Rulemaking Then and Now: From Management to Lawmaking

Category: Print Issues

Rulemaking Then and Now: From Management to Lawmaking

Ronald A. Cass

Volume 28

, Issue 2

28 GEO. MASON L. REV. 683 (2021)

Introduction

Rulemaking occupies a central place in modern administrative law. It is the focus of innumerable fights—over policy, the scope of constitutionally and statutorily permissible agency policy making (including debates over the delegation, or nondelegation, doctrine), the particular policy choices made and the substantive support needed to make them, the way policy choices must be articulated, who within the executive branch properly exercises control over these choices, and the intersection between agency and court readings of governing legal materials (notably, in arguments respecting the Chevron doctrine¹ and the Auer–Seminole Rock doctrine²). In other words, rulemaking figures prominently in virtually every important contest in American administrative law today.

Yet rulemaking’s centrality is a relatively unforeseen part of the story of the Administrative Procedure Act’s (“APA”) importance and the development of administrative law in the three-quarters of a century following the APA’s enactment. It also is a perfect illustration of the relationship between substance and process, as well as the law of unintended consequences. Although some government officials were authorized to make rules going back to the earliest years of the republic,³ the nature of the authority changed over time, transforming the rulemaking process from a tool of management and rate making to a process aimed at lawmaking.⁴ Although the seeds of the delegation doctrine’s effective demise had been sown before adoption of the APA, it was reasonable for those who were contemplating a charter of administrative procedure to expect that the doctrine still would have bite.⁵ The modest demands the APA put on rulemaking were intended for a less widespread and expansive commitment of lawmaking power to agencies than eventuated over the ensuing decades.⁶ Without a serious constraint on delegation, rulemaking’s procedural requirements took on special importance, as they—together with the rules for reviewing the substance of agency actions—constituted the only substantial legal impediments to freewheeling administrative lawmaking.

Not surprisingly, given the rise in the importance of, arguments over, and changes in rulemaking, procedural requirements are part and parcel of the rulemaking landscape. Following decades of relative quiescence after enactment of the APA, procedural requirements on rulemaking were increased, then increased further, and then assailed as leading to ossification of the (now) most obvious method for agency policy making.⁷ Subsequent generations in rulemaking’s evolution saw rulemaking procedures modified again (or, more accurately, most judicial modifications halted).⁸ Rulemaking requirements then were altered through the addition of explicit mechanisms for more direct executive oversight and debated as vehicles for law-free governance by the executive branch or for last-minute entrenchment of the political priorities of an outgoing administration.⁹ Paralleling the evolution of procedural requirements, administrative law scholarship in the past several decades has focused almost obsessively on rulemaking and its intersection with oversight mechanisms used by the three branches of national government, the judiciary most of all.¹⁰

This Article explains the evolution of rulemaking from a relatively infrequent method of guiding executive action to the engine for a massive regulatory system that both complements and substitutes for congressional lawmaking. It sketches the way in which the APA’s few, simple procedural requirements helped pave the way for a shift from adjudication to rulemaking as the major force in administrative action. And it explains the increasing emphasis in academic commentary on the intersection between rulemaking and democracy—and the increasing use of analogies comparing rulemaking to legislating. This emphasis is understandable in light of the transformation of rulemaking in practice, but analogies to legislating are deeply flawed, for both constitutional and pragmatic reasons. The Constitution clearly and pointedly restricts lawmaking to a specific process that requires consensus among officials selected at different times in different ways by different constituencies, and efforts to shift lawmaking to administrative officials cannot be reconciled with that system. That observation is at once the reason for the increasing debate over legal constraints on dispersion of lawmaking authority and also the nub of the objection to the rulemaking-as-legislating analogy. After discussing the problematic aspects of that analogy, this Article suggests a return to a different understanding of the rulemaking authority that can be reposed in administrators’ hands. The Article explains that this change is necessary to make rulemaking more akin to the tool the APA’s creators imagined and defends that goal as both true to the proper implementation of the statute and better aligned with the constitutional structure that frames American administrative law.

I. Rulemaking in a World of Limited Delegation

Understanding the limited nature of the APA’s procedural requisites for rulemaking begins with appreciation of the role rulemaking played prior to the blossoming—or, for those less enamored of it, the metastasizing—of the modern administrative state. The most basic and most important lesson about rulemaking for most of the nation’s history leading up to the New Deal era is that there was little of it—and even less of note—primarily because the administrative agencies that might have engaged in rulemaking had little clear authority to regulate and even less authority to regulate by rule.

A. Regulatory Authority at the Founding

Academic commentary over the past decade has focused increasingly on the extent and terms of congressional delegations of authority to administrators, especially on the authority to make rules binding on private conduct.¹¹ Much of this commentary has addressed the nature of such delegations in the founding era. Practices of that era presumably reflect the founding generation’s understanding of what delegations were permissible and appropriate.¹² In other words, a relative paucity of significant delegations of discretionary authority would suggest that the contemporaneous understanding of the Constitution was that it prohibited such delegations, while extensive delegations of discretionary authority would suggest the opposite.

