How The Court's Sarbanes-Oxley Decision Affects Social Security (and Other) Policies

Rick Pildes

Yesterday's NY Times carried a story about tensions between Congress and the Social Security Administration (SSA), along with tensions inside the SSA, over the critical task of how to keep the numbers concerning social security honest. The key figure is the agency's chief actuary; the current actuary has served 37 years and apparently has earned Congress's respect for his independence, accuracy, and reliability. His independence is legally protected by standard "for-cause" removal provisions -- the head of the SSA cannot fire the actuary at will (and therefore pressure the actuary) but only if specific, demonstrated good-cause reasons exist. This is especially important because there is, in fact, tension between the current head of the SSA and the actuary over some issues. Yet if the comments from House and Senate members in the Times story are accepted, this system has worked; for all the political and policy struggles over social security, at least policymakers have been able to rely on the numbers the chief actuary has generated.

Now here's the rub: the SSA is an independent agency, headed by someone President Bush appointed who will serve until 2013. President Obama cannot fire him, even if they disagree over policy; the head of the SSA is also protected by for-cause removal provisions. Thus, to protect the independence of the chief actuary, Congress has created a structure that looks much like the one the Court just held unconstitutional in the Free Enterprise case: the chief actuary is an independent official inside an independent agency. The President is twice removed from being able to exercise any direct control over the chief actuary: once, by the independence of the SSA itself, and then again, by the independence of the chief actuary within the SSA.

This recent example highlights two implications of the Court's Free Enterprise decision. The first is one rather strange consequence: to protect the President's power -- which is the basis for the Court's decision -- the head of an independent agency like the SSA has to be given the power to fire at will someone like the chief actuary. Congress cannot make this official independent; Congress cannot protect him/her with good-cause removal protections. But the head of the SSA was appointed by President Bush and President Obama has no control over him. How does it protect the President's power to give the head of the SSA (or similar agencies) -- officials the current President did not appoint and cannot remove -- more power? The second implication is this: if Congress concludes public policy is well served by creating officials who are independent, inside agencies like the Federal Reserve, the SEC, the FCC, SSA, and other independent agencies, should that option be unconstitutional? Is the best understanding of the Constitution, and the President's Art. II powers, one in which this option is taken off the table, in contexts like that described in the Times story?

Perhaps there are enough distinctions between what the chief actuary in SSA does and what the Board at issue in the Sarbanes-Oxley case does, so that the former structure is not necessarily unconstitutional merely because the Court concluded the latter was. And even if the independence of the chief actuary is unconstitutional, it might be that no one will ever have legal standing to challenge that structure in court. But at a minimum, the Court's decision in the Sarbanes-Oxley case raises very serious constitutional questions about one of the most critical tasks in administering social security: how to design the administrative system so that the numbers, on which all policy decisions are based, are accurate, reliable, and honest. The structure for doing that for SSA, which has been in place since social security was created, is now cast into serious constitutional doubt by the Court's recent decision in the Free Enterprise case.
Posted 6:36 AM by Rick Pildes [link]