Dismantling the Fourth Branch of Government

Date: February 22, 2017

In the fall of 2015 NFIB Small Business Legal Center released a comprehensive White Paper highlighting the problem of “underground regulation,” whereby unaccountable federal bureaucrats pronounce new and burdensome regulatory standards through guidance documents, opinion letters and other informal means. As we explained, this is highly problematic. To be sure, the Administrative Procedures Act requires that the regulated community must have at least some opportunity for notice and comment on new standards, which is essential for transparency and any semblance of good governance.

Following-up on this work, we’ve been pushing our point in amicus filings before the Supreme Court in appropriate cases. We even have a lawsuit against OSHA. But as Luke Wake, Senior Staff Attorney for the NFIB Legal Center, explained in a recent interview on the Bob Zadek show in San Francisco, this is only one aspect of a much more pervasive problem.

Anyone running a small business knows that the modern administrative state is out of control. But in this interview, Wake seeks to identify the root cause of the problem and to offer a solution. But of course, much of what was discussed was outlined in the prefatory comments of our Underground Regulations White Paper.

In a nutshell, the problem is that New Deal era precedent has allowed federal agencies broad power to effectively make law by “filling in gaps” in statutory language, or fleshing out ambiguities. Whereas courts once would strictly enforce the “non-delegation doctrine” to prohibit Congress from delegating its lawmaking powers, modern precedent has mostly taken the teeth out of that doctrine to the point that federal agencies now promulgate most of the regulatory standards affecting small business—albeit ostensibly “interpreting” statutory text. But, the problem is exacerbated by the fact that federal courts also defer to an agency’s interpretation of ambiguous statutory text. And given that lawyers are exceedingly creative in finding ambiguity in language that ordinary folks would think crystal clear, it is easy to see how things have gotten so far out of control.

But, can we put the genie back in the bottle?

Well that depends. Certainly, Congress can act to reign in agency power by speaking more clearly when enacting legislation to limit the powers of federal agencies. But ultimately the only way to stem the tide of rising regulation would be for the Supreme Court to revisit (and revise) bad precedent that has created this regulatory leviathan. At the end of the day, it should be for the courts (not federal agencies) to interpret the law, and for Congress alone to impose regulatory standards.

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