Obama's equivocal defense of agency independence.

• Author: Stack, Kevin M.
• Position: Presidential Power in the Obama Administration: Early Reflections

You can't judge a President by his view of Article II. At the very least, only looking to a President's construction of Article II gives a misleading portrait of the actual legal authority recent Presidents have asserted.

President Obama is no exception, as revealed by his defense of the constitutionality of an independent agency from challenge under Article II in Free Enterprise Fund v. Public Company Accounting Oversight Board (1) (PCAOB) in the Supreme Court this term. The PCAOB is an independent agency, located inside the Securities Exchange Commission (SEE), created to regulate accounting of public companies in the wake of the WorldCom and Enron accounting scandals by the Sarbanes-Oxley Act of 2002. (2) The Supreme Court's decision to review the constitutionality of the PCAOB required the Obama Administration, in its first year, to take a stance on several issues that are viewed as litmus tests for theories of Article II, including whether the appointments clause permits the agency's appointment to be vested in the SEC (3) and whether the "good cause" restriction on its removal by the SEC (4) violates Article II and separation-of-powers principles.

At the level of constitutional doctrine, the fact of President Obama's defense of the constitutionality of the PCAOB might suggest his acquiescence in isolating executive officials from presidential supervision. At the very least, it appears to place his Administration at the opposite end of the spectrum on executive power from the Reagan Administration, which actively sought a Supreme Court ruling overturning the removal restrictions on independent agencies as violating the President's power under Article II. But the contrast between President Obama's and President Reagan's constitutional positions on independent agencies is revealing, I shall argue in this early reflection on President Obama's views on executive power, in part because it vastly overstates the differences in the powers these Presidents claimed to possess.

A deeper look at President Obama's defense of the PCAOB, as reflected in his Solicitor General Elena Kagan's arguments to the Supreme Court, shows that it is premised on an assertion of a level of control over the agency, despite its independent status, that is roughly equivalent to what President Reagan's lawyers sought to achieve through a constitutional decision striking down congressionally-imposed good cause restrictions on the removal of independent agency officials. Presidents Obama and Reagan, in other words, claim a similar level of control over independent agencies, just on different legal grounds. For President Reagan, this control was warranted by Article II, and achievable only through constitutional invalidation of removal restrictions; for President Obama, the statutory good cause removal protections do not impede near-plenary presidential supervision of the agency.

What explains both this shift from constitutional to statutory ground--and basic convergence on the level of control these President's viewed as warranted? To be sure, Presidents face tremendous incentives to assert control over the federal bureaucracy. (5) As Congress delegates more and more power to federal agencies, including independent agencies, control over the federal bureaucracy is vital to a President's capacity to implement his policies. (6) That shared interest might help explain the rough convergence between President Obama's and President Reagan's views on the level of control they assert. It does not explain, however, the shift in the legal grounds on which that control is asserted. The way in which President Reagan's lawyers litigated these issues, I argue, set in motion that shift in legal grounds; in particular, their litigation opening the door to the broad interpretation of good cause provisions that President Obama adopts. The shift might be seen as the Obama Administration capitalizing on the precedent created during the Reagan era. In that respect, it offers a cautionary tale for reading too much into the constitutional stance of a President without attention to underlying questions of statutory interpretation. At another level, Obama's lodging of his control on statutory grounds may suggest a different vision of the constitutional allocation of authority between Congress and the Executive.

1. THE REAGAN LEGACY

   To appreciate the meaning of President Obama's defense of the PCAOB, it makes sense to look back to the Reagan-era precedent with which President Obama's defense engages, and in particular Morrison v. Olson. (7) The Reagan Administration hoped to overturn the constitutionality of independent agencies, but in their attempt to avoid Supreme Court review of the independent counsel statute, which they thought would be a bad case to advance this challenge, the Reagan Administration lawyers ended up helping to establish the grounds for an analogy between the President's control over independent and executive agencies that President Obama makes central to his defense of the PCAOB. (8)

   President Reagan, we recall, campaigned on a broadly deregulatory platform. (9) While implementing any presidential agenda requires asserting control over the vast administrative state, implementing a platform based on deregulation makes that control all the more important. President Reagan made enduring strides in this direction, including centralizing review of significant regulatory activities of executive agencies in the Office of Management and Budget. (10) In the Administration's effort to centralize regulatory policy within the White House, Reagan officials viewed independent agencies as a serious problem. As President Reagan's Solicitor General Charles Fried writes, their "independence of presidential authority was considered the extreme example, a kind of emblem, of one of the biggest obstacles to the administration's program." (11) This view that independent agencies were critical barriers to the President's agenda helps explain the legal positions and strategies taken by President Reagan's Department of Justice--and also contrasts sharply with President Obama's view as represented in the PCAOB litigation.

   Among the various routes to reducing or overcoming the resistance of these agencies to President Reagan's policies, top lawyers at the Department of Justice focused on their constitutionality. (12) In particular, they sought a Supreme Court decision that "would hold that agency commissions served at the pleasure of the President, and that statutory limitations on their removal were unconstitutional." (13) This approach was premised on two legal grounds--statutory construction of good cause removal restrictions, and the powers Article II of the Constitution grants the President.

   The statutory construction question posed by good cause restrictions is what grounds for removal they allow: Mere lack of confidence in the office-holder? Policy disagreement? Misapplication of the law? Insubordination? Complete neglect of duty or ineptitude? It is clear that the Reagan Administration took good cause restrictions as providing significant protection from removal, including, it appears, protection from removal based on policy disagreements. Indeed, if the Reagan Administration had believed that a policy disagreement was a sufficient ground for removal of an officer protected by a good cause restriction, then, at least in principle, independent agencies would not have posed such a significant a legal obstacle to the Administration's program. Of course, they still would pose a significant political obstacle, requiring a potentially distracting removal of officials perceived to be isolated from the President's policy preferences.

   By construing the good cause provisions as providing protection from removal based on a policy disagreement, the Reagan Administration took a relatively conventional view of the protections these removal restrictions provide, and one consistent with Humphrey's Executor v. United States, (14) the leading decision on removal of principal officers at the time. In Humphrey's Executor, the Supreme Court made clear that the good cause restriction protecting the Federal Trade Commission (FTC) protected the Commissioners from termination at will, and held that these restrictions did not unconstitutionally infringe the President's executive power. The Federal Trade Commission Act granted Commissioners of the FTC seven-year terms, and vested the President with the right to remove them "for inefficiency, neglect of duty, or malfeasance in office." (15) President Roosevelt removed Commissioner Humphrey without a reason, (16) and did not claim that his termination of Humphrey was based on one of the enumerated grounds of the removal provision. (17) The Supreme Court held that the combination of the statute's specification of fixed terms in office and for cause provision limited the executive's power to terminate to "the causes enumerated, the existence of which none is claimed here." (18) By implication, it is clear from Humphrey's Executor that simply terminating officer for no reason, as one could with an officer that served at the President's pleasure, does not constitute cause. But Humphrey's Executor itself left open the question of what constitutes cause, and specifically did not foreclose the possibility that policy disagreement could constitute cause. (19) In any event, given the ambiguity about what would constitute cause, the Reagan Administration appeared to adopt the conventional view that policy disagreement alone did not constitute cause.

   That statutory conclusion created the grounds for a serious constitutional question--namely, whether such a restriction constituted an unconstitutional infringement on the President's Article II power. On that question, the Reagan Administration sought to create the foundations for a...