No Law Passed, Not Even A Regulation Promulgated—But Servitude Nonetheless

In my last post I suggested that I may point out a few prominent examples of agencies regulating with “guidance” alone rather than the notice-and-comment regulatory process. I will do so here.

Guidance—and notices, memoranda, circulars, letters, bulletins, and the rest of the regulatory dark matter “word cloud”—dispense with even the Administrative Procedure Act’s sub-constitutional requirement for formal advance public notice. The APA conveniently doesn’t apply to “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice” (P.L. 79-404. Section 553).

Now, I’m glad to partly agree with Adrian Vermeule’s characterization that my “seeming objections to the administrative state are really objections to the content of regulatory policies,” whatever their source. But it’s one thing to say Congress delegates legitimate administrative power, and what’s happening now is quite another. The difference was apparent for example in a Senate Hearing last year over agency guidance documents. Even under questioning, the process for how agencies decide whether some new initiative will be a formal rule or informal guidance was a “black box” to exasperated lawmakers. Democratic Senator Heidi Heitkamp questioned, “How some of this became guidance when it seems to us that some of it might have been better done in a substantive rulemaking, or better done in the bullying process by Congress.”

Such comes on top of my noting earlier how over a third of agency rules issue without a Notice of Proposed Rulemaking, thanks to the APA’s obliging “good cause” exemption. Further, most final rules have no Office of Management and Budget (OMB)-reviewed cost-benefit analysis (13 rules in the 2015 report, out of thousands or rules that actually issue any given year).

If legislation passed by Congress and signed in plain view by the president sometimes may strain the doctrines of limited government, then sub rosa decrees and guidances of bureaus most assuredly do. While President Barack Obama’s unilateral executive actions are today’s most prominent examples of action without Congress, federal agency guidance documents, memoranda and other proclamations probably predominate.

While their costs remain largely unmeasured or debated, we can count agency proposed and final rules, and even presidential executive orders and memoranda. But agency memoranda, guidance documents, notices, bulletins and the like are more intractable. Purportedly not legally binding, they do intimidate. It has been long recognized that guidance binds “as a practical matter” given that “failure to conform will bring adverse consequences, such as an enforcement action or denial of an application.”

Prominent recent executive agency guidance includes:

  • Housing and Urban Development guidance asserting that landlord and home-seller denial of those with criminal records violates the Fair Housing Act;
  • A Department of Labor blog post and “Administrative Interpretation” announcing that many independent contractors are henceforth employees;
  • A Treasury Department delay (first by a July 2013 blog column, then by Internal Revenue Service guidance) delaying the Patient Protection and Affordable Care Act’s (ACA) employer mandate and in turn the accompanying tax penalty for noncompliance. This happened without public feedback or the mandatory economic analysis that is required (theoretically, but not actually) for “major” rules;
  • The November 2013 declaration (in a presidential press conference, and then in Department of Health and Human Services guidance) that non-ACA compliant health policies could continue to be sold to the public;
  • Environmental Protection Agency Clean Water Act interpretive guidance for “Waters of the United States.” Somewhat uniquely, this directive solicited notice and comment, but the agency apparently illegally manufactured endorsement by lobbying for supportive comments; 
  • A Federal Aviation Administration “Notice of Policy” on drones that temporarily outlawed commercial activity. That action was reversed by the National Transportation Safety Board as an APA violation;
  • Education Department guidance affecting colleges and schools with new mandates at the rate of one issuance per business day. One media-grabbing recent presidential/Department of Justice guidance concerns toilets in public schools.

Whether or not some will disagree that these count as abuses, these are a just a handful; I’ve personally tallied up a partial inventory of 580 pieces of “significant” guidance, yet there are thousands of sub-regulatory guidances that become more difficult to sort out even according to the agencies themselves. In addition, the aftermath of reforms like Dodd-Frank and net neutrality seemingly enable regulation without writing anything down at all. Increasingly, we’re living in a mother-may-I world.

In the recent paper “Why Congress Must End Regulation by Guidance Document,” I described the rise of federal agency regulatory dark matter and proposed some options for dealing with it. In this Cato Unbound exchange over legitimacy of the administrative state, questions still remain over what counts as expertise, why we think agencies have it, and whether we can “outrun” the administrative state as John Hasnas hopes.

As it happens, congressional task forces are engaging in some of this work as well. They are looking at overlapping issues of the expansion of executive branch power, restoration of congressional authority under the Constitution, and oversight and control of the federal regulatory enterprise. I hope that our lead essayist Philip Wallach continues to contribute to those efforts. It will be interesting to see the results.

Also from this issue

Lead Essay

  • Farewell to the Administrative State? by Philip Wallach

    Philip Wallach describes rising skepticism about the administrative state in our representative government. But what can be done about it? Populists promise to return the government to the people, and yet effective government in the modern world to a high degree requires technical expertise. Libertarians have a telling diagnosis of the problem, says Wallach, but few workable solutions. If Congress is to regain control of the sprawling administrative state, it will have to demonstrate that it is willing and able to govern instead.

Response Essays

  • The Administrative State’s Irredeemable Devotion to Central Power by Clyde Wayne Crews

    Clyde Wayne Crews finds much to agree with in Philip Wallach’s diagnosis of administrative sprawl. But then he asks: Why not rein it in? Other countries have done so, and we have even taken some important and bipartisan steps in that direction before. The bureaucratic pretense of expertise has never been so clearly exposed as it is today, and we should take the opportunity to improve the regulatory environment before incipient technologies, like autonomous cars and commercial drone transport, are caught in the regulatory web.

  • What Legitimacy Crisis? by Adrian Vermeule

    Adrian Vermeule openly doubts that the administrative state faces a legitimacy crisis. He observes that Congress itself created the administrative state, and that it remains firmly in control of its creature. Moreover, the public appears fairly content with the administrative state that we have, and certainly shows no inclination to scrap the whole thing. Both these observations should count, he suggests, in any consideration of the administrative state’s legitimacy. In short, there is no crisis here, and no radical solutions are warranted.

  • It’s Better Not to Play the Game at All by John Hasnas

    John Hasnas does not think that the administrative state can be reformed. But it can be outpaced. This, he says, offers hope for libertarians, whereas politics does not. The administrative state is inherently slow to adjust to new social developments, and liberty will always exist just a few steps ahead of it.

The Conversation