Supreme Court Tries to Rebalance American Democracy: An Explanation of the Decision on Regulatory Deference

In its recent 2023-2024 term, several Supreme Court decisions attracted a lot of attention, including one on presidential immunity and others on social media content restrictions, gerrymandering, guns, and abortion drugs. One decision received little media attention, however, Loper Bright Enterprises v. Raimondo, although it could turn out to be particularly important for American democracy. I’m writing this post for those who are interested in the state of American democracy but haven’t yet found a discussion of this decision. I also want to explain why I believe it’s potentially a good decision for democracy, albeit with some risks. (I’m building on issues raised in my book, Let the People Rule, for those interested in a deeper dive.)

The Decision

The specific matter in dispute in this decision was almost a sideshow: In 1976, Congress passed a fisheries management law that allowed the National Marine Fisheries Service (NMFS) to require observers onboard ships to collect data; in 2020 the NMFS created a rule requiring the ships to pay for the observer services; two shipping companies challenged the rule, saying that the original law did not give the NMFS the power to require fishermen to pay for observers, that it only allowed them onboard. A lower court found that the text of the original law was ambiguous about whether the NMFS had the power to require this charge, but under what is known as the Chevron Doctrine, it deferred to interpretation of the NMFS to resolve the ambiguity and allowed the regulation to stand.

The Supreme Court reversed the decision, but more important, it also repealed the Chevron Doctrine in no uncertain terms: “Chevron is overruled.” The upshot is that federal agencies no longer get to interpret ambiguous laws on their own – judges are now required to use their independent judgement in determining the most natural meaning of ambiguous text.

Why the Decision Matters for Democracy

The decision matters in part because it affects the amount of regulation, but the reason I want to discuss here, is that it adjusts the balance of power between the different branches of the federal government.

To understand this, remember that the U.S. government is divided into three independent branches: Congress makes laws; the President and the agencies administer the laws; and the courts interpret the laws when there is an ambiguity. For example, a tariff law is supposed to work as follows: Congress passes a law imposing a tariff on imports of some product, say cigarettes; the President and the relevant agency collect the tariffs at the border; and the courts adjudicate disputes, such as what happens if an importer claims that its e-cigarettes are not actually “cigarettes” under the definition of the law. Note that in this system, the president has no power to make laws.

Why do we have this convoluted structure? The founders could have created just one branch and aggregated all responsibilities in that single branch. If they had done that, government would have been able to move more quickly and decisively that it can at present. They chose to fragment power, even at the risk of creating gridlock, to prevent any branch from becoming too powerful. They wanted to each branch to have restricted domains so that if one of them became a threat to our liberties, the other branches could check them. This fragmentation of power is the core feature in the U.S. Constitution designed to prevent the emergency of tyranny.

Over the last century the system has become unbalanced as the executive branch has gradually accumulated lawmaking power. Formally, Congress still has the power to make all laws, but in practice, agencies now make most of the laws in the form of rules and regulations. This threatens to destabilize the “checks and balances” of our democracy.

The Complicated Fact of the Administrative State

The reason this happened is because Congress has passed numerous laws delegating its lawmaking powers to the executive branch. It did this by creating agencies and authorizing them to make rules and regulations to achieve specified policy goals. For example, Congress has passed a series of clean air and clean water acts that charge the director of the Environmental Protection Agency to promulgate national clean air and water standards; these acts leave it to the agency to determine exactly what constitutes a pollutant, how much pollutants must be removed to make the air or water clean, and how those pollutants are to be limited and removed.

Depending on how you count them, there are now between 60 and 117 federal agencies. In 2023, according to the Regulatory Studies Center at George Washington University, they issued 2,803 final rules, 2,011 proposed rules, and various executive orders and advisory letters, filling more than 90,000 pages of the Federal Register. These agencies now comprise by far most of the government in the United States, and legal scholars refer to the eclipse of Congress by agencies as “the rise of the Administrative State,”

It's important to recognize that the growth of the Administrative State has been a good thing overall. As the number of policy issues and their complexity became more than Congress could feasibly address on its own, Congress adopted the reasonable strategy of prescribing general laws, and leaving it to experts (technocrats) in the agencies to fill in the details. All other industrialized nations have become administrative states as well.

But it has one big downside: decisions are decoupled from the people. When laws are made by Congress, voters have direct control over their elected representatives who make the laws. When laws are made by technocrats in agencies, voters have at best indirect control through their ability to choose the president who oversees the agencies.

