Remarks as Prepared for Delivery
Thank you Beth Williams for that kind introduction and for helping lead the Justice Department’s important regulatory reform work.
Before I begin, I would be remiss not to mention the events that transpired this morning. On behalf of the Department, our thoughts and prayers are with the victims of the shooting this morning at the Naval Air Station in Pensacola, Florida. Promoting public safety and the rule of law are two of the most critical missions that the Department undertakes. Success in those areas, in turn, allows for important events like this Summit.
So with that said, thank you also to Noel Francisco and to all of our speakers, moderators, and panelists for their insights today. We’ve heard many thoughtful ideas for improving the APA, and I hope this summit begins a process that leads to many of those ideas becoming law.
It’s also great to see many familiar faces in the audience, including from across the administration. As the last panel showcased, this administration has done stellar work reforming the regulatory process and reducing unnecessary regulation. Between our panelists and our audience, the presence of so many leading thinkers on administrative law speaks to the importance of the topic that brings us together: modernizing the Administrative Procedure Act (APA).
The Administrative Procedure Act is one of the most important pieces of legislation ever enacted. By prescribing the procedures agencies must follow in regulating private parties, the APA governs much of the federal government’s conduct and affects virtually every American. For these reasons, the APA has been described as a “superstatute,” as the “fundamental charter” of the “Fourth Branch” of the government, and even as “the constitution of the administrative state.”
That last description, I have to say, goes too far. The constitution of the administrative state is the Constitution of the United States. And the APA is celebrated largely because it advances the values of that fundamental charter by making administrative procedure more consistent with principles of due process and the rule of law.
Today, it is easy to take these contributions of the APA for granted. But that is a mistake. The APA’s enactment in 1946 followed years of debate over whether, and to what extent, to restrain an administrative state that had grown rapidly during the New Deal. That debate partly pitted the New Deal’s supporters against its opponents and, more fundamentally, pitted a vision of government based on supposed bureaucratic expertise and trust in permanent civil servants against one based on due process, public input, the separation of powers, and the rule of law.
In the course of that debate, both sides experienced victories and setbacks. The 1941 Walter-Logan bill, for example, was a strong rebuke to the excesses of the administrative state, but was vetoed by President Roosevelt. Ultimately, the bill that became the APA firmly established rule-of-law principles as a check on administrative powers, but it did not decisively settle the broader contest. This history is an important reminder that beneath seemingly dry matters of administrative procedure are fundamental questions about what values we want the administrative state — and government generally — to embody.
The Amount of Regulation Has Ballooned Since 1946.
Those questions remain important today because, while the APA has not changed much in the 73 years since its passage, administrative procedure and the regulatory state very much have.
The clearest, most consequential example of this change is in informal rulemaking. In the debate over the APA, and in the APA itself, informal rulemaking was something of an afterthought. In 1946, the main form of regulation was adjudication and, as former Harvard Law school dean James Landis wrote, the “uppermost problem” that “led eventually to the passage of the [APA]” was concern about separating agencies’ prosecutorial and adjudicatory functions. The 1941 Report of the Attorney General’s Committee on Administrative Procedure reflects this focus, devoting more than twice as many pages to adjudication as to rulemaking.
Today, of course, the opposite is true: informal rulemaking is where the action is. Informal rulemaking’s day came with the major health, welfare, and environmental statutes of the 1960s and 1970s, and regulation has never been the same. Informal rulemaking has been the fuel of the administrative state’s explosive growth.
This growth can be measured in several ways. One metric is the length each year of the Federal Register, where agencies publish proposed rules, final rules, and rule changes. In 1947, as wartime regulation receded, the Federal Register was a breezy 8,902 pages. In a speech on the APA to a state bar association around that time, Attorney General Tom Clark felt it necessary to pause his discussion to observe: “It occurs to me that some of you may not be acquainted with the Federal Register. Too few lawyers are aware of the existence of this publication.” It is inconceivable that such a public service announcement would be needed today. In 2016, the Federal Register’s length peaked at 97,110 pages. Last year, that shrunk by nearly one-third, but it was still 68,082 pages.
