Debating Founders’ Intent on Appropriations, Justices OK Dodd-Frank Agency’s Funding Scheme
Jack Fitzhenry /
Is it concern for history or the present that underlies the Supreme Court’s ruling upholding the constitutionality of the perpetual funding scheme granted to the Consumer Financial Protection Bureau under the Dodd-Frank Wall Street Reform Act?
Citations of the 17th and 18th century may have dominated the opinions, but concern for flexibility in funding the modern administrative state is at work here as well.
There is much to digest and debate in the four separate opinions that ultimately gave the CFPB a 7-2 win, but one upshot is perfectly clear: This decision will not help to restore legislative control over federal agencies.
Those who assume that this court is reflexively skeptical of the administrative state may be surprised by the outcome—and even more surprised by the fact that the author of the majority opinion was Justice Clarