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Reining In the Agencies
On April 20, 2011, the National Labor Relations Board set off a heated political and economic debate, and in the process forced into the public spotlight a question that normally occupies only administrative lawyers and scholars of regulation: the question of "independent federal agencies" in our system of government.
Two years earlier, the Boeing Company had decided to create a new production facility in South Carolina to build its latest commercial aircraft, the 787 Dreamliner. Boeing was already producing Dreamliners at its plant in Everett, Washington, but chose to build a second assembly line in South Carolina in part because of that state's relative labor-market stability. In Washington, union strikes and protests had closed Boeing's production facilities four times since 1989, costing the company billions of dollars and delaying the Dreamliner's production. South Carolina, by contrast, is a "right to work" state (meaning that its laws do not allow unions to compel workers to join), and its labor market is not nearly as dominated by union power.
By April 2011, Boeing had already built its South Carolina facility and hired a thousand workers; operations were due to begin in just weeks. But in response to a union complaint that the company had deliberately chosen to place its new factory in a state far less friendly to unionization, the NLRB demanded that Boeing shutter its nascent South Carolina operations and, as the formal complaint put it, "operate its second line of 787 Dreamliner aircraft assembly production in the State of Washington, utilizing supply lines maintained by [Boeing] in the Seattle, Washington, and Portland, Oregon, area facilities." To justify its demand, the NLRB cited five examples of Boeing officials' remarking on the indisputable business appeal of opening the new production facility in a state where labor stoppages would be less likely.
It was an unprecedented government action against an American employer, telling Boeing where it had to build a new facility and essentially asserting that the company did not have the right to consider the implications of state labor laws in making decisions about its own operations. That interpretation of the law, Boeing responded, "defie[d] more than 40 years of precedent and would effect a government intrusion into an American business" to a degree not seen since President Truman's attempt to nationalize steel companies in April 1952.
The invocation of Truman's steel-company seizure was no accident. In June 1952, Truman's actions were struck down as unconstitutional by the Supreme Court in Youngstown Sheet & Tube v. Sawyer, a landmark case regarding presidential power. Clearly, Boeing was reminding the federal courts of that fact. But by referring to that case, Boeing implicitly drew an even more portentous contrast: Truman's nationalization of steel companies was an act of presidential power, while the Boeing complaint was the act of an "independent" agency, traditionally free from presidential oversight.
In the fallout from the Boeing controversy, President Obama made sure to highlight that difference, and to disclaim responsibility for the NLRB's actions. At an East Room press conference in June 2011, a reporter asked Obama about the economic effects of the NLRB's prosecution of Boeing. The president responded by taking credit for his administration's "unprecedented" review of regulatory burdens on the economy, but then pleaded impotence to restrain this particular regulatory body:
Essentially, the NLRB made a finding that Boeing had not followed the law in making a decision to move a plant. And it's an independent agency. It's going before a judge. So I don't want to get into the details of the case. I don't know all the facts. That's going to be up to a judge to decide.
Months later, when the president was due to meet with Boeing's CEO, White House press secretary Jay Carney asserted that the NLRB prosecution would not even be on the agenda: "Well, as you know, the NLRB is an independent agency, so I don't expect that that would come up in a conversation." And the NLRB, for its part, echoed the White House line: "We are an independent agency," the NLRB's spokesman maintained. "It would be inappropriate for the White House to get involved."
To many observers unfamiliar with the idea of "independent" agencies, the president's disclaiming responsibility for federal regulators' overreach might seem peculiar. The president alone is vested by the Constitution with the "executive power" and the responsibility to "take care that the laws be faithfully executed." Moreover, the president appoints the members and officers of the NLRB (who are then confirmed by the Senate). Obama himself had appointed the agency's acting general counsel, Lafe Solomon, who oversaw the Boeing complaint.
