Shaking the Foundations of the Administrative State

Most Americans probably never notice the Federal Universal Service Charge, buried under “surcharges, taxes, and fees,” in their cellphone bills.  Other than saving $0.60 a month, it would not have been worth considering this random tax. Until now. In F.C.C. v. Consumers’ Research, argued last week, the Supreme Court’s consideration of that small charge may shake the foundations of the vast administrative state.

The charge arises because Congress ordered the FCC to establish universal access to telecom networks, even in places where companies would find it inefficient to build or for people who could not afford the service. The FCC took this mandate and created a fund, paid for by telecom companies and directed by representatives of interested groups, such as the companies themselves. This fund sets the amount of that year’s tax, which is then passed on to consumers.  Although the FCC uses the Orwellian phrase “universal service fund contribution factor,” the federal appeals court said, “but we call it what it is — the [universal service fund] tax.”

Consumers’ Research offers the Court the opportunity to limit Congress’s delegation of its legislative power to the administrative state. The universal fund is an example of double delegation: first, Congress has given the FCC the authority to set a tax; second, the FCC has re-delegated this power to a group of private companies. If it strikes down the tax, the Court could rely on the non-delegation doctrine, which forbids Congress from transferring excessive power to the executive branch to issue rules and make decisions with the force of law.  The doctrine has origins in the first decades of the Supreme Court. “The legislature makes, the executive executes, and the judiciary construes the law,” Chief Justice John Marshall observed in Wayman v. Southard (1825). Nevertheless, he wrote, “the maker of the law may commit something to the discretion of the other departments.” In upholding a federal statute that allows courts to set their own rules of procedure, Chief Justice Marshall acknowledged that “the precise boundary of this power is a subject of delicate and difficult inquiry, into which a Court will not enter unnecessarily.”

The Constitution does not explicitly address the delegation of legislative authority. Its text follows a simple three-part division of government authority into legislative, executive, and judicial powers, and then allocates these powers to Congress, the President, and the Judiciary. Article I begins with “All legislative Powers herein granted shall be vested in a Congress of the United States.” While the Constitution does not forbid the executive from making law, it only grants the President “the executive power” and the duty to “take Care that the Laws be faithfully executed.” As a result of the language of the vesting clauses and the broader principle of the separation of powers, the Supreme Court has declared that only Congress can exercise legislative power and cannot transfer it to the executive. “The fundamental precept of the delegation doctrine is that the lawmaking function belongs to Congress, and may not be conveyed to another branch or entity,” the Court said in a 1996 case.

The original understanding of the Constitution’s separation of powers might allow the executive branch to fill in the details while implementing the laws, but that does not permit Congress to transfer its Article I, Section 8 powers to the agencies. Because regulations do not undergo the Article I, Section 7 process of bicameralism and presentment, they cannot have the effect of laws. Political thought at the time of the Framing rejected broad delegations of legislative power. In his Second Treatise on Government, Locke declared that “the legislative cannot transfer the power of making laws to any other hands: for it being but a delegated power from the people, they who have it cannot pass it over to others.” Alexander Hamilton explained in Federalist No. 75 that “the essence of the legislative authority is to enact laws, or, in other words to prescribe rules for the regulation of society” and that this power could be exercised only by Congress.

These originalist arguments found their modern exponent, as on so many issues, in Justice Clarence Thomas. In 2015, Justice Thomas called for a broad re-consideration of the Court’s approach to delegation. “The core of the legislative power that the Framers sought to protect from consolidation with the executive,” Thomas wrote in a 2015 dissent, “is the power to make ‘law’ in the Blackstonian sense of generally applicable rules of private conduct.” Justice Thomas would require Congress to enact any regulation that affected private conduct. “It is evident that [current law] does not adequately reinforce the Constitution's allocation of legislative power,” Thomas wrote in concurrence. “I would return to the original understanding of the federal legislative power and require that the Federal Government create generally applicable rules of private conduct only through the constitutionally prescribed legislative process.”