The number of new regulations is equally startling. From 1995 to 2017, agencies issued over 92,000 rules, compared to just 4,400 newly-enacted laws by Congress. Regulation is now our principal form of lawmaking by far.
Moreover, the number of regulations tells only part of the story. Just as important has been regulation’s expanding scope. In recent years, regulation has increasingly replaced legislation as the tool for resolving fundamental policy questions. Some major regulations issued by past administrations have imposed billions of dollars in costs, affected thousands of jobs, and have sought to decide the course and survival of entire industries. These sorts of policy decisions are ones average citizens would rightly expect to be made by politically accountable representatives in Congress — not by administrators and agency staff, many of whom are intentionally insulated from accountability to voters. This is partly a problem created by Congress itself through excessive delegation. But it has also been a problem of regulatory overreach, as regulators in prior administrations have sought to bypass Congress by stretching their statutory authority to enact policies that the relevant statutes do not allow and that Congress did not contemplate.
Presidents and Policymakers Have Long Recognized that the APA Alone Does Not Ensure a Regulatory Process that Promotes Economic Growth, Public Voice, or Accountability.
Unsurprisingly, the explosive growth in rulemaking has brought into focus additional values that regulation should serve. In recent decades, both Republican and Democratic administrations have recognized the need for the regulatory process to promote economic growth and efficiency, public voice, transparency, and accountability. President Reagan introduced these themes in his landmark Executive Order 12291, stressing the need “to reduce the burdens of existing and future regulations, increase agency accountability for regulatory actions, provide for presidential oversight of the regulatory process, minimize duplication and conflict of regulations, and insure well-reasoned regulations.”
Each succeeding administration has carried these principles forward. For example, in Executive Order 12866, President Clinton called for a regulatory system that protects the public “without imposing unacceptable or unreasonable costs on society.” EO 12866 recognized that “the private sector and private markets are the best engine for economic growth,” and that agencies should produce “regulations that are effective, consistent, sensible, and understandable” through a process that is “accessible and open to the public.” President Obama echoed these themes in EO 13563, declaring that our regulatory system “must allow for public participation and an open exchange of ideas,” “must promote predictability and reduce uncertainty,” and “must take into account benefits and costs.”
In short, for decades, every administration has recognized that we need a better regulatory process. Yet, for decades, the APA has been virtually unchanged. This is remarkable. For all its virtues, the APA is not perfect and never has been. As the Supreme Court observed in 1950, the APA “contains many compromises and generalities and, no doubt, some ambiguities,” and “experience may reveal defects” in the statute.
That prediction was prescient. Experience has revealed ways the APA fails to achieve the goals of good but limited government. As early as the mid-1950s, the Second Hoover Commission recommended amending the APA to make both rulemaking and adjudication fairer and less burdensome. And these defects have been repeatedly recognized since.
In his 1960 report to President-Elect Kennedy, James Landis wrote that “effective procedural solutions, so necessary to the proper functioning of the administrative agencies, have admittedly not been achieved despite the sweeping studies which culminated in the Administrative Procedure Act of 1946.”
Two decades later, Griffin Bell, who served as attorney general under President Carter, lamented that overregulation has been “allowed to impede national growth,” and blamed this problem on Congress’s “reluctan[ce] to re-examine the functions of any of the regulatory agencies it created” or to meaningfully supervise their rulemaking. These critiques have also been reflected in legislative proposals over the decades — from Senator Lloyd Bentsen’s 1979 proposal to create a regulatory budget for each agency, to Senator Bob Dole’s 1995 proposal to require agencies to revisit old rules and to undertake rigorous cost-benefit analysis for all new ones, to the Regulatory Accountability Act passed by the House in several successive Congresses right up to last year.
In recent years, interest in updating the APA has been widespread. One of the leading voices originally pushing for enactment of the APA in the 1930’s and 1940’s was the American Bar Association, and in 2016, seventy years after the APA’s enactment, as Professor Ronald Levin explained earlier today, the American Bar Association House of Delegates adopted Resolution 106B, which urged “Congress to amend the rulemaking provisions of the APA,” and identified nine ways the APA could be modernized.
