A Powerful Administrative State – Why You Should Fear It

Neither Democrats nor Republicans realize what the true threat to our liberty is. As a result, both parties spend all their time and resources attacking the wrong things. For example, conservatives complained loudly when President Obama agreed to the Iran nuclear deal and cut the defense budget, citing these actions as proof of his contempt for American exceptionalism. While today, liberals assert that President Trump’s proposed immigration restrictions and his distrust of the national press corps amount to an assault on the Constitution.

However, both sides are ignoring the very large elephant in the room. The biggest danger Americans face is actually the administrative state—a sprawling, executive-branch bureaucracy made up of hundreds of federal agencies, sub-agencies, and departments. Often referred to as the “deep state” or the “regulatory state,” this bipartisan behemoth exercises powers once held only by royalty. These include the authority to create, adjudicate, and enforce laws that affect almost every aspect of our lives.

Americans should fear an overly powerful administrative state for a variety of reasons. First, it is nearly impossible to hold these bureaucrats accountable for their actions. These officials are unelected and thus don’t have to please their constituents to keep their jobs. Adding to the unaccountability of the administrative state is its status as a nebulous entity.

Nobody can even say for sure how many agencies actually exist, because there is no definitive list. The spring 2015 edition of the Unified Agenda of Federal Deregulatory and Regulatory Actions publication, for example, lists 60 federal agencies. However, the Administrative Conference of the United States claims the number is 115. Meanwhile, The United States Government Manual states that there are 316 federal agencies.

If we can’t even figure out how many agencies there are, how can we tell who is making all the rules we must follow, or for that matter, how many rules even exist? To make matters worse, these agencies constantly produce a multitude of what amount to undocumented regulations, otherwise known as “regulatory dark matter,” through their bulletins, memos, and guidance documents. A US House of Representatives Committee on Oversight and Government Reform voiced its alarm over these “non-legislative” rules in 2012, stating

“Guidance documents, while not legally binding or technically enforceable, are supposed to be issued only to clarify regulations already on the books. However . . . they are increasingly used to effect policy changes, and they often are as effective as regulations in changing behavior due to the weight agencies and the courts give them.”

Another reason to fear the administrative state is that it has assumed the powers that were once the exclusive domain of Congress and the courts. The National Labor Relations Board (NLRB), for example, not only creates laws that govern employer-employee relations, it also investigates rule violations, decides the fate of the rule-breakers, and enforces the consequences of its decisions. However, according to Article I, Section I of the Constitution, all legislative powers are supposed to reside with Congress. In fact, the Founding Fathers thought it was extremely important to separate the judicial, legislative, and executive powers into different branches of government. James Madison explicitly states in Federalist No. 47 that

“the accumulation of all powers legislative, executive, and judiciary in the same hands . . . may justly be pronounced the very definition of tyranny.”

In his 2014 book Is Administrative Law Unlawful?, constitutional scholar Philip Hamburger claims that today’s administrative state has essentially “gutted” the Constitution. One supporting example is the use of administrative courts, which deny citizens the right to a fair trial. These proceedings, which judges on the agencies’ payroll oversee, often lack a jury and fail to follow full due-process procedures.

According to Hamburger, the framers of our Constitution would be appalled by the abuses we see perpetuated by today’s administrative state. In fact, they drafted the Constitution specifically to avoid the possibility of a corrupt head of state, like King James I, ever governing America. James Madison even went as far as to say that the Constitution was a means to guard against “the danger to liberty from the overgrown and all-grasping prerogative of an hereditary magistrate.”

King James I believed that his divine right of “absolute power” allowed him to dismiss laws or make them not apply to certain people without having to obtain approval from Parliament. James also made his own laws, bypassing Parliament and the court system. He issued proclamations and established tribunals, which, like modern administrative agencies, commissioned expert reports and issued and enforced decrees.

The federal agencies of today are essentially doing the same thing. The federal Department of Health and Human Services (HHS), for instance, exempted a number of politically important companies, like McDonald’s, from certain Obamacare provisions. However, in place of royal decrees, the administrative state issues rules and sends out “guidance” letters. One particularly infamous letter is the one from an Education Department official in 2011 that stripped college students of due process rights when someone accuses them of sexual misconduct.

So, how do we reign in the administrative state and the overreach of the executive branch? According to Hamburger, there are several practical things we can do. One is to hold agency officials financially accountable for exceeding their constitutional authority. Until the 19th century, the American people could sue these individuals for damages. Today, thanks to a “qualified immunity” doctrine, government officials are safe from repercussions of their actions.

Other ways to restrain the power of the administrative state involve requiring Congress to approve any new laws and to review all existing regulations to decide which ones should become laws. Additionally, the president could make certain agencies try cases in regular courts rather than relying on administrative judges.