In the end, President Obama managed to avoid taking responsibility for the NLRB prosecution. In December 2011, the agency dismissed its own case, at the union's request (after the union had worked out an arrangement with Boeing). In fact, just two months later, President Obama toured Boeing's facilities in Washington and called Boeing "a great example of what American manufacturing can do in a way that nobody else in the world can do it....This is a good place to work. This is a good place to be. And our job as a nation is to make it easier for more of these companies to do the right thing." The president never once acknowledged that a federal agency, led by his own appointee, had aggressively targeted Boeing. After all, as he had already explained, the Boeing case had nothing to do with him; it had been an exercise of federal power not by the executive branch but by an "independent" agency, formally insulated against presidential control.
The Boeing dispute illustrated two elements of a persistent trend under the Obama administration: "Independent" agencies undertake increasingly significant regulatory actions that advance the president's agenda or assist an important constituency of his, but the administration then evades responsibility by pointing to the agencies' independent standing. One rough measure of the trend can be found in the Office of Management and Budget's record of independent agencies' "major rules" — that is, regulations having annual costs or benefits of $100 million or more, or likely to have other significant effects on the economy. According to OMB (which in turn relied on data provided by the Government Accountability Office), independent agencies have substantially increased their output of major rules, from ten in fiscal year 2007 to 17 in fiscal year 2010. And because these data are collected primarily through agency self-reporting — with no standardized rubric for assessing costs and benefits — the figures likely underestimate independent agencies' activities.
From the NLRB to the new independent agencies carrying out the Dodd-Frank financial-reform law, we are witnessing extraordinary growth in the power and reach of executive agencies that claim not to be answerable to the nation's chief executive. Their powers, and their claims to independence, are at the core of the growth of the regulatory state. But how can such agencies be "independent"? Where does their power come from, and what is their constitutional standing? And how should reformers eager to restrain the power of federal regulators approach these unusual entities?
THE RISE OF INDEPENDENT AGENCIES
There is no authoritative, general definition of agency "independence." One key federal statute, the Paperwork Reduction Act of 1980, defines the term "independent regulatory agency" with a tautology: It enumerates several familiar "independent" agencies — the NLRB, the Federal Reserve Board of Governors, the Commodity Futures Trading Commission, the Federal Energy Regulatory Commission, the Securities and Exchange Commission, to name a few — but ends the list with "any other similar agency designated by statute as a Federal independent regulatory agency or commission."
In the absence of an overarching statutory definition, scholars and practitioners take a functional approach: A regulatory agency is considered "independent" if the law limits the president's power to remove the agency's leadership. In many cases, this limitation is embedded in the text of the agency's authorizing statute. The NLRB's five members, for example, are appointed by the president to five-year terms (which therefore often span the terms of different presidents) and can be fired by the president only "for neglect of duty or malfeasance in office, but for no other reason," as the statute puts it. Other statutes are less precise. The president may fire members of the Federal Reserve's Board of Governors only "for cause," though that vague term is not defined. But a regulatory agency may be considered "independent" even without an express limit on the president's removal power: The Securities and Exchange Commission has long been treated as an independent agency, even though its original authorizing statute mentions no limitation on the commissioners' removal.
There are other features common to most "independent" regulatory agencies: They are predominantly multi-member bodies statutorily required to include appointees from both political parties. And in some cases — the Consumer Product Safety Commission, for example — the agency's appointed leaders are required to have "background and expertise" in the agency's subject matter. But these secondary requirements vary from agency to agency; when speaking generally of agency "independence," statutes and legal precedents generally refer to the agency leadership's insulation against arbitrary termination by the president.
Generally speaking, the "independent regulatory agencies" include the dozen or so longstanding commissions that broadly regulate the national economy; among them, the most important are the aforementioned NLRB, Federal Reserve, CFTC, FERC, SEC, and CPSC, as well as the Federal Communications Commission, Nuclear Regulatory Commission, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Federal Maritime Commission, Federal Trade Commission, Surface Transportation Board, Occupational Safety and Health Review Commission, and the new Consumer Financial Protection Bureau, added recently by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The list has been growing for well over a century, though the general idea of an administrative agency with some independence from the chief executive is even older. As Yale's Jerry Mashaw has documented, the first Congress actually considered providing at least some degree of administrative independence to some agency officials. As a congressman, James Madison proposed giving the Comptroller of the United States — an officer in the nascent Treasury Department — a fixed term of years, free from the threat of presidential removal. Madison proposed this limited independence because the comptroller exercised the power of deciding individual claims against the government — decisions that "partake of a Judiciary quality as well as Executive."
