Harvard Law Review: Volume 126, Number 7 - May 2013
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About this ebook
The Harvard Law Review is offered in a digital edition, featuring active Contents, linked notes, and proper ebook formatting. The contents of Issue 7 include a Symposium on privacy and several contributions from leading legal scholars:
Article, "Agency Self-Insulation Under Presidential Review," by Jennifer Nou
Commentary, "The Office of Information and Regulatory Affairs: Myths and Realities," by Cass R. Sunstein
SYMPOSIUM: PRIVACY AND TECHNOLOGY
"Introduction: Privacy Self-Management and the Consent Dilemma," by Daniel J. Solove
"What Privacy Is For," by Julie E. Cohen
"The Dangers of Surveillance," by Neil M. Richards
"The EU-U.S. Privacy Collision: A Turn to Institutions and Procedures," by Paul M. Schwartz
"Toward a Positive Theory of Privacy Law," by Lior Jacob Strahilevitz
Book Review, "Does the Past Matter? On the Origins of Human Rights," by Philip Alston
A student Note explores "Enabling Television Competition in a Converged Market." In addition, extensive student analyses of Recent Cases discuss such subjects as First Amendment implications of falsely wearing military uniforms, First Amendment implications of public employment job duties, justiciability of claims that Scientologists violated trafficking laws, habeas corpus "custody" for actually innocent sex offenders, and ineffective assistance of counsel claims. Finally, the issue includes several summaries of Recent Publications.
Harvard Law Review
The Harvard Law Review is a student-run organization whose primary purpose is to publish a journal of legal scholarship. The Review comes out monthly from November through June and has roughly 2500 pages per volume. The organization is formally independent of Harvard Law School. Primary articles are written by leading legal scholars, with contributions in the form of case summaries and Notes by student members.
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Harvard Law Review - Harvard Law Review
Volume 126
Number 7
May 2013
Smashwords edition: Published in 2013 by Quid Pro Books, at Smashwords.
Copyright © 2013 by The Harvard Law Review Association. All rights reserved. This work or parts of it may not be reproduced, copied or transmitted (except as permitted by sections 107 and 108 of the U.S. Copyright Law and except by reviewers for the public press), by any means including voice recordings and the copying of its digital form, without the written permission of the print publisher.
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CONTENTS
About the Harvard Law Review
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ARTICLE
AGENCY SELF-INSULATION UNDER
PRESIDENTIAL REVIEW
Jennifer Nou
[cite as 126 HARV. L. REV. 1755 (2013)]
CONTENTS
AGENCY SELF-INSULATION UNDER
PRESIDENTIAL REVIEW
Jennifer Nou*
Agencies possess enormous regulatory discretion. This discretion allows executive branch agencies in particular to insulate their decisions from presidential review by raising the costs of such review. They can do so, for example, through variations in policymaking form, cost-benefit analysis quality, timing strategies, and institutional coalition-building. This Article seeks to help shift the literature’s focus on court-centered agency behavior to consider instead the role of the President under current executive orders. Specifically, the Article marshals public-choice insights to offer an analytic framework for what it calls agency self-insulation under presidential review, illustrates the phenomenon, and assesses some normative implications. The framework generates several empirically testable hypotheses regarding how presidential transitions and policy shifts will influence agency behavior. It also challenges the doctrinal focus on removal restrictions and highlights instead a more functional understanding of agency independence. Finally, these dynamics suggest a role for courts to help enforce separation of powers principles within the executive branch and also, along with Congress, to facilitate political monitoring by encouraging information from sources external to the presidential review process.
INTRODUCTION
Administrative agencies, like trial judges facing appellate review, dislike having their decisions reversed. Reversals are costly. They can upend months, usually years, of work spent gathering data, reaching out to stakeholders, and considering and responding to public comments.¹ This is to say nothing of the efforts required to draft regulatory text, analyses, and preambles with the sustained coordination of policy experts, economists, scientists, and lawyers through multiple stages of the rulemaking process.² Moreover, reversals create more work for agencies by sending them back to the drawing board in settings where resources are already constrained and budgets consistently threatened. Reversals also thwart the policy preferences of the agency.
That agencies may act strategically to avoid costly reversals, then, is hardly a surprise, nor is it a novel insight. For the most part, however, scholars have explored this premise with respect to the anticipated effects of judicial review.³ From this outlook, an agency facing the prospect of litigation will behave in order to minimize the risk of judicial reversals. A rational agency, that is, will select its interpretive and policy choices efficiently, taking into account the court’s expected reaction.⁴ For example, many noted that after United States v. Mead Corp.⁵ an agency could expect to qualify for greater deference through more elaborate proceedings.⁶ Some thus expected to see agencies engage in more notice-and-comment rulemaking relative to less formal mechanisms after Mead, and have found tentative empirical support for this hypothesis.⁷ As the potential for costly judicial reversals increased, so did concerns about regulatory ossification.
⁸
What this perspective overlooks, however, is the fact that the vast majority of rulemaking agencies — the executive branch agencies — face not only the courts’ review of their decisions, but also review by the President. The lopsided attention to judicial review in the literature is thus puzzling for multiple reasons. First, presidential review is more systematic than judicial review. Judicial review of an agency action is available only when a litigating party with standing and the necessary resources brings suit.⁹ Not only must that party demonstrate that she has come to court at the right time (that is, when the issue is ripe, based on a final agency action, and administratively exhausted),¹⁰ but also that review is neither precluded by statute nor committed to the agency’s discretion.¹¹ Presidential review of rulemaking, by contrast, encompasses all significant
regulatory actions, which agencies are required to submit directly for review.¹²
Second, even when a party does bring suit, courts are often self-consciously deferential to an agency’s interpretive and policy decisions.¹³ Presidential review, however, operates under weaker principles of self-restraint. Presidential review is also broader in coverage than judicial review. More rules are reviewed by the executive branch than by the courts — or by the legislature, for that matter.¹⁴ How many and which rules count as significant
enough for presidential review varies, but in recent years the number has hovered between about 500 and 700 per year.¹⁵ Only a small fraction of these, however, are litigated and reviewed in court.¹⁶ Even if one argues that the threat of judicial review alone is sufficient to shift agency behavior, the prospect of such review is still attenuated relative to presidential review.
