a “threat.”

• Romeril v. SEC. In 2003 Mr. Romeril settled a case with the SEC. The SEC requires, as part of any settlement with the Commission, that the defendant agree to a permanent lifetime ban on

  “ever even ‘indirectly’ leaving the ‘impression’ that ‘any allegation’ in the Commission’s original complaint is ‘without factual basis.’” 

  Some sixteen years after agreeing to those conditions, Mr. Romeril now wants to speak about the circumstances of the case where the SEC pursued him. He took his claim to the Southern District of New York, and then to the Second Circuit, where he lost both times. The NCLA now represents him in a petition for certiorari to the Supreme Court. The final briefs on that petition were just filed on Friday May 27. As NCLA points out in the brief in support of its cert. petition, 

  “As a result of the SEC’s gag policy, Mr. Romeril has been unable for over 18 years fully to discuss his case publicly, a sanction that, as a matter of well- established First Amendment law, could not have been imposed on someone convicted of treason or of murdering the highest-ranking federal officials.”

These are just a small sample of what the NCLA is up to. A complete list of their current cases can be found at this link. It’s about time that someone is giving some effective pushback against some of the worst practices of the administrative state.

 

A Chink In The Armor Of The Progressive Administrative State

Francis Menton @ 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.

 

Federal Courts Reveal Move Back to Enumeration Doctrine

By Douglas V. Gibbs ——Bio and Archives--May 23, 2022

 The Fifth Circuit Court of Appeals told the Securities and Exchange Commission that they could no longer legislate from within, nor hold court within the agency. Those charged have a right to a jury trial, said the court.

The move was based on the Enumeration Doctrine. Nowhere in the Constitution of the United States does it expressly authorize any agency to handle legislative activities or judicial activities within the agency. According to Article I, Section 1 of the Constitution, all legislative powers (the powers to make law, modify law, and repeal law) belongs to the legislative body of government, which, at the federal level, is the United States Congress. 

One might argue that the legislatures gave the agency the authority to make rules and to hear any challenges or make rulings regarding rule-breaking. However, in Article I, Section 1 the word used regarding the legal transfer of legislative powers from the States to Congress is “vested,” which means the authority cannot be given away by the legislative branch. As per the Separation of Powers doctrine, only the legislature can legislate, and they cannot legally hand those powers off to another branch of government............To Read More...

 

The Dubious Premise for Expanding the Regulatory State

Ethan Yang  – May 10, 2021

In the US, there are two basic ways in which the government exercises power over its citizens. The first is through the legislative process, which is the basic high school civics method. Elective representatives in the legislature vote on a bill and the president signs or vetoes it. This is primarily how laws are meant to be made in a representative democracy. 

Then there is the administrative process of rulemaking and guidance, which is run primarily by unelected bureaucrats that provide a level of technocratic expertise. Such agencies include organizations like the Environmental Protection Agency, the Department of Education, the Department of Motor Vehicles, and so on. These agencies exist to make rules on the margins to make sure that laws passed by Congress, which is comprised of democratically accountable representatives, accomplish their intended purpose. 

Of course today this is not the case. Administrative agencies have practically become an independently operating governing body, exerting control over the general population with little democratic accountability or transparency. Philip Hamburger notes in his work titled Is Administrative Law Unlawful? that,

“Administrative law has by now dwarfed statutory law and has become the federal government’s pervasive mode of dealing with the public. Therefore, rather than merely a means of completing the work of Congress and the courts at the margins, administrative power has become central.”

In a previous article, I summarized the rise of the administrative state from a handful of agencies at the beginning of the republic to its current structure where there are now more federal agencies than there are elected officials in the House of Representatives. The rise of the administrative state dates back to the big-government Progressive visions of men like Woodrow Wilson and Franklin Roosevelt while seeing rapid expansion in the 1970s. However, much of the modern administrative state is a product of the Obama administration. Peter Wallison cites distinguished legal scholar Christopher DeMuth when he notes,

“In the Obama years, DeMuth observes, the expansion of executive power essentially became lawless: “[T]he most dramatic departure in executive government in the years following 2008 was sheer unilateralism — executive agencies, and frequently President Obama personally, effecting major policy changes in defiance of reasonably clear statutory requirements, often on grounds that Congress had failed to enact them.”

This was an inevitable development for the administrative state. At its core, the growth of the regulatory apparatus was premised on the idea that sometimes the legislature is too slow and too divided to pass laws to better society. In practice, its unilateral growth and power is simply an expedited way of cramming down a political agenda from the highest level of government.