The long-held assumption—which might be termed the “delegation-light” assumption—has been that the men who wrote and ratified the American Constitution passed very few, if any, laws granting substantial discretionary authority for nonelected officials of the national government to impose obligations on the private conduct of ordinary citizens.¹³ The distinction between such laws and other legislation was important to the Constitution’s framers, who, in the words of Alexander Hamilton, identified the legislative enterprise as quintessentially “prescrib[ing] rules for the regulation of society.”¹⁴ That description generally has been recognized as describing rules controlling behavior of private citizens.¹⁵

Until recently, reviews of early laws by both opponents and proponents of such delegations have been consistent with the delegation-light assumption.¹⁶ The point is not that delegations of authority were rare (they were not) but that the authority delegated to executive officials generally was limited—usually quite tightly—except in cases dealing with management of government functions, such as customs collections.¹⁷ Even then, the delegation typically was only to exercise authority in case of emergency when Congress was not in session or over matters that were sufficiently far from major public concerns to survive the test for delegation announced by Chief Justice John Marshall in 1825, distinguishing more important matters on which Congress alone could exercise authority and less important matters which could (within bounds) be delegated to other officers.¹⁸

This account of early lawmaking has been challenged by recent writings that have received considerable attention in the academic community.¹⁹ Prominent writings in the revisionist camp have asserted that Congress, from the very beginning, handed out substantial regulatory authority without reservation about constitutional limits on delegation.²⁰ These claims, especially in their broader forms, are inconsistent with other careful reviews of the authority exercised, the nature of that authority, and the restrictions placed on its exercise.²¹ Most notably, the revisionist accounts blend delegations of authority over administrative functioning under legal command—of discretion over the details of management of how government officials perform various tasks, such as the mechanisms to be used in distributing benefit payments—with delegations of authority over regulatory functioning (coercive control over private conduct). Delegations of discretionary authority over private conduct are especially problematic, as this is the category of authority that repeatedly has been singled out as the special domain of legislative power,²² but revisionist assertions of broad discretionary authority of that sort are, at best, far less consistent with actual practice in the founding era.

An as-yet (as of this writing) unpublished article by Professor Nicholas Parrillo, which advances arguments associated with the revisionist writings, focuses primarily on one episode that supports a more limited claim.²³ Parrillo describes in considerable detail a regime for tax assessment during the founding era that has largely escaped notice, the direct property tax of 1798. This regime, which was set up to assess and collect proceeds from a national tax on property, dispersed authority among different officials in the various states, and apparently gave significant authority to some officials to determine methods for calculating and adjusting the value of properties for assessment purposes (and of making the assessments more uniform, at least in theory).²⁴ Parrillo makes the point that the discretion exercised by various boards making adjustments to other officials’ tax calculations was both substantial and doubtless affected private citizens, as those were the parties who bore the tax’s incidence.²⁵ Yet discretion over formulae for property taxes is not equivalent to regulatory discretion: it does not comprehend the choice whether to tax or what to tax or whether to proscribe particular conduct.²⁶ Moreover, whatever characterization one gives to this particular episode, it certainly is not emblematic of a large group of founding-era regulatory delegations.²⁷

Ultimately, the revisionist approach may be credited as making the case that life is complicated, that government authority is not easily pigeonholed in simple categories, and that even a relatively modest amount of government activity comprehends a considerable degree of discretionary authority. The revisionist accounts, however, do not succeed in significantly undermining the delegation-light account of the founding era. In short, there was little significant regulation or rulemaking in the decades following adoption of the Constitution.

B. Progressivism’s Expansion of Regulatory Authority

The pattern set in the founding era carried through for at least the first seventy-five years of the nation’s history. Administrative officers were authorized to adopt rules, for example, governing the collection of taxes and assessment of imported goods’ value as an incident to customs duty collections.²⁸ Another example of the sort of rules that were authorized well after the founding era are those concerning postal rates. The Postmaster General, with the President’s approval, was empowered

to reduce or enlarge, from time to time, the rates of postage upon all letters and other mailable matter conveyed between the United States and any foreign country, for the purpose of making better postal arrangements with other governments, or counteracting any adverse measures affecting our postal intercourse with foreign countries.²⁹

This authority, designed to facilitate international postal accords, sounds substantial, but actually covered a fairly narrow set of possible arrangements and, critically, controlled only government functions rather than private conduct.

During the latter part of the Nineteenth Century and early part of the Twentieth Century, rulemaking that differed from this pattern began to emerge. Administrative officials were given authority to adopt rules designed to control private conduct that threatened health, safety, or certain economic functions. For example, in 1890, after repeated outbreaks of smallpox, cholera, and yellow fever in different parts of the nation—and following reports of further disease outbreaks in Hong Kong, sparking fears of new infections on the West Coast—Congress authorized the Secretary of the Treasury (working with the Surgeon General of the Marine Hospital Service) to adopt rules and regulations he deemed necessary to halt the spread of infectious diseases from one state to another.³⁰

At the federal level, the Progressive Era saw the creation of the Interstate Commerce Commission (“ICC”) (1887), the Food and Drug Administration (“FDA”) (originally the Bureau of Chemistry in the Department of Agriculture) (1906), the Federal Trade Commission (“FTC”) (1914), and the Tariff Commission (1916). The expanded regulatory authority reposed in these bodies frequently was defended as calling on experts to make technical determinations—setting reasonable rates for rail carriage and assuring that those rates were uniform across shippers, identifying misbranded or adulterated foods, restraining fraudulent advertising and unfair methods of competition, and using “science” to calculate tariff rates.³¹

Much of the work of these entities was done through reports and recommendations or through adjudication, rather than through adoption of rules. Most of the early regulatory commissions, in fact, exercised authority that either had been lodged in the courts—such as policing fraudulent advertising or unfair competition or requiring common carriers for hire to charge reasonable rates—or was similar to it.³² This fit the historic acceptance of judicial authority to make determinations respecting subjects that had immediate application to a specific factual setting, while also following (and elaborating on) principles that would guide future actions.³³ It also explains the contemporary consensus that agencies could exercise substantial authority in regulating matters that typically were regarded as adjudicatory. After all, if courts, rather than the legislature, could exercise this authority, the objection to the delegation of similar power to an agency premised on the assertion that Congress, itself, had to make these determinations could no longer stand.³⁴