Executive and Judicial Branch Reforms to the Regulatory Process Provide Some Insights for Modernizing the APA.
Happily, as all this suggests, the lack of reform does not result from a lack of ideas. As our panelists discussed today, there are many ideas for improving the regulatory process — including some I’ve offered myself in the past — and some have already been put into practice without legislation. In the absence of legislative reform, the executive branch and the judiciary have, on their own, made numerous changes to how regulation is formulated, enforced, and reviewed. Together, they provide a partial menu of options for modernizing the APA.
A. Executive Branch Reforms
Let me offer two examples of longstanding executive branch improvements to the regulatory process. The first is centralized review of agency regulation through the Office of Management and Budget. When President Reagan introduced centralized review in Executive Order 12291, one month into his administration, he met with considerable skepticism. Boyden Gray, who helped draft that EO, has recounted that when agency officials first gathered to review the order, “[h]eads were shaking vigorously” and “sidebar conversations were expressing disagreement and skepticism” — that is, until “cacophony turned to stunned silence as the officials in attendance, one by one, reached the end of a document they had assumed to be a draft, only to find the signature of Ronald Reagan on the last page.” But despite that initial opposition, over the ensuing years centralized presidential review so proved its value that every President since Reagan has embraced it as an essential regulatory tool.
Centralized presidential review has enjoyed such support because, fundamentally, it advances widely shared, good governance values that apply to regulation and deregulation alike. Centralized review has improved the regulatory process in numerous ways, including priority setting, consistency, analytical requirements, and accountability. For these reasons, past OIRA administrators of both parties, the Administrative Conference of the United States, and the American Bar Association have all endorsed expansion of centralized OMB review to most independent agencies.
So that takes me to the second executive branch innovation that has become a crucial feature of centralized review: the use of cost-benefit analysis for major rules. For approximately 40 years, administrations of both parties have used this tool to improve regulation by preventing rules that do more harm than good.
I would also note that the basic distinction between major and minor rules is itself an executive branch innovation. Under the APA, all legislative rules — no matter how costly or consequential — are governed by a single, one-size-fits-all set of procedures. Isn’t that odd? Our jurisprudence has long recognized that before the government can deprive someone of his property, the amount of process due depends, in part, on the private interest at issue and the probable value of additional procedural safeguards. The same logic should apply to the regulatory process. Some rules impose minor burdens on parties; others impose existential costs. The idea that the latter deserve no more scrutiny than the former is absurd. And it is a position every Administration for the past 40 years has rejected. So it bears emphasizing that centralized review, cost-benefit analysis, and greater scrutiny for the most costly rules all spring from the executive branch and are not currently part of the APA.
More recently, the executive branch has developed additional innovations that I want to highlight as well, because regulatory reform has been one of this administration’s highest priorities. Those reforms began with one of President Trump’s first acts in office: issuing Executive Order 13771. This EO required agencies to repeal two existing regulations for each new one they issued and to impose no new net regulatory costs — a goal the administration exceeded. EO 13771 is a landmark process reform because it encourages agencies, for the first time, to adhere to a regulatory budget and to consider the cumulative burden of their regulations on taxpayers. This helps agencies to adopt the most cost-effective approach to regulating and to prioritize rescission of the most burdensome regulations, insofar as is consistent with their statutory obligations. In fact, countries such as the United Kingdom, Canada, and Australia already had a “one in, one out” system for regulations. And the administration’s overall deregulatory approach has delivered real reform: The administration has eliminated hundreds of unnecessarily burdensome regulations, netting tens of billions of dollars in regulatory cost savings.
In another important reform, this administration has also combatted the misuse of guidance documents. In prior administrations, agencies sometimes used guidance documents as a shortcut around rulemaking. They issued guidance not merely to provide non-binding advice, but to expand the law and change the public’s behavior. And, making matters worse, agencies scattered guidance across a range of documents, many of which were difficult for regulated parties to find, and agencies sometimes enforced interpretations of law without providing public notice of those interpretations. Small businesses, in particular, often found themselves confronted with an unknown and unknowable regulatory regime.
