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Shrinking the Administrative State

books and culture

Shrinking the Administrative State

An awakened judiciary could limit hyperregulation. January 3, 2019
Politics and law

Judicial Fortitude: The Last Chance to Rein in the Administrative State, by Peter J. Wallison (Encounter Books, 216 pp., $23.99)

Peter Wallison has written a work of advocacy that could lead to action. An American Enterprise Institute senior fellow and lawyer who once served as White House counsel to Ronald Reagan, Wallison convincingly argues that the passivity of our judiciary has permitted the emergence of an administrative state that wields immense power, in defiance of the Constitution. The only remedy, in his view, is the reassertion of “judicial fortitude” to curb these abuses. Doing so seemed a fantasy before the election of Donald Trump, but now it could become reality, with a majority of Supreme Court justices sympathetic to what Judicial Fortitude advocates.

As others have done, the author traces the administrative state’s origins to the presidencies of Theodore Roosevelt and Woodrow Wilson, who believed that regulatory agencies were essential to governance in the complex modern world. The administrative state was subsequently enabled and expanded by decades of Supreme Court rulings that allowed ever more discretion to these unelected bureaucrats. The trend culminated in the 1984 Chevron v. Natural Resources Defense Council decision, in which the Court effectively ruled that deference must be given these agencies in interpreting the statutes that they’re supposed to administer. 

Among the long train of abuses that Wallison documents, a standout was the Barack Obama-approved 2013 Justice Department initiative “Operation Choke Point,” meant to investigate the dealings of financial institutions with industries that were supposedly at high risk for fraud or money-laundering. But as the thuggish-sounding name of the operation suggested, financial strangulation, rather than regulation, was the real premise. As Wallison explains, the “regulatory agencies directed banks to cease making loans, or in some cases cease to provide any banking services,” to a hitlist of merchants that included “sellers of firearms and ammunition, coin dealers, sellers of lottery tickets, money transfer networks, and payday lenders.”

If these merchants’ activities were illegal, legal means could have been used to shut them down. But since no laws were being broken, the government decided to choke off their financial oxygen through extralegal means, going well beyond financial regulators’ mandate to ensure the safety and soundness of the banks. This story has a relatively happy ending: after payday lenders brought an action in 2015, the D.C. Federal District Court ordered the end of Operation Choke Point. But the fact that such an outrageous intervention could occur in the first place stands as testament, as Wallison observes, to “the arrogance that comes from not having to answer to anyone.”

Flagrant agency overreach persists today at the Equal Employment Opportunity Commission, which has given itself the power to level charges of discrimination without having to demonstrate any intent to discriminate. The presence of “disparate impact,” which means that a practice or policy has an adverse effect on members of a protected class, suffices to establish legal violation. As Wallison points out, the implications of disparate impact are almost laughable. “Let’s assume that an automobile dealer advertises cars, but only in English,” he writes. “Could this be discriminatory with respect to Spanish speakers—either because they don’t understand English or because they regard the ads as intended to exclude them as purchasers?” He concludes, “from the standpoint of a business, there is almost nothing one can do that can’t be regarded as having a disparate impact on one group or another.”

The reach of the administrative state is staggering. More than 3,000 new regulations get passed every year, far more than the number of new laws passed by Congress, at an annual cost to the economy estimated at $2 trillion. “It is wryly amusing,” observes Wallison, “to see the great efforts that are made . . . among economists at the Congressional Budget Office to assess the effects of tax changes on the economy, while the agencies of the administrative state go merrily along—virtually unchallenged by anyone—imposing more and more invisible costs on the economy through regulation.”

That challenge might come, eventually, from the new five-member majority on the Supreme Court. Meantime, Judicial Fortitude should be must-reading. If the administrative state does get reined in, regulatory agencies will be forced to adhere strictly to the wording of statutes that they’re supposed to administer. The burden will be placed on Congress to write bills that more carefully specify those rules, and that could produce a collateral benefit: an overworked Congress might pass fewer laws.  

Photo: audioundwerbung/iStock

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