This notion is supported by a book review defending the administrative state published by the Harvard Law Review which opens with the following statement about a debate on the matter, 

“Speaking at Yale Law School in 1938, Dean James Landis offered a powerful defense of President Franklin Roosevelt’s New Deal, and in particular its innovation of new federal administrative agencies. “The administrative process,” declared Landis, “is, in essence, our generation’s answer to the inadequacy of the judicial and the legislative process.”

The article includes the counter-argument by writing,

“The eminent Dean Roscoe Pound, then chair of an American Bar Association special committee evaluating the rise of the New Deal administrative state, saw the mixing of legislative, executive, and adjudicatory functions in agencies like the Securities and Exchange Commission (SEC) — which Landis himself designed and later chaired — as tantamount to “administrative absolutism.”

Today, with the expansive rulemaking authority which administrative agencies continually possess, the fears of Dean Pound are continuing to realize themselves. An article produced by Ascent on financial regulation notes,

50 percent of respondents to a Risk Management Association survey said they spend 6-10 percent of their revenue on compliance costs. Large firms report that the average cost of maintaining compliance runs approximately $10,000 per employee. Global banks and large brokers that have upwards of 20,000+ employees could end up spending a staggering $200 million+ in compliance every year…

Though startling, even these numbers show only a static snapshot. They fail to capture the acceleration of regulatory change and the level of regulatory complexity, which have both exploded over the last decade. Regulatory change has increased 500 percent since the 2008 global financial crisis and, unsurprisingly, has heightened regulatory costs in the process. 

This is just on financial regulation. The administrative state continues to expand into vast swathes of the economy, imposing rules that are often complicated, costly, and counterproductive. In a review of legal scholar Richard Epstein’s book, The Dubious Morality of Administrative Law, The Federalist Society writes,

“This failure is closely connected to the modern regulatory climate insofar as federal statutes impose “comprehensive systems of government control on the environment, drug development, telecommunications, and labor relations, among other fields,” giving agencies broad powers to intervene. Weak protections for property rights and broad grants of rulemaking authority enable agencies to regulate broad swaths of the economy without sufficient regard for the interests of the regulated entities.”

In his book Simple Rules for A Complex World (which I reviewed here), Epstein outlines the serious issues caused by the expansion of the regulatory state into all areas of economic and social life. He argues for a radical shift to a more simplistic set of primary ground rules such as basic protections to contracts, exchange, and individual rights while allowing private discretion to run uninterrupted insofar as it does not violate those rules. This is also congruent with the work of Nobel Laureate Elinor Ostrom, whose award-winning work covered how the shared distribution of power amongst private and public actors leads to far better outcomes compared to when it is wielded by a single entity. The government ought to set some basic operating rules but decision-making should largely be dispersed across the private sector and left to voluntary interactions. 

The Questionable Case for the Expanding Administrative State 

Today there is a debate much as there was during the 20th century about the danger or necessity for empowering the bureaucratic arm of the government. Today, it seems that the case for an ever growing regulatory apparatus seems to be shrinking by the day as the damage makes itself more apparent. To summarize the best case for the continued expansion of the regulatory state, K. Sabeel Rahman writes for the Harvard Law Review by noting,

“If we are in the midst of a “Third Reconstruction” seeking to finally make good on the aspirations for economic, racial, and gender inclusion after the ups and downs of the twentieth century, the administrative state will be a critical institutional source of power and policymaking.”

It is clear that the regulatory state does not make society more efficient, and it does not make it more innovative. It can be argued that it doesn’t even make it safer, but perhaps the regulatory state can shape society in a more democratic fashion to achieve political goals. 

This argument is flawed in two major capacities, one practical and the other philosophical. The practical flaw is that oftentimes most regulations do not work as intended and do not accomplish the aforementioned goal of making society a more equitable place. They typically only induce higher cost and difficulty on the individuals that must comply while benefiting entrenched economic interests such as large corporations as well as labor unions that wield power. 

One does not have to look any further than efforts by taxi cab unions to lobby for regulations against ride-sharing apps like Uber. This has little to do with improving public safety and everything to do with using the power of the administrative state to stamp out competition at the expense of society. Chris Edwards, a scholar at the Cato Institute cites a study conducted by the National Association of Manufacturers by noting,

“In manufacturing, they found that the per employee regulatory costs for small businesses were 152 percent higher than the costs for large businesses.”

