Democrats in general, and the Biden administration in particular, would have you and other potential voters believe that they are friends of the little guy and opponents of Big Business. Thus, for example, a banner headline on the front page of the Wall Street Journal trumpets “Biden Order Targets Big Business.”
Nothing could be further from the truth. In fact, Big Government works hand in glove with Big Business to create what economists call entry barriers to keep out potential competitors. That is why Big Business overwhelmingly supported Biden and opposed Trump in the last election.
One of their favorite gambits to keep out competition utilizes complex but secret regulatory requirements that big business can cope with but potential competitors cannot. Keeping administrative regulations complex and out of the sight is one of the stratagems that Big Business and Big Government use to delude many voters into thinking that expansive government regulation is in their best interests. (Why Big Business, which provides good livings to many Americans and good products and services to all of us, is a bogeyman in our politics is a topic for another day.)
Understanding how this secret-law gambit works requires delving deeper than usual into the methods that the administrative state uses to keep most of us in the dark about the administrative policies and interpretations that well-connected insiders understand.
Let’s start with how our lawmaking system really works today. Surprise, surprise: contrary to what you were taught in high school civics (if you are old enough to have taken high school civics), the overwhelming majority of our laws are not passed by Congress. Rather, as federal regulation has become more pervasive and complex, Congress has become increasingly unable to reach consensus on the myriad policy decisions that are required by a government that tries to supervise everything from healthcare to the safety of consumer products and the workplace. As a result, Congress has increasingly “delegated” its power to make laws to administrative agencies. Congress passes vaguely worded laws that define lofty, uncontroversial goals like “keep all workers safe” and leaves the specifics to the so-called “administrative state” of career “experts.” I tell my law school students that it is virtually impossible for a polluter to violate the Clean Air Act because that statute, like most other statutes passed since World War II, consists primarily of directives to administrative officials to make rules on one topic or another. When polluters are prosecuted for violating the Clean Air Act, they are actually accused of violating some administrative rule issued under the auspices of the Clean Air Act.
The Administrative Procedure Act, an obscure federal statute passed in 1946, provides that such administrative rules issued by all agencies, not just EPA, may indeed “prescribe law.” This is arguably unconstitutional as the Constitution dictates that “all legislative Powers … shall be vested in a Congress of the United States.”
A few brave conservative critics such as New York Law School professor David Schoenbrod, Boston University Law School professor Gary Lawson, and Columbia Law professor Philip Hamburger have all railed against this fundamental transformation in the structure of American government that was accomplished without a constitutional amendment but so far to little avail.
More recently the conservative majority on the Supreme Court has developed out of whole cloth something called “the major questions doctrine,” which means that judges decide that some questions are just too important to be decided by agencies under vaguely worded statutes but require clear instructions from Congress. That was the main idea behind the recent Supreme Court case striking down the vaccine mandate promulgated by the Occupational Safety and Health Administration (OSHA). The Court held that although OSHA was authorized by Congress to ensure safe workplaces and COVID could be transmitted from one worker to another in the workplace because COVID didn’t originate in the workplace, OSHA couldn’t require vaccines or testing to make sure that infected workers were not transmitting the virus to their co-workers.
Some conservatives may applaud that outcome as a victory for individual liberty, but that was not the basis on which the Court decided the case. Rather, the Court imagined that it could divine the intentions of Congress underlying vaguely worded statutes. This is deeply troubling, particularly for a court that portrays itself as committed to “textualism.” If textualism means anything, it means following the words of a statute as written, not making up what the judges consider good policy and then projecting their policy preferences onto Congress as its unspoken “intention.” Admittedly, the major questions doctrine is a well-meaning attempt to curtail overly broad delegations, but two wrongs don’t make a right. I fear that it will become an excuse for legislating from the bench that is almost as bad as the disease it is attempting to cure. In any event, as a practical matter, the courts cannot force Congress to make all the important decisions required by an administrative state that tries to regulate everything. But I digress from the main topic of complexity and secrecy in government and how it works to the advantage of Big Business and harms the rest of us.