Congress ultimately did not adopt that proposal, and it would be a century before the creation of a truly independent agency in the modern sense. The Interstate Commerce Commission, established by the Interstate Commerce Act of 1887, was created initially to regulate rates and terms of service for interstate railroad transportation. The agency "was something new in the American system of government: a strange amalgam of executive, legislative, and judicial powers," as New York University law professor Geoffrey Miller has put it. The ICC was created not merely to execute precise federal statutory commands: Having been assigned a broad mandate to ensure "reasonable and just" rates and non-discriminatory terms of service, the ICC would exercise quasi-legislative power in promulgating regulations to implement that broad mandate; executive-like power in enforcing those regulations; and quasi-judicial power in conducting administrative trials to adjudicate alleged violations of the rules.
The ICC's structure foreshadowed the modern independent agencies. The Interstate Commerce Act provided for the president's removal of ICC commissioners only in cases of "inefficiency, neglect of duty, or malfeasance in office." It mandated that commissioners be drawn from both political parties. And just two years after President Grover Cleveland signed the Interstate Commerce Act into law, an amendment to the statute removed the ICC from its original administrative home in the Department of the Interior and fixed it as a stand-alone agency.
But if the Gilded Age planted the seeds of the independent agency, the Progressive and New Deal eras brought the idea into full bloom. In 1913, President Woodrow Wilson signed the Federal Reserve Act, which created a new kind of independent body. Rather than replicate the ICC's regulatory model, the Federal Reserve System was created to be (as Carnegie Mellon University economist Allan Meltzer explains in his magisterial history of the Fed) "a public-private partnership with semiautonomous, privately funded reserve banks supervised by a public board."
In 1914, President Wilson returned to more familiar territory by signing into law the Federal Trade Commission Act, creating an agency modeled upon the ICC but intended to prevent unfair methods of competition. The FTC, like the ICC, was partially insulated against presidential control: The president could remove commissioners only "for inefficiency, neglect of duly, or malfeasance in office," and the act provided for the appointment of a bipartisan slate of commissioners.
Eventually, the New Deal would give rise to the alphabet-soup agencies we are familiar with today, each created to regulate market activity largely on a case-by-case basis. Yet it was also in the New Deal period that strenuous presidential objections to such independent agencies first arose in earnest. Indeed, it was President Franklin Roosevelt himself who forced the issue to the Supreme Court, leaving us with a complicated legacy of judicially protected agency independence.
In 1931, President Herbert Hoover appointed William Humphrey to a second, seven-year term on the Federal Trade Commission. The appointment would, of course, have taken Humphrey well into the term of the next president. But that next president, Franklin Roosevelt, decided that Humphrey was too much of a Hoover man for his taste, and in July 1933 the new president requested Humphrey's resignation. "I do not feel that your mind and my mind go along together on either the policies or the administering of the Federal Trade Commission," Roosevelt wrote to Humphrey, "and, frankly, I think it is best for the people of this country that I should have a full confidence."
Commissioner Humphrey rebuffed Roosevelt's request and declined to leave his post. Three months later, the president fired him. (Little did Roosevelt know that he could have avoided the disagreement by simply waiting a few more months: Humphrey died early the next year.) Humphrey's firing forced the question of the meaning of the FTC Act: Had the president violated the act's stipulation that commissioners be removable only in cases of "inefficiency, neglect of duty, or malfeasance in office"?
In Humphrey's Executor v. United States, decided in 1935, the Supreme Court answered, emphatically, "yes." First, the Court held that the act's enumeration of grounds for removal implied that those grounds were the exclusive allowable grounds for removal; if Roosevelt wanted to justify his actions under the statute, then he would need to match his concerns to one of the statutory criteria — which he never did. Second, the Court held that none of those grounds justified the president's firing of Humphrey, whose removal for political reasons also contravened the act's provision for a "non-partisan" commission. Finally, the Court held that the president lacked inherent power to fire Humphrey despite the act's restrictions: While such power might allow the president to terminate purely "executive" officers, the FTC, the Court found, exercises "predominantly quasi-judicial and quasi-legislative" powers.