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One Important Way This Think Tank Is Fighting for Your Rights

To guard against any one bloc of the central government gaining too much influence, the founding fathers installed a system of checks and balances into our founding documents. One aspect of this system is the concept of separation of powers, which means that each of the three branches of government – the executive, the judicial, and the legislative – must operate solely within the boundaries delegated to it by the Constitution.

Also inherent in separation of powers is the idea that those who execute the law are directly accountable to the president. However, many government agencies today are effectively disregarding the strictures of the Constitution. They do so by arguing that in order to efficiently serve the needs of modern society, they must employ powers designated to other branches.

Administrative Law Judges and Conflicts of Interest

There are a number of organizations, however, that are fighting against the creep of the administrative state. The Cato Institute is a research foundation that aims to advance the principles of limited government, free markets, and individual liberty in public policy. It recently filed an amicus curiae, or “Friend of the Court,” brief in support of the defendant in a case involving the US Securities and Exchange Commission (SEC), condemning its use of administrative law judges (ALJs).

Essentially, the SEC claimed that in 2006, the investment advisory firm Timbervest and its four owners committed fraud by arranging to sell a client’s land at an extremely low price to another client before purchasing the property itself without notifying the first client. The SEC also alleged that Timbervest received real estate commissions on these transactions that it failed to disclose. The SEC “tried” Timbervest’s owners in its in-house court, which does not rely on a jury to render a decision, but instead leaves rulings in the hands of ALJs, who the agency considers its “employees.”

After the SEC pronounced Timbervest liable, it ordered the firm to pay back all the fees the initial client paid and permanently barred the owners of Timbervest from engaging with any investment advisers. Timbervest appealed to the DC Circuit Court, arguing that it was innocent of the charges and that, regardless, the matter had surpassed the statute of limitations specified by the Investment Advisers Act of 1940.

The Significance of the Appointments Clause

The Cato Institute filed its amicus brief with the DC Circuit Court on May 2, 2016 because it wanted to “address the implications of core separation-of-powers issues along with the democratic accountability of executive officers – issues that no other amicus brief covers.” Cato argued that ALJs are essentially judicial officers of the executive branch, similar to territorial judges.

However, there are three layers of officials between the SEC’s ALJs and the president. As a result, the president cannot remove them like he or she can remove other officers if they abuse their powers. The ALJ system therefore violates the Appointments Clause in Article II of the Constitution, which grants the president control over “inferior officers” of the executive branch, even if these posts are judicial in nature.

Another issue Cato raised was that the process by which the SEC hires ALJs produces inherent bias. After all, if a judge’s employer chooses him or her to try a case that involves the employer, the judge may (whether consciously or unconsciously) side with the entity that supplies his or her paycheck.

The Supreme Court has even stated that bias is nearly inevitable when “a man chooses the judge in his own cause.” As a testament to how widespread the problem has become, a former SEC ALJ named Lillian McEwen recently publicly revealed how the SEC pressured ALJs to favor the agency in rulings.

Article III Courts Ensure Due Process

In addition, the Constitution specifies that cases involving real estate fraud should be heard before an Article III court, not an administrative one. Congress can assign cases to administrative courts for cases involving new public rights, such as Social Security Disability claims. However, it can’t do this for cases, like the Timbervest one, that address common-law matters that have been argued in courts since the birth of our nation.

The government also can’t eliminate a person’s Constitutional rights without the due process provided by a proper judge. By banning Timbervest’s owners from any kind of association with an investment adviser, the ALJ violated the owners’ First Amendment right to free association. To remove this right requires, at the least, a jury trial held in an Article III, or federal, court.

While the Timbervest case still lingers in the appeals process, a number of other organizations have joined The Cato Institute in supporting Timbervest in its struggle against the ALJ system. The Washington Legal Foundation, a public interest law firm that bills itself as “an advocate for freedom and justice,” and the Securities Industry and Financial Markets Association, which promotes efficient and effective capital markets, have also filed amicus briefs supporting Timbervest’s assertion that the SEC’s ALJ system is inherently unconstitutional.

Why Is the 7th Amendment Important to Us Today?

Most people know that the 1st Amendment is about free speech, and nearly every school kid can tell you that the 2nd Amendment guarantees Americans the right to bear arms. However, many people do not understand what the 7th Amendment protects. The irony of this is that without the 7th Amendment, Americans could lose many of the other rights to which they are entitled.

Added to the Constitution in 1791, the text of the 7th Amendment reads:

“In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.”

This means that in a civil case (when single persons or organizations sue each other, as opposed to a criminal charge brought by the government against a person or an organization) involving a sum that exceeds the minimum threshold (which, according to 28 U.S. Code § 1332, is currently more than $75,000 if diversity of citizenship applies, or more than $20 if diversity of citizenship does not apply), the parties involved have the right to argue their case before a jury of their peers. Further, any decision arising from a civil case such as this cannot be summarily overturned unless appropriate legal procedures are followed.