Finally, presidential review precedes even the possibility of judicial oversight for many executive branch regulatory actions. Such review covers agency actions much earlier in the rulemaking process, not only proposed and final rules as the literature commonly (but incorrectly) claims,¹⁷ but also more preliminary notices of inquiry, requests for information, and advance notices of proposed rulemaking.¹⁸ Doctrines such as ripeness and finality, however, preclude judicial review of such actions.¹⁹ The failure to decompose the effects of this sequential review process — presidential, then judicial — may cloud existing empirical efforts to consider the impacts of court oversight.
The relative lack of attention to agency incentives when faced with presidential review, in short, has resulted in an ultimately incomplete account of agency behavior. Extant work has focused on discrete but related issues such as the institutional role of cost-benefit analysis,²⁰ the effects of political transitions more broadly,²¹ and agency attempts to avoid the review process altogether.²² Positive political theorists have long considered the strategic interactions between political actors and the bureaucracy, but their models of political control are often Congress-centric, frequently leaving the President to appear simply as a strategic legislative actor, whose influence over the bureaucracy pales beside that of Congress.
²³ Renewed efforts to consider agencies as strategic actors in their own right are still nascent²⁴ and continue to lack a contextual examination of incentives during the presidential review process as currently conceived and actually practiced.²⁵
This Article seeks to help further shift the focus from the judiciary to the executive branch by offering such an analysis, illustrating its applications, and assessing its normative implications. Specifically, the discussion draws upon public choice premises grounded in the straightforward notion that agencies can choose from different regulatory instruments, each of which will impose varying costs on the executive branch to review and reverse. Increasing review costs will effectively insulate various decisions contained within a rule or across a number of rules, since the President will have to spend his limited resources more selectively, reviewing and reversing fewer decisions. These agency self-insulation instruments include the means through which agencies can bypass review or raise the political and resource costs during the review itself. The incentive to engage in strategic behavior, in turn, increases the more an agency expects the President to disagree with and thus reverse it.²⁶ At the same time, decreases in relative resources can also have self-insulating effects. Because agencies are repeat players whose self-insulation attempts earn the President’s ire, the agency will selectively deploy the strategy only when it finds it the most valuable.
The full story is, of course, a more subtle one. Presidential review has many benefits that may reduce the incentive to self-insulate, and informal communication avenues preceding formal review may render the prospect of self-insulation infeasible. Self-insulation may thus be most prevalent for the broad set of regulatory actions that are not clearly salient or high profile; actions that are already high profile are likely to come to the attention of the White House through other means.²⁷ And no doubt, other exogenous actors and oversight mechanisms — most notably from Congress — can cut against and complicate these dynamics, some of which will be briefly discussed. The narrow focus here, however, will be on the relationship between executive branch agencies and the President under formal regulatory review, holding all other factors constant; in this sense, the Article presents a partial equilibrium analysis. One aim is to isolate a robust set of dynamics that can generate compelling (but falsifiable) hypotheses, with a view toward helping to explain potentially systematic behavioral variation.
Exploring these intraexecutive branch dynamics is valuable in part because they temper two traditional tenets of presidential control. First, the most robust accounts of a unitary
executive celebrate a vision of executive power that is vested in one, and only one, person,
emphasizing the accountability-enhancing features of that singular figurehead.²⁸ The scope of this vision must be qualified, however, by the reality that Presidents delegate regulatory review to a number of agents, mostly within the Executive Office of the President, who themselves disagree and conflict over what the President desires. Accountability diminishes when these actors publicly blame each other for unpopular policies from which the President seeks distance.²⁹ In other words, the more the institutional presidency is perceived as a they
and not an it,
the more diffuse the blame.³⁰ As such, while this Article speaks of review by the President
and presidential review,
the terms are but shorthand for the more complex dynamics of the coordinated, interagency review process within the executive branch; they refer to review by the President not as an individual, but as an institution.
Second, also at stake in these debates is the ability of the President to sanction defiant agency heads. A look through the U.S. case reporters would suggest that, at least as a doctrinal matter, the hallmark of such control lies in the President’s removal power. Recently, in Free Enterprise Fund v. Public Co. Accounting Oversight Board,³¹ for example, the 5–4 majority struck down a dual for-cause
provision of the Sarbanes-Oxley Act: Congress could not create an entity, the heads of which enjoyed for-cause tenure protections, within another agency, the heads of which were similarly protected.³² The second layer of removal restrictions unconstitutionally blurred the lines of executive responsibility. By contrast, Justice Breyer’s dissent privileged function over form.³³ In his view, the independence of an agency depends on a number of factors, including its separate budgeting and litigating authority and, above all, a political environment, reflecting tradition and function, that would impose a heavy political cost
upon a President seeking to remove without cause.³⁴ Independence is a matter of degree that cannot be determined by removal restrictions alone, but rather requires a careful assessment of the likely presidential calculations within particular contexts.