This administration is putting an end to those practices. In the Sessions and Brand memos, DOJ declared that it will not treat noncompliance with other agencies’ sub-regulatory guidance as itself a violation of applicable statutes or regulations in civil or criminal enforcement. And, just two months ago, President Trump issued two Executive Orders to curtail guidance abuse. EO 13891 requires agencies to review existing guidance, rescind any that should no longer be in effect, post all effective guidance on a single, searchable webpage, and make clear that guidance documents are not legally binding in any way. EO 13892, meanwhile, bars agencies from applying guidance in a manner that causes unfair surprise. With all due respect to the decision in Chenery II, where the Supreme Court tolerated ex post facto regulating, this practice deprives parties of fair notice and presents a fundamental due process concern. Accordingly, EO 13892 provides that in taking actions that affect parties’ legal rights, an agency may apply only standards of conduct that have been publicly stated in a manner that would not cause unfair surprise. This reform will help ensure that administrative enforcement proceedings, in particular, provide greater protection for American’s individual rights.
B. Judicial Branch Reforms
Now, in modernizing the APA, what about judicial precedents? So-called “administrative common law” has significantly changed the regulatory process in varied ways. Take the D.C. Circuit’s Portland Cement rule that agencies disclose data, studies, and other information upon which they intend to rely in rulemaking. By enabling interested parties to evaluate and, if necessary, challenge the basis of agency decision-making, Portland Cement has pushed rulemaking towards greater rigor and accountability. One can contrast the APA’s requirement of a “concise general statement” with the requirements for notice-and-comment rulemaking today. In 1947, the Attorney General’s Manual on the APA opined that, under the concise-general-statement requirement, “findings of fact and conclusions of law are not necessary,” “[n]or is there required an elaborate analysis of the rules or of the considerations upon which the rules were issued.” This guidance tracked the 1947 Manual’s overall effort to downplay the APA’s significance. Today, however, the Manual’s approach is sometimes out-of-step with later judicial decisions.
At the same time, some administrative common law is neither sound law nor sound policy. One recent example of harmful judicial innovation concerns the scope of the administrative record. Under the APA, judicial review must be based on the “record” compiled in the administrative proceeding at issue, full stop. Accordingly, courts have recognized that, at least ordinarily, judicial review is limited to that record, and nothing more. In the 1970s, however, the Supreme Court posited that there may be rare cases where extra-record discovery is appropriate. The Court cited no textual basis for this exception. All the same, until recently, the Supreme Court had never allowed extra-record discovery in a challenge to administrative action. That changed with the Census case last June, when the Court considered extra-record evidence even though all Justices to consider the question agreed the district court had abused its discretion in ordering such discovery. Now that the Supreme Court has allowed this exception once, litigants will try to open a whole new front in APA litigation, albeit one the APA itself did not contemplate.
This highlights that modernizing the APA may involve clarifying what is not allowed, as well as adopting improvements to how the regulatory process should function.
Now, where does this leave us? The Administrative Procedure Act of 1946 plainly needs to be brought current to 2019. The time available today does not allow a full canvass of all the ways the APA might be modernized, but I have tried today to sketch some executive branch and judicial reforms that are suggestive. Even the basic act of codifying existing best practices would be valuable, as it would promote stability and eliminate uncertainty. But, ideally, Congress should do even more to modernize the regulatory process.
Indeed, it is clear the APA needs modernizing to meet the realities of today’s economy and regulatory state. Let me reiterate that: The Department of Justice unequivocally supports the position that the Administrative Procedure Act of 1946 needs legislative modernization. Fortunately, there are thoughtful voices in Congress who have been working on this. And just as DOJ played a vital role with regard to the Walter-Logan bill and the legislation that became the APA during the 1940s, we are prepared to do so again. DOJ stands firmly in favor of legislating improvements to the APA that would build on the commendable regulatory improvements made since January 2017. Good administrative procedure is essential to a well-functioning government and to respecting Americans’ individual liberties, and we look forward to working with Congress on this vital issue.
Many thanks to all of you for joining us here today.
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Author: December 6, 2019