The courts also fought back more modestly against broad delegations of Congress’s authority to make law in the 1970s by requiring that most of the law at the retail level that applies to regulated parties had to be made through a procedure called “notice and comment rulemaking.” This method of making administrative rules that “implement, interpret or prescribe law” requires only that the text of a proposed rule must be published in an official government newspaper called the Federal Register and interested parties are allowed to submit comments in writing. The agency then responds to the comments and the final version is subject to judicial review in court but only under a highly deferential standard that requires a challenger to show the agency’s decisions are “capricious and arbitrary.” Most administrative rules are upheld in their entirety, and, even when the courts do object to a detail here or there, the overwhelming majority eventually go into effect with only minor changes.
As modest as these procedural requirements for making administrative rules are, they have proved to be too much trouble for the regulators. In recent years, administrative agencies have found a way around even these modest requirements of the Administrative Procedure Act by issuing “guidance” rather than “rules.” Guidance documents are administrative edicts that do not even go through the minimal notice and comment procedures for making notice and comment rules. In legal theory, guidance is non-binding. That is a legal fiction, however, as anyone who disregards agency guidance may face enforcement by the government agency that issued the guidance. This problem was identified a generation ago by a perceptive legal scholar, Robert B. Anthony, in an article with the prescient title, “Well, You Want the Permit, Don’t You?” Regulated parties ignore agency guidance at their peril and, as a practical matter, the agency’s word in guidance is law.
No one knows for sure how much law is made today via guidance. A recent study that a co-author and I did for the Administrative Conference of the United States identified 37,000 separate guidance documents issued by just one agency, the Centers for Medicare & Medicaid Services (CMS). Be honest, now: how many of you even knew that CMS existed, much less that it had promulgated 37,000 little laws dictating every detail of how Medicare reimbursements are paid? And CMS is better than many agencies in that at least some of its key guidance documents are made available on its website.
The best guess is that notice and comment rules prescribe 10 to 100 times more law than the statutes actually passed by Congress, and guidance documents elaborate further by another factor of 10 to 100, thereby creating a huge maze of millions of words of detailed regulatory requirements.
As noted previously, most guidance documents do not go through public notice and comment, but, worse yet, there is no effective legal requirement that agency guidance documents be made available to the public. True, Congress passed a law saying that all agency documents of “general applicability” had to be made available to the public, but the enforcement mechanisms are weak and the requirement for making guidance available to the public is generally honored in the breach by most agencies. Read that again: hundreds of thousands of documents consisting of millions of words of secret law are promulgated by what Angelo Codevilla calls “the ruling class” in Washington. These secret rules made by agencies without any public input are allowed to be the sole property of insiders who know how agencies interpret and apply their rules. While this undoubtedly increases the power and future marketability of government experts who know the details of how these laws are interpreted and applied in practice, it is fundamentally antithetical to the Anglo-American tradition that those subject to laws must be given “fair notice” of their content. (READ MORE: Angelo Codevilla: America’s Ruling Class)
This is a big problem in the real world. When I was general counsel of EPA, I spoke to the American Bar Association’s annual conference. At one point in my speech, I stated that we at EPA were going to make all of our guidance documents interpreting a single statute, the Resource Conservation and Recovery Act, available to the public. Much to my surprise, the audience spontaneously rose to its feet and gave me a standing ovation. Unfortunately, I was naïve enough to think that as general counsel I could actually make such a thing happen. Although I ordered the career staff to make the Resource Conservation and Recovery Act guidance available, they managed to frustrate this commitment until I left and it never happened. I later learned that a rule also requires the EPA to make its guidance documents under another statute, the Clean Air Act, available to the public, but that also has never happened in practice.
Enter the Trump administration. In one of his wiser and less controversial actions, in October 2019, then-President Trump issued an executive order requiring agencies to post all their operative guidance documents on their websites. Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents, Executive Order 13,891, 84 Fed. Reg. 55,235 (Oct. 9, 2019) (“Each agency … shall establish or maintain on its website a single, searchable, indexed database that contains or links to all guidance documents in effect … ”).
On its first day in office, the Biden administration revoked that Trump executive order, thereby reinstating the previous system under which agencies are permitted to keep their guidance documents secret from those who are supposed to abide by them. True, you can request them under the Freedom of Information Act, but first, you have to know they exist and be able to identify them, plus you will have to pay the government’s costs for finding and producing them.