It must be noted that the 7th amendment only applies to federal cases. The Supreme Court has never ruled that the 7th amendment can be extended to state and local courts. However, most states voluntarily guarantee the right to a jury trial in civil cases. Additionally, state court cases that are decided under federal law must guarantee the right to a jury trial.

Why did the founders include this amendment?

The framers of the Constitution believed strongly in a citizen’s right to a trial by his or her peers. In fact, it was one of the key ideals for which they fought in the Revolution. The founders were worried that if judges had the sole authority to decide trials, they would take the government’s side in any issue, thus tipping the scales of justice towards those in power.

Early Americans had good reason to fear this outcome. When King George III appointed judges in the colonies, these judges tended to rule in favor of the crown. Consequently, the founders believed that the best way to ensure fair trials was to entrust the outcomes to juries composed of locals. These people likely knew the defendant(s) and understood the issues involved in a case.

The founding fathers added the 7th Amendment to the Constitution to protect the jury system from the influence of any official or subjective power. As the founders had learned from their days under colonial rule, those high in the political hierarchy had no qualms about subverting the workings of justice for their own ends.

Today, Constitutional scholars across the political spectrum agree on the necessity of protecting the civic jury system. According to Justice William Rehnquist, the right to a jury trial is an “important bulwark against tyranny and corruption, a safeguard too precious to be left to the whim of the sovereign, or, it might be added, to that of the judiciary.”

Recent abuses of our 7th Amendment rights

Pressured by special interests over the past few decades, legislatures and other government bodies across the country have passed laws that limit people’s access to the courts and restrict the power of juries, thus eroding the authority of the civil jury system. The following are a few examples of how American’s 7th Amendment rights are being violated:

1) Using internal courts. More than two dozen federal agencies, including the Social Security Administration and the Securities and Exchange Commission, rely upon their own internal court system to make decisions regarding compliance matters. According to these agencies, these internal judges (known as “administrative law judges”) are experts in their particular field. Thus, the argument goes, they are better suited to adjudicate regulatory cases than regular federal judges.

However, these agency courts do not follow the same rules as other court systems. Internal judges can disallow the testimony of expert witnesses, refuse requests for information regarding government witnesses, and limit how the defense can depose a witness or conduct discovery. Unsurprisingly, these internal courts tend to rule in favor of the agency that provides their paychecks.

2) Forcing arbitration. It is difficult nowadays to shop online, accept a job offer, or fill out an application for a credit card without having to agree to an arbitration clause. These are often hidden in the fine print in Terms of Service contracts that everyone agrees to, yet almost no one actually reads. Arbitration clauses mean that people cannot obtain certain goods or services without first relinquishing their right to jury trial.

Under these Terms of Service, if an individual wants to hold a company accountable for unfair or illegal business practices, he or she is barred from filing a class-action lawsuit. Instead, he or she must participate in arbitration, a process that often favors corporate interests. In fact, according to data from The New York Times, nearly two-thirds of those who engage in arbitration to fight fraud, excessive fees, or bad loans received zero compensation.

3) EstablishingThe English Rule.” Lobbyists across the country have begun advocating for “The English Rule,” which is when the loser of a civil court trial is responsible for paying the winner’s legal fees. For example, if a person sued General Motors, he or she would be required to pay the corporation’s legal expenses if he or she lost. Obviously, this makes it very risky for any but the very wealthy to sue a large business, thus reducing access to a jury trial for all but a select few.

The Debate over How to Interpret the Constitution

The Constitution is the basis for America’s system of government and laws, but many Americans disagree about what role this founding document plays in our lives today. Is the Constitution a sacred document that should be interpreted according to the original intentions of its creators? Is it a “living” document that should grow and change to reflect modern sensibilities? Or, is it something else?

Read on to learn more about these different perspectives.

What Is a Living Constitution?

In short, a living Constitution is one that evolves according to the new circumstances of the nation. Interpreting the Constitution as a living document comes with the assumption that the words have meaning beyond the relevant text, meaning that the situation of contemporary society needs to be taken into account when looking at a particular phrase.

Why Do People Think We Need a Living Constitution?

The Constitution has remained the cornerstone of our nation’s liberty for more than 220 years. While it can be amended, the process is necessarily difficult. In fact, the most important amendments were made 150 years ago after the Civil War. Amendments since that time have dealt mostly with very minor matters that do not impact the daily lives of American citizens. In those 150 years, the country, not to mention the world, has changed dramatically. The population of the United States has increased many times over, and the nation’s technology, economy, and social mores are completely different. People who support the idea of a living Constitution argue that amendments alone cannot keep up with this rate of change.

