Agency Problems
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Agency Problems

Back to the Future: The Necessary Constitutional Restraints on Administrative Power (Old Time Badger Edition)

Not Pictured: Bucky Badger

The constitutional legitimacy of modern administrative power is premised upon energetic judicial and legislative oversight, restraint, and reform. Today’s liberty-minded reformers stress this point—and they’re not the first.

Last week I had the pleasure of traveling to Wisconsin, for a great Madison Federalist Society conference on “The State of Madison’s Administrative State.” Needless to say, the last decade has been a fascinating era in Wisconsin governance, with many significant and welcome reforms by the Walker Administration and the State Legislature—including, perhaps most significantly, the first act by a state to legislate a “REINS Act” to un-delegate some regulatory power from agencies and require those agencies to pursue their most significant new regulatory policies through the legislative process instead.

The conference organizers asked me to prepare remarks on the modern administrative state generally, and as usual I focused on trends at the federal level. But I always like to adapt remarks to the local audience whenever possible, so I spent some time looking through Wisconsin’s cases for interesting discussions of administrative and constitutional structure.

And before long I happened to come across a fascinating and revealing passage from nearly a century ago, in State ex rel. Wisconsin Inspection Bureau v. Whitman, State Commissioner of Insurance, 196 Wis. 472, 220 N.W. 929 (1928). The case centered around the question of whether the state legislature could properly vest the state insurance commissioner (a longstanding but tightly-circumscribed administrative officer) with much broader regulatory powers without violating a constitutional “nondelegation” rule.

In other words, Wisconsin—always at the vanguard of progressive administration reforms in the early 20th Century—was grappling with the same question that the U.S. Supreme Court grappled with just months earlier in J.W. Hampton v. U.S., and soon in Schechter Poultry and Panama Refining.

The Wisconsin Court, in an opinion written by Justice (later longtime Chief Justice) Marvin Rosenberry, made clear from the outset its recognition that the insurance case was in fact a momentous moment for the state:

No case coming to the bar of this court can be treated or considered as unimportant. Some cases, by reason of the public interests involved, the complexity of the problems presented, the magnitude of the interests affected, are of unusual importance. We recognize the fact that this is one of the second class, and have given it the careful and thoughtful consideration which its importance demands.

The commissioner of insurance is an administrative officer. The office has long been known to the law. Because it was among the earlier administrative agencies created, the laws delegating powers to insurance commissioners were very closely scrutinized, and a rather rigid and inflexible application was made of the doctrine of separation of powers and its corollary that powers once vested cannot be redelegated. These earlier cases have continued to exert a restrictive influence upon the development of the powers of commissioners of insurance, whereas statutes creating other administrative agencies passed at a later date have received a much more generous and tolerant treatment than was accorded the early laws delegating powers to commissioners of insurance.

After some preliminary issues, the Court reached the crux of the matter:

The validity of the statute [empowering the insurance commissioner] so construed is challenged upon two grounds: First, that it constitutes an unlawful delegation of legislative power; second, that, if it is held to be a delegation of legislative power, the statute erects no standard in accordance with which the discretion of the commissioner of insurance is to be exercised, and vests in him an arbitrary power.

A determination of the question raised involves a fundamental question of law. … This has led us to a re–examination of the decisions of this court relating to the delegation of legislative power so–called and to a study of the development of administrative law, not only in this state, but in other jurisdictions.

I’ll surprise precisely no one by cutting to the chase and telling you that yes, the Wisconsin Supreme Court rejected the nondelegation challenge and affirmed the statute.

But what may surprise you—it pleasantly surprised me—was the Court’s explanation for why such a broad delegation of power would not jeopardize the constitutional order.

Justice Rosenberry and his colleagues emphasized the checks and balances that would restrain the exercise of administrative power. They began with the courts:

As was pointed out by Mr. Dicey, there will remain two checks upon the abuse of power by administrative agencies. In the first place, every such agency must conform precisely to the statute which grants the power; secondly, such delegated powers must be exercised in a spirit of judicial fairness and equity and not oppressively and unreasonably.

The doors of the courts of this country will always stand open to any citizen complaining that he has been deprived of his constitutional rights, no matter under what form of law the deprivation has been worked. The emergence of administrative agencies will not impair or destroy the checks and balances of the Constitution.

In short, they recognized that the courts must not only ensure that agencies “conform precisely” to statutes, but they must also ensure that agencies conform to notions of “judicial fairness and equity.” (This passage called to my mind Federalist 78 — not just the more famous lines about judicial review, but also the less famous lines about “the firmness of the judicial magistracy” being “of vast importance in mitigating the severity and confining the operation of such laws.”)

But, perhaps most importantly, the Wisconsin court then turned from the courts to the legislature, and emphasized that the most important check on agency power must come from the legislature itself:

To these two may be added a third check, one which seems to us is frequently overlooked, and that is, that all of these administrative agencies are the creatures of the Legislature and are responsible to it. Consequently the Legislature may withdraw powers which have been granted, prescribe the procedure through which granted powers are to be exercised, and, if necessary, wipe out the agency entirely.

How fascinating to see the court itself emphasize this: that modern delegations of administrative power are legitimate and prudent precisely because the legislature itself stands ready to withdraw powers, prescribe new procedures, and from time to time “wipe out the agency entirely.”

Needless to say, this became the theme of my remarks in Madison last week—not so much on the “wipe out the agency” side of things, but rather the court’s advice on withdrawing powers and prescribing procedures, in order to properly check and balance administrative agencies in light of the ongoing experience of actual governance.

As I mentioned to my friends in Wisconsin, this is the spirit that animated much of Wisconsin’s reforms in the last decade, and it should similarly animate those of us who are interested in federal governance as well. The Administrative Procedure Act wasn’t written in stone—nor were doctrines like Chevron or Auer or Chenery II. It’s incumbent that policymakers, judges, and scholars continue to subject these laws and precedents to ongoing scrutiny, in light of actual experience, in order to keep administrative power forever moored to constitutional principle. (Hence the title of one of my essays in National Affairs’s 2017 monograph on regulatory reform: “Reforming Administrative Law to Reflect Administrative Reality.”)

It’s always a pleasure to return to Wisconsin—where much of my own family roots are found; where my wife grew up; and where my wife and I still bring the kids for much of the summer. But it was a particular pleasure to return to Wisconsin to discuss constitutional principle and administrative policy—and, in so doing, to find that Wisconsin’s own history offers reminders of what the work of administrative modernization and reform really entails.

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Adam J. White

Adam J. White

I’m a resident scholar at AEI, and a law professor at George Mason University, directing the law school’s Gray Center for the Study of the Administrative State.