One way to understand the majority and dissent’s disagreement is as an empirical one about the actual determinants of successful agency resistance to the President: do removal restrictions trump the myriad other factors that could determine relative bargaining power?³⁵ If not, then courts need other tools and more systematic ways to think about the concept. By focusing on a subset of agencies without the traditional hallmarks of independence — the executive branch agencies — this analysis provides one such lens, trained on the ways in which agencies can resist institutionalized forms of presidential influence amidst resource constraints. In addition, it also highlights another locus of independence in the more stable federal bureaucracy: the career civil servants within agencies who may bear many of the potential reversal costs and thus possess significant incentives to avoid them. As such, this discussion hopes to combine insights from studies that attempt to understand how agency officials assess presidential control
and how it affect[s] their decision-making processes,
³⁶ along with more top-down analyses of White House control³⁷ and more recent efforts to clarify the nature of the presidential review process.³⁸ This investigation also seeks to engage the literature on cost-benefit analysis not only as a set of numbers such as net benefits, but also as a practice — the ways that agencies, for example, present costs and benefits, and why.³⁹
Moreover, this Article will argue that indicia of agency self-insulation can serve as signals of agency resistance to presidential control, the normative desirability of which depends on the nature of the underlying statutory scheme at issue. Under statutes that narrowly constrain policy discretion, self-insulation should be viewed as more likely to be salutary attempts to protect against undue politicization; thus, in these circumstances, courts should be more willing to uphold such efforts under either Chevron’s second step⁴⁰ or hard look review. By contrast, when statutes authorize broad policy judgments and call for discretionary interest-balancing, then courts should view self-insulation more warily as efforts that evade democratic accountability. Finally, both courts and Congress should facilitate political monitoring when strategic behavior or resource constraints have reduced the quality of information about a regulatory action’s consequences.
Part I introduces an analytic framework focusing on the potential for principal-agent divergence between the President and agencies as well as the resulting decision and reviewing costs. Part II further develops this approach by examining the various regulatory instruments available to a self-insulating agency and the incentives to choose among them. Specifically, these instruments can functionally serve to bypass review, calibrate its scrutiny, or truncate the amount of time available — all of which can be augmented by successful coalition-building attempts. Part III, in turn, examines various responses available to the executive branch, such as directives, spot checks, and timing strategies, as well as the potential implications of agency self-insulation for Congress and the courts.
I. FACING PRESIDENTIAL REVIEW
A. Strategic Agencies
One of administrative law’s anxieties is the problem of authority delegated from more politically accountable actors to the unelected ones within administrative agencies. Concerns that Congress, resigned only to fire-alarm
oversight by interest groups and stymied by collective action problems, has effectively abdicated the monitoring of its initial delegations of power only heighten these worries.⁴¹ If congressional ex post oversight is sporadic and ad hoc, some have argued that political actors could nevertheless control bureaucratic discretion by carefully designing the ex ante structures and processes through which agencies determine policy outcomes.⁴² One basic premise of these accounts is that procedures can help promote desired outcomes by, for example, stacking the deck towards preferred interest groups,⁴³ specifying the timing of agency decisions,⁴⁴ or otherwise constraining agency discretion.
1. The Limits of Ex Ante Controls. — With much of the attention on the relationship between Congress and agencies, however, Presidents were, for all intents and purposes, left out
⁴⁵ of many scholarly analyses, primarily characterized as part of the enacting coalition,⁴⁶ or else notable only for their indirect influence on legislative calculations, perhaps through later appointments⁴⁷ or veto threats.⁴⁸ In response, some have sought to bring the President firmly back into the picture as a discrete and autonomous actor with his own institutional objectives and mechanisms of control.⁴⁹ In this view, sitting atop the institutions that execute and project his power, the President must delegate tasks to his own agents and ensure their fidelity. These control mechanisms include efforts to politicize the bureaucracy through appointments, along with the related authority to remove insubordinates.⁵⁰
A growing literature, however, has documented some of the pragmatic realities that blunt the impact of both of these strategies. Appointments can often arise from patronage motivations as opposed to close ideological alignment,⁵¹ or can prove less than effective due to the relative institutional inexperience of the appointees⁵² or countervailing legislative pressures.⁵³ Similarly, while the power of the President to remove an agency head at will no doubt bears on the scope of his influence, some have questioned its actual utility and detailed the obstacles to its use.⁵⁴ Namely, removals can exact high political costs, especially when they defy norms or conventions about the removed party’s perceived need for independence.⁵⁵ In light of these limitations, the social science literature has taken a more functional approach to presidential control, as the degree of actual or effective control exerted over the agency.
⁵⁶ These accounts have identified other avenues of presidential influence, such as through budgetary decisions coordinated by the Office of Management and Budget (OMB),⁵⁷ input in agency legislative programs,⁵⁸ and the relative location of the agency within the cabinet hierarchy.⁵⁹
While these structures and processes are important ex ante mechanisms of control, they still allow for significant agency slack and discretion over individual rules and regulatory decisions. As a result, numerous Presidents have opted for more institutionalized and systematic mechanisms of ex post oversight through regulatory review.⁶⁰ These agency-cost-reducing procedures are categorically different from ex ante control mechanisms in that they allow the President to evaluate and more surgically influence discrete administrative outputs rather than inputs. While appointments and budgeting, for instance, can help steer the general direction of regulatory policy, review procedures by their very nature allow the President to reassess the individual outcomes of these efforts after the fact and to react under potentially changed circumstances.⁶¹ That is, they allow for more dynamic and responsive presidential influence.⁶²
In this manner, presidential review can, like appellate court review, be understood as part of a class of institutional mechanisms that in volve more flexible and situation-specific monitoring by principals relative to the enforcement of rigid ex ante rules.⁶³ As regulatory review becomes increasingly institutionalized through promulgated procedures and standards, it also becomes more predictable relative to more ad hoc methods of ex post monitoring. The process is thus more likely to give rise to sustained patterns of strategic behavior on the part of covered actors the longer these procedures are in place.
