The editors of the Wall Street Journal point to two recent appellate court cases on the role of federal agencies:
Elizabeth Warren touts her creation of the Consumer Financial Protection Bureau as a major accomplishment, and expect regulatory agencies shielded from accountability to proliferate in a Warren Administration. But as a recent appellate ruling suggests, the courts may prove an obstacle to such bureaucratic entrenchment.
An en banc Fifth Circuit Court of Appeals ruled this month that the design of the Federal Housing Finance Agency is unconstitutional, with 12 of 16 judges agreeing (Collins v. Mnuchin). The agency, created amid the financial crisis to manage Fannie Mae and Freddie Mac, is controlled by a single director who cannot be removed by the President except “for cause.” The CFPB has a similar structure, suggesting it too may be vulnerable.
Judge Don Willett ’s majority opinion said the FHFA director’s independence violates the separation of powers, the Constitution’s “most essential attribute.” The Constitution provides for power divided between a legislative branch, the executive and the judiciary. Too often the bureaucracy has become a kind of fourth branch, shaping policy but lacking political oversight. “The Constitution bounds Congress’s power,” the majority writes, “to create agencies, draw their structure, and grant them authority.”
The Sixth Circuit also grappled with the limits of agency power in an en banc order Aug. 28, though 9 of 16 judges deferred to the agency. The plaintiff wanted to challenge certain IRS reporting rules; the IRS said its rules couldn’t be challenged pre-emptively (CIC Services v. IRS).
The IRS prevailed, but Judge Amul Thapar wrote for seven dissenters highlighting the importance of judicial review of agency decisions. He noted that the Founders deliberately gave the taxing power to Congress but now an executive agency exercises it “in ways that the Founders never would have envisioned.”
He added that courts “accepted this departure from constitutional principle on the promise that Congress would still constrain agency power.” But Congress has not followed through, surrendering legislative responsibilities to agencies.
Judge Jeffrey Sutton wrote in a concurrence that he was inclined to rule against the IRS but Supreme Court precedents “plausibly point in opposite directions.” He suggested the High Court is in a better position to decide the question. The Justices effectively punted on two major separation-of-powers decisions last term, Gundy v. U.S. and Kisor v. Wilkie.
We can only hope. Our political system was not designed to grant legislators lifetime sinecures with plenty of time for fundraising, create an all-powerful executive, or allow a federal bureaucracy that operates without supervision. We have evolved in that direction over a century. It will take a long time to reverse it but reverse it we must if we are to make our political system function as designed. Or at all for that matter.