The acceptance of agency authority as a substitute for certain types of adjudication—especially adjudications respecting categories of activity that were assimilable to management of public resources, public benefits, or activities that had special status (both protections and obligations) as providing public services—did not, however, eliminate all objections to regulatory delegations, particularly not to exercises of authority that strayed from the judicial model. From relatively early in its existence, the ICC asserted authority to set rates for broad classes of shipments and circumstances.³⁵ Predictably, courts found this assertion of broad, forward-looking rate-making authority problematic, invoking doctrines that limited the agency’s authority to impose rates without judicial scrutiny.³⁶ Concerns about provoking similar restraints on regulatory actions may have prompted agencies such as the FTC and FDA to forswear broad legislative-type rules until much more recently.³⁷

C. The New Deal, Newer Deal, and the Modern-Day Regulatory Colossus

Traditional resistance to broad delegations of authority for agencies to engage in legislative-like rulemaking—prospectively imposing restrictions on or requirements for private conduct—largely evaporated in the New Deal era. New delegations of authority were adopted for regulation of “securities markets (1934), wholesale electric power (1935), labor relations (1935), trucking (1935), airlines (1938), [and] natural gas (1938).”³⁸ These delegations, along with some at the end of the Progressive Era, such as for regulation of the radio spectrum,³⁹ either were framed in sweeping terms that comprehended discretionary authority to control private conduct or were not articulated sufficiently clearly to preclude later interpretation as authorizing capacious exercises of administrative control.⁴⁰ Further delegations—what collectively might be termed the Newer Deal (springing from Lyndon Johnson’s Great Society programs but moving well beyond them)—occurred in succeeding decades, focused largely on regulation of suspect forms of discrimination, environmental harm, risks to health and safety, or questionable dealings with consumers.⁴¹

Prior to the end of the twentieth century, the rulemaking authority that was included in these laws was seldom expressly framed in the governing statutes as a sweeping power to make legislative-like decisions. Instead, most—though certainly not all—rulemaking either concerned issues better characterized as procedural or managerial (instructing agency staff rather than binding others) and, so far as rules had direct effect on others, generally addressed factual determinations (such as identifying the prevailing wage in a given area) or technical questions (such as how to define different grades of grain).⁴² Yet the legislation and judicial interpretations of the New Deal era did, at the very least, contain the seeds of a defanged nondelegation doctrine.

To be sure, even in the absence of a well-defined and consistently enforced nondelegation doctrine, there are both practical and legal constraints on the exercise of discretionary administrative actions that purport to impose binding legal controls on private conduct.⁴³ Still, an expansive range of discretionary administrative and regulatory powers has been approved as consistent with the law—to a very large extent exercised through agency rulemaking.⁴⁴ Moreover, the delegations from the Newer Deal regulatory wave that took hold starting in the late 1960s and 1970s—aimed at combatting discrimination, environmental harm, health and safety risks, and harm to consumers—frequently were couched in terms that invited agencies to complete the task of assessing what behavior was appropriate and writing rules to control private conduct.⁴⁵ Starting around 1970, agencies took those invitations very seriously.⁴⁶

The result has been a proliferation of administratively generated rules that impose specific obligations or prohibitions on private conduct. While there are roughly two hundred to four hundred laws passed by Congress each year, the federal administrative agencies adopt something on the order of three thousand to five thousand final rules.⁴⁷ These rules, covering an astounding range of different regulations, restrictions, and commands, occupy more than one hundred eighty thousand pages in the Code of Federal Regulations.⁴⁸ Their impact on the American economy is variously estimated as benefitting or costing the economy trillions of dollars per year.⁴⁹ Whatever the best calculation of rules’ effects, it is obvious that rulemaking today has major consequences for the citizenry, the economy, and the nation—which is why the functioning of the rulemaking process has become a matter of far greater importance now than it was at the birth of the APA.

II. Rulemaking Process: The APA and Beyond

The procedural requirements for rulemaking contained in the APA, and the limitations on the set of rules to which they apply, reflect reactions to the sort of rules adopted over the generation leading up to the APA and the rulemaking authority in place at the time. Mandating notice-and-comment procedures for most significant rulemaking appeared significant primarily as a means for preventing application of substantive regulations to unwary individuals and entities. Yet its modest constraint on rulemaking more importantly facilitated the dramatic expansion of rulemaking, in turn fueling demands for further constraints.

A. Rulemaking’s New Process

Professor George Shepherd characterized the events that shaped drafting and adoption of the APA as “a pitched political battle for the life of the New Deal.”⁵⁰ That battle focused mainly on the terms of judicial review, which for New Deal opponents presented the best hope for stemming the growing tide of government control over private enterprise.⁵¹ Rulemaking was not a major concern of the American Bar Association committees that were working on proposed legislation to regulate administrative procedure or for the Attorney General’s Committee that was set up to study administrative procedure and to come up with recommendations for improvement, including potential legislation.⁵²

Even so, the requirement of notice and comment for rulemaking that emerged from the process has been heralded as “the APA’s most important reform”⁵³ and the APA’s “most important idea.”⁵⁴ In its original iteration, the idea was that every rulemaking required advance notice to the public and a public hearing to permit introduction of evidence relevant to the topic and argument about the proposed rule.⁵⁵ That was the idea incorporated in the Walter–Logan Act, the precursor of the APA that was vetoed by President Franklin Roosevelt as interfering too much with administrative discretion.⁵⁶