Such a dynamic is emblematic of the regressive effects of policies that are progressive in their purpose. There is also the common-sense realization inherent to public choice theory that government is not composed of angels. It is composed of human beings with human limitations on what they can accomplish and limitations on their integrity. Giving ever-increasing power to regulatory agencies believing they will accomplish their lofty goals and run society better than it can run itself is a flawed idea from the start. 

The second and perhaps the most important flaw with the argument that the expanding regulatory state is necessary to democratically mold society is the fact that such a democratic mandate is not only flawed, but it doesn’t exist. The expanding regulatory state is often premised on the idea that powerful economic interests must be combatted to forward the public interest. However, the fact of the matter is that the public interest is a vague buzzword that is simply an arbitrary political interest. One cannot possibly justify the idea that the vast expansion of the regulatory state into economic and social life is in the interest of the general public. Whether the cause is enforcing gender or racial parity, redistributing income, discouraging soda consumption, mandating prayer, banning menthol, or forcing people to exercise, such “public interests” are merely the focus of those in power and the specific interest groups that back them. 

Arbitrary political interests are meant to be enacted by the legislative process where they can be debated, vetted and their architects ultimately held accountable. Looking to the regulatory state, which can essentially act as judge, jury, and executioner, to pass one’s political mandate not only exhibits a disdain for the lives of individual citizens but is also tyrannical in nature. It is a telltale sign of a philosophical outlook that only values liberal democracy insofar that it forwards one’s political goals rather than as a system that exists to build consensus in governance while protecting individual liberty. 

READ MORE

Ethan Yang

Ethan joined AIER in 2020 as an Editorial Assistant and is a graduate of Trinity College. He received a BA in Political Science alongside a minor in Legal Studies and Formal Organizations.

He currently serves as Local Coordinator at Students for Liberty and the Director of the Mark Twain Center for the Study of Human Freedom at Trinity College.

Prior to joining AIER, he interned at organizations such as the American Legislative Exchange Council, the Connecticut State Senate, and the Cause of Action Institute.

Ethan is currently based in Washington D.C.

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The misguided Affordable Clean Energy rule

Why is the US EPA still determined to control plant food and drive up electricity prices?

Dr. Tim Ball and Tom Harris

On August 29, 2018, the U.S. Environmental Protection Agency (EPA) issued a press release “EPA Acting Administrator tours Ohio to promote ACE rule,” his proposed Affordable Clean Energy rule.

According to the release, the Trump Administration’s proposed rule will “replace the Clean Power Plan [CPP] and establish emission guidelines for [U.S.] states to develop plans to reduce greenhouse gas emissions.”

But the new rule is still misguided. Like the CPP, it is based on the mistaken idea that human activities, and particularly our industries and electricity generators, are causing dangerous global warming.

In reality, increasing atmospheric levels of carbon dioxide (CO2), the only gas restricted by both the ACE and the CPP, is bringing huge benefits across the terrestrial biosphere. CO2 is an essential ingredient in photosynthesis. The last thing we should be doing is trying to reduce this “plant food.” So why is it that, even under President Trump, the EPA still finds it necessary to restrict CO2 emissions? Let’s review a bit of history. To increase government control over the economy, the Obama White House strongly supported the climate scare: the unfounded crusade to restrict CO2 emissions. The impact was and would be profoundly harmful. As MIT atmospheric meteorologist Richard Lindzen has said, “Controlling carbon is a bureaucrat’s dream. If you control carbon, you control life.”

Obama achieved his goals using the “deep state” – influential, unelected, decision-making, unaccountable government bureaucrats, whose policies and long-term goals are mostly unaffected by changes in elected officials. In particular, the Environmental Protection Agency (EPA) was central to his administration’s control of carbon in the form of CO2.

Obama knew he could not get the Paris Agreement on climate change through the Senate because – just before the rest of the world adopted the UN’s 1997 Kyoto Protocol in Japan – the Senate unanimously passed the Byrd/Hagel Resolution. This resolution stated that the United States should not be a signatory to any agreement that did not hold developing countries to similar targets as developed nations. In particular, the document said in part: Resolved, that it is the sense of the Senate that –

(1) the United States should not be a signatory to any protocol to, or other agreement regarding, the United Nations Framework Convention on Climate Change of 1992, at negotiations in Kyoto in December 1997, or thereafter, which would – 

(A) mandate new commitments to limit or reduce greenhouse gas emissions for the Annex I Parties, unless the protocol or other agreement also mandates new specific scheduled commitments to limit or reduce greenhouse gas emissions for Developing Country Parties within the same compliance period The Paris Agreement does indeed have very different targets for developing and developed countries. So Obama asserted that Paris should not be considered a “treaty,” and so would not require Senate approval.

