Administrative law has been a greenfield for scholars for quite some time because it stands at the confluence of American constitutional law and political theory regarding the proper structure of American government.[1] Most administrative law is made not by Congress, but by the federal courts, particularly the Supreme Court of the United States. The last major statute that Congress enacted was the Administrative Procedure Act (APA),[2] and it became a part of the federal code 70 years ago. Since then, the Supreme Court has principally been responsible for the development of administrative law. Some of the Court’s decisions interpreting the APA—such as Citizens to Preserve Overton Park v. Volpe[3] and Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council[4]—are landmark decisions in the administrative law field because they defined the “arbitrary and capricious” standard for review of federal agency actions and prohibited the federal courts from imposing rulemaking requirements on administrative agencies that Congress chose not to adopt itself.[5] To some extent, those decisions have become so closely allied with the meaning and role of the APA in governance that they might as well have been written into the text of the statute itself.
But the Court’s 1984 decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council[6] stands head and shoulders above any other administrative law decision rendered during the past several generations. Chevron created a new two-step test for courts to use when interpreting a statute that Congress has directed an agency to implement. The test gave federal agencies a potentially commanding role in the interpretive process even though American jurisprudence had long vested that authority in the federal courts.
Like most issues of administrative law, Chevron was largely noncontroversial for most of its early life. Times have changed, however, and Chevron is now the subject of considerable legal and policy debate. Its elevated treatment of agency interpretive authority rests uncomfortably alongside a long tradition of judicial primacy. Its foundation in the Progressive-Era belief in the wisdom of delegating vast amounts of decision-making authority to expert agency officials is jarring to a public that has become distrustful of losing any control of or influence over an increasingly vast portion of American life that is now regulated by remote, unknown officials.
What perhaps brought that dispute to a boil has been President Barack Obama’s oft-repeated resort to administrative lawmaking when he could not achieve the same legislative success that he enjoyed during the early portion of his first Administration. Over the past five years, the question whether Chevron was wrongly decided and, if so, whether its two-part analysis should be abandoned has been a subject of considerable ferment among certain members of the Supreme Court and the academy. Whether Chevron will survive may well turn on what happens this November.
It might be useful to ask, however, what the world would look like if Chevron were legislatively or judicially overruled. Would the federal courts still give deference to an agency’s interpretation of a statute? If so, how much deference? Would the courts defer to an agency even if they would have construed the statute differently? Would the courts treat the agency’s opinion as if it were a law review article? Does all the hoopla over Chevron matter very much in the long run?[7]
The Rise of Chevron and Deference to a Federal Agency’s Interpretation of an Act of Congress
The issue in Chevron was whether the Environmental Protection Agency (EPA) could reasonably interpret the term “stationary source” for purposes of the Clean Air Act Amendments of 1977[8] as an entire plant rather than as each separate smokestack, an interpretation that had come to be known as the “bubble” concept. The Reagan Administration had interpreted that term to apply to each facility, not each smokestack, while the environmental organizations took the contrary position. Unfortunately, neither the text of the statute nor its legislative history offered more than a wisp of evidence as to what “stationary source” meant, and the competing policy arguments seemed to wrestle themselves to a draw. All of the traditional tools of statutory interpretation left the Supreme Court in equipoise. The result was that the Court found itself with only two choices: flip a coin or devise a new approach to statutory construction.