In the form adopted in the APA, the idea became less restrictive in several important ways. First, the requirement of an actual hearing that resembled adjudicative production and evaluation of evidence was limited to “formal rule making,” a category that has been confined to instances in which laws expressly require rulemaking to be done “on the record” after opportunity for a hearing.⁵⁷ Second, the ambit of the rules subject to notice-and-comment requirements was limited: the provision adopted and codified as 5 U.S.C. § 553 (notice-and-comment rulemaking) only applied to rules that are not “interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice”⁵⁸ and does not apply to rules or portions of rules that involve “a military or foreign affairs function of the United States; or . . . a matter relating to agency management or personnel or to public property, loans, grants, benefits, or contracts.”⁵⁹ Third, even for the category of rules for which section 553’s notice-and-comment requirements apply, agencies are, by the terms of that section, subject to relatively thin obligations. These are: (1) to provide notice of the “time, place, and nature of public rule making proceedings;”⁶⁰ (2) to include a “reference to the legal authority” for the contemplated rule;⁶¹ (3) to state “either the terms or substance of the proposed rule or a description of the subjects and issues involved”;⁶² (4) to provide for public participation “through submission of written data, views, or arguments with or without opportunity for oral presentation”;⁶³ and (5) to “incorporate in the rules adopted a concise general statement of their basis and purpose.”⁶⁴ Fourth and finally, just to give one last dollop of discretion to the agencies, even these requirements—modest almost to the point of being merely precatory—could be elided if the agency decided that the use of notice-and-comment procedures in the particular instance was “impracticable, unnecessary, or contrary to the public interest.”⁶⁵

With so little bite to the APA’s rulemaking requirements, why would commentators laud them as an important reform? What made the notice-and-comment process adopted in the APA noteworthy was not the stringency of the procedural requirements in the law but the mere fact that the law imposed some process requirements on agencies for adopting rules. The reason for stressing notice-and-comment rulemaking as an important idea is that the notice-and-comment requirement reinforced the notion of administration as subject to process constraints redolent of those embedded in the concept of due process. That is, it embraces the principle that those who are affected by government actions have legitimate claims to ensure those actions are taken only through processes commensurate with the level of imposition on specified individuals, the directness of the imposition, and the nature of the reasons behind the imposition.⁶⁶

B. Notice-and-Comment Rulemaking Gets Noticed—Eventually

The new procedural requirements did not have much impact on the pace at which agencies adopted rules. Although precise numbers are not available, the number of rules adopted appears to have risen sharply in the 1930s, declined at the end of World War II, and then remained relatively stable over the next twenty years.⁶⁷ The evidence is consistent with a conclusion that the APA’s adoption neither sparked an increase in rulemaking nor caused a decline. Some agencies used rulemaking as a primary tool for policy formation.⁶⁸ Others did not, most likely because the agency officials did not think that they were authorized to use rulemaking to regulate private conduct without more certain, direct authorization.⁶⁹

The 1960s, however, saw a blossoming of academic commentary touting, or at least acknowledging in some degree, the benefits of legislative-like rulemaking by agencies.⁷⁰ Contemporaneous with and following these writings—no doubt propelled, as well, by changes in administration and, for some agencies, in their governing laws—in the mid-to-late 1960s and 1970s, agencies increasingly turned to rulemaking to make policies on a wide array of issues.⁷¹ While some new agencies with more readily established authority to use rulemaking for purposes other than internal management and housekeeping embraced this form of policy making, a few older agencies, such as the FTC, which had previously abjured using rulemaking for substantive regulatory purposes, also decided to use rulemaking to announce prospective policy determinations.⁷² Like the FTC, the Food and Drug Administration belatedly discovered long-denied authority for it to use rulemaking to adopt broad, legislative-type regulations.⁷³ And the Civil Aeronautics Board deployed rulemaking as a means of not only prescribing policy for the future but also modifying licenses it had previously granted.⁷⁴

The courts’ acceptance of expanded use of rulemaking to lay down policies binding on others doubtless encouraged wider employment of this process. From the mid-1960s to 1980, the annual number of Federal Register pages grew dramatically: from roughly 17,000 in 1965 to 77,000 in 1979 and 87,000 in 1980, a more than five-fold increase in that fifteen-year span.⁷⁵ As a proxy for rulemaking, these figures suggest an extraordinary explosion of regulatory activity. A similar story emerges if one looks at the number of pages in the Code of Federal Regulations, which more than quadrupled from 1960 to 1980, from fewer than 23,000 pages to more than 102,000.⁷⁶ The numbers may to some degree reflect a shift from adjudication to rulemaking as a mechanism for announcing agency policy decisions,⁷⁷ but they almost certainly also represent a marked expansion in the amount of regulatory activity among federal agencies.

C. Re-Modeling Process: Procedural Pile-On (and Off)

Whatever explains the striking growth in rulemaking between 1965 and 1980, that growth certainly is testament to the relatively minor process constraints imposed on it by the APA. As noted above, the APA’s notice-and-comment process in its original formulation (unchanged in the text of the law today) required only a spare form of notification as to the subject of a contemplated rule, virtually any form of opportunity for public input, and a bare-bones explanation of why the ultimately adopted rule was chosen.⁷⁸ Nothing in the APA as written required specific steps to assure that comments were received from an extensive group of interested parties, that they were carefully considered by the agency, or that the agency addressed major comments in laying out the reasons behind the final rule. The law did not go as far as the majority of the Attorney General’s Committee would have in providing freedom for agencies to decide rulemaking procedures on their own,⁷⁹ but the APA’s notice-and-comment mandate did not tightly constrict rulemaking processes.

