The Wall Street Journal called it “A Victory for the Administrative State,” but the recent Supreme Court ruling on the Consumer Financial Protection Bureau (CFPB) was far more consequential than that.
A Supreme Court that only a few years ago had strongly endorsed the powers of the President in Seila Law v. CFPB—assuring that the President had full authority to direct the Executive Branch—decided in this case that it could not support Congress’s “Power of the Purse” to preserve legislative, financial, and policy control over administrative agencies. Instead, it permitted Congress to set up, or utilize, independent funding sources for administrative agencies outside the control of the elected legislature.
To make clear how serious this breach really is—how it is more than simply a victory over the administrative state—it’s necessary to understand the constitutional framework established by the Framers, and how it has worked up to now.
The Constitution’s Article I, Section 9 says, “No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” Most federal agencies are supported under this language by annual appropriations from Congress that are ultimately approved by the President. This had been previously described universally as Congress’s “Power of the Purse”—the source of its influence with Executive agencies and the key to the authority of Congress in the separation of powers.
Congress’s power to finance (or not) the agencies of government is the reason why the massive US government has been democratically successful for almost 250 years. Although administrative agencies live for ages, from administration to administration, they are kept in check by congressional appropriations doled out year by year by committees of Congress knowledgeable about their responsibilities and authorities.
At least until now. In Consumer Financial Protection Bureau v. Consumer Financial Services Assn. of America, the Supreme Court (Justice Thomas, writing for a majority of seven) said in essence that Congress’s Power of the Purse is fundamentally a myth. That famous authority—seemingly written into the Constitution to give Congress and the American people the power to control administrative agencies—has been grossly exaggerated.
In reality, said the Court, Congress can simply designate any source from which the agency can draw the necessary funds to operate, and in the case of the CFPB Congress could specify—as it did in the CFPB’s case—that it will be funded by sums drawn from the Federal Reserve, not the Treasury.
Could this really be true? Instead of the Federal Reserve, could Congress specify some other independent source, like, say, the Smithsonian Institution, the Farm Credit Administration, or maybe even a private firm.
The serious problem created by this decision does not arise from statutory or constitutional interpretation; it comes from how things could develop in the future as Presidents and Congresses—like the Congress that enabled the CFPB to seek its funding from the Fed—try to avoid the restrictions written into the Constitution by the Framers. Unfortunately, these restrictions were added in the first place for the benefit and protection of the American people
The Supreme Court has now authorized Congress to provide for the funding of agencies from sources—like the Fed—over which neither Congress nor the President has any significant control.
The reason Congress originally did this for the CFPB is clear: The Democratic Congress that created CFPB did not want the agency’s regulation of the financial system to be limited by the “politics” of a democracy; for example, some day, the regulated industry might acquire the power in Congress to reduce the authority of the CFPB.
To prevent this result, the financing of the agency was placed in the Federal Reserve, beyond the control of Congress. Although part of this independence has now been erased by Seila Law, which gave the President the power to dismiss the head of the agency in case he or she pursues policies inconsistent with those of the President.
But now a powerful agency of the government has been placed beyond the control of Congress, and by extension the American people.
Could Congress fund, say, the Defense Department the same way? Under the holding of this case, Congress and the President—or possibly one of them alone—could set up an enterprise like the Federal Reserve, entirely outside the government, that would fund activities—such as building armaments–that the American people have no way to control. Didn’t anyone in the Supreme Court majority think of this?
Once a way around the existing Constitution has been blessed by the Court it will be used for all kinds of troubling adventures, the objective of which will be to escape the strictures of the original Constitution. It is painful to see the Supreme Court agree to this.
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