It’s crucial to remember, however, that a prior liberal/Progressive SCOTUS created the regulatory powers of the Administrative State. These court-created powers lasted for many decades and greatly diminished Congress’s powers to control the Administrative State.

To prevent a return to an all-powerful, court-sanctioned Administrative State, it is imperative that Congress seizes this period of anticipated regulatory sanity to codify and expand the court’s decisions. The role of congressional action in preserving this victory cannot be overstated. After being absent from the regulatory reform debate for decades, Congress must now actively protect the benefits of these recent decisions.

The three SCOTUS decisions are excellent examples of how, in the absence of Congress, the federal judiciary can allow regulators to take on the trappings of a “Star Chamber” that can only be dismantled by a future court.

In Loper Bright Enterprises v. The Secretary of Commerce, the court reversed the forty years of deference courts gave to federal agencies under Chevron vs. NRDC. Chevron’s legal and economic impact is gargantuan. At the time of the Chevron decision in 1984, the federal bureaucracy had issued approximately 65,000 regulations since the beginning of the Administrative State. After Chevron, the tentacles of the Administrative State expanded to control almost every aspect of society, including the products made, the information provided, and the energy it used. By 2023, the bureaucracy had issued 215,500 regulations costing the economy approximately $2 trillion to implement annually.

The courts dutifully applied Chevron’s deference. Seventy future SCOTUS  decisions relied upon it, and it was cited in 17,000 lower court decisions. By removing agency deference, SCOTUS returned agency rulemaking power to Congress’s original intent, formulated in its Administrative Procedure Act (“APA”)—that judges, not bureaucrats, make independent interpretations of the law.

In the second case, SEC vs. Jarkesy, the court struck down the power of federal agencies to act as regulators, judges, and executioners, which could impose substantial civil penalties without providing the defendant’s Seventh Amendment right to a jury trial.

While Jarkesy sought judicial review in a federal court, the SEC forced him to adjudicate the matter in-house. The agency’s administrative law judge levied a $300,000 fine on Jarkesy and ordered the disgorgement of $685,000 in illicit profits for violations of the anti-fraud provisions in federal securities law. Jarkesy petitioned the Fifth Circuit Court of Appeals for judicial review, arguing that he had the right to a jury trial since the SEC sought penalties. The federal appellate court agreed with Jarkesy.

The Supreme Court upheld the appellate court’s finding. It is reasoned that when an agency seeks to impose civil penalties, the action is in the nature of punishment. Since punishment at common law was imposed by courts holding jury trials, Jarkesy was entitled to a jury trial.

The ruling in Jarkesy is significant because federal agencies hire several thousand ALJs to hear evidence and make judicial decisions. These administrative proceedings are very costly to defendants but are more comfortable for agencies since the outcome is determined by their paid-for, in-house “judges.”

Loper and Jarkesy build upon  WVA v. EPA, the case in which SCOTUS formulated its Major Questions Doctrine requiring an agency to establish statutory authority when transforming long-standing policy into a dramatically new one. EPA historically applied section 111 of the Clean Air Act only to specific energy sources at particular locations. Suddenly, the EPA “discovered new authority” and authorized itself to determine what types of electrical power could be generated and distributed to the nation. SCOTUS found that EPA lacked the statutory authority to transform its facility-by-facility approach to clean air regulation into the power to regulate the entire electricity grid. The critical aspect of its ruling is that when federal agencies suddenly change long-established policies, the agency must prove Congress granted them such authority.

In the three cases, SCOTUS reversed long-established positions that agencies could fill in the legislative blanks in the law, force citizens into trials controlled by agency-paid judges, and unilaterally extend regulatory powers to “newly discovered activities.”

The dramatic change in the court’s judicial philosophy exhibited a newfound respect for Congress as it searched for its congressional intent or any constitutional support for agency activity

For those familiar with our Constitution and congressionally written laws, it’s clear that vagueness is omnipresent in most texts. This understanding should raise concerns about the potential for a future SCOTUS with a liberal/Progressive majority to reverse the current limits. Such a reversal could allow agencies to once again operate as unsupervised lawmakers, thereby potentially making them supreme in the lawmaking process. This potential imbalance underscores the need to preserve the recent SCOTUS decisions.

