Balkinization: The Supreme Court Could Cripple America’s Pandemic-Fighting Capacity, Part I

The Supreme Court Could Cripple America’s Pandemic-Fighting Capacity, Part I

Guest Blogger

Simon Lazarus

The biggest impediment to the nation’s capacity to tame the coronavirus pandemic, may not be President Trump’s distaste for mounting a national strategy requisite for limiting its health and economic devastation. More damaging than Trump could be the Supreme Court – plausibly, regarding the current crisis, and far more menacing for efforts to curb future iterations or new cataclysms. In particular, Trump’s two appointees, Associate Justices Neil Gorsuch and Brett Kavanaugh, in three too-little-noted cases over the past several months, have heralded their zeal to resuscitate two long-defunct doctrines imposing drastic constitutional constraints on federal authority. These precepts, emphatically repudiated by New Deal era Supreme Court decisions, would, If exhumed, hamstring current and future federal anti-pandemic strategies.

Specifically, the Gorsuch-Kavanaugh catechism could strip the Federal Reserve Board of its independence from White House control and of the broad policy-making flexibility repeatedly conferred and confirmed by Congress since it first passed the Federal Reserve Act in 1913. These attributes have been indispensable to the Fed’s huge role in the current crisis, and, indeed, to all the vital assignments it has shouldered for more than a century -- inflation control, growth support, economic stability, safety-and-soundness of financial providers, consumer protection, as well as crisis-management. In addition, apart from their implications for the Fed, these back-to-the-future constitutional rewrites could also keep a new Congress from enhancing the independence and/or expanding the authority of existing federal public health, homeland security, or other agencies, or empowering new ones – credible reform possibilities that were actually raised by advocates Paul Clement and Doug Letter while defending current law in the March 3^rd oral argument of one of the above-mentioned Supreme Court cases.

Today’s post will spotlight the doctrinal revamp that threatens the independence of the Fed and similarly structured agencies. Tomorrow I will review the threat to the policy-making flexibility central to the Fed and other agencies broadly empowered by Congress, and also sketch scenarios of how and when these threats could be realized.

In the case argued on March 3, Seila Law v. CFPB, which the Court has not yet decided, opponents of the Consumer Financial Protection Bureau (CFPB) ask the justices to overrule a landmark 1935 precedent, which upheld the constitutionality of so-called “for cause” restrictions on the president’s power to fire heads of agencies like the CFPB, the Federal Trade Commission, and many others – including the Fed. Variously phrased, these restrictions mean that presidents can remove such agencies’ heads only for serious misconduct, but not because of policy disagreements, doubts about political loyalty, or personal dislike. As senior administration officials have related, President Trump has grudgingly acknowledged that he can neither remove Powell as a Board member nor demote him as chair before the end of the terms for those posts prescribed by the Federal Reserve Act. Congress conferred this independence on the Fed, precisely to ensure that its vast powers could not be manipulated to serve presidents’ political interests or personal whims. Experts agree that eliminating that independence could “ignite a chain of calamities that could derail the global economy and financial markets.”

Unlike the Fed and most other agencies covered by for cause removal protections, the CFPB is governed by a single director, not by a multi-member board or commission. Consequently, the Bureau’s opponents have suggested, as a fall-back option, that the Court could hold, more narrowly, that the Constitution bars statutory removal restrictions only for agencies with single heads. In the oral argument, the justices, including Gorsuch and Kavanaugh, seemed focused on that suggestion, devoting most of their questioning to how such a ruling could be justified and/or feasible.

But even if the Court’s conservative majority purports to require at-will presidential authority for single-headed agencies alone, that will not leave unscathed Jerome Powell’s job security, nor that of his successors. This is because, while the Federal Reserve Act specifies that members of the Federal Reserve Board of Governors cannot be removed, except for cause, prior to the end of their 14 year terms, the Act provides for the President to select one member to serve a four-year term as Chair. But the statute does not state whether, before the four years are up, the president needs cause to demote him or her to mere membership, The weight of legal opinion is that the provision should, and likely would, be read by a court to confer for-cause protection on the Fed Chair position. But once President Trump hears that the Court has made single agency heads terminable at will, he might want a second look at whether a federal judiciary increasingly dominated by “his” appointees would block a decision to demote Powell. His White-House-uber-alles Attorney General, Bill Barr, might well favor a court fight to test that issue.

To be sure, the President’s advisors have repeatedly dissuaded him from stirring this pot by demoting Powell, and stated that Trump “realizes that he does not have the right to do so.” But Trump’s always-smoldering enmity for officials he cannot control, and his flare for disruption, could at any point override his strategists’ caution. Indeed, Trump has more than once bared inklings of back-sliding on leaving Powell be, most recently in mid-March of this year. In any event, were he to try to demote Powell, it is by no means clear that the Supreme Court’s conservatives will shrink from making Fed chairs terminable at the president’s will. In January 2018, while still a federal appellate judge on the District of Columbia Circuit Court, Kavanaugh, in support of a challenge to the CFPB’s independence identical to the pending Supreme Court case, brushed away the claim that the Fed Chair is “not removable at will from the chair position;” he tartly observed that “That is not apparent from the statutory language.”

Moreover, even if the pending decision purports to bar for-cause removal restrictions only for single-headed agencies, that will tee up follow-on challenges to the independence of the – far more numerous – multi-member variety. Indeed, in his 2018 D.C. Circuit opinion, Kavanaugh elaborately criticized the 1935 Supreme Court decision sanctioning such protections for the FTC and its many multi-member brethren. Pointedly, he wrote that, “as a lower court, we must follow Supreme Court precedent,” but made no effort to conceal his view that, if it got the chance, the Supreme Court should overrule that precedent, and “transform [all] independent agencies . . . into executive agencies supervised and directed by the President,” Now that he is on the Court, it is not likely he would suppress this passionately held conviction. Nor that his four conservative colleagues would harbor, at a minimum, considerable sympathy for his view.

Simon Lazarus is a lawyer and contributor to legal and opinion blogs and journals. He served as Associate Director of President Jimmy Carter’s White House Domestic Policy Staff, and since then with private and public interest law firms in Washington, DC. His email address is Simonlaz@comcast.net.

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