Nevertheless, it is evident that the other branches of government make law today. Federal agencies within the executive branch issue broad regulations under the Clean Air Act, for example, that set the miles-per-gallon standard for all cars and the emissions requirements for all power plants in the country.  Agencies under the Clean Water Act establish how private property owners may use their land.  Independent agencies issue equally detailed regulations without undergoing White House control, such as the Securities and Exchange Commission’s regulation of the financial markets, the Federal Reserve Bank’s management of the money supply, or the Federal Communications Commission’s control over the internet, cable, and communications networks.  The question today may have become not whether the Constitution permits the delegation of legislative authority, but whether, at some point, the delegation goes too far.  

If forced to rely on a constitutional text, supporters of delegation would rely on the same bases of power that justify the modern administrative state. Article I, Section 1 of the Constitution grants Congress the authority to make federal law, and the enumeration in Section 8 includes the powers to tax and spend for the general welfare and to regulate interstate and international commerce. Article I, Section 8 then allows Congress to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.” If the Commerce Clause allows Congress to regulate telecommunications, then the Necessary and Proper Clause allows it to establish the Federal Communications Commission and to empower it to enact regulations. Defenders of the administrative state argue that Congress lacks the time, resources, or expertise to make the numerous decisions required to regulate a modern economy and society – delegation, in other words, is inevitable, and arguments to the contrary are antiquated if not utterly quixotic.

These defenders of the progressive administrative state can draw some support from the Court’s failure to enforce non-delegation. The dividing line between what Congress must decide for itself and what it can delegate has remained obscure. It even challenged the great Chief Justice Marshall in Wayman. The separation of powers, he observed, did not preclude Congress from delegating some of its powers to the other branches. “Congress may certainly delegate to others, powers which the legislature may rightfully exercise itself.” Nevertheless, Congress could not delegate everything. “[T]he maker of the law may commit something to the discretion of the other departments, and the precise boundary of this power is a subject of delicate and difficult inquiry.” Marshall himself drew a distinction between “important subjects, which must be entirely regulated by the legislature itself,” and “those of less interest, in which a general provision may be made, and power given to those who are to act under such general provisions to fill up the details.” He gave little clue as to the difference between “important subjects” and “those of less interest,” and courts ever since have struggled to identify that line.  Nevertheless, Marshall made clear that Congress could not delegate “powers which are strictly and exclusively legislative.”

Subsequent Supreme Court decisions have not improved upon Marshall’s framing of the question. In Field v. Clark, the Court faced a statute that delegated to the President the authority to suspend the duty-free treatment of imports from countries that imposed “reciprocally unequal and unreasonable” tariffs on U.S. products. The Court rejected the claim that the law unconstitutionally vested legislative power in the executive. “That Congress cannot delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution,” the Court declared.  But the statute did not violate the separation of powers, according to the majority, because it only charged the President with finding whether a set of facts existed; if it did, the law itself took effect without further discretion to be exercised by the President.

Foreign trade again presented the Court with the opportunity to further elaborate a delegation test. In J.W. Hampton, Jr. & Co. v. United States, the Court announced the “intelligible principle” test that still governs non-delegation claims. In J.W. Hampton, Congress authorized the President to impose duties on foreign imports to “equalize” the “costs of production.” In upholding the delegation, the Court announced: “If Congress shall lay down by intelligible principle to which the person or body authorizes to fix such rates is directed to conform, such legislative action is not a forbidden delegation of legislative power.” That intelligible principle test continues in force today.

No Supreme Court decision has struck down a statute on nondelegation grounds since the 1930s, partly because of the hollowness of this test. Even the two New Deal cases, Panama Refining Co. v. Ryan and A.L.A. Schechter Poultry Corp. v. United States, paid allegiance to the intelligible principle standard. Panama Refining and Schechter Poultry invalidated parts of the National Industrial Recovery Act on the ground that Congress had “declared no policy . . . established no definition of circumstances and conditions” to guide the presidential exercise of power. Schechter found a federal statute to be unconstitutionally delegated power because Congress had provided no standard at all, and Panama Refining found that Congress had violated the non-delegation doctrine by authorizing the executive branch to regulate the entire economy according to a principle of “stimulating the economy by assuring fair competition.” But in both cases, the Court found that the statutes vested such broad power upon the executive branch to issue legislative rules that it felt little need to explain why the NIRA failed the intelligible principle test, when the laws in Field and J.W. Hampton did not. And since the New Deal, the Supreme Court has upheld every delegation to come before it. In Whitman v. American Trucking Association (2001), for example, the Court unanimously upheld one of the broadest legislative delegations known: the Clean Air Act’s transfer to the Environmental Protection Agency the power to set air quality standards “to protect the public health” with “an adequate margin of safety.”  