2. Presidential Review. — The current structure of presidential review has, for the most part, persisted for almost twenty years, since 1993 when President Clinton issued Executive Order 12,866.⁶⁴ While these governing procedures are the focus of this Article, some brief historical context may be useful. Presidential oversight efforts date back centuries,⁶⁵ though President Reagan was arguably the first to exert more supervisory control self-consciously and openly
⁶⁶ when he issued Executive Order 12,291 in 1981.⁶⁷ Among other things, the order required executive agencies to submit proposed and final rules to the OMB,⁶⁸ a role delegated thereafter to the then-newly established Office of Information and Regulatory Affairs (OIRA).⁶⁹ For a subset of these rules, those deemed major,
⁷⁰ agencies also had to submit a regulatory impact analysis: the agency’s description of the rule’s anticipated costs and benefits, net benefits, and the potential alternatives considered.⁷¹
These innovations were reinforced four years later when President Reagan issued Executive Order 12,498, which allowed OMB to exert its influence earlier in the regulatory process in conjunction with agencies’ political appointees.⁷² The order required executive agencies to submit a regulatory program
for review each year that covered all of their significant regulatory actions underway or planned.⁷³ The President now had an opportunity to influence the regulatory process during its planning, proposal, and final stages.
While George H.W. Bush’s Administration kept the Reagan executive orders in place, President Clinton issued Executive Order 12,866 in 1993, which contained several noteworthy changes relevant here.⁷⁴ First, unlike the previous regime that reviewed all regulations, executive branch agencies now only had to submit those rules that were the most significant,
demarcating a reduced scope of review.⁷⁵ The effort was an attempt to make the process more selective so as to focus resources on the most important
rules.⁷⁶
Second, for those rules that were economically significant,
agencies were required to provide an especially thorough regulatory impact analysis.⁷⁷ This requirement effectively heightened the scrutiny of review as well as the amount of information available for it. Third, since agencies and other commentators had accused OIRA of unduly delaying regulations, the order now established a presumptive timetable: it expected review to be complete within ninety days, but allowed the OMB Director to extend that period for another thirty days at the request of the agency.⁷⁸ Fourth, the order contained a number of dispute-resolution provisions for disagreements or conflicts between or among agency heads or between OMB and any agency that [could not] be resolved by the [OIRA Administrator].
⁷⁹ Specifically, such disputes were to be resolved by the President or the Vice President acting at the President’s request.⁸⁰
Finally, the order specified general standards of review. Namely, it called for consistency with the President’s priorities,
the prevention of conflict with the policies or actions taken or planned by another agency,
as well as adherence to the principles set forth in this Executive order.
⁸¹ One of the most important principles was that the benefits of the intended regulation justify its costs,
⁸² while another demanded the best reasonably obtainable scientific, technical, economic, and other information
regarding regulatory consequences.⁸³ In this manner, the order distinguished between what might be called political review (those issues raised as part of the President’s agenda and priorities) and analytical review (how agencies evaluate the costs and benefits of regulatory options, justify the choices among them, and consider a host of other technical issues).⁸⁴
As an indication of just how entrenched these procedures had become, President George W. Bush left Clinton’s executive order virtually unmodified for most of his Administration. In 2002, however, he issued an order that transferred various vice presidential functions to the White House Chief of Staff or OMB Director, but otherwise left the previous text unchanged.⁸⁵ It was not until January 2007, about thirteen years after President Clinton’s intervention, that President Bush imposed more substantive amendments.⁸⁶ However, on January 30,2009, President Obama withdrew the Bush amendments and returned to the original and unamended Clinton executive order.⁸⁷ In January 2011, he issued Executive Order 13,563, which among other things reaffirm[ed] the principles, structures, and definitions governing contemporary regulatory review
⁸⁸ and modernized many of its provisions.⁸⁹ As such, with the exception of about two years under President George W. Bush, the formal procedures first established under President Clinton in 1993 continue to operate today.⁹⁰
B. Resource-Centered Insulation
Given the prospect of presidential review as practiced in its current form for almost two decades, it is reasonable to expect that executive branch agencies, and especially the career staff within them, have learned to manage and adapt to the process in accordance with their own aims. Administrative agencies are bureaucracies as traditionally conceived, and such bureaucracies have long been known to create routines and strategies for dealing with new requirements imposed upon them.⁹¹ As such, it is fruitful to think about agencies’ behaviors relative to the President’s in terms of their respective resource constraints, and the differential costs and payoffs faced by the actors that initiate review (like agencies) and the actors that review them (like the institutional President). These concepts, originally developed by Professors Emerson Tiller and Pablo Spiller for the purposes of understanding agency interaction with judicial review,⁹² yield fresh perspectives when applied to the presidential context.