While conservative Republicans in Congress for decades voiced concerns over the growth of the regulatory state, they could not secure the votes to restrain the system created by the liberal/Progressive SCOTUS.

Only the 115^th Congress seriously attempted to reform the APA and, by implication, the Administrative State through the proposed Regulatory Accountability Act (“RAA”). The RAA sought to reform the rulemaking process to ensure final rules were based on sound facts and law, inadequate science could be challenged, major rules were subject to on-the-record hearings with cross-examination, and courts, not regulators, interpreted the law.

The House passed the RAA several times. A Republican Senate even voted it out of committee; however, Senate leadership under Mitch McConnell, a patron of the Administrative State, refused to bring the legislation to the floor. This effort was Congress’ first and last serious attempt to reform the Administrative State since its creation in 1946.

In the final analysis, agencies will fight to the last rulemaking proceeding to expand their regulatory powers. The Biden administration recently proved the truth of the assertion by forgiving additional student loan debt after a conservative SCOTUS declared such actions beyond the powers granted to the Executive by Congress. While the current SCOTUS has significantly limited the power of agencies to make new laws without congressional authority, a future liberal/Progressive court could reverse these limits. It is up to Congress to place statutory limitations on an agency’s power to make laws without authority from Congress. Such action is necessary if Congress is to reclaim and retain its constitutional role as the nation’s sole legislative authority.

William L. Kovacs, author of Devolution of Power: Rolling Back the Federal State to Preserve the Republic. Received 5 stars from Readers’ Favorite. His previous book, Reform the Kakistocracy, received the 2021 Independent Press Award for Political/Social Change. He served as senior vice president for the U.S. Chamber of Commerce and chief counsel to a congressional committee. He can be contacted at wlk@ReformTheKakistocracy.com

The post SCOTUS Ignites a Regulatory Reform Revolution appeared first on The Libertarian Republic.

For decades, there have been concerns about the federal government’s growing power, size, and cost. Nothing, however, has been done to address it. It just expands. Why? Is it an uncontrollable deep state, an unmanageable bureaucracy, or just too complex? While a solution is always available, the federal government benefits significantly from the Administrative State. It opposes change.

The term Administrative State describes the power of Executive branch agencies to create, adjudicate and enforce their own rules. Congress enacted the Administrative Procedure Act in 1946 (“APA”) to exert control over the administrative State by establishing procedures for federal agencies to make and enforce regulations. Unfortunately, over time the agencies, with the help of the courts, found ways around APA restraints.

Unfortunately, Congress has been unable to substantively amend the APA in the 76 years since its enactment, notwithstanding that the federal courts have expanded agency power by granting deference to their interpretations of the law. Judicial deference is a critical component of the Executive’s regulatory power. Applying it diminishes the lawmaking power of Congress by tipping the scales in favor of Executive branch interpretations.

Today, the Administrative State is a massive collection of unelected federal officials, except the president, that has issued 212,271 rules since 1976. Its regulatory tenacles control almost every aspect of society, from the food we eat to the health information given to us. Regulatory costs are estimated at $1.9 trillion in 2021.

Can the administrative State be reformed?

The 115^th Congress made a serious attempt to reform the APA, and by implication, the administrative State, through the Regulatory Accountability Act (“RAA”). The RAA sought to reform the rulemaking process to ensure final rules were based on sound facts and law. The House passed the RAA. The Senate voted it out of committee; however, Senate leadership refused to bring it to the floor. This effort was Congress’ first and last serious attempt to reform the administrative State.

While Congress has shown little ability to control federal agencies, the courts are now recognizing that the U.S. has an out-of-control regulatory process in need of restraint.

