A Note on Administrative Agencies
Administrative agencies, the hallmark institutions of the modern regulatory state, vary by form and function according to their statutory mandates. Some are relatively small entities executing narrowly specified duties; others are sizeable bureaucracies armed with large budgets and broad rulemaking authority. Some are sub-units of executive departments others are free-standing. The latter, in turn, fall into two categories: executive agencies (so called because they are accountable to the president) and “independent” agencies (which are wholly accountable neither to the president nor to Congress). The difference between the two generally inheres in the degree to which the president can unilaterally dismiss the head of the agency.
The legal status, powers, and purpose of administrative agencies are prescribed by acts of Congress, which differ considerably in their delegation of administrative discretion. Some statutes grant great leeway to agencies, e.g., the power to define and police “unfair methods of competition,” or to promulgate rules based on “public interest, convenience, or necessity.” Others seek to circumscribe the scope of agency autonomy. In either event, most agencies are authorized to make rules having the same force and effect as statutes. Many combine legislative, executive, and judicial powers: they not only make rules; they conduct trials to determine whether their rules have been violated and impose fines and penalties for infractions. Unless otherwise specified in their enabling acts or subsequent legislation, agency operations are governed by the Administrative Procedure Act (APA) of 1946, which distinguishes various kinds of proceedings, sets rules for each, and establishes criteria for obtaining judicial review following final agency action.
The APA requires—and general principles of administrative law dictate—that all agency regulations and rulings (1) constitute a valid delegation of legislative authority, (2) be based on an agency’s factual findings, (3) be made with the goal of serving the public interest or meeting public necessity, and (4) conform to certain procedural requirements, such as “notice and comment.”
The APA distinguishes between two general categories of agency action: rulemaking and adjudication. Each is normally preceded by investigation (though sometimes agencies adjudicate matters brought before them by private parties without any prior investigation). In many cases, the power to gather information can be quite plenary.
In terms of rulemaking, all procedural rules that bind agencies are found in legislation; only Congress can impose procedural limitations on agency rulemaking; courts are not free to do so on their own authority, but must instead turn to enabling statutes. Agencies are free to add legally binding procedural requirements by regulation on their own. The public must have notice of an intended rulemaking so as to prepare meaningful comment and to consider the proffered facts supporting the intended rule.
Adjudications can take many forms, but generally can be grouped into law enforcement adjudications (such as those conducted by the Federal Trade Commission), benefits adjudications (such as those conducted by the Social Security Administration), and licensing and permit adjudications (such as those conducted by the Environmental Protection Agency). Many of these adjudications, known as “informal” adjudications, are effectively subject to no procedural requirements imposed by the APA, though the agencies’ governing statutes, the agencies’ own regulations, and due process constraints can all be sources of procedural law. Traditional common law rules, or those found in the Federal Rules of Civil Procedure, are unenforceable against federal administrative agencies.
Many administrative agencies with regulatory authority have been created to redress perceived or actual market failures—for example, to regulate monopoly power, “windfall” profits, or “unfair” methods of competition or to compensate for externalities, inadequate information, or unequal bargaining power. Others exist to administer benefits programs. Whatever might be said by way of justifying the purpose or behavior of particular agencies, their number and variety testify to the growth of federal authority during the past century. Expansive interpretations of Congress’s powers under the Commerce Clause and the Fourteenth Amendment have broadened federal jurisdiction to the extent that few subjects now lie beyond its reach. And whereas earlier phases of federal regulation focused primarily on the economic activities of businesses, a new era of “social regulation” (beginning in the 1970s) expanded federal jurisdiction over matters that cut deeply into the personal lives of citizens, e.g., civil rights, workplace safety, environmental and consumer protection, and, most recently, doctor-patient relations.
