Supreme Court curtails power of government agencies

Investment Analysis Clubs Macro Economic Trends and Risks
1

The executive branch of the government contains numerous agencies which interpret and apply sometimes vague laws that are passed by Congress. These agency regulations have a tremendous impact on individual companies and the Macro economy as a whole.

Agencies include an alphabet soup including the EPA, FDA, FAA, OSHA and many more. Many companies were put out of business in the 1970s by EPA regulations because the pollution controls were so costly that the companies couldn’t make a profit.

Companies have been pushing back against agency regulation for decades but the 1984 case, Chevron v. Natural Resources Defense Council, provided a precedent to support agency authority to regulate – the so-called “Chevron Deference.”

Here is the heart of Chevron Deference: “If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress,” Justice John Paul Stevens wrote for a 6-0 court in the 1984 opinion. But “if the statute is silent or ambiguous with respect to the specific issue,” he said that courts should defer to reasonable interpretations by the agency charged with implementing the law.

The Supreme Court has just overruled the Chevron Doctrine. This could have a massive impact on the Macro economy and the markets. There have been 70 Supreme Court decisions relying on Chevron, along with 17,000 in the lower courts. Will this unleash a tsunami of court challenges?

https://www.wsj.com/us-news/law/supreme-court-pares-back-federal-regulatory-power-954a101c?mod=hp_lead_pos1

Supreme Court Pares Back Federal Regulatory Power

Justices abandon 1984 precedent giving agencies leeway to interpret their own powers

By Jess Bravin, The Wall Street Journal, June 28, 2024

The Supreme Court upended the federal regulatory framework in place for 40 years, expanding the power of federal judges to second-guess agency decisions over environmental, consumer and workplace safety policy among other areas…

By abandoning the doctrine called Chevron deference, the justices have given parties unhappy with agency decisions more opportunities to overturn regulations by persuading federal judges that agency officials exceeded their authority. … [end quote]

Here is more on the topic.

It will take time for the eventual outcome of this stunning decision to unfold. It’s not like company managers will thumb their noses at government regulators today, necessarily. Or will they?

The number of regulations issued by government agencies is mind-boggling. They are listed in the Code of Federal Regulations which has its own Office of the Federal Register to keep track of them.

https://www.regulations.gov/faq

Does today’s Supreme Court decision nullify all of them? Today? Or must each separate regulation be dragged through the courts to decide?

This will be a field day for the lawyers!

And what about the public (environment, workers, consumers, etc.) that the regulations are designed to protect?

Wendy

9 Likes
2

The thing is it is nearly impossible to write anything that is “clear” and has no ambiguity. Reasonableness in interpretation is always necessary. This is true not only of laws and of policies, but also true of technical standards (like USB bus, PCI, IEEE-748, nearly any programming language, etc.)

7 Likes
3

Yes, and is one of the essential qualities of successful executive power ( care that the Laws be faithfully executed).

d fb

2 Likes
4

If there is retribution taking away executive power is a good thing. It forces things to the courts. That means the executive can not get many forms of retribution.

If there was simple decency, the agencies’ hearings would be less expensive for the common man.

5

This has been true for thousands of years. As society develops, old rules require detailed interpretation to apply them to new situations.

In the Jewish religion, halacha is the word that describes these detailed interpretations. The Torah, which is over 3,000 years old, says, “Do not build a fire on the Sabbath.” But it was rabbis living in the 19th century that interpreted this to mean, “Do not operate an electric switch on the Sabbath.” This protects the intent of the original law as new situations develop.*

Laissez-faire capitalism can be destructive in many ways. I remember when the EPA, OSHA and other agencies were first organized in the 1970s to mitigate the harms to the environment and workers. As recently as the 21st century, the Consumer Financial Protection Agency was organized to protect the public from predatory financial practices.

In my mind, the Code of Federal Regulations is analagous to halacha. As new situations develop and/or new or existing harms are recognized the agencies develop rules to address them. The agencies have a lengthy, iterative process that includes expert and public feedback to develop detailed rules which Congress couldn’t possibly write into the original law. The intent of the original law is protected.

The new Supreme Court decision has the potential to reverse decades of regulation in the public interest. A few special interests could benefit while the broader public suffers material harm.

Wendy

*Reform Jews, who are the majority of American Jews, do not follow halacha but Orthodox and Conservative Jews do.

10 Likes
6

It is a recognition by the Court that its several decades experiment in rebalancing the relationship between administration and judicial review has failed. The Court itself hasn’t used the doctrine in almost a decade. As Roberts wrote, “At this point all that remains of Chevron is a decaying husk with false pretensions.”

Executive agencies have expertise in technical matters. Courts have expertise in resolving statutory ambiguities and should be free to do so when appropriate, such as the scope of an agency’s power - especially its own.

DB2

1 Like
7

So, let’s see if I have this right: when the court decides to interpret a law one way, they are “reining in an out of control administrative state”. When the court decides to interpret a law a different way, they are “unelected judges, legislating from the bench”. Do I have that right? If a court says an issue needs to be left up to Congress, that is correct, unless Congress is leaning the “wrong way”, then the court has to block Congressional action. Do I have it right?