In December 2022, the Ohio Supreme Court, in TWISM Enterprises v. Board for Registering Professional Engineers, rejected “[A]ll forms of mandatory deference.” The case involved a rule that independent contractors could not be in charge of engineering projects since they were not full-time company employees. The Ohio Engineering Board received judicial deference for its interpretation from the lower courts. The Ohio Supreme Court reversed, finding there was no statutory language precluding independent contractors from serving as full-time managers of an engineering firm. It held the principle of separation of powers precludes any mandatory deference to agency regulations that interpret a statute. Under the principle of separation of powers, only courts can interpret the law, not agencies. Deference to agencies produces “systematically biased judgments” that permit the executive branch “to say what the law means,” a clear intrusion into judicial authority.

The Ohio court also noted, “Roughly half the states in the Union review agency interpretations de novo.” The Ohio court’s decision provides the reasoning the U.S. Supreme Court needs to restore the principle of separation of powers at the federal level, a principle it abandoned in Chevron when it granted agencies almost unfettered discretion to create law.

Moreover, the U.S. Supreme Court is also moving to restrict agency lawmaking. In WVA v. EPA, the court reviewed an EPA rule that relied upon section 111 of the Clean Air Act to regulate the types and amounts of energy that could be carried on the electricity grid. Before EPA’s “new found authority,” it applied section 111 only to specific energy sources at specific locations.

Like the Ohio court, the Supreme Court examined the power Congress granted the agency. It described EPA’s attempt to assume “unheralded” regulatory power as a “transformative expansion in [its]regulatory authority” over the American economy. It concluded Congress did not grant the agency the authority to set emission caps based on shifting the percentage generation of fuels that could be carried on the grid.

Recognizing that agencies use “vague language of a long-extant, but rarely used statute[s]” to create new law,” it announced the “Major Questions Doctrine, requiring agencies to point to “clear congressional authorization” when issuing expansive rules.

The uncontrolled growth of the administrative State results from the Executive constantly seeking more power, courts that, until recently, fostered the expansion of executive power, and a Congress that has failed to provide aggressive oversight of agency actions and spending. If the courts continue to restrain the expansion of agency power, reform of the administrative State will be accomplished without Congress performing its constitutional duties.

If the U.S. Supreme Court, in its next deference case, adopts reasoning similar to the Ohio Supreme Court’s decision and it actually enforces its “Major Questions Doctrine,” it will put federal agencies back into their constitutional boxes. At that point, going forward, all that is needed to maintain our constitutional separation of powers is for each branch to do its job by constantly checking the powers of competing branches.

.

The post Congress Fails, Courts Prevail in Reforming Out-of-Control Federal Agencies appeared first on The Libertarian Republic.

From its first days, the Biden administration was using agencies to impose laws without congressional authority. The court noted it rejected the Biden administration’s use of the Occupational Safety and Health Act (OSHA) to mandate 84 million Americans either obtain a Covid-19 vaccine or submit to weekly testing. It also discussed its rejection of the Centers for Disease Control and Prevention’s asserted authority to impose a nationwide eviction moratorium to stem the spread of Covid. Recognizing that federal agencies “were asserting highly consequential power beyond what Congress could reasonably be understood to have granted,” it took up the EPA’s efforts to impose a climate change law by regulation.

The EPA and environmentalists (at times referred to jointly as the “environmental community”) sought, without any specific statutory authority, to impose a  comprehensive and costly regulatory structure to address climate change. To determine the extent of the EPA’s authority, the Supreme Court took up a case brought by the state of West Virginia, West Virginia vs Environmental Protection Agency (WVA v. EPA).

The court reaffirmed the legislative power of Congress holding that agencies cannot legislate without specific congressional authority.

To resolve the issue of whether agencies can make new laws by regulation, the Supreme Court, for the first time, announced the “Major Question Doctrine,” for analyzing an agency’s authority to regulate. The court made clear that regulatory agencies can only act on matters of economic and political significance if the agency… point[s] to ‘clear congressional authority.’”