As the scope and number of rules increased and the expectation that courts would seriously constrain congressional delegations of rulemaking authority declined, however, courts were urged to find that the notice-and-comment provisions were more confining—and in significant measure, the courts did impose more, and more onerous, obligations on agencies—than a “plain language” reading of the law’s text would indicate.⁸⁰ In this vein, courts have required agencies to hold hearings or employ specific methods for testing evidence to develop better records for judicial review,⁸¹ to more fully articulate the details of proposed rules or to reissue notices of proposed rulemaking to more fully account for the content of final rules,⁸² to more clearly explain the reasons for rejecting particular arguments,⁸³ and to more fully and persuasively explain the reasons behind choosing one regulatory option over another.⁸⁴

For its part, the Supreme Court largely rejected these additions to the rulemaking procedures set out in the APA. Its Allegheny-Ludlum⁸⁵United States v. Allegheny-Ludlum Steel Corp., 406 U.S. 742 (1972). and Florida East Coast Railway⁸⁶United States v. Fla. E. Coast Ry., 410 U.S. 224 (1973). decisions in the early 1970s rejected assertions that the words “after hearing” required full trial-type proceedings.⁸⁷ Its Vermont Yankee⁸⁸Vt. Yankee Nuclear Power Corp. v. Nat. Res. Def. Council, Inc., 435 U.S. 519 (1978).decision famously chastised lower courts for freelancing additional process requirements:

The court below uncritically assumed that additional procedures will automatically result in a more adequate record because it will give interested parties more of an opportunity to participate in and contribute to the proceedings. But . . . the adequacy of the “record” in this type of proceeding is not correlated directly to the type of procedural devices employed, but rather turns on whether the agency has followed the statutory mandate of the Administrative Procedure Act or other relevant statutes . . . . [U]nwarranted judicial examination of perceived procedural shortcomings of a rulemaking proceeding can do nothing but seriously interfere with that process prescribed by Congress.⁸⁹

Despite Vermont Yankee’s stance against adding procedural requirements to what the APA and other governing statutes command, it hardly foreclosed courts getting to essentially the same place through the back door. In fact, the Court plainly left open a path for judges deciding that a rulemaking needed better reasoning or fuller explanation of the agency’s position, saying, “There remains, of course, the question of whether the challenged rule finds sufficient justification in the administrative proceedings that it should be upheld by the reviewing court.”⁹⁰

Unsurprisingly, this characterization of the courts’ role proved a runway for reintroducing effective changes in the requisites of rulemaking—not through mandating specific procedures directly, but through rejecting rules that rested on less complete explanations or less than full engagement with comments. Judicial review can be minimal or searching. In the extreme, searching review can demand explanations so carefully aimed at sealing off each potential avenue of challenge that the agency would need a comprehensive recapitulation of issues, evidence, and analysis to insulate itself against judicial reversal.⁹¹ Looking at the way judicial review evolved in the decade following Vermont Yankee, Professor Richard Pierce opined that this is exactly what occurred: the courts effectively “replaced the statutory adjectives ‘concise’ and ‘general’ with the judicial adjectives ‘encyclopedic’ and ‘detailed.’”⁹² Some judges more recently have taken pains to underscore the limited role of judicial review and the narrow requirements of APA section 553 for rulemaking.⁹³ But these cautions do not represent the state of judicial review across the board. Judges still intrude aggressively into discretionary administrative decisions, at least on a selective basis, often citing defects in reasoning or inadequate explanation of choices made in light of evidence in the administrative record.⁹⁴ More on that anon.

D. Legislative and Executive Add-Ons

As rulemaking became a more important mechanism for announcing agency policies designed to govern private conduct, judges were not the only officials who tried to control the rulemaking process. Both the executive and legislative branches have endeavored to influence the process through additional demands on what agency rule makers must consider and through review of the rulemaking results.

One source of constraint on the rulemaking process comes from laws targeting particular concerns respecting regulation.⁹⁵ These include: the National Environmental Policy Act, requiring agencies to minimize certain adverse effects on the environment, to consult with relevant officials about potential environmental effects, and to study and prepare environmental impact statements when it anticipates significant effects on the environment as a result of a proposed rule or other action;⁹⁶ the Paperwork Reduction Act, mandating limitation of, explanation for, and agency coordination respecting requirements for collection of information;⁹⁷ the Regulatory Flexibility Act, restricting interference with small businesses, small governmental units, and small nonprofit entities and mandating analysis of alternatives that reduce interference with small entities;⁹⁸ the Unfunded Mandates Reform Act, instructing executive branch and some independent agencies to look at the expenditures required, the costs and benefits of the contemplated rule, and alternatives that might reduce expenditures;⁹⁹ and numerous other laws that direct agencies using rulemaking to account for particular considerations in tailoring rules, to engage in certain specific types of outreach or inter-agency consultation, or to avoid given outcomes.¹⁰⁰

Another constraint comes from Executive Orders regularizing review of rulemaking by officials in the Executive Office of the President and setting forth considerations that should be part of the rulemaking process. The process at the heart of this review is administered by the Office of Information and Regulatory Affairs (“OIRA”), a part of the Office of Management and the Budget.¹⁰¹ OIRA is charged with reviewing economically significant rules or “major rules”—those with an economic impact of $100 million or more—to assure that the adopting agency has performed a serious benefit-cost analysis.¹⁰² Commentators have debated the specific considerations that are comprehended in particular benefit-cost analyses, as well as whether benefit-cost analysis inherently predisposes evaluators to make assessments more or less favorable to regulation.¹⁰³