Although politicians have long since accommodated themselves to administrative agencies as a necessary adjunct of modern government, the scope of agency powers continues to generate heated controversy. This is especially true of independent agencies, sometimes referred to as the “headless fourth branch of government,” which are and remain a constitutional anomaly. In theory, independent agencies are subject to supervision by the constitutional branches in the sense that the president appoints agency leadership (subject to Senate confirmation), Congress authorizes agency budgets and conducts legislative oversight, and judicial review ensures agency compliance with statutory and constitutional requirements. But these controls, precisely because they are remote, indirect, and incomplete, strain the legal and political accountability that the separation of powers was designed to secure.
The anomalous constitutional character of independent agencies has prompted efforts by the political branches to exert greater political control over their behavior. President Franklin D. Roosevelt, for example, unsuccessfully sought to bring independent agency appointees within the ambit of the president’s removal power. Humphrey’s Executor v. United States (1935). Congress, in turn, has tried and failed to assert its authority over both the appointment and removal of independent agency officers. Buckley v. Valeo (1976); Bowsher v. Synar (1986).
Executive-congressional competition of this sort reflects unresolved ambiguities in the modern administrative state. Conceding that Congress cannot specify every detail of policy, some degree of legislative delegation is inevitable, especially when Congress tries to regulate many subjects extensively. The separation of powers, however, necessarily limits the extent to which Congress may delegate its legislative authority. What are the constitutional standards that distinguish valid and invalid delegations? When Congress delegates, does discretion then vest automatically and entirely in the executive? And once it delegates, may Congress nevertheless retain control over certain details of policy and, if so, by how much and by what means? What happens when congressional efforts to control details run up against the president’s constitutional duty to execute the law?
These questions are difficult enough when applied to executive agencies, but they are particularly nettlesome when applied to independent agencies, which by their nature are neither congressional fish nor presidential fowl. As it constructed the administrative state, Congress slowly began to recognize a political dilemma. Congress was at first content to delegate broad rulemaking authority to administrative agencies, even while referring to them, somewhat incongruously, as “arms of Congress.” As the number and authority of agencies expanded, Congress sought in diverse ways to limit executive control over agency policy and operations. Presidents, for their part, initially sought to maximize their authority over administrative agencies, but yielded over time to the palpable reality of congressional power. After much experimentation and conflict over many decades, as qualified from time to time by the instruction of the Supreme Court, independent agencies, despite their constitutional irregularity, became politically acceptable. They are, at bottom, the institutional embodiment of a congressional desire to delegate the details of governance while simultaneously seeking to retain some measure of control.
The short history of the administrative state is a tale of more or less continual struggle between the political branches for control of agency lawmaking, with the judiciary playing the occasional role of referee. Prior to the 1930s, the Supreme Court sustained piecemeal delegations of legislative authority on varying grounds. Field v. Clark (1892); United States v. Grimaud (1911); and J. W. Hampton, Jr. & Co. v. United States (1928). Later efforts to invest administrative agencies with essentially open-ended authority to make and enforce rules gave the Court pause. Accordingly, it invalidated a number of New Deal regulatory schemes, either because they lacked intelligible standards necessarily implied by the separation of powers (the nondelegation doctrine) or because they failed to meet the requirements of due process. A.L.A. Schechter Poultry Corp. v. United States (1935); Panama Refining Co. v. Ryan (1935); Carter v. Carter Coal Co. (1936).
In the late 1930s, the Court essentially abandoned its effort to police the growth of administrative lawmaking. See United States v. Carolene Products Co. (1938). Even so, judicial reservations about the scope of administrative discretion have retained a certain purchase. The enactment of the APA in 1946 quieted many procedural concerns, but the substantive scope of rulemaking authority (whether exercised by executive or independent agencies) remains a matter of continuing controversy. The judiciary originally granted agencies great freedom to interpret their statutory mandates. In the 1970s, the courts began to second-guess the interpretative license they had previously granted, but then reverted to a modified version of its earlier embrace of administrative deference. See Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. (1984). Judges also seem to be of two minds concerning congressional delegation generally. In some instances, they have upheld vague or even conflicting delegations, but in others they have sought to place tighter reins on Congress. And in many cases, Supreme Court justices remain sharply divided. Compare Industrial Union Dep’t, AFLCIO v. American Petroleum Institute (1980); Mistretta v. United States (1989); Whitman v. American Trucking Ass’ns, Inc. (2001); and Massachusetts v. EPA (2007). This oscillation and conflict may reflect a continuing, though mostly unarticulated, ambivalence about the constitutionality of delegation.