While the Supreme Court could have narrowly resolved the controversy (EPA’s “new found authority” to impose a cap-and-trade scheme for carbon emissions) using statutory construction, it recognized that many agencies were finding “vague language of a long-extant, but rarely used, statute[s]” as authority to regulate major economic and political issues without congressional authorization. The climate debate was the perfect set of facts for clarifying the roles of Congress and agencies.

Congress consistently rejected climate legislation

The court noted, “Congress, however, has consistently rejected proposals to amend the Clean Air Act to create such a program [regulating climate change].” It cited the American Clean Energy and Security Act of 2009, the Clean Energy Jobs and American Power Act of 2009, the Climate Protection Act of 2011, and Save our Climate Act of 2011. There were many more failed attempts by the environmental community to enact a comprehensive legal structure to address climate change: The Kyoto Protocol (Senate voted 95-0 against ratification), The Paris Agreement (Lacking votes, it was never submitted as a Treaty); McCain-Lieberman, Kerry-Lieberman-Graham, and others that never received a vote. Congress clearly spoke.

Efforts to make law by litigation

Realizing Congress would not impose a massive climate change scheme on American society, the environmental community orchestrated a nationwide litigation campaign to persuade courts to impose such a system. It filed lawsuits across the nation under any statute that might relate to climate change – Clean Air Act, (186), Endangered Species and other wildlife statutes (174), National Environmental Protection Act (322), Clean Water Act (58), miscellaneous land use statutes (168), constitutional claims under the Commerce Clause (20), First, Fifth and Fourteenth Amendments (41); under state laws (464), common law (29), public trust (27) and securities and financial statutes (24). The environmental community had some successes; however, its overreach ended in a defeat for the administrative state.

Using Executive Orders to make climate law

On Biden’s first day in office, he issued several Executive Orders to address climate change. Biden further directed all executive departments to place a moratorium on oil and gas leasing programs and establish the Social Cost of Carbon to justify the high cost of the regulatory structure. A week later, Biden ordered a whole-of-government approach to address climate change. This order was followed by the SEC’s proposed climate disclosure rules which again raise the question of identifying the needed congressional authority.

The futile regulatory march to circumvent Congress ends

While the environmental community worked for decades to impose a climate change law by regulation or litigation, it was the Biden administration’s sheer arbitrary use of the regulatory process that captured the Supreme Court’s attention.

As the environmental community was suffering legislative defeat after defeat, Obama’s EPA issued an “endangerment finding” that greenhouse gases contributed to man-made climate change that may endanger public health and welfare.  This finding served as the foundation for the EPA’s Clean Power Plan (CPP) regulations, the issue decided in WVA v. EPA.  The CPP was a cap-and-trade rule. President Trump repealed the CPP and put in its place the Affordable Clean Energy rule that limited EPA’s regulatory power to available emission reduction technologies, consistent with the Clean Air Act. On Trump’s last day in office, the DC Circuit Court of Appeals vacated the Trump rule; however, before President Biden could reinstate a new CPP rule, the Supreme Court accepted the case for review.

The Supreme Court establishes regulatory sanity

While the Supreme Court held that “Congress could not have intended to delegate a decision of such economic and political significance (regulation of climate change) to an agency [EPA] in so cryptic of a fashion,” its decision limits the regulatory power of all agencies to enact major political and economic matters unless the agency can point to “clear congressional authority.”

Had the environmental community been successful in expanding the authority of agencies to regulate climate change without statutory authorization, many agencies would search for and find “long-extant authorities” to further diminish the role of Congress. By reaffirming the constitutional powers of Congress, and placing limits on the Executive’s power to legislate using the rulemaking process, the Supreme Court also solidified its role as a co-equal branch of our government.

The most gratifying aspect of the long battle over the power of EPA to regulate climate change is the ironic ending to the struggle. In the end, the EPA’s aggressive regulatory overreach resulted in limits being placed on the regulatory powers of all federal agencies.

The post The Supreme Court Ends Federal Agency Lawmaking appeared first on The Libertarian Republic.