The most important aspect of executive-driven review, however, is its perspective rather than its particulars. The substantive laws administered by single-focus agencies generally represent preferences of especially interested groups, preferences that also tend to be reflected in those agencies’ actions.¹⁰⁴ Many of the laws that add requirements to agency rulemaking similarly respond to the preferences of groups especially interested in one set of issues or values.¹⁰⁵ Requiring attention to these issues or values could duplicate or counteract biases already present in particular rulemakings. The goal for OIRA review—as with antecedent forms of presidential review—is to place more global concerns (those consistent with broader national welfare) over the focus of any given agency or bureau.¹⁰⁶ Even if these efforts are subject to criticism as merely representing different administrations’ peculiar, partisan visions of public interest,¹⁰⁷ the goal of imposing a broader vision, more responsive to the views of an officer accountable to the nation as a whole, should be credited.¹⁰⁸

Similarly, while congressional add-ons can be criticized as promoting parochial (and personal) interests, the Congressional Review Act (“CRA”)¹⁰⁹ can be seen as providing Congress an analogue to OIRA review. The CRA requires agencies to submit major rules to Congress, along with accompanying benefit-cost analyses, prior to the rules going into effect. Following a report to Congress from the Comptroller General, the House and Senate have a limited time to pass a joint resolution of disapproval of a rule.¹¹⁰ If the President does not veto the resolution, the agency rule does not go into effect, or if it went into effect under one of the exceptions for tolling effectiveness, the rule is repealed.¹¹¹ Congress does have a limited set of considerations that effectively constrain its decisions under the CRA, but the process does at least give some prospect of bringing a broader set of considerations to bear. As with all legislation, it subjects a significant public policy decision to the processes constitutionally prescribed: decision by both Houses of Congress and presentment to the President—requirements that provide better prospects than agency rulemaking for assuring that the ultimate decision conforms to current majorities’ preferences for law.

E. Ossification and Response

As each level of government adds its own requirements for rulemaking to the basic set adopted in the APA, rulemaking gets more costly, more difficult, and more uncertain. This development led to academic writing about the “ossification” of rulemaking, observing that the cumulation of added burdens clogged the arteries of the rulemaking process.¹¹² Despite argument about whether ossification exists, the numbers show an almost monotonic decline in rule adoptions since 1980. In the five-year period from 1976 to 1980, federal agencies adopted an average of roughly 7,360 final rules per year.¹¹³ In the next five years, that figure dropped to below 5,770.¹¹⁴ For the five-year period following that, rules per year dropped below 4,600.¹¹⁵ This trend continued through the next thirty years, with agencies logging an average of only 3,375 final rules during the most recent five-year period.¹¹⁶ That is less than half the average of the late 1970s. Different political inclinations may explain some of the change, but it is hard to credit that explanation alone for a trend covering four decades.

While the increasing burdens put on rulemaking logically would—and evidently did—decrease the amount of rulemaking in the federal government, the incentives that led to increasing regulatory burdens over the better part of a century did not disappear overnight.¹¹⁷ In fact, observations about the demand for regulation should mean that incentives to seek additional regulations would have been rising, not declining, throughout the period that rulemaking has been decreasing. Opportunities to shift costs and benefits in ways that are economically advantageous to well-positioned groups, as well as ideological commitments to government taking over roles formerly understood to be the realm of other decision-making and support loci—personal choice, families, or religious, ethnic, and fraternal organizations—generally rise with increased population, greater wealth, expanded leisure, and expanded competition for business.¹¹⁸ For all those reasons, federal regulatory activity, even if dipping on occasion (as occurred to some degree during the Reagan and Trump presidencies), generally has risen almost constantly for more than one hundred years.¹¹⁹

The solution to the apparent paradox of decreased rulemaking and increased incentives for regulation is that regulatory activity has not disappeared but instead has merely changed form. Over the past several decades, regulation has been occurring less through formal rules and more through guidance documents (such as policy statements, interpretive rules, or instructions in manuals), enforcement decisions, and other instruments that do not bear the same burdens as notice-and-comment rulemaking. Scholarly commentaries have observed this shift, and entities committed to increasing the fit between law and administrative functioning have addressed this change as well.¹²⁰ For example, the Administrative Conference of the United States (“ACUS”) has adopted six recommendations in the past seven years respecting the way agencies should handle guidance not adopted through notice-and-comment rulemaking.¹²¹ The number of times ACUS has taken up this subject suggests the wide scope of options for using processes other than notice-and-comment rulemaking to achieve similar regulatory outcomes, and the difficulty of controlling administrative impulses to use them.¹²²

III. Constitutional Rules and Administrative Process from the APA to Today

Understanding what procedures are best requires understanding what administrative rulemaking can and cannot do. Scholars have praised notice-and-comment rulemaking and decried departures from it largely on the ground that, even in bare-bones form, those procedures help maintain democratic legitimacy of regulation, as well as enhancing the mechanics of regulation (the ability of rules to accomplish their assigned regulatory tasks).¹²³ Certainly, procedures such as notice-and-comment can improve administrative decision-making and even increase its congruence with notions like democratic legitimacy.