The Biden administration never really explained its reasons for revoking such a simple and obviously good government measure as making guidance documents available equally to all. The best guess is that (1) the executive order had been issued by Trump, and (2) the agencies didn’t like it. However, several agencies did explain their thinking when canceling their policies to make their guidance documents available. For example, the Department of Education explained:
[W]e believe that the provisions [of the Trump Executive Order] create unreasonable burdens on Department staff and will slow the process of issuing regulatory and guidance documents without improving the quality of the documents. Allowing the Department to issue guidance documents that clarify its understanding of relevant law and how it intends to use its discretionary authority without these additional procedural hurdles imposed by the [Trump order] will better allow it to serve students, schools, and other stakeholders.
Right, the bureaucrats are so busy fighting systematic racism and other putative issues in the public schools that they couldn’t be bothered to give notice to the governed about what rules they are supposed to follow. You couldn’t make that up.
The preliminary report to the Administrative Conference of the United States on improving agency notice of significant regulatory changes that I mentioned previously concludes that the present system works relatively well for Big Business, which has internal staff, as well as trade associations and outside law firms, to track and advise about changes in complex administrative regulatory requirements. Those who suffer from the complex world of secret guidance are the small- to medium-sized enterprises, as well as smaller unions, environmental, consumer, and community groups who cannot keep up with the constantly changing federal regulatory requirements. Our preliminary report does not represent official Administrative Conference policy or conclusions, but it does reflect what we heard over and over in extensive interviews with numerous participants on the front lines of trying to comply with extensive administrative regulation. The starting point for this ongoing Administrative Conference study on improving procedures for providing notice of regulatory changes, which is now at the stage of inviting comments from the public, was my realization that every small- to medium-sized entity that I represented in a government enforcement suit during my long career in private practice was unaware of the requirements it violated. I discussed my experience with one of the staff attorneys at the Administrative Conference, and he said that was also his experience. True, “ignorance of the law is no excuse,” but we wondered together whether there weren’t better ways for the government to get the word out.
Chicago economist George Stigler won the Nobel Prize in economics primarily for pointing out in a famous article that regulation often benefits incumbents and harms the public it is supposed to protect by creating entry barriers against competition. What even Professor Stigler did not foresee in the 1970s was that complex and secretive agency edicts that only insiders know about aids big companies that know the rules in keeping out smaller or international competitors. I saw this firsthand in 2020 when the U.S. was experiencing a severe shortage of N95 masks that can filter out particles as small as viruses, including the COVID-19 virus. We didn’t have enough to go around, so public health officials prioritized the good ones for health care workers and told the rest of us to wear cloth masks that are much less effective. Meanwhile, a number of international manufacturers approached me seeking regulatory approval to supply more N95 masks. They are relatively easy to make and cost only a few cents to make but they cannot be sold legally in the U.S. as N95s without federal government approval. When I sent the potential new entrants into the market the 89 pages of instructions for the application — no lie, 89 pages of fine print just to apply for regulatory approval — they all backed off. Eventually, the ingenuity of capitalism triumphed and someone came up with the brilliant idea of calling the unapproved competitors KN95s, which is what most of us are wearing today. However, in the meantime, people died unnecessarily, but the virtual monopoly of a few big U.S. companies over the market for U.S. government-approved N95s was preserved, and they continue to sell their N-95s at many times the cost to make one.
Complex regulatory requirements such as these benefit incumbents and large enterprises that can hire former government officials like me and pay us to guide them through the regulatory maze. They harm potential competitors and ordinary consumers by reducing competition. By reinstating the principle that guidance documents may be kept secret, Biden helps Big Business and hurts the little guy.
If you think Biden and other pro-regulation “progressives” are on your side and against the big companies who are their contributors, I’ve got a bridge in Brooklyn that I’d like to sell you.
Author’s Note: The opinions in this article are those of the author alone and do not represent policies or recommendations adopted by the Administrative Conference of the United States or any other organization or group. It does not necessarily reflect the views of the Office of the Chairman or the Conference (including the Conference’s Council, committees, or members).