Proponents of a living Constitution believe that change is necessary, even for the Constitution, as demonstrated by the amendments that have already been made. People who believe in a living Constitution and those who do not both accept this fact. However, supporters of a living Constitution argue that the document was written such that the meaning of the language could change without requiring a formal amendment.

What Do Originalists Believe?

Originalists believe that the Constitutional provisions meant, and continue to mean, exactly what they did to the people who wrote and adopted them. In other words, they argue that the idea of a living Constitution is a moot point because the document does not need to change or adapt except through formal amendment.

The Constitution is the foundation of the nation, and a changing foundation leads to instability. Many originalist constitutional scholars scoff at the idea of a “living Constitution.” After all, the Constitution is the embodiment of our most sacred beliefs and principles. Public opinion changes, but these foundational concepts do not. If they did, what is the point of a Constitution?

Why Do Originalists Prioritize the Founders’ Original Intentions?

The Founding Fathers

The Founding Fathers – Source: DonkeyHotey

Originalists argue that it is vital to interpret the words of the Constitution according to the intentions of the Founding Fathers because doing so removes the personal judgments of individuals or judges from the equation and minimizes the chances of corruption. Many originalists turn to quotes from the Founding Fathers to explain this point of view. While George Washington believed that “the basis of our political systems is the right of the people to make and to alter their constitutions of government,” he also thought that the Constitution as it exists at the time is “sacredly obligatory upon all.” Similarly, Thomas Jefferson said, “Instead of trying what meaning may be squeezed out of the text or invented against it, conform to the probable one in which it was passed.”

Originalists believe that a living Constitution is equivalent to a manipulable Constitution. If the document changes, then someone is doing the changing and inserting his or her own ideas into it. Generally, the “someone” is a group of judges charged with interpreting the document. To many, a fluid Constitution is not a Constitution at all and should not be taken as law any more than the ideas of judges in power should be considered law.

Are There Other Opinions on the Nature of the Constitution?

People in support of and against the idea of a living Constitution both seek to protect the Constitution as the ultimate law and the source of our liberty. At the same time, these are not the only viewpoints that exist about the Constitution. Some scholars have taken a different position altogether.

This position is grounded in the belief that the Constitutional law of the United States resembles a type of law that predates the actual Constitution. This older type of law is called common law, and its roots can be traced back thousands of year informally, and hundreds of years formally. Common law is a system built on precedents and traditions that become solidified over time. While the law can adapt and change, these shifts must stay rooted to the past and thus evolution becomes checked. Supporters of the common law theory believe that the American Constitutional system is a common law system defined by the Constitution but also sensitive to precedent.

As a source of common law, the Constitution, some would argue, gives room for growth, but it also lays out the fundamental principles that are protected from the vicissitudes of public opinion. While amendment is possible, it is not something that can simply be directed according to the opinions of one judge or even a group of judges.

Exploring the Constitution’s Six Big Ideas in the Classroom

Constitution pic

Constitution
Image: archives.gov

Koch Asset Management president Donald L. Koch possesses over four decades of experience in the financial sector. He has written extensively on topics including business economics and monetary policy and has taught courses in economics and banking at institutions including Jacksonville University, University of North Florida and the Georgia Institute of Technology. In addition, Donald L. Koch is the founder of the Koch Charitable Foundation, a nonprofit dedicated to educating Americans on the nation’s founding documents.

While inspiring high school and junior high students to engage meaningfully with these topics may seem a lofty task, the US National Archives and Records Administration’s Center for Legislative Archives has developed an extensive lesson plan for grades eight through 12, focusing on the key principles of the Constitution. By breaking the Constitution down into the “Six Big Ideas” of limited government, republicanism, checks and balances, federalism, separation of powers, and popular sovereignty, educators can more clearly demonstrate how the document shaped the structure and function of the federal government.

Before the lesson, students should have an understanding of concepts such as ratification, republic, and sovereignty, as well as the Articles of Confederation and the Three-Fifths Compromise. Their first foray into constitutional studies should consist of mapping the text of the document, which will shed light on its most heavily emphasized topics. Students should also investigate how the backgrounds and political relationships of the country’s founders impacted the Constitutional Convention.

After thoroughly discussing the “Big Ideas” as demonstrated in the Constitution, educators can guide students in analyzing various archived documents exemplifying the government’s constitutional powers throughout history. The National Archives’ lesson plan concludes with a classroom activity that demonstrates how the Constitution continues to inspire widespread debate. Students work together in two groups to develop arguments related to the Constitution’s Big Ideas, answering such thought-provoking questions as “What should be the role of citizens in public policy development?” in a structured classroom debate.