However, there are limits to what can be done to advance democratic legitimacy that are not usually acknowledged in discussions of rulemaking procedures. The analogy of rulemaking to lawmaking is helpful in seeing why some procedural requirements are less sensibly applied to administrative rulemaking than to administrative adjudications, but at its core, the analogy gets wrong what agencies do. That lesson was understood by those who wrote the APA. The problem at the heart of demands for constraints on agency rulemaking is the need for law to set properly the parameters of what an agency is permitted to decide. If Congress and courts fail to contain delegations of authority appropriately, rulemaking procedures become more critical as means of mitigating—but not eliminating—the damage. In short, procedures cannot fully substitute for control over the parameters of delegated authority.

A. Agencies’ Place in Our Constitutional Construct¹²⁴

The American Constitution sets the framework for understanding what agencies can, and cannot, do. Those who wrote and ratified the Constitution sought to make a national government that could act as needed to protect national interests and protect the nation against threats beyond the ability of states effectively to address—but to do this without empowering national officeholders to exercise the sort of unchecked discretionary authority that colonial Americans had objected to under British rule.¹²⁵ The Constitution assigned tasks peculiarly suited to national governance to the national government, retained other powers in the states, divided national authority among various government entities and offices, and asserted the continued primacy of individual (natural) rights against government at all levels.¹²⁶

The most noted and most significant aspects of the constitutional framework were the division of the three large powers of government among the three branches and self-conscious creation of mechanisms for each branch to check the others. As every civics student knows—even though many brilliant scholars, politicians, and judges seem to have forgotten—under this tripartite construct, Congress makes laws (and makes the critical policy choices necessary for governance),¹²⁷ the president and those who work for him implement the laws (and make the less important policy choices assigned to that function),¹²⁸ and the courts decide disputes about law (and interpret the laws as necessary to resolve those disputes).¹²⁹

As with so many things, these divisions are both important and, in some respects, imprecise.¹³⁰ Of particular significance for this Article, there has been growing debate over the shape and vitality of the nondelegation doctrine, which asserts the general proposition that only Congress can make decisions that constitute “law” even if both courts and administrators can make decisions within some parameters that have “the force of law.”¹³¹ While some elements of a restraint on what Congress can authorize an agency to do are contestable, the underlying principle of nondelegation should not be a matter of doubt. Restricting lawmaking to Congress—and insisting that laws be made by a specific process that requires agreement among two houses of Congress that are differently constituted (selected by different means, at different times, and representing differently composed constituencies) and the President (or among super-majorities to override a presidential veto)—was undeniably central to the Constitution’s design.¹³² Look at the space given to that in the document itself, at the energy devoted to it during the Constitutional Convention, at contemporaneous explanation of the Constitution, as well as the plain text of the vesting clause in Article I—the text and context demand a rule against delegation of lawmaking power.¹³³

The serious question is the shape of the nondelegation rule. In other words, what constitutes an exercise of “the legislative Powers herein granted” in the Constitution?¹³⁴ What is the essence of the lawmaking power reposed in Congress?

While some theorists propose rules that essentially deny the possibility of a meaningful restriction on congressional delegations of authority,¹³⁵ the Supreme Court has stopped short of that position—but not by much.¹³⁶ The rule articulated in J. W. Hampton, Jr., & Co. v. United States (Hampton),¹³⁷ which has been the accepted test for the past ninety-three years,¹³⁸ requires merely that Congress provide an “intelligible principle” to guide the exercise of authority delegated to another official.¹³⁹ Only two enactments in the last ninety-plus years have failed to satisfy that test,¹⁴⁰ which in part explains why it has drawn increasing criticism from the justices.¹⁴¹

A more thoughtful test would be rooted in two opinions written over a century and a half apart. The first, written by Chief Justice Marshall for the Court in Wayman v. Southard,¹⁴² makes the test turn not on the intelligibility of the standard for exercising a power but on the nature of the power itself.¹⁴³ Marshall’s Wayman opinion declared that some decisions are essentially legislative because of their importance—matters that Alexander Hamilton had described in Federalist 75 as “rules for the regulation of society”¹⁴⁴—and that these must be made exclusively by Congress.¹⁴⁵ Other decisions, on matters of lesser importance to society, may be assigned to administrators.¹⁴⁶ The second decision, Justice Scalia’s dissenting opinion in Mistretta v. United States,¹⁴⁷ emphasizes that the power assigned to administrators must be connected to (and in service of) the exercise of an executive function.¹⁴⁸ Congress cannot give any other body authority to engage in freestanding rulemaking, separate from activity that implements the rules. A body that makes rules regulating the conduct of others, independent of actions to implement those rules, would, in Scalia’s pithy characterization, be “a sort of junior-varsity Congress.”¹⁴⁹

Despite the Supreme Court’s continued adherence to some form of Hampton’s intelligible principle test,¹⁵⁰ the Marshall–Scalia “importance-plus-function” test has garnered increased support in recent years.¹⁵¹ Indeed, recent opinions on the delegation issue—including the Court’s latest decision on the issue in Gundy v. United States¹⁵²139 S. Ct. 2116 (2019).—raise serious questions respecting the Hampton test’s future.¹⁵³ The particular lineup of justices in Gundy also suggests the test may change in the future to one more constraining on delegations of rulemaking authority.¹⁵⁴ For now, however, the combination of a centuries-old commitment to the notion that the Constitution forbids delegation of lawmaking authority from Congress to other branches and the almost-century-old use of a test that stops almost no delegations must frame the inquiry into what standards should be used to judge the propriety of rulemaking procedures.