Although administrative agencies are a given of modern industrial society, the political branches continue to battle for control of agency action. In the 1960s and 1970s, in an effort to curb regulatory excess and to tighten its control over administrative agencies, Congress imposed various forms of legislative veto, which the Supreme Court invalidated in INS v. Chadha (1983). Presidential efforts to control regulation have been relatively more successful. In 1981, President Ronald Reagan issued an executive order requiring executive agencies to apply cost-benefit analysis to proposed major rules and authorizing the Office of Management and Budget to police their efforts. Despite criticism by certain legislators and interest groups, the approach initiated by Reagan has continued, with relatively minor modification, under his successors in office.
The growth of administrative rulemaking is a dominant theme of American political development during the past century. It permeates virtually every aspect of economic and even social activity, and in recent decades has extended its reach into the lives of individuals in ways that would have been thought shocking only a generation ago. Whatever the virtues or vices of particular rules in terms of policy outcomes, the regulatory regime under which we now live has significantly altered the nation’s constitutional structure. To underscore only the most obvious point, administrative rulemaking entails a massive shift of legislative authority from elected representatives to bureaucratic officials who are for the most part neither known nor accountable to the citizens whose lives are increasingly subjected to their control.
This development is no accident. While American history from its early days has been replete with examples of administrative delegation, Congress and the courts once kept fairly tight control over the substance and many details of policy. Such is no longer the case. The administrative state today differs not only in degree but in kind from prevalent practice prior to the New Deal. The intellectual godfathers of the modern administrative state—Woodrow Wilson and Herbert Croly, to name but two of the most influential thinkers—believed that the Founders’ Constitution was hopelessly antiquated, inefficient, anti-democratic, and dogmatically committed to the idea of limited government. They evinced a dislike for the separation of powers, which they correctly identified as the principal structural obstacle to the growth of efficient federal regulatory power. Allied with this belief was a second conviction: that there was a group of men whose dedication to the commonweal was unsullied by the spirit of faction, and whose public-spirited, non-partisan expertise could be brought to bear against the most pressing social and economic problems of the day. The objective was to reconstitute government in such a way as to vest these experts with power to devise rules and regulations that Congress, left to its own devices, would be reluctant to impose.
Though Congress was at first wary about the manner in which it delegated its legislative responsibilities, it has gradually and willingly surrendered a good deal of its authority to administrative agencies and has learned how to profit politically from its abdication. Members of Congress continue to insist, at least formally, that they remain in charge by controlling agency budgets and conducting oversight hearings to ensure bureaucratic compliance with legislative mandates. These are indeed potent instruments of control, but they are infrequently deployed in a systemically efficacious manner. In truth, with episodic exceptions, Congress seems content to play ombudsman to the operations of the administrative state. Its members intervene on behalf of diverse factional interests that stand to gain or lose under extant or proposed regulations and, in return, receive campaign contributions and other forms of support from those whom they assist. Apart from this politically advantageous quid pro quo, however, Congress evinces little interest in defining or controlling many of the most important details of public policy. It may complain about bureaucratic malfeasance, excess, or neglect, but it continues to delegate vast discretionary authority to administrative agencies.