In this last respect, the Court distinguished Humphrey's Executor from earlier cases involving administrative agencies. In 1926's Myers v. United States, the Court had held that the president had full constitutional power to remove a postmaster, despite statutory protections; in 1903's Shurtleff v. United States, the Court held that the president had full constitutional power to remove a customs appraiser, despite statutory restrictions. But in Humphrey's Executor, the Court ruled that each of these precedents was inapt, because each involved not a "quasi-judicial and quasi-legislative" officer of an independent agency, but rather a purely executive official.
In the immediate aftermath of Humphrey's Executor, presidents were not reluctant to express their unease with the implications of the decision and to try to address that concern by asking for legislative reforms. The "Brownlow Committee," appointed by President Roosevelt to recommend administrative reforms of the federal government, urged Congress in 1937 to fold the independent agencies into the traditional "executive branch" agencies, thereby eliminating the "headless ‘fourth branch' of government" and repairing the "violence" done by independent agencies "to the basic theory of the American Constitution that there should be three major branches of the Government." Similarly, during the Truman administration, the first "Hoover Commission" (which had a mandate much like the Brownlow Committee's) recommended folding the independent agencies into the executive-branch agencies. A famous memorandum written for John Kennedy in 1960 by law professor (and former SEC chairman) James Landis urged the president-elect to exert control over independent agencies. But none of these pleas bore much fruit; as the decades passed, the independence of many executive agencies came to be implicitly accepted.
Even the Reagan Revolution could not dislodge the independent agencies. Reagan's Justice Department argued that the president rightfully held the constitutional power to order independent agencies to comply with Executive Order No. 12,291 — the administration's landmark order that coordinated all regulatory activity through the Office of Management and Budget in the White House and required the use of cost-benefit analysis whenever allowable under law. Despite the Justice Department's firm position, however, the administration ultimately flinched, declining to extend the executive order to independent agencies. As C. Boyden Gray — then counsel to Vice President Bush, and one of the officials tasked with overseeing the administration's regulatory reforms — explained at the time of the decision, "[w]e chose not to do it really because of policy reasons." He and others in the White House, Gray added, "had our plate more than full with the executive-branch agencies which impose by far the greatest" burdens on the economy. (Thirty years later, Gray would testify before Congress in favor of reining in the independent agencies; reflecting upon the years since the Reagan administration's decision not to assert control over them, he concluded that, because independent agencies "have come to exert exponentially greater weight on the economy, their exemption has become utterly untenable.")
The Clinton administration showed a greater appetite for exerting at least marginal control over independent agencies, requiring them to participate in the administration's "unified regulatory agenda" and "regulatory plan" — both intended to streamline federal regulation. When it came to complying with presidentially mandated regulatory review and cost-benefit requirements, however, the White House only "requested" that the independent agencies comply "on a voluntary basis," to the extent that such compliance was "pertinent to their activities."
Similarly, when the Obama administration responded to the rebuke issued in the 2010 mid-term elections by requiring executive-branch agencies to review their regulations in order to identify "outmoded, ineffective, insufficient, or excessively burdensome" rules, its executive order stated only that independent agencies "should" undertake a review, while those agencies subject to full presidential control were required to do so outright. OMB's guidance memo explaining the order was even less assertive, stressing its "full respect for the independence of the agencies to which it is addressed," such that none of the guidance was "meant to be binding."
AN EXPLOSION OF INDEPENDENCE
The Obama administration's extreme deference to agency independence may reflect a wholesale capitulation to the legacy of Humphrey's Executor. Then again, it may simply reflect the administration's willingness to use agency independence as a shield against criticism. On issue after issue, agency officials appointed by President Obama have implemented policies supported by President Obama, but the White House has deflected criticism of these officials' actions by stressing that their agencies are "independent."