Steve

13 Likes
8

On a theoretic basis, the law requires Congress to pass a new law for every nuance of regulation. This opens them to a new fund-raising/lobbying industry to help fund their reelection campaigns (not to mention "out of bounds stuff like NJ’s Menendez is accused of). It will also tie up their time as well as that of the courts. It also depends on both the Legislative and Judicial branches being as familiar with the technical aspects of a broad spectrum of areas as the specialists at the agencies.

Jeff

8 Likes
9

Congress can do this and raise taxes on the top bracket and corporations to improve gdp growth.

The people supporting low taxes are a burden.

10

Ayup. When Medicare Part D was being written, the head of the minority on the committee complained he was never told when the meetings were being held. He engaged in some spycraft to find out where and when the meeting was. He, and his minority committee members burst into the room, and found the majority leadership, and drug industry lobbyists, hard at work.

Congress writes legislation, recognizing that pols do not have the specialized knowledge needed, so, write legislation in broad strokes, and delegates authority to the administrating department to make appropriate rules and regulations to fulfill the broad objectives of the legislation.

If Congress has to write every rule itself, rather than having an agency staffed with people with the appropriate specialized knowledge, do the rulemaking, to who will they turn? The other stash of specialized knowledge, the industries that the law will impact.

Steve

11 Likes
11

Then so will the Supreme Court have to cover each and every possible argument with their decisions. If something is omitted, then it has to be begun all over again. Which is why the Supreme Court shall determine they do NOT have to do that–but everyone must do it. LOL !!

3 Likes
12

It has occurred to me that rolling back the Chevron case may have been necessary to implement Project 2025. Which is a truly scary future for the country.

3 Likes
13

Yeah, bring back the good old days, when the Proles learned “the dignity of work”.

thedignityofworkb5f46758c7
thedignityofworkb5f46758c71280×720 143 KB

3 Likes
14

This decision on the Chevron doctrine will likely have big implications on EPA’s recently established rules on coal and natural gas power plants. The new rules will require existing coal and new natural gas plants to install carbon capture and storage (CCS) technologies.

From the link…
New gas plants and coal plants planning to operate past 2039 — as opposed to 2040 under the original proposal — will be required to meet a carbon dioxide emission standard equal to installing a carbon capture and sequestration system and running it at 90% efficiency, officials said. Compliance starts in 2032.

~ ~ ~ ~ ~

Coal and natural gas power plants generate nearly 60% of the electricity in the US. Just my opinion, but mandating such a huge change to the way power plants operate, which will also have an effect on customers’ utility bills, is maybe something that should be approved by Congress first? Bureaucrats alone shouldn’t have that kind of mandate power, especially for a new and largely unproven technology at the scale that will be needed for all power plants to comply.

  • Pete
1 Like
15

Consider the “carbon capture” narrative, like the “clean coal” narrative, is meant to keep the coal industry alive. We know how to generate power without releasing huge amounts of carbon. Nuclear power technology is pretty well developed. But the coal lobby has influence. Some years ago, a prominent pol, in an unguarded moment, openly said the objective was to put the coal industry out of business. The talking heads of Fox Noise went apoplectic. So we get technology bandaides, to keep alive industries that should die.

Steve

2 Likes
16

Congress gave EPA the authority to regulate greenhouse gasses under the Clean Air Act. This has been upheld by the Supreme Court.

But I don’t think this will be as big a deal as you seem to think. This rule applies to new natural gas and existing coal plants. Coal has been dying for a long time and coal plants don’t have fully comply until 2039. Not much new natural gas generation is in the pipeline so I suspect the effect won’t be that large.

I’m sure the utilities will scream bloody murder and sue EPA, of course.

17

It’s more than that. It is impossible to reach ‘net zero’ in 2050 without carbon capture. Thus, for those who want to believe it possible, CCS becomes a necessity (with or without coal).

DB2

18

Several years ago, a POTUS kept chattering about using H2, but it seemed he was using H2 as an excuse to not adopt clean technologies that were more mature, and available more near term. In the back of my mind is the thought the same tactic is at work with “clean coal”: it is being used as an excuse to not go big with nukes now. 2050 is quite a ways away. Even Shiny-land could get nukes built in that time frame. Southern applied for the permits for Vogtle 3 and 4 in 2006. Construction started in 2013. Both units are now in commercial operation. But “clean coal” provides an excuse to not go all nuke, and pacify the coal lobby.

Steve

2 Likes
19

It strikes me that this may not be the win certain pols expect it to be.

I think of the laws regarding immigration in particular that might also be impacted by the loss of Chevron. The undocumented might find a greater ability to challenge immigration law now that INS can no longer interpret statutory law.

A quick review of relevant sites seems to support that interpretation as well. A lot more legal challenges for asylum will be forthcoming.

5 Likes
20

The evidence doesn’t quite back that up. The government is throwing enormous amount of money at nuclear energy and has been for 15 years. Believe it or not, the 2009 stimulus bill allocated more money for nuclear than it did for renewables. The IRA allocated about $30 billion to nuclear (mostly in the form of tax credits). A big reason is that it is hard to get to net zero without nuclear.

However, nuclear is straight up really expensive. While carbon capture is still a new technology with only a few examples, it still looks like it is cheaper than nuclear.

4 Likes