Two of the most significant additions to the administrative agency regime are the Patient Protection and Affordable Care Act (commonly called “Obamacare”) and the Wall Street Reform and Consumer Protection Act (usually referred to as “Dodd-Frank”). Each statute will require hundreds of separate rulemakings, which will in turn produce many thousands of pages of new or revised regulations. The administrative regimes created by both acts are, and will continue to be for some time, the subject of litigation challenging various features of these laws, including their constitutionality. How all this will turn out cannot be predicted, but this much seems clear: the new regulations spawned by these and other recent enactments portend a quantum leap in the way the federal government can control the details of individual behavior.
At the height of the New Deal, President Roosevelt and Congress initiated such schemes as the National Industrial Recovery Act and the Agricultural Adjustment Act, which sought to regulate in minute detail virtually every aspect of economic behavior. The Supreme Court turned back that effort in the mid-1930s, but thereafter stopped trying to control the growth and reach of delegated regulatory authority. For many reasons, the Court is unable or unwilling to exercise a similar policing function today, whence it follows that remedies, if they are to be found, must originate in the political branches, and especially in Congress.
In recent years, a number of significant legislative plans have been advanced to limit the scope of administrative discretion. These include proposals that would narrow the scope of legislative delegations, delay the effective date of major rules until they are affirmatively approved by Congress, impose tighter restrictions on agency rulemaking procedures, enhance the scope of judicial review, subject proposed regulations to cost-benefit analysis, and bring independent agencies under presidential control. For the most part, such reforming legislation has not passed both houses of Congress.
Stephen Breyer, Regulation and Its Reform (1982)
HERBERT CROLY, THE PROMISE OF AMERICAN LIFE (1909)
JAMES O. FREEDMAN, CRISIS AND LEGITIMACY (1978)
RICHARD A. HARRIS & SIDNEY M. MILKIS, THE POLITICS OF REGULATORY CHANGE (1996)
GARY LAWSON, FEDERAL ADMINISTRATIVE LAW (6th ed. 2012)
Gary Lawson, The Rise and Rise of the Administrative State, 107 Harv. L. Rev. 1231 (1994)
JERRY L. MASHAW, CREATING THE ADMINISTRATIVE CONSTITUTION (2012)
Matthew McCubbins, Roger Noll, & Barry Weingast, The Political Origins of the Administrative Procedure Act, 15 J.L. Econ. & Org. 180 (1999)
Ronald J. Pestritto, The Birth of the Administrative State: Where It Came From and What It Means for Limited Government, Heritage Foundation First Principles Report, November 20, 2007
Robert L. Rabin, Federal Regulation in Historical Perspective, 38 Stan. L. Rev. 1189 (1986)
Woodrow Wilson, The Study of Administration, 2 Pol. Sci. Q. 197 (1887)
Field v. Clark, 143 U.S. 649 (1892)
United States v. Grimaud, 220 U.S. 506 (1911) Bi-Metallic Inv. Co. v. State Bd. of Equalization of Colorado, 239 U.S. 441 (1915)
J. W. Hampton Jr. & Co. v. United States, 276 U.S. 394 (1928) A. L. A. Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935)
Humphrey’s Executor v. United States, 295 U.S. 602 (1935)
Panama Refining Co. v. Ryan, 293 U.S. 388 (1935)
Carter v. Carter Coal Co., 298 U.S. 238 (1936)
United States v. Carolene Products Co., 304 U.S. 144 (1938)
United States v. Florida East Coast Ry., 410 U.S. 224 (1973)
Buckley v. Valeo, 424 U.S. 1 (1976)
Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U.S. 519 (1978)
Industrial Union Dep’t, AFL-CIO v. American Petro-leum Inst., 448 U.S. 607 (1980)
INS v. Chadha, 462 U.S. 919 (1983)
Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)
Bowsher v. Synar, 478 U.S. 714 (1986)
United States, 488 U.S. 361 (1989) Whitman v. American Trucking Ass’ns, Inc., 531 U.S. 457 (2001)
Massachusetts v. EPA, 549 U.S. 497 (2007)