In an opinion written by Justice John Paul Stevens, the Supreme Court chose the latter approach. In reviewing the validity of the EPA’s interpretation of the statute, the Court wrote, a court should not follow the traditional approach to the construction of a law set forth by the Court’s 1803 decision in Marbury v. Madison,[9] which had explained that the courts have the responsibility “to say what the law is.”[10] Instead, in Chevron, the Court established a two-step test for judicial review of an agency’s interpretation of a statute. The first step is to ask whether Congress has answered the particular question in dispute in the statute itself.[11] If so, that answer (absent some constitutional flaw) is dispositive.[12] But if the statute is ambiguous on the issue, the next step for a reviewing court is to ask whether the agency’s interpretation is reasonable.[13] If so, that ends the controversy. The court may not disagree with the agency as long as its interpretation is a plausible construction of the act. Why? When a statute is ambiguous, the Court wrote, there is a presumption that Congress implicitly delegated to the agency the authority to fill in the blanks,[14] which is a policymaking function.[15] Unlike courts, agencies may make policy judgments, and if Congress empowered an agency to do so, the courts may not overrule the agency’s decision.[16]
Having identified how it would answer the question, the Court then applied its new two-step test to the Clean Air Act. Applying Chevron Step 1, the Court concluded that neither the statute nor its legislative history defined the term “stationary source,” nor did either one prohibit the EPA from adopting its “bubble” concept.[17] Moving then to Chevron Step 2, the Court decided that the agency’s “bubble” concept was a reasonable interpretation of the term “stationary source” and entered judgment in the agency’s favor.[18]
Chevron adopted a two-step test, but in King v. Burwell[19] the Court added a third step, which some commentators have labeled “Chevron Step 0.”[20] King involved an interpretation of the Patient Protection and Affordable Care Act of 2010,[21] known to some as Obamacare.[22] The question before the Court was whether the phrase “[e]xchange established by a state” included an exchange established by the federal government. The Internal Revenue Service had promulgated a rule answering that question in the affirmative, and the Solicitor General argued that the IRS’s interpretation was entitled to Chevron deference. Although the majority, in an opinion written by Chief Justice John Roberts, reached the same conclusion on statutory grounds, the majority declined to defer to the IRS’s interpretation. Instead, the Court concluded that this was one of those “extraordinary cases” in which it would be unreasonable to presume that Congress delegated interpretive authority to an agency instead of resolving an issue itself.[23] The Court stated that it had reached this conclusion because the phrase “[e]xchange established by a state” was critical to one of that act’s “key reforms,” involved “billions of dollars in spending each year,” “affect[ed] the price of health insurance for millions of people,” and was therefore “a question of deep economic and political significance that is central to [the Obamacare] statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly.”[24]
King therefore adds a new step to Chevron, one that asks whether the matter is of such importance that a court should not presume that Congress implicitly delegated interpretive authority to an agency to resolve it. Given the plasticity of that inquiry, that step could render Chevron inapplicable in an unknown number of cases.[25]
The Steady Transfer of Lawmaking Power from Congress to Administrative Agencies
Chevron did not appear at first to be a major decision in administrative law.[26] The Supreme Court had been interested in how an agency construed a statute long before Chevron was decided, and the Court often gave the agency’s interpretation deference in a variety of circumstances.[27] For example, the Court was likely to defer to an agency’s position that was consistent, long-standing, or technical in nature. Even Chevron acknowledged those points.[28] Moreover, a court would not reach Chevron Step 2 unless it found that Congress did not itself answer the issue in the case. Instances in which Congress had directed an agency to promulgate regulations to implement a statutory program were the most likely to receive judicial deference. Yet since the Court decided Chevron in 1984, the decision has taken on enormous importance. One reason why is that, given the deep political disagreements in American politics today, Congress has not passed any major legislation since Obamacare in 2010, and the President has stepped forward to take up the slack, whether or not he possesses the statutory authority to do so.
The Framers anticipated that Congress would be the principal lawmaking body for the federal government. That explains why they spent most of the Convention of 1787 debating how to select Members of Congress[29] and what legislative powers Congress should have.[30] Early on, President Barack Obama accepted that norm, working with Congress to enact as law policies that he believed were necessary to benefit the nation. An example is his economic stimulus package. Yet since his party lost control of the Senate and House of Representatives, President Obama has shifted gears and used executive orders and administrative regulations or decrees to create law. In fact, he has issued some decrees that are inconsistent with the very laws he helped enact in his first term.[31]
The result of the President’s resort to lawmaking by administrative regulation or order has been to cause several Members of Congress to attempt to reclaim their principal role in the federal lawmaking process. Various commentators have also decried the administrative state’s usurpation of Congress’s lawmaking authority.[32] Along the way, lawmakers and scholars have focused on Chevron as epitomizing the out-of-kilter nature of federal governance, one in which unelected administrative officials exert more effective lawmaking power through their interpretation of statutes than either Congress or the federal courts are able to exert. Members of Congress have introduced legislation that would overrule Chevron,[33] and members of the academy have urged the Supreme Court to clean up the mess it created by overruling the decision itself.[34]
Critics of Chevron have offered several arguments to show why they believe it was wrongly decided and should be abandoned.[35] But the central argument against Chevron is that it conflicts with a fundamental principle of our constitutional system: The federal courts have the responsibility to interpret federal law and enter final judgments reflecting how that law applies to the facts in a particular case. The Constitution’s text, its English and American common-law history, and the need for (and textual guarantees of) judicial independence, the argument goes, make it clear that the third branch of government must have the final say as to a law’s meaning.[36] Chevron, critics correctly say, gave no weight to any of those concerns. In fact, Justice Stevens’s opinion does not even mention them.
