Balkinization: Misappropriation

Misappropriation

Joseph Fishkin

Yesterday’s blockbuster student loan decision in Biden v. Nebraska expanded the new “major questions doctrine” (MQD) to benefits programs—a place this new doctrine was certainly destined to go eventually, but it had to get there yesterday in a hurry in order to strike down the Biden Administration’s student loan relief plan. Congress instructed the Department of Education in broad language to “waive or modify” any part of the student loan program including parts concerning debt forgiveness to ensure that individuals affected by a national emergency would not be left worse off by it. Both the Trump and Biden administrations used this statutory authority to pause federal student loan payments and interest accrual for all borrowers across the country over the past three years (at a cost in foregone revenue of over $200 billion). But the six-justice supermajority of Republican appointees on the court simply could not allow the same statutory authority to be used to actually write down the principal—to forgive $400 billion or so of student debt, about a quarter of all the debt outstanding. And so today they struck it down.

A pause is one thing. An actual write-down just felt too much like redistribution. And redistribution is anathema to the core constitutional politics of the Republican party as presently constituted. Chief Justice Roberts’ opinion hints at this, quoting a news article for the proposition that student loan cancellation “raises questions that are personal and emotionally charged, hitting fundamental issues about the structure of the economy.” In other words, student loan relief is a fundamentally redistributive intervention in American political economy of a kind that conservatives deeply oppose; that opposition makes the program controversial enough to be a “major” question for purposes of the MQD; and that in turn provides a justification for killing the program. The court, even as it kneecaps Congress, styles itself as defending Congress. It’s all very neat and tidy. It’s a doctrine designed like a heat-seeking missile to blow up Congressional power to do things that are controversial because they contradict the present Republican Party’s vision of constitutional political economy.

There are hints in Biden v. Nebraska about where that vision might lead next. If you are trying to rein in the administrative state in general, and its potentially redistributive aspects in particular, then one of your major agenda items will be to bring as much of the fiscal state as possible under the umbrella of annual congressional appropriations. Appropriations are subject to across-the-board budget cuts, government shutdowns, sequestration, and all the other insanity that comprises the modern bipartisan bicameral budget circus in moments when Republicans control any houses of Congress. Money that isn’t subject to appropriations is, from this perspective, a problem.

And so, in the coming years, watch for the emergence of a robust new theory of what counts as an “appropriation.”

It’s already happening. To see it, you have to look both inside and outside the courts at the same time. I have learned from Jack Balkin to watch for arguments moving from “off the wall” to on the wall, and here I see it happening in real time. In the runup to this case, a number of conservative commentators outside the courts began to characterize student loan forgiveness as an appropriation. This is not literally true. A straight write-down of student loan balances is definitely not an appropriation in the constitutional sense (Article I, Section 9: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law…”). A write-down doesn’t draw money from the Treasury. It’s more like a tax cut, in that it deprives the government of future revenue it would otherwise have received. An economist would say these things are economically equivalent. But constitutionally, they’re quite different, and Republicans know it. Just a year ago, Senator Rick Scott proposed a whole bill whose sole purpose was shifting student loan relief over into the annual appropriations process. His “Debt Cancellation Affordability Act” would require “an express appropriation from Congress to pay for any federal student loan debts the Department proposes to waive, discharge, or otherwise reduce whenever granted to two or more borrowers in an amount greater than $1,000,000, rather than on a case-by-case basis.”

Soon after Scott’s bill went nowhere, a George Will syndicated column previewing this litigation implied that Scott’s bill was effectively unnecessary: Biden’s student loan relief plan was already an illegal appropriation: it was, essentially, a form of spending, so doing it without a Congressional appropriation down to the specific dollar amount already violated the Constitution’s appropriations clause (quoted above).