As I discuss in my book, Let the People Rule, the shift of lawmaking from elected representatives to unelected bureaucrats is probably one cause of the popular resentment of government that is undermining support for democracy. A huge portion and growing fraction of Americans tell pollsters that government does not care about people like them.

This massive shift in lawmaking power from Congress to the executive branch also threatens to unbalance the constitutional structure of American democracy. The problem is compounded by the growing tendency of presidents to use agencies to make laws when they cannot get Congress to support their proposals.

To give just one example (of what is a bipartisan problem), the Biden Administration decided that it wanted to forgive essentially all student loans. Since the Constitution gives only Congress the power to make laws, one might expect the president to try to persuade Congress to pass such a law. That’s been the time-honored approach in American democracy.

Instead, the administration decided to do it on its by having its lawyers scour the law books to find some ambiguous text that it could claim gave it the power to forgive loans. They found it in the Higher Education Relief Opportunities for Students Act of 2003. This act, passed during the Iraq War, was designed to allow the Department of Education to modify loan provision for soldiers who were serving in the war. The administration claimed that the act’s provision to “wave or modify” loan provisions in “war or other military operation or national emergency” allowed it entirely write off students loans during COVID.

Leaving aside the policy debate about whether forgiving student loans is a good idea or not, this way of going about making laws is worrisome for democracy. The Constitution is designed to fragment power and keep the different players in their lanes. When one branch grabs power that belongs to another, it threatens to upset the balance. If presidents are able to grab more and more power, it’s not inconceivable that somewhere down the line a bad actor in the White House could do serious damage to our democracy.

Grappling with the Power of Agencies

This brings us back to the Supreme Court. When agencies make rules, the impacted parties can argue in court that the agency lacks the authority to issue the rule, that Congress did not delegate to the agency the power it is exercising. In such cases, it falls to judges to interpret the original law, and decide if it actually gives the agency the power it is claiming.

In 1984, the court adopted a general rule for such disputes called the Chevron Doctrine, after the case in which it was first stated, Chevron U.S.A. v. Natural Resources Defense Council. The Chevron Doctrine states that in resolving such disputes, judges must defer to the agency’s interpretation of the law when there is an ambiguity. So, for example, if the text of the authorizing act could be interpreted in several different ways, the agency gets to decide which of the interpretations is correct. Obviously, this deference gives agencies tremendous power. Clever lawyers working for the executive branch have been using this deference to expand agency powers over the last four decades.

The important decision this term – Loper Bright Enterprises v. Raimondo – flat out repealed the Chevron Doctrine. The court said that under the separation of powers, the U.S. Constitution empowers judges to determine what statutes mean; it does not give that power to agencies. As a result of the decision, judges may no longer automatically defer to agency interpretations; judges must now use their own judgement to determine which of the alternative interpretations is most likely to be what Congress intended when it delegated power to the agency.

The upshot of this, as I said at the beginning, will be to reduce the scope of action for agencies. Most of the commentary on the decision focused on the policy implications – that it would be more difficult for agencies to issue regulations. The policy issues are certainly important, but we should not overlook the importance of maintaining the structure of our democracy, a structure has served us well for more than two centuries. Our liberties are protected by preventing any one branch from accumulating disproportionate power – especially a branch overseen by a single person, the president. The Supreme Court’s decision has the promise of preventing an imperial expansion of the executive branch beyond its constitutional boundaries.

Nevertheless, this does comes with some risks. One risk is that the end of Chevron deference may overwhelm the courts. There are not enough judges to micromanage the agencies, nor are they well equipped to function as supervisors of agencies. As Justice Kagan wrote in her dissent: “In one fell swoop, the majority today gives itself exclusive power over every open issue . . . ?involving the meaning of regulatory law . . . As if it did not have enough on its place, the majority turns itself into the country’s administrative czar.”

Also, a virtue of the Chevron Doctrine was its clarity: if an agency claimed that it had a power, then pretty much it had the power. This may have inhibited litigation and made the task of judges simpler.

How the courts manage the potentially higher workflow remains to be seen. Because courts have limited bandwidth, we can speculate that agencies will retain substantial discretion on minor matters. The difference will be most apparent on major issues, where the courts are mostly likely to spend their scarce time. We may also expect fewer suits because agencies will rely on less expansive interpretations of the law.