1. Strategic Self-Insulation. — The basic insight pursued in depth here is that resource-constrained agencies can choose among various regulatory forms and strategies to achieve their desired results while at the same time making it more difficult for the institutional President to review and reverse them. Specifically, they can make such review more difficult by increasing the costs of review, thereby forcing the President to spend his limited resources more selectively such that he reverses fewer decisions and affirms the rest. In this manner, agency instruments that increase reviewing costs effectively serve to insulate discrete decisions within a rule or across rules. Holding other factors constant, agencies will be more likely to self-insulate the greater their perceived preference divergence from the President. In other words, one would expect to observe self-insulation more when the agency expects the President to be an enemy (with different preferences), rather than an ally (with the same preferences); the agency seeks to shield decisions more from the former than the latter.⁹³ Moreover, because agencies are repeat players that would undoubtedly earn the executive branch’s displeasure by recurrent and brazen attempts to self-insulate, they are likely to do so only when most valuable to them — when the probability of reversal is greatest but not certain, when decision costs and resource investment are relatively high, or more generally, when agencies receive the most benefit from doing so.
To help motivate this account, begin by considering a familiar analogy: that of trial judges who seek to avoid reversal upon appellate review. Reversals can impose real resource costs on trial judges in the form of new trials and motions on remand, and they can impose reputational costs as well.⁹⁴ Trial judges thus have strong incentives to insulate their decisions and minimize the probability of reversal. A trial judge might do so, for example, by writing an opinion that turns more heavily on a finding of fact than a question of law in order to take advantage of a more favorable standard upon appellate review (say, clearly erroneous
instead of de novo
).⁹⁵ Because of the more deferential standard, an appellate judge seeking to reverse this decision would have to use more resources to examine the record and describe her rationale in greater detail. As a result, a resource-constrained appellate judge would have less incentive to reverse this fact-bound decision. In this manner, the trial judge would have insulated her decision.
So too can administrative agencies self-insulate under presidential review. Of course, the analogy is imperfect; for starters, judges have life tenure, a lack of mission orientation, and so on. The nature of judicial reversal is also less iterative and dynamic than in the presidential context, as we shall see.⁹⁶ But the analogy is not illusory either: the basic modalities of [presidential] review
since Reagan’s executive order have been drawn, perhaps unconsciously, from appellate court review of agency rules.
⁹⁷ Those modalities themselves, in turn, borrowed from the understandings that govern the relationship between appeals courts and trial courts in civil litigation.
⁹⁸ In other words, presidential review was designed with the appellate court review model in mind.⁹⁹ As in that model, review occurs as a matter of ex post oversight after many of the major substantive and procedural decisions, whether during trials or agency rule-drafting, have already been made. In this sense, both appellate court and presidential review represent opportunities for strategic behavior, where the ability to manipulate the instruments of decision making, rather than merely selecting policy choices, allows actors to insulate their policy choices from higher level review.
¹⁰⁰
To explore these implications in greater depth, the remaining analysis will largely treat agencies and the President as unitary actors with exogenous preferences, though it will later relax some of these assumptions. These simplifications allow for greater initial analytic traction and are also reasonable as a first approximation: agencies move first when they submit a regulatory action for review in anticipation of what they know (or think they know) about the President’s preferences before the review process begins.¹⁰¹ Even when those predictions may be wrong, the uncertainties about what the agency may discover during a costly review can be incentive enough to engage in self-insulation. As others have noted, the process was mainly designed as an end-of-the-pipeline check against poorly conceived regulations,
¹⁰² thus operating as a kind of last-minute barrier to action at a point when cooperation and trust are nearly impossible.
¹⁰³ In other words, while endogenous preference-shifting by both the agency and the President is possible and undoubtedly occurs,¹⁰⁴ the structure and constraints of the review process can often make the prospect more difficult.
Of course, in reality the agency
and the President
are not singular entities; rather, they are institutions. Institutions have multiple actors within them, each playing various roles. Consider the agency
(we will consider the President
in more depth too, but much later). Agencies have career staff with tenure protections and no expressed political loyalties,¹⁰⁵ as well as agency heads appointed by the President, subject to typically deferential Senate approval, and removable at will.¹⁰⁶ But if the President appoints executive branch agency heads and can fire them without cause, why would one ever expect agency and presidential preferences to diverge? The short answer is that the President and his agency heads suffer from familiar principal-agent problems, which can be exacerbated by similar issues between agency heads and their career staff.¹⁰⁷ Indeed, while this story is in part about the potential conflict between the President and his appointees, it is perhaps even more so about the incentives of the quasi-independent federal bureaucracy relative to its multiple overseers.
First, even the most faithful civil servants and loyal agency heads may have divergent preferences due to what they perceive (rightly or wrongly) as more refined information about implementation difficulties or political sensitivities.¹⁰⁸ Because of the transaction costs of briefing and elevating issues, such information may be difficult to convey fully to superiors. The agency head or civil servant may thus resist entreaties due to constraints of which the Executive is only dimly aware.
¹⁰⁹ Moreover, many decisions are necessarily made at the career-staff level and never elevated, despite what could be the contrary wishes of agency heads or the President had they been informed of the issues. This prospect need not be a pernicious one: it can also be a function of limited resources and the need to prioritize among issues worthy of higher-level attention. Alternatively, preference divergence may arise because of the President’s own transaction costs in communicating his priorities and having them filter down multiple levels in ways that facilitate informed elevation of an issue.
Moreover, there is the well-known prospect of bureaucratic capture — the notion that both career and political agency actors may become beholden to external special interests, whether the regulated industry or broader public interest groups.¹¹⁰ The notorious revolving door
between agencies and industry only reinforces this concern.¹¹¹ Alternatively, career staff may have been hired or may have self-selected due to the agency’s single-mission orientation, bringing to the job a narrowly focused zeal.¹¹² They may in turn influence political appointees who may end up go[ing] native
and supporting the views of their entrenched staff.¹¹³ Finally, the difficulties of the confirmation process, especially under divided government, may also result in appointees whose preferences are not fully aligned with the President’s due to compromises struck with Congress.¹¹⁴ In a similar vein, a host of dynamic, exogenous factors, including pressure from congressional committees and interest groups, will also increase the likelihood of disagreement over individual rules. For any of these reasons, there is the potential for preference divergence between the President and even his most loyal appointed agency heads or faithful career staff. Putting the cover back on the agency, this analysis will assume that agencies as units behave accordingly; opportunities for preference divergence abound.