So far, neither the full Congress nor the Supreme Court has taken up those invitations, and it is uncertain whether they ever will. Presidential and congressional elections are just over the horizon, and the outcome of those races could decide whether any legislation to overrule Chevron advances in either chamber of Congress. The death of Justice Antonin Scalia earlier this year left the Court with only eight members, which meant that some cases were decided by a 4-to-4 vote[37] and some might as well have been for all of the clarity that the Court’s decision provided.[38] It is unlikely that the Supreme Court would be willing to reconsider a precedent with the significance of Chevron without a full complement of justices. The appointment of a new justice will occasion debate in the Senate over the role that administrative agencies should play in the interpretation of law, but it is unlikely that the nominee will say very much about the matter or that Congress will resolve it during confirmation proceedings (in which the House of Representatives plays no part).
Accordingly, the eventual fate of Chevron is a question mark. Yet equally important to the debate about whether the Chevron doctrine should ride off into the sunset like Shane[39] or remain firmly in place like Horton[40] is this question: Where would we be if Congress or the Supreme Court overruled Chevron?
What Would Follow Chevron’s Demise?
Bills introduced in the Senate and House of Representatives would overrule Chevron by modifying the APA to make clear that federal courts must independently resolve any legal issue posed by a case.[41] The goal of those bills is to eliminate Chevron Step 2 and reestablish the default position in administrative law that applied before the Court in Chevron devised its new two-step analysis. Were one of those bills to become law, the federal courts would no longer be free to avoid deciding the meaning of a statute by relying on the agency’s interpretation. That would also be true if the Supreme Court were to overrule Chevron and return administrative law to its pre-Chevron status quo. The federal courts would once again have final decision-making authority over the interpretation of federal statutes—at least in the short run. But two features of the Chevron decision suggest that the Supreme Court may be unwilling over the long haul to reassume the burden of final responsibility for the interpretation of acts of Congress that are meant to be implemented by the administrative state.
The first one is that the Chevron two-step analysis represents an odd marriage of common-law decision-making and statutory construction at a time when the former has largely become a thing of the past. The common-law courts resolved disputes by inching their way along from the guideposts set by analogous precedents in cases involving comparable facts. The courts did not defer to the position of the government (including an executive branch agency) as a litigant because they saw their role as being that of an impartial referee: an adjudicator charged with deciding cases based on the strength of a party’s arguments rather than on the identity of a litigant.
That approach made sense at a time when Congress had not yet begun to turn out statutes like so many loaves of bread for executive branch officials to manage economic and social affairs through a distinct “fourth branch” of government. But the world changed during the New Deal. The birth of the administrative state forced the Supreme Court to decide how to treat the opinions of officials who were not parties to litigation but were held out as experts and utility infielders[42] with congressionally assigned rulemaking, management, and adjudicatory responsibilities, thereby effectively becoming junior varsity versions of Congress, the executive branch, and the judiciary. The result was to give agencies deference in their area of expertise in order to give effect to Congress’s judgment that agency officials, not courts, should manage the economy at the granular level.
The effect of Chevron was to mix all of that together into one approach to statutory analysis. Since Erie R. Co. v. Tompkins, the federal courts have been unable to engage in the type of common-law lawmaking necessary to fill the gaps left by legislation.[43] But Erie does not limit the power of agencies to assume that role. Accordingly, where an issue arises that Congress did not answer, whether due to an unforeseen problem or to a crevice between two parts of a statute, Chevron directs the federal courts to leave the responsibility for filling that gap to the agency that Congress chartered to perform that task. That is, given the administrative state, the task of filling in the blanks—the role that courts performed when the law consisted of judicial decisions rather than statutes—now falls to the agencies. In other words, federal administrative agencies have become the new common-law courts in “the age of statutes,”[44] authorized to engage in the same “molar to molecular” lawmaking that the pre–New Deal courts had long performed.[45] The role for the federal courts was now the subsidiary one of making sure that an agency remained within the bounds of reason. Otherwise, agencies had the power to act interstitially.
The second noteworthy feature of Chevron is closely related to the first one. The Supreme Court’s decision in Chevron represents a renewed belief in the Progressive-Era dogma that agency officials are subject-matter experts who know better than anyone else what a statute means and how it must be read so that it can work.[46] The problem with such a canon is that it is neither always right nor always wrong. Some agency officials—biochemists, epidemiologists, hydrogeologists, nuclear engineers, astrophysicists, and so forth—will know more about a particular subject matter than even Supreme Court justices think they know and also will have a better grasp of the on-the-ground tasks that must be accomplished to make a regulatory program work. Other agency officials will be no smarter or better equipped to manage a complicated regulatory program than are the people behind the counter at your local DMV. Uttering that conclusion certainly is not politically correct, and it is highly unlikely that the Supreme Court would ever endorse it in a written opinion published for posterity in the United States Reports. But Supreme Court justices are people—actually, very savvy people—and like everyone else, they will hold a personal view of the different competencies of various agencies and administrative officials.