To get “rulings” that seemed to legitimize the EPA’s control over CO2 without going through Congress, Obama exploited a growing problem with the Constitutional balance of powers: the increasing tendency of the Judicial Branch to rule from the bench and make decisions that were properly Legislative Branch responsibilities. The The EPA website explains   how it was able to bypass Congress and control CO2: gases

On April 2, 2007, in Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court found that greenhouse gasesgases [including CO₂] are air pollutants covered by the Clean Air Act. The Court held that the [EPA] Administrator must determine whether or not emissions of greenhouse gases from new motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision.

Predictably, on December 7, 2009, the EPA issued its “Endangerment Finding” that GHG emissions did indeed threaten health, asserting:

The Administrator finds that the current and projected concentrations of the six key well-mixed greenhouse gases – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) – in the atmosphere threaten the public health and welfare of current and future generations.

and:

The Administrator finds that the combined emissions of these well-mixed greenhouse gases from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas pollution which threatens public health and welfare.

This is the flawed driver, the faulty reasoning, that underlies both the CPP and the ACE. Ironically, under the EPA definition of “air pollutant,” EPA could even include oxygen because it causes rust.

It is likely that the EPA colluded with the State of Massachusetts to get it to sue the EPA in support of designating GHGs as pollutants. In effect, the state claimed that the EPA was endangering the lives of its citizens by failing to control “harmful” CO2.

The trial transcript strongly suggests that EPA deliberately lost the final Supreme Court case. If it had properly defended itself, the case would have exposed all the lies and misinformation already pedaled to convince the public that dangerous human-caused global warming is a proven scientific fact.

The trouble is, most people think about this case in the context of criminal or civil law. In fact, and this is central to the problems created by unaccountable bureaucrats, it was adjudicated under Administrative Law  (AL), a third component of the U.S. legal system.

Created just after World War II, AL allows groups and individuals to bypass the Constitution and Congress. It gives direct, unaccountable power to technocrats, subject matter experts who are members of highly skilled elite groups. The creation of AL speaks to the failure of the political class, but also to the manipulative power of technocrats and technocracy.

It was created because too many politicians cannot understand science and technology. They are afraid of making a mistake and exposing their ignorance, which would jeopardize their political careers. Instead of creating legislation that enables them to get information in ways they can understand, they give nearly complete control of issues involving science and technology to scientists, specialists and technologists. Here is what the Administrative Law does,

The executive, legislative, and judicial branches of the US federal government cannot always directly perform their constitutional responsibilities. Specialized powers are therefore delegated to an agency, board, or commission. These administrative governmental bodies oversee and monitor activities in complex areas, such as commercial aviation, medical device manufacturing and securities markets.

Simply put, if legislators can’t decide these matters in the first place, they won’t know if what the experts are telling them is the truth, or an exaggeration, manipulation or fabrication.

Justice Scalia summarized the situation when the case came before the Supreme Court in 2007:

The Court’s alarm over global warming may or may not be justified, but it ought not distort the outcome of this litigation. This is a straightforward administrative-law case, in which Congress has passed a malleable statute giving broad discretion, not to us but to an executive agency. No matter how important the underlying policy issues at stake, this Court has no business substituting its own desired outcome for the reasoned judgment of the responsible agency.  

As forceful and persuasive as Justice Scalia’s comments were were, (here is his dissent in full), there is one massive hole in them that illustrates what is wrong with AL, not only in this case, but in almost every case where it is the basis for judgment.

It was the EPA that determined that CO2 was a harmful substance. The Supreme Court is in the foolish position of effectively ruling that the EPA must control a harmful substance that the EPA decided, with little evidence, was a harmful substance.

No wonder so many bureaucrats take positions with technocrat groups after they leave government. They can guide the groups on how to get what they want without having to bribe politicians.

The EPA was the central agency for creating, perpetuating and applying the myth that that CO2 is a harmful substance that is causing runaway global warming. Its bureaucrats wrote and promoted the biggest deep state fake news story of all time. President Trump must continue to rein them in.

Dr. Tim Ball is an environmental consultant and former climatology professor at the University of Winnipeg. Tom Harris is executive director of the Ottawa, Canada-based International Climate Science Coalition.