At the same time, agencies and Presidents — like trial judges and appellate courts — make decisions with limited resources. Thus, understanding the costs each incurs by initiating and reviewing an action is critical to appreciating their respective incentives. Call these decision costs for the agency and reviewing costs for the President.¹¹⁵ Both kinds of costs include the resources required to acquire, synthesize, and deliberate over the information necessary to reach a rational conclusion, as well as the costs of communicating that conclusion. Say, for example, that the Environmental Protection Agency (EPA) is required by statute to ensure that cooling-water intake structures reflect the best technology available for minimizing adverse environmental impact.
¹¹⁶ In considering how to fulfill this statutory mandate for existing structures, the EPA might engage in outreach through public meetings and might conduct research on how cooling-water intake structures damage the environment. After studying the problem, the EPA might determine that there are various technologies available to reduce the number of fish and other species killed in these structures (such as mesh screens or barrier nets), and that some technologies are more effective than others and should be used accordingly. The costs of arriving at this decision constitute the EPA’s decision costs.
After it has decided on an outcome, an agency must also decide what means, or instruments, it will use to pursue and communicate that outcome.¹¹⁷ As we shall see, these instruments include the literature’s familiar catalogue of adjudication, guidance documents, and rulemaking.¹¹⁸ But the following discussion also considers a broader set of instruments, as well as the instruments’ institutional dimensions: for example, how the instruments are characterized by agencies (their significance determinations), the quality of information conveyed by their accompanying cost-benefit analyses, various timing decisions, and the internal coalitions built in support of an agency’s action.
Returning to our simple example, once the EPA decides to regulate cooling-water intake structures to reduce environmental harm, it can pursue this approach through discrete permitting decisions, through a guidance document describing various available technologies for facility-specific determinations,¹¹⁹ or by eventually undertaking a rulemaking to set a standard or to mandate a particular technology.¹²⁰ All of these instruments vary in their form and impact, and the discretion to use them can be constrained by statute; such a statute may dictate, for example, the substance, form, and timelines for agency action. Within these bounds, agencies will consider decision costs for themselves, as well as the reviewing costs the chosen instrument imposes on the executive branch. In other words, faced with the prospect of presidential review, agencies can choose among various instruments to advance their regulatory policies, but their choices will depend on the relative effectiveness of those instruments as well as the costs of review they expect those instruments to impose on the President.
To illustrate, say there is a Republican President in power who has campaigned on reducing the number of regulations and blocking costly new ones. The EPA knows that if it decides to pursue a policy through its permitting decisions for cooling-water intake structures, then these adjudicatory decisions will not be subject to presidential review and are thus immune from reversal. If the EPA chooses the guidance document route, however, it knows that the executive branch might review the document, but that it will be more difficult to reverse since the document is not legally binding and so its effects are unclear. For the same reasons, however, the instrument will be less effective in bringing about its desired policy changes. Alternatively, the EPA is also aware that if it undertakes a rulemaking, it will likely be required to prepare a resource-intensive cost-benefit analysis. Because of the Republican President’s business-friendly stance, the EPA is concerned that preparing a thorough cost-benefit analysis may make it easier for the rule to be reversed since the analysis could reveal expensive burdens on industry.
With these various choices, agencies can insulate their decisions from review by increasing the costs of review, which would decrease the probability of reversal due to the President’s resource constraints. In our example, the EPA could choose to issue a guidance document instead of a rule to reduce the policy’s visibility, but doing so would also bring about the EPA’s policy changes less effectively given the nonbinding nature of guidance documents. Alternatively, the EPA could produce a low-quality cost-benefit analysis when submitting a rule. Both of these strategies are examples of self-insulation, since in both cases the President would have to spend greater resources to identify, review, and justify a reversal.
To avoid reversal, then, agencies may trade off their own institutional efficiency
(the ability to achieve an outcome with the lowest-cost instrument¹²¹), provided that the selected higher-cost instrument imposes greater reviewing costs on the executive branch.¹²² In other words, an agency will pursue a policy as close to its preferences as possible through a strategic instrument choice that takes into account, among other things, the costs imposed upon the reviewer and the corresponding likelihood of presidential reversal.
2. Presidential Reversals. — The power to review implies the ability to examine something again (re-view
) as well as the authority to instruct an agent or subordinate based on that evaluation.¹²³ Whether that presidential authority is directive or supervisory is a matter of much academic debate,¹²⁴ but when viewed against the backdrop of at-will removal, as a practical matter, presidential review shares several structural similarities with judicial review. Namely, OIRA can effectively reverse an agency action on behalf of the President and his interagency reviewers in a number of ways.¹²⁵ Just as agencies can choose regulatory instruments, the President has various reversal instruments at his disposal. They are reversals
in the sense that the interagency review process can result in revisions or changes that the agency does not otherwise prefer, but which it will make due to the threat of delay or return, or because of resource constraints.¹²⁶ These reversal instruments can be arrayed in terms of their respective reviewing costs, which increase the more public the reversal and, correspondingly, the more reasoned the explanation required for it.
To begin, OIRA can return
a rule to an agency for further consideration of some or all of its provisions.
¹²⁷ While this procedure is infrequently invoked, the threat is real and has, at times, been vigorously exercised. For each return, the Administrator of OIRA provides a written explanation for such return,
¹²⁸ commonly known as a return letter.