When Biden v. Nebraska reached the court, a number of amicus briefs on the plaintiff side made the same claim. Take a look at this brief from the “Citizens United Foundation,” this brief for the Americans for Prosperity Foundation, this brief from the “Empire Center,” or this brief from Betsy DeVos and other former Republican Secretaries of Education (a non-exhaustive list). At oral argument, Justice Thomas picked up the baton (see oral argument transcript, 37–42). He asked Solicitor General Prelogar whether the write-down “runs headlong into Congress’s appropriations authority.” You’d need an appropriation to make a $400 billion “grant,” he argued; aren’t you “in effect” doing the same thing through loan forgiveness? And of course in an economic sense, the answer is yes, although that proves too much—any form of relief under the HEROES Act including the covid pause also costs the government money, as Prelogar quickly pointed out.

In his opinion for the Court, Chief Justice Roberts does not endorse this novel “anything affecting the government balance sheet is an appropriation” theory. But he winks at it. Like the broccoli in the Affordable Care Act litigation, this theory, which I’ll just call misappropriation for short, gets two subtle winks. In a section arguing for why the MQD should extend to government benefits, sort of apropos of nothing Chief Justice Roberts works this in:

Among Congress’s most important authorities is its control of the purse. U. S. Const., Art. I, §9, cl. 7; see also Office of Personnel Management v. Richmond, 496 U. S. 414, 427 (1990) (the Appropriations Clause is “a most useful and salutary check upon profusion and extravagance” (internal quotation marks omitted)).

Separately, and a little saucily, he responds to Justice Kagan’s dissent at one point this way:

The dissent insists that “[s]tudent loans are in the Secretary’s wheelhouse.” Post, at 26 (opinion of KAGAN, J.). But in light of the sweeping and unprecedented impact of the Secretary’s loan forgiveness program, it would seem more accurate to describe the program as being in the “wheelhouse” of the House and Senate Committees on Appropriations.

I am not enough of an expert in congressional procedure to be sure of which committee(s) would have jurisdiction over a student loan write-down bill, but there is no obvious reason in the rules for it to go to the Committees on Appropriations rather than, say, the education committees, since again, in the literal sense this is not an appropriation. I put little weight on my reading of those rules.* But my point is that Roberts, in choosing this particular committee as the place to assign his imaginary bill that is the loan forgiveness program for purposes of this rejoinder to Kagan, seems to be potentially making another little nod to the misappropriation argument. It’s at the very least misappropriation-curious, kind of feeling out the possibility of arguing—carefully without explicitly arguing—that maybe student loan relief is really somehow an appropriation.

After the decision came down, I heard Rep. Virginia Foxx on the radio picking up on the appropriations language, as well as the underlying political economy point: “What the president has done is take on the role of Congress by deciding through a rule to appropriate money from the taxpayers to people who willingly took on a debt. And I think what he has done is totally illegal.”

Why does this matter? Well, in an immediate sense it matters because the Biden Administration is coming back with a new student loan relief proposal under a different statute, and surely the underlying logic of “this is like an appropriation—hey actually it counts as an appropriation under Article I” will likely be part of the Republican party line against it. But the implications of a new jurisprudence of the Appropriations Clause are potentially much more far-reaching.

Consider the challenge to the Consumer Financial Protection Bureau that the Court has already granted for next term. The Fifth Circuit has held that Congress has violated the Appropriations Clause by setting up the CFPB to get its funding, not from annual appropriations bills, but from a separate fund (basically the money comes from the Fed). Despite the irony of holding that Congress itself has violated the Appropriations Clause, this is apparently a serious enough argument to have won over a Fifth Circuit panel and it’ll be at the Court next term.

In the long run, it will be very convenient for opponents of redistribution and of the modern administrative state to find a way to hold that anything with large fiscal consequences, especially redistributive consequences—basically, anything that financially helps ordinary people rather than the wealthy political donor class—is somehow an appropriation. Then it can be reined in by the Appropriations Clause and each house of Congress can get as many chances as possible to kill or modify the program. (Obviously, tax breaks for the wealthy will not be considered an appropriation.)

This misappropriation of the term “appropriation” makes no sense as textualism, but then neither did killing the student loan forgiveness program. It makes no sense as originalism, but then neither did killing affirmative action. Constitutional politics ain’t beanbag.

Watch out for this one. It’s coming. You read it here first.

*Thanks to Josh Chafetz for pointing me to the relevant rules and also for pointing out the CFPB connection.

Posted 3:48 AM by Joseph Fishkin [link]