The consequence is that even if Chevron were overruled, the Court is likely to defer to different federal agencies based on the factors to which it pointed before Chevron.[47] When did the agency first adopt its interpretation (e.g., when the statute was adopted or 50 years later)?[48] How long has the agency had that position (e.g., for 50 years or since last year)?[49] Has the agency interpretation remained consistent over time?[50] Is the field at issue one that is evolving or highly technical?[51] Did Congress instruct the agency to decide what was in the “public interest”?[52] And so forth. A contemporaneous, consistent, long-standing interpretation of a statute governing a technical field is likely to receive deference because it reveals that—from the outset and through Administrations of both parties—the agency has figured out what is in the public interest.
Here is another way to answer the question of what the world will look like after Chevron. The Supreme Court may replace Chevron deference with what has been (mis)labeled as Skidmore deference, after the case that first articulated the standard, Skidmore v. Swift & Co.[53] Skidmore involved the question of whether employees were entitled to overtime pay for the hours they spent at or nearby their job in a state of readiness in case of a fire. The Fair Labor Standards Act of 1938[54] did not expressly answer that question, but the relevant federal official, the Administrator of Wages and Hours, had concluded in an agency bulletin that a flexible approach was the best way to decide whether such “waiting” time should be deemed overtime. No statute identified the weight that the Administrator’s opinions should receive, but his views reflected his experience in applying the act.[55] For that reason, the Supreme Court decided that it would be guided by the persuasiveness of the Administrator’s interpretation:
We consider that the interpretations and opinions of the Administrator under this Act, while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.[56]
Were Chevron gone, the Supreme Court would likely apply the Skidmore standard to an agency’s interpretations of one of its organic statutes. Pre-Chevron Supreme Court case law suggests as much.[57]
Overturning Chevron by statute might prevent the Supreme Court from delegating responsibility for statutory interpretation to an agency, but no act of Congress could force the Court to completely disregard what an agency says a law means. At a minimum, the Court would likely place an agency’s construction of a statute on a par with the interpretation adopted by a learned member of the bar or a scholar in the academy. A persuasive agency position would carry the same weight as an opinion by Arthur Corbin on contract law, Herbert Hovenkamp on antitrust law, William Prosser on tort law, David Shapiro on federal jurisdiction, Herbert Wechsler on criminal law, or Charles Allen Wright on federal civil procedure. Each one is a recognized and highly regarded expert in his field whose opinions are valued and sought throughout the legal community.
Of course, each of those experts could be wrong about a particular point—even Homer nodded[58]—and the courts would have the responsibility to accept or reject their opinions. But it would be irrational to disregard a persuasive argument of theirs just because their views are not final. It would be equally irrational to reject an otherwise persuasive argument just because an agency made it, not a law professor. Under Skidmore, a federal court would likely give an agency’s opinion whatever persuasive force its reasoning deserved. The difference between Skidmore and Chevron is that Skidmore lets a court decide what is persuasive. A persuasive agency argument is no less persuasive just because the court has the final say.
Conclusion
The Supreme Court’s Chevron decision has generated considerable controversy over the past decade because it has the effect of transferring the final interpretive authority from the courts to the agencies in any case where Congress did not itself answer the precise dispute. The effect of Chevron was to transform agencies into common-law courts because only agencies can engage in the blank-filling necessary when Congress has failed to answer a question.
Overturning Chevron would return that ultimate decision-making authority to the federal courts, but it would not eliminate the importance of an agency’s interpretation of a statute. The agency’s position would have the same status as the interpretation offered by a scholar in the particular field: an opinion that must be considered and should be endorsed if it is persuasive, even if is not controlling.
—Paul J. Larkin, Jr., is Senior Legal Research Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.
This report is part of Prosperity Unleashed: Smarter Financial Regulation. Government policies have—for decades—empowered regulators to manage private risks and mitigate private losses in an effort to prevent financial-sector turmoil from spreading to the rest of the economy. This approach, rarely contemplated in nonfinancial industries, has demonstrably failed. Prosperity Unleashed: Smarter Financial Regulation provides solutions to the core regulatory problems that existed in U.S. financial markets long before the 2008 financial crisis.
