Towards a Functional Theory of Independent Agencies
N.B. The spending bill passed by the House of Representatives last week (and now before the Senate) includes $25 billion for the development and eventual deployment of a missile defense system that President Trump is calling "Golden Dome." My latest Verdict column explains why this is a terrible idea: it won't work but will likely be destabilizing, increasing rather than decreasing the risk of nuclear war. In today's essay here on the blog, however, I return to a subject I raised earlier this week.
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On Monday, I wrote on this blog that the Supreme Court's shadow docket ruling last week in Trump v. Wilcox effectively overrules Humphrey's Executor v. United States--the 1935 Supreme Court case that upheld the power of Congress to create independent agencies. What makes an agency independent is simply that the people in charge of it--the commissioners or board members who head it--can be fired only for good cause. Most of my essay on Monday was devoted to examining how the Supreme Court had, in its eagerness to rid itself of the Humphrey's precedent, undermined another precedent: the one that says that lower courts should not anticipatorily overrule SCOTUS decisions.
I also mentioned that the Court included a caveat to the effect that the new rule--under which just about everyone exercising executive power must be subject to dismissal at will by the president--has an exception for the Fed. The Court asserted: "The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States."
If we had a functional Congress, it might try to rewrite the statutes that insulate other independent agencies so that they too can partake of the Fed's unique structure. That would render such a structure no longer unique, but surely the key to the exception for the Fed is not the uniqueness of the structure but the characteristics of that structure. Like the Fed, perhaps the National Labor Relations Board (NLRB), Merit Systems Protection Board (MSPB), Federal Trade Commission (FTC), Federal Election Commission (FEC), and every other independent agency under threat from the overruling of Humphrey's could be re-designed to make them quasi-private as well.
But if so, would the Supreme Court that invented the ad hoc exception to its made-up rule invalidating independent agencies play along? Maybe not. Maybe it would say that while the NLRB, MSPB, FTC, FEC, and other agencies are now structured just like the Fed, they don't follow "in the distinct historical tradition of the First and Second Banks of the United States."
Do such agencies follow in that tradition? To figure out whether or not they do, presumably one would need to know something about what the historical tradition of the First and Second Banks actually is.
A simple-minded answer would go like this: The Fed is a central bank and thus a bank; the First and Second Banks of the United States were also banks; but those other agencies aren't banks; so they fall outside the tradition. I have every reason to worry that the Court would say something like that. Even so, it doesn't make a whole lot of sense.
A somewhat better answer would go like this: The Fed is the dominant actor in controlling interest rates and thus the money supply. Although the First and Second Banks of the United States did not have the powers of a modern central bank, they did play a substantial role in controlling the money supply. Thus, they were, at least in part, instruments of monetary policy, just as the Fed is. Those other agencies don't play a role in monetary policy. Therefore, they fall outside the tradition.
That's a better answer but still not a good answer because it fails to tie monetary policy to independence. To do that, we need to take note of the key connection: It is important to put monetary policy in the hands of people who are focused on the long-term health of the economy rather than the election cycle. Politicians have a political incentive to keep interest rates low in order to provide economic stimulus in the short run even if it is harmful in the medium to long run; a central bank subject to political control will lead to high inflation or even hyper-inflation.
But now there's a problem for the Supreme Court if it wants to rely on "the distinct historical tradition" of federal monetary policy. What makes that tradition distinct with respect to independence is not the fact that it involves banking per se. It's the fact that it involves a function with respect to which there is a risk of dangerous self-dealing if there's political control. Once we recognize the reason that ties banking to independence, we see that the tradition should encompass other functions that also present a risk of self-dealing.
What are those? The category isn't self-defining. As we are learning, a sufficiently aggressive administration will attempt to use all the agencies of government to pursue its petty grievances and corrupt schemes. Nonetheless, if the Supreme Court were to follow the logic that makes central banks different from some other government-created entities, it would develop a jurisprudence that asks whether Congress has a sufficient functional need for good-cause removal restrictions because of heightened self-dealing risks.
Where can independence be justified on the ground of insulation from self-dealing politicians? Article III courts are a constitutionally required example. The Fed appears to be permissibly independent. The Supreme Court in Morrison v. Olson upheld a congressionally created independent counsel for prosecuting the president and other high-ranking executive branch officials. The Morrison opinion is obtuse, but the result is correct because presidential control over prosecution of the president and his cronies is an obvious conflict of interest. Given political temptation, the FEC is also justifiably independent.
Had the Court in Wilcox bothered to wait for full briefing and oral argument, it might have distinguished between the MSPB and the NLRB. The whole point of the MSPB is to ensure that federal employees who are doing their job well are not arbitrarily dismissed for political or other purposes. That's a self-dealing risk that justifies good-cause removal protection for MSPB members. The case for NLRB independence is substantially more difficult. I don't like the labor policies of Republican administrations, but setting such policies does seem to be an appropriate matter for political judgment. Under a functional approach to the permissibility of good-cause removal restrictions, the NLRB might fall on the impermissible side of the line.
To be clear, I'm not advocating a functional inquiry into whether Congress is trying to address a heightened risk of self-dealing. Were it up to me, I'd say--as Justice Kagan did in dissent in Wilcox--that the Humphrey's test works just fine, as it appropriately gives substantial deference to Congress's judgment that good-cause removal protection is justified. Such deference seems to me especially warranted given that the Constitution is silent about removal. Actually, from the perspective of the unitary executive theorists, it's much worse than silent: the only express reference to removal of officers is via impeachment, so the burden should be on the unitarians who want to see congressional limits on presidential removal invalidated.
What I am saying is that if the Court wants to distinguish the Fed from some other agencies, it should be honest about why it wants to do that rather than make up some bogus historical exception. The Court wants the Fed exempted from its rule of presidential at-will dismissal power because it understands that allowing the president to control the Fed presents an unacceptable risk of self-dealing. But then the Court should focus its attention on self-dealing and recognize exceptions for various agencies besides the Fed.
Postscript: Readers who are interested in a deeper account of why self-dealing would be the right focus for a functional test of the permissibility of good-cause removal restrictions may wish to consult Don't End or Audit the Fed: Central Bank Independence in an Age of Austerity, a 2016 article by Professor Buchanan and me in the Cornell Law Review. Part IV(A) of that article develops the anti-self-dealing account of agency independence.
--Michael C. Dorf