The NLRB's complaint against Boeing has been perhaps the most widely noticed instance, but others abound. Consider the Federal Communications Commission's proposal to impose "net neutrality" regulations on internet service providers. The FCC's rule would limit the providers' ability to charge different prices for content based on how much bandwidth it requires. Proponents of the policy — such as Harvard law professor Lawrence Lessig and University of Illinois at Urbana-Champaign communications professor Robert McChesney — argue that net neutrality "means simply that all like Internet content must be treated alike and move at the same speed over the network." But net neutrality is no free lunch: By preventing internet providers from charging more for certain services (for instance, setting a higher price for the transmission of video than of text) or from favoring and disfavoring particular services in response to customer demands, it risks stifling investment in internet infrastructure, a multi-billion-dollar industry.
Net neutrality has been a hotly contested issue in the past decade; when campaigning for president, then-senator Obama did not hesitate to pick sides. In a 2007 appearance on MTV, he declared himself to be "a strong supporter of net neutrality" and pledged to appoint Federal Communications Commission members similarly dedicated to this regulatory agenda. After his inauguration, Obama made good on his promise, appointing his campaign advisor (and former Harvard Law School classmate) Julius Genachowski to chair the FCC. And under Genachowski, the agency promptly began to pursue net-neutrality regulation.
But despite Obama's clear interest in the matter, because the FCC is an "independent" agency, the White House has generally avoided commenting on its work. In April 2010, after a federal court dealt a blow to the FCC's net-neutrality agenda, the White House press secretary refused to comment on the court decision's effect on the FCC, "which as you know is an independent agency." That summer, Time magazine observed that the administration was deliberately avoiding comment on the ongoing regulatory debate, citing a White House aide who explained that the president did not want to interfere with the work of an "independent agency."
Another example is the fiercely contested proposal to construct a nuclear storage facility in Yucca Mountain, Nevada. When Barack Obama's heated primary battle with Hillary Clinton reached Nevada in 2008, Obama sought to win favor among voters by stressing his opposition to the project. "I want every Nevadan to know that I have always opposed using Yucca Mountain as a nuclear waste repository," he wrote to the editors of the Las Vegas Review-Journal. When the Clinton campaign continued to press him on the issue, he grew all the more adamant; at a town-hall meeting the day before the Nevada caucuses, Obama maintained: "[Y]ou've got the Clinton camp out there saying ‘He's for Yucca.' What part of ‘I'm not for Yucca' do you not understand?" Once he was elected, Obama followed up on his pledge first and foremost through his Energy Department, which asked the Nuclear Regulatory Commission to terminate the Yucca Mountain proposal "with prejudice" — that is, permanently.
Under the Nuclear Waste Policy Act, the decision to continue building the proposed Yucca Mountain facility would ultimately rest with the "independent" NRC. To chair that body, President Obama appointed Gregory Jaczko — formerly an advisor to Nevada senator Harry Reid — knowing that Jaczko was an adamant opponent of the storage facility. To the surprise of perhaps no one, in September 2011, the commission announced that it would terminate consideration of the Yucca Mountain proposal, citing budget constraints.
Both the FCC and the NRC were acting under statutory authority granted long before the Obama administration. But perhaps even more significant are the new powers granted to independent agencies by one of the administration's landmark legislative achievements: the Wall Street Reform and Consumer Protection Act, commonly referred to as Dodd-Frank.
Dodd-Frank mandated an immense volume of regulatory proceedings: roughly 240 separate rulemakings, according to the Davis Polk law firm's Dodd-Frank tracker. The vast majority of those rulemakings are to be undertaken not by "executive branch" agencies but by "independent" agencies: the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve, the Federal Deposit Insurance Corporation, and the newly created Consumer Financial Protection Bureau.