B. The APA, Process, and Rulemaking’s Limits

There is a growing literature extolling the virtues of administrative decision-making as good for democracy.¹⁵⁵ Professor Nina Mendelson, a proponent of expanded public participation in rulemaking as enhancing its democratic legitimacy, has collected an impressive set of statements trumpeting the fit between administrative rulemaking and democratic ideals.¹⁵⁶ Yet, Mendelson also recognizes that, in general, when engaged in rulemaking, “an agency must make value-laden decisions without significant guidance from the statute that authorizes the decisions.”¹⁵⁷ That point was made even more explicitly by then-Professor Elena Kagan, who noted that rulemaking officials have no “democratic warrant . . . to make the value judgments—the essentially political choices—that underlie most administrative policymaking.”¹⁵⁸ As Professor Peter Strauss has observed, an obvious explanation for the continued refrain that rulemaking is democratically grounded and serves as a legitimate vehicle for making these “essentially political choices” is because so many people need the current administrative lawmaking process to be valid.¹⁵⁹ It is an example of what might be termed “the imperative of the extant”—the vast amount of political rules generated through agency rulemaking must be found to come from proper exercise of administrative power because the alternative would knock the props from under so much activity that the great bulk of administrative law scholars, practitioners, and jurists accept as right.

Professors Mendelson, Kagan, and Strauss were not trying to undermine agency rulemaking, even rulemaking having the force of law. Instead, they were endeavoring to explain ways to conceive of agency actions, or ways to test the propriety of agency actions, without having to treat lawmaking outside of the legislative process—the process of bicameralism and presentment set forth in the Constitution—as illegitimate.

Yet, at the same time, they recognized that the constant comparison of agency rulemaking to legislative activity is fundamentally flawed. Others have even more directly asserted that agency decision-making is often preferred by interested parties and chosen by legislators precisely because it is not the same as legislating by constitutionally prescribed means.¹⁶⁰ If legislating involves “log-rolling”—compromises fueled by one lawmaker agreeing to back one initiative in exchange for another lawmaker backing a different legislative action—agency decision-making inevitably functions in a less complicated world where there are fewer logs to roll.¹⁶¹ For agency officials, the costs of backing a given regulation are different than the legislator’s costs because the agency official is responsive to a smaller set of interests and influences than the legislator and thinks about public interests differently, as well.¹⁶²

These differences were not discussed in great detail in the reports prepared as background for the drafting of the APA, but the drafters made clear their understanding of the distinction between legislating and rulemaking.¹⁶³ Despite treating rules that purport to bind individuals with “the force and effect of law” as if they were the equivalent of laws,¹⁶⁴ the APA was not designed to produce procedures for lawmaking. Subsequent efforts to graft additional procedures onto the rulemaking process may respond to concerns that rulemaking has effectively become equivalent to lawmaking,¹⁶⁵ but it cannot transform rulemaking into lawmaking. It cannot, in short, make the administrative process the same as the process that requires majorities of two houses of Congress and presentment to the President—procedural requirements that form the touchstone for permitting coercive regulation of society.¹⁶⁶

Rulemaking can help flesh out administrative programs, provide guidance on their administration, and give direction to government personnel. But rulemaking, especially of the sort that imposes obligations or constraints on private conduct, if it is to be consistent with a sensible notion of what the Constitution commands, cannot be made a substitute option for making the sort of important decisions on matters of critical, political judgment that Wayman recognized have been committed to legislative solution through a process that includes bicameralism and presentment. Hammering out the details of a workable judicial rule for nondelegation may remain difficult, but that has not been enough of an argument to sideline other constitutional constraints.¹⁶⁷

Further, as is implicit in the observation about the APA’s drafting, limiting delegation of rulemaking authority to the scope understood at the time of the APA’s passage will better align rulemaking with the statutory framework for notice-and-comment proceedings. This will reduce the force of arguments in favor of expanded processes and additional considerations. Given that these are the forces behind much of the ossification in rulemaking observed over the past two decades and much that is problematic in the efforts to eliminate the adverse effects of the solutions, as well,¹⁶⁸ the move back to a Marshall–Scalia delegation test would have pragmatic payoffs and an increased congruence to statutory and constitutional instructions. It would reduce the benefits politicians derive from being able to delegate difficult problems to administrators rather than having to resolve them.¹⁶⁹ And it would reduce some of the benefits administrators derive from having additional discretion over the particulars of their own regulatory power.¹⁷⁰ But it would provide a basis for improving the fit between regulatory discretion in theory, its exercise in practice, and the legal frameworks that should govern it.

Conclusion

Rulemaking, in one form or another, is as old as government, and American administrative officials have exercised rulemaking authority from the nation’s constitutional beginnings. The nature of the rules made, however, changed from mainly managerial to regulatory, from housekeeping matters and internal guidance to means for controlling private conduct, and from matters of modest political significance to subjects that are vigorously contested in the political arena. The change in the nature of federal administrative rules overwhelmingly post-dates enactment of the APA, with its minimal requirements for notice and comment. Efforts to expand controls over rulemaking have increased its subjection to constraints more congruent with the exercise of power by those to whom lawmaking and execution responsibilities are entrusted. But at the same time, those efforts have so increased the costs of rulemaking as to incentivize shifts from rulemaking to other forms of regulation. In essence, some parts of the cure may have had effects worse than the disease (less democratically accountable rulemaking). In the end, the necessary steps going forward—and the government’s ability to keep rulemaking as a tool of administration rather than an end run around constitutional restraints on lawmaking—depend first on judicial enforcement of the Constitution’s limits on delegation. Only after that has occurred can meaningful improvements in rulemaking process take hold.

Category: Print Issues

Rulemaking Then and Now: From Management to Lawmaking

Share this article