Nevertheless, the Roberts Court has signaled its willingness to breathe new life into nondelegation. In 2019’s Gundy v. United States, the Court appeared to have five Justices who questioned the narrow reach of the nondelegation doctrine. The case asked whether Congress could vest the Attorney General with the power to require sex offenders, who were convicted before passage of the Sex Offender Registration and Notification Act, to register with the government. Only four Justices joined Justice Elena Kagan’s opinion upholding the Attorney General’s regulation, which extended the registration requirement retroactively. Justice Neil Gorsuch, joined by Chief Justice John Roberts and Justice Clarence Thomas, dissented from the broad grant of power to the administrative state. Justice Samuel Alito concurred in the judgment but declared his support for “reconsider[ing] the approach we have taken for the past 84 years” of blessing broad transfers of power from Congress to the executive branch. Justice Brett Kavanaugh did not participate in Gundy, but, dissenting from denial of certiorari in a different case, stated that the issue warrants “further consideration in future cases.” Count these votes up, and it appears that the Court has at least five Justices who want to revive the nondelegation doctrine.  

More consequentially, the Court has revived non-delegation principles in its new major questions doctrine. In West Virginia v. Environmental Protection Agency, the Court limited the Environmental Protection Agency's (EPA) authority to regulate individual power plants rather than attempting wholesale control over the nation’s electrical grid in the name of environmental protection. It announced a new “major questions” doctrine that bars new regulations that have broad “economic and political significance” unless the agency has received “clear congressional authorization” in the statute.

The major questions doctrine, however, is not a doctrine of constitutional dimension. It takes the form of a canon of statutory interpretation which counsels courts against, in Justice Scalia’s words, finding elephants in mouseholes. It operates as a type of clear statement rule, requiring courts to find unmistakable congressional authorization for novel agency actions that involve controversial or significant policies. But the major questions doctrine does not attack Congress’s constitutional authority to delegate such authority, if it does so in plain statutory language. Congress could overrule any of the major question doctrine precedents and, presumably, even the doctrine itself. In this respect, the doctrine primarily acts as a rule of statutory construction, but one that makes sense only if the Court believes in the substantive values it promotes. As several academic critics observe, these values come from the non-delegation doctrine.

But the difficulties in identifying the right test to use for the non-delegation doctrine may counsel against the Court announcing a clear bright line test on delegation in Consumers’ Research. It could make clear that Congress cannot delegate the power to tax at all because taxation is one of the core legislative powers, and leave for future cases the development of a principled test to apply to harder questions involving economic regulation. A flexible standard, developed over future cases, could allow the Court to moderate its revival of the nondelegation doctrine by applying it to narrower circumstances. It could find newer regulations under the Clean Air and Clean Water Acts, such as nationwide efforts to control greenhouse gases, as beyond the law’s scope, without threatening older rules governing pollution from factories or cars. A standard would allow the Court to examine recent, broader rules without having to identify any single factor or authority as dispositive in a totality of the circumstances test that seeks to measure regulations against a norm of nondelegation.

While an evolving standard may conflict with a system of predictable constitutional rules, it may also provide the Court with the political leeway to advance norms that are faithful to the original constitutional design. Balancing tests enable the Court to consider not only the law and facts of the disputes at hand but also the political system’s response to more aggressive enforcement of the separation of powers. After each decision, it can measure whether its outcomes rest within the boundaries acceptable to the political system. As it continues to expand the reach of the nondelegation doctrine, the Court could gradually transform its standard into a stricter rule that can gain the agreement of a majority of the justices without triggering a political backlash. And it will all have started with a 60 cent tax on cellphone bills.

John Yoo is a senior research fellow at the Civitas Institute, and a distinguished visiting professor at the School of Civic Leadership at the University of Texas at Austin. He is also the Emanuel Heller Professor of Law at the University of California at Berkeley where he supervises the Public Law and Policy Program, among other programs at Berkeley Law. Concurrently, he is a nonresident senior fellow at the American Enterprise Institute.