Of those agencies, the newly established CFPB is the most controversial. It was at the center of a constitutional fight over "recess appointments" in early 2012, when President Obama circumvented the Senate's advice-and-consent power by using a recess appointment to name Richard Cordray as the CFPB's first director. (Senate Republicans criticized the appointment as unconstitutional, arguing that the Senate was not actually in "recess" at the time of the appointment.) But the president's innovation in appointing the CFPB's director pales in comparison to the president and Congress's innovation in creating the CFPB in the first place.
The CFPB was created as an independent agency; its director, once appointed and confirmed, serves a statutory five-year term during which the president can remove him only for "inefficiency, neglect of duty, or malfeasance in office." The powers committed to this independent agency are exceptionally sweeping: Dodd-Frank empowers the CFPB director to regulate all "unfair, deceptive, or abusive" consumer-lending practices, not just by promulgating regulations, but also by regulation-through-litigation. The statute also transfers to CFPB's exclusive administration 18 consumer-lending statutes previously administered by other agencies.
In administering those statutes, the CFPB is insulated not only against presidential oversight, but also against Congress's power of the purse. Rather than funding the CFPB through the regular appropriations process, Dodd-Frank empowers the CFPB to unilaterally claim from the Federal Reserve each year a sum equal to 12% of the Fed's 2009 operating expenses, roughly $400 million. Dodd-Frank goes so far as to prohibit Congress from even attempting to "review" that part of the CFPB's budget. At the same time, the legislation relaxes judicial oversight of the agency by instructing the courts to defer under certain circumstances to the agency's interpretation of federal consumer-finance laws.
In creating this agency and concentrating its power in a single "independent" director (rather than a commission of several members, as is the case with most such agencies), Dodd-Frank went beyond even the recommendations of some of the law's Democratic supporters. Harvard law professor (and now U.S. Senate candidate) Elizabeth Warren, who originally proposed the creation of such an agency in an essay in the journal Democracy in 2007, did not suggest committing this regulatory authority to a single director; rather, she urged Congress to create a Financial Product Safety Commission modeled on the Consumer Product Safety Commission, in which a bipartisan slate of commissioners check and balance one another. Similarly, Democratic senators Richard Durbin, Charles Schumer, and the late Edward Kennedy proposed creating a body consisting of five commissioners, from both political parties, each "qualified" with requisite "background and expertise in areas related to consumer financial product safety." The final Dodd-Frank bill, by contrast, committed the CFPB's power to the director alone; under the law, the director is not required to have any particular qualifications. (Indeed, Obama's choice, former Ohio attorney general Cordray, is an experienced litigator but lacks any background in regulation.)
The CFPB is not the only independent agency vested with substantial new powers under Dodd-Frank. The statute also dramatically expanded the regulatory power of the Commodity Futures Trading Commission, adding (by Davis Polk's count) 64 new rulemaking responsibilities. The CFTC has taken full advantage of its independence, aggressively expanding the scope of its already broad Dodd-Frank authority. In originally pressing Congress to authorize the agency to regulate derivatives, for instance, CFTC chairman Gary Gensler argued that regulations would be necessary to rein in the "15 to 20 large complex financial institutions that are at the center of today's global derivatives marketplace." But when the CFTC eventually proposed regulations implementing Dodd-Frank, its regulatory reach stretched much farther, affecting countless "end users" — farms, airlines, and other companies that use derivatives not for speculative reasons, but as genuine hedges against commodity risk. Even the liberal Progressive Policy Institute warned that the CFTC's over-regulation of derivatives threatened to "tie up capital that would otherwise be directed to investment and hiring, drive up the cost of producing goods and services, and ultimately cost American jobs."
The Federal Deposit Insurance Corporation, too, was delegated substantial new powers by Dodd-Frank, the most dramatic being the agency's liquidation authority. If the Treasury secretary concludes — with the FDIC's and Federal Reserve's concurrence — that a financial company is in danger of default; that that default would have serious adverse effects on U.S. financial stability; that private-sector remedies are incapable of preventing the default; and that the effect of liquidation on creditors, shareholders, and counterparties would be "appropriate," he may seize the company and deliver it to the FDIC's control to be "liquidated." The company's ability to challenge the Treasury secretary's decision is severely limited: Once the secretary petitions a federal court to approve the takeover, the company must convince the court to issue a final decision in the company's favor within 24 hours; moreover, the litigation must be conducted in secret.