The parallel to judicial reversal and remand is likely clear. Aside from agency-head removal, return letters are the most costly reversal instrument because they require a public rationale. During the first seven years after President Clinton issued Executive Order 12,866, from 1994 to 2000, OIRA returned only a handful of the 500 to 700 rules for which it coordinated review: three rules in 1995, and four in 1997.¹²⁹ Under the subsequent Bush Administration, by contrast, OIRA publicly posted forty-two return letters explaining various disagreements with the agencies’ rules.¹³⁰ To date, the Obama Administration has issued only one.¹³¹ This pattern could suggest that more antiregulatory Presidents incur fewer political costs relative to proregulatory Presidents when issuing public return letters.
At the same time, however, it is misleading to focus on the number of return letters as a measure of OIRA’s impact,
since executive branch reviewers may still be acting aggressively
in their absence.¹³² Indeed, as part of the review process, interagency and White House reviewers can also negotiate revisions to a draft rule before agreeing to a version upon which to conclude review. Each time there is another round of comments or edits from reviewers, OIRA compiles and transmit[s]
them back to the agency.¹³³ The agency can respond to these comments, make revisions, and circulate a new draft during the review period, if it so chooses and to the extent time permits.¹³⁴
Regulatory submissions have a host of elements, including preambles, new and revised regulatory text, alternatives, effective dates, statutory interpretations, and cost-benefit estimates, among other provisions. The regulatory actions can also take different forms, such as advance notices of proposed rulemaking or interim final rules, and so on. Each of these agency decisions
within a rule or about the form of a rule can be the subject of comment and possible reversal during the interagency review process. These revisions can be loosely analogized to the multiple reversals and remands with instructions after judicial review in the course of serial litigation.¹³⁵ Sometimes these multiple rounds of revision and interagency review can be lengthy, resulting in significant delays.¹³⁶
To put this category of reversals into perspective, even seemingly minor revisions may upend the product of hard-won compromises with agencies and external constituencies (including legislative staff, industry, and interest groups), as well as internal agency stakeholders among career staff and policy officials (including lawyers, economists, scientists, and policy analysts).¹³⁷ Agencies, which have often spent sizeable resources throughout the rulemaking process, can be loathe to see these hard-won balances upset and their work overturned. Of course, they may be indifferent to particular revisions when the stakes are low; in other situations, however, the threat of reversal is costly and real.
As for these reversal costs, the effective ability to insist on these revisions will depend on the amount of political capital and resources required. Specifically, these costs will be a function of the resources necessary to communicate the issue to the agency or other interagency reviewers, whether in terms of briefings or meetings, as well as the political capital necessary to elevate the issue to higher-level officials and, ultimately, to refuse to conclude upon the rule in its current form.¹³⁸ Evidence from a 2003 Government Accountability Office (GAO) report suggests that presidential reversals, even within a rule, are nontrivial in effect. Specifically, the report finds that the review process resulted in significant
or material
changes to fifty-one of the subset of eighty-five rules examined (sixty percent).¹³⁹ The report defined these changes as those made at a reviewer’s suggestion that affected the scope, impact, or estimated costs and benefits
of the submitted rules, or resulted in the addition or deletion of material in the explanatory preamble section of the rule.
¹⁴⁰
In addition to these dispositions, OIRA can also encourage
an agency to withdraw
a rule,¹⁴¹ presumably because the review reveals the likelihood that OIRA, on behalf of executive branch reviewers, would not conclude on the rule in its present form.¹⁴² The costs to the President of these withdrawals will depend on the stage of the rulemaking process. Before an agency proposes a rule, it can quietly withdraw the rule without publishing anything; however, OIRA’s public database notes the simple fact of withdrawal.¹⁴³ Thus, at this point, the reversal costs are relatively low. After an agency has already publicly proposed a rule, though not yet finalized it, the agency may unilaterally withdraw it without notice-and-comment; however, the agency will have already made public its contemplated course of action.¹⁴⁴ As a result, there will be greater costs to reversing the agency and having it withdraw the rule at this stage, given that the President will feel more pressure from monitoring groups opposed to this action.¹⁴⁵ Finally, the review can also result in no revisions or changes to the rule at all. In such a case, the rule that was submitted to OIRA for review is the same as the rule upon which OIRA concludes review. It has been affirmed.
Which reversal instrument the President ultimately chooses, in turn, will depend on these reviewing costs, his available resources, and how far his preferences diverge from those of the agency.¹⁴⁶ If their preferences are sufficiently close, and the agency has used an instrument rendering reversal a costly enough proposition, then the President will affirm the agency’s decision.¹⁴⁷ As the preference divergence grows and as the costs of reversal diminish, the President will be more likely to reverse the agency.¹⁴⁸ At some point, however, the preference divergence can be so great that the President will reverse the agency’s decision even if the cost required to do so is significant.
II. AGENCY SELF-INSULATION
A. Self-Insulation Mechanisms
Faced with these reversal prospects, agencies as the first movers can choose from an array of regulatory instruments, each with different expected effects on presidential review. An agency will, in turn, be more likely to use those instruments that will insulate its decisions from review the more it expects presidential preferences to diverge from its own, all else being equal. The agency’s equilibrium choice, then, will depend on its decision costs and the points at which it expects to avoid reversal,¹⁴⁹ background conditions for this section’s closer examination of the various ways in which agencies can attempt to raise the costs of review and ultimately reversal.¹⁵⁰ These self-insulation mechanisms are the institutional means through which agencies can render the process more resource-intensive, thereby increasing the probability of insulation. These mechanisms can be classified in terms of their functional effects: to bypass review, to decrease scrutiny, to truncate the amount of time available, or to facilitate successful internal coalitions. They will each require their own respective decision costs,¹⁵¹ but they share the ability to help minimize the probability of reversal.
