May 18, 2022
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There was big news today from a quarter that made it easily overlooked. In a decision about the power of the Securities and Exchange Commission to judge those accused of engaging in securities fraud, the United States Court of Appeals for the Fifth Circuit ruled that “Congress unconstitutionally delegated legislative power to the SEC by failing to provide an intelligible principle by which the SEC would exercise the delegated power, in violation of Article I’s vesting of ‘all’ legislative power in Congress….”
Congress created the Securities and Exchange Commission in 1934, after the Great Crash of 1929 revealed illegal shenanigans on Wall Street. The SEC is supposed to enforce the law against manipulating financial markets. The Fifth Circuit covers Louisiana, Texas, and Mississippi, and its judges lean to the right. Today’s decision suggests that the leaked draft of the decision that would overturn Roe v. Wade has empowered other judges to challenge other established precedents.
What is at stake with this decision is something called the “nondelegation doctrine,” which says that Congress, which constitutes the legislative branch of the government, cannot delegate legislative authority to the executive branch. Most of the regulatory bodies in our government since the New Deal have been housed in the executive branch. So the nondelegation doctrine would hamstring the modern regulatory state.
According to an article in the Columbia Law Review by Julian Davis Mortenson and Nicholas Bagley, the idea of nondelegation was invented in 1935 to undercut the business regulation of the New Deal. In the first 100 days of his term, President Franklin Delano Roosevelt set out to regulate the economy to combat the Great Depression. Under his leadership, Congress established a number of new agencies to regulate everything from banking to agricultural production.
While the new rules were hugely popular among ordinary Americans, they infuriated business leaders. The Supreme Court stepped in and, in two decisions, said that Congress could not delegate its authority to administrative agencies. But FDR’s threat of increasing the size of the court and the justices’ recognition that they were on the wrong side of public opinion undercut their opposition to the New Deal. The nondelegation theory was ignored until the 1980s, when conservative lawyers began to look for ways to rein in the federal government.
In 2001, the Supreme Court unanimously rejected the argument in a decision written by Justice Antonin Scalia, who said the court must trust Congress to take care of its own power. But after Justice Clarence Thomas suggested that he might be open to the argument, conservative scholars began to say that the framers of the Constitution did not want Congress to delegate authority. Mortenson and Bagley say that argument “can’t stand…. It’s just making stuff up and calling it constitutional law.” Nonetheless, Republican appointees on the court have come to embrace the doctrine.
In November 2019, Justice Brett Kavanaugh sided with Justice Neil Gorsuch-—Trump appointees both—to say the Court should reexamine whether or not Congress can delegate authority to administrative agencies. Along with Chief Justice John Roberts and Justice Thomas, they appear to believe that the Constitution forbids such delegation. If Justice Amy Coney Barrett sides with them, the resurrection of that doctrine will curtail the modern administrative state that since the 1930s has regulated business, provided a basic social safety net, and promoted infrastructure.
As Justice Elena Kagan pointed out, the nondelegation doctrine would mean that “most of Government is unconstitutional.”
In today’s decision, it is no accident that Judge Jennifer Walker Elrod's majority opinion recalls what President Ronald Reagan, at a press conference in 1986, called the “nine most terrifying words in the English language”: “I'm from the government, and I'm here to help.” Reagan began the process of dismantling the New Deal government, and its achievement seems now to be at hand.
The decision will almost certainly be appealed.