Finally, the independent Federal Reserve also saw its power expanded by Dodd-Frank. Required to promulgate as many as 92 new rules, the Fed's most controversial assignment is the implementation of the "Volcker Rule" — a Dodd-Frank provision that authorizes the Fed (with the FDIC, the Securities and Exchange Commission, and the Office of the Comptroller of the Currency) to mandate the separation of banks' traditional, federally insured depository activities from their riskier "proprietary trading" activities. The authority to enforce these rules gives these independent agencies significant new powers over the financial sector — powers that come with tremendous potential for error and mischief and, again, with relatively little oversight by elected officials.
Concern about the undue and potentially extra-constitutional power of independent agencies was once a bipartisan preoccupation. Today, though, the Obama administration, congressional Democrats, and others on the left seem to have largely abandoned the issue, seeing independent agencies as effective tools for advancing otherwise unpopular measures. Among conservatives, however, agency independence has long been seen as the unconstitutional fruit of the judicial activism of Humphrey's Executor. It is perceived as a problem caused by the courts — and therefore one that must be corrected by them.
The best recent example of this conservative line of thinking was offered by Judge Brett Kavanaugh of the U.S. Court of Appeals for the D.C. Circuit. In the 2011 case In re Aiken County, the court was confronted with the difficult intersection of executive and independent-agency jurisdiction. The context was, once again, the proposed Yucca Mountain nuclear-waste storage facility. In accordance with the Nuclear Waste Policy Act, as noted above, the Energy Department was required to apply to the NRC for approval of the storage-facility project on the Yucca Mountain site. Under President George W. Bush, the Energy Department filed its application in 2008, and the NRC began its review; in 2010, under a new president, the department asked the NRC to dismiss the application and permanently terminate review of the project.
States and other litigants filed suit in the D.C. Circuit, seeking to block the Energy Department's request, but the D.C. Circuit dismissed the case for lack of jurisdiction. Kavanaugh, who was one of the three judges hearing the case, issued a separate opinion explaining what he saw to be the fundamental problem: the overlapping authorities of the Energy Department and the NRC. "This case is a mess because the executive agency (the Department of Energy) and the independent agency (the Nuclear Regulatory Commission) have overlapping statutory responsibilities with respect to the Yucca Mountain project," he wrote. The president controls the Energy Department, but not the NRC, and therefore he "does not have the final word about whether to terminate the Yucca Mountain project," Kavanaugh added. "This case is a dramatic illustration of the continuing significance and implications of Humphrey's Executor." The Supreme Court, the judge implied, should respond by overturning Humphrey's Executor and restoring the executive power of the government to the elected chief executive.
Kavanaugh's call for the Supreme Court to overturn Humphrey's Executor does not lack support. In the 1988 case Morrison v. Olson, Justice Antonin Scalia famously denounced the Humphrey's Executor decision as ipse dixit, or a naked assertion made without justification. The decision, Scalia wrote, was "six quick pages devoid of textual or historical precedent for the novel principle it set forth."
Scalia and Kavanaugh are joined by no shortage of judges, scholars, and practitioners (again, largely on the right) critical of agency independence. But could it be that, in focusing exclusively on a judicial reconsideration of Humphrey's Executor, they are actually giving the original decision — and the standing of the independent agencies — too much credit? Could it be that the problem we confront is not so much judicial overreach as presidential timidity?
Judge Kavanaugh and others focus on Humphrey's Executor because they see it as a largely insurmountable obstruction of the president's constitutional powers and duties. Two years before the Yucca Mountain case reached his court, Kavanaugh wrote in a law-review article that Humphrey's Executor "made fairly clear (albeit not crystal clear) that the for-cause standard" for removing independent-agency officers "is hard to meet, and therefore presidents rarely attempt to fire officials in independent agencies even when they under-perform."
Perhaps Judge Kavanaugh is only half right. Presidents might see Humphrey's Executor as preventing the removal of underperforming officials. But what if presidents — and the critics of Humphrey's Executor — are over-reading the original case and its implications?