1. Bypass. — Presidential review currently covers regulatory action[s]
that are significant.
¹⁵² Regulatory actions, in turn, include any substantive action . . . that promulgates or is expected to lead to the promulgation of a final rule or regulation, including notices of inquiry, advance notices of proposed rulemaking, and notices of proposed rulemaking.
¹⁵³ These provisions define the scope of regulatory review. Any scope-defining provision of an institutionalized review process, however, begets incentives for agencies to employ instruments that attempt to bypass the costly process entirely, and thus avoid the risk of reversal altogether. This section surveys some of those instruments.
(a) Inaction. — As stated, Executive Order 12,866 requires agencies to submit significant regulatory action[s]
to OIRA for presidential review.¹⁵⁴ If an agency does not affirmatively engage in regulatory action, this decision does not undergo presidential review. According to a Congressional Research Service report, some agencies have indicated that they do not even propose certain regulatory provisions because they believe that OIRA would find them objectionable.
¹⁵⁵ An agency may choose not to act because of its own internal resource constraints or because of the threat of presidential review. While the empirical outcome is the same — no new regulatory action — the distinction is still important to keep in mind as an analytic matter.
Relative to the status quo, there are no affirmative impacts of agency inaction (by definition). However, as others have noted, agency inaction can nonetheless have important consequences (for example, the failure to regulate a pollutant can have adverse impacts on public health) — a decision that is not currently subject to presidential review.¹⁵⁶ While the consequences of agency inaction can indeed be significant, the decision facing the agency in the present analysis is whether to depart from the status quo. Relative to this baseline, a decision not to depart — not to act — can be understood as yielding no new, marginal impacts on the state of the world.
(b) Adjudication and Guidance Documents. — Agencies can also bypass presidential review by choosing an instrument other than any substantive action
that promulgates or is expected to lead to the promulgation of a final rule or regulation.
¹⁵⁷ One such instrument is adjudication. This category of agency action could include benefits determinations and licensing proceedings, among other actions.¹⁵⁸ Because adjudication, unlike rulemaking, proceeds on a case-by-case basis, each adjudication’s policy impacts are limited and aggregate policy change is developed only incrementally. As a result, there is relatively little information to review and, in any case, adjudication decisions are not subject to the presidential review process. Case studies of particular agencies — such as the National Highway Traffic and Safety Administration (NHTSA), which shifted from rulemaking to adjudication in the mid-1970s due in part to changes in presidential administrations — provide evidence of this dynamic.¹⁵⁹ As permitted by statute, courts have consistently allowed agencies to choose between these policymaking forms.¹⁶⁰
Alternatively, an agency could issue a guidance document.¹⁶¹ Guidance documents are interpretive rules and statements of policy intended to clarify existing regulatory requirements, though they have often been criticized as creating new obligations upon private parties without the traditional requirements imposed on legislative rulemaking.¹⁶² Guidance documents are exempt from the Administrative Procedure Act’s notice-and-comment requirements and thus less internally costly for the agency relative to rulemaking.¹⁶³ They sometimes enable agencies to obtain voluntary compliance, either because the agencies wield gatekeeping
power over private parties or because savvy regulatory targets foresee forthcoming policy shifts.¹⁶⁴ However, as a practical matter, guidance documents are not legally binding, and are thus likely to be less effective than rulemaking in bringing about the desired behavioral changes.¹⁶⁵
Significant
guidance documents, defined under a multifactor test including expected economic impacts and policy novelty, are currently subject to presidential review.¹⁶⁶ They garnered much attention in January 2007, when President George W. Bush amended President Clinton’s executive order to formally subject such guidance documents to review, though President Obama has since revoked the amendments.¹⁶⁷ Around the time the order was amended, the Office of Management and Budget (OMB) also released its Final Bulletin for Agency Good Guidance Practices, which directed agencies to implement procedures for the approval and use of significant guidance documents by appropriate senior officials, sought to standardize the documents’ elements, and established public access and feedback procedures.¹⁶⁸
Before then, presidential review of such documents was at best sporadic, with one former OIRA Administrator, Sally Katzen, testifying that President Clinton’s ‘Executive Order . . . was written to apply only where agencies undertook regulatory actions that had the force and effect of law’ and that she [had] never reviewed a guidance document during her tenure in the Clinton administration.
¹⁶⁹ After President Obama revoked the Bush amendments and returned to the unamended Clinton executive order,¹⁷⁰ however, OMB Director Peter Orszag issued a memorandum to agencies stating that OIRA had previously reviewed significant policy and guidance documents
and that such documents remained subject to review.¹⁷¹
Relative to the review of rules, however, the review of guidance documents is much more limited and unsystematic in practice.¹⁷² This is partly because guidance documents as a class are not required to undergo formal notice-and-comment procedures, so there are fewer opportunities for fire-alarm oversight by outside monitoring groups regarding each document’s significance, making the agency’s own initial significance determination that much more critical.¹⁷³ In addition, guidance documents that are not expected to lead to a final regulation are not required by executive order to provide a cost-benefit analysis (CBA), further limiting the information about their potential impacts and therefore their potential significance to the President.¹⁷⁴ Finally, the sheer number of such documents likely constrains the amount of time available to review each one.¹⁷⁵ To be sure, many agencies will be hesitant to "issue important regulatory documents that have not