In Humphrey's Executor, the Court held that the Federal Trade Commission Act could limit the president from arbitrarily removing FTC commissioners. But before it addressed that issue, it found that the president's vague dispute with Commissioner Humphrey did not rise to the level of "inefficiency, neglect of duty, or malfeasance in office," which would have justified Humphrey's removal under the act. This statutory holding, more than the constitutional issue, could be the best target for the next president eager to assert control over independent agencies.
The Humphrey's Executor Court did not hold that genuine disputes over independent agencies' policies do not rise to the level of a fireable offense. President Roosevelt, who stated his concerns very broadly, offered no basis on which the Court could make such a ruling. In fact, as law professors Cass Sunstein (now the director of the Office of Information and Regulatory Affairs in the Obama administration's Office of Management and Budget) and Lawrence Lessig noted in a 1994 law-review article, the Supreme Court has never defined "inefficiency, neglect of duty, or malfeasance in office." As they argued, "There is no controlling judicial decision on how ‘independent' the independent agencies and officers can legitimately claim to be."
And in that vacuum of legal authority, respected scholars on both sides of the political aisle have endorsed the theory that an independent-agency official can be fired for failing to obey the president's policy priorities. This would mean, in essence, that liberals and conservatives are both wrong to assume that presidents cannot exert authority over the independent agencies unless Humphrey's Executor is overturned.
Sunstein and Lessig, both liberals, argued in the same paper that the statutory bases for terminating an independent-agency officer "might even allow discharge of commissioners who have frequently or on important occasions acted in ways inconsistent with the President's wishes with respect to what is required by sound policy." On the other side of the aisle, conservative legal scholars Steven Calabresi and Christopher Yoo argued in their 2008 book The Unitary Executive that "these removal provisions do not necessarily preclude the president from removing a member of [an independent commission] simply for disagreements over policy."
In fact, by working within, not against, the scope of "good cause" removal statutes, presidents might avoid or at least mitigate the problems of regulatory uncertainty fostered by an unfettered executive. Removal restrictions might be best construed as limiting the president's power to fire officers over case-specific regulatory actions — the rate cases under the old Interstate Commerce Commission, or the NRC's recent Yucca Mountain proceedings — but not over broader policy matters. This is not a perfect distinction — cases often create policy — but it would be an improvement over today's extra-constitutional agency powers.
If the president in fact wanted to assert his authority over the executive branch, rather than to hide behind the supposed independence of agencies run by his appointees, he could do so — and thus dramatically simplify the chains of responsibility and command in our increasingly complex administrative state. The barrier to a president's reining in the independent agencies, then, is not judicial overreach but rather the president's own dereliction.
The excessive deference given by presidents of both parties to independent executive agencies in the post-war period needs to come to an end. If our elected president wants to put into effect a course of policy, he should stand behind it and take responsibility. Our constitutional order demands no less of the president, and the laws and judicial precedents governing the independent agencies do not preclude the president from doing his job.
In Humphrey's Executor, the Court concluded that Franklin Roosevelt's actions were driven by nothing more than partisan politics, and that this was not a sufficient basis for removing an "independent" officer statutorily entitled to a term in office absent particular misconduct. The Court did not, however, hold that the FTC Act, or any other independent-agency statute, bars the president from terminating an independent-agency official over a genuine policy disagreement.
Ironically, those who champion presidential authority and responsibility actually undermine their own cause when they overestimate the barriers erected by Humphrey's Executor. By assuming that that legal precedent prevents the president from firing independent-agency officials over policy disputes — and therefore arguing that the president can regain his authority only if the Court overturns the Humphrey's Executor decision — they strengthen the president's ability to disclaim authority over independent agencies, and so to hide behind them. By properly constraining our view of the reach of Humphrey's Executor, we can prevent future presidents from ducking their own constitutional responsibility — the obligation, which is ultimately the president's alone, to "take care that the laws be faithfully executed."
Adam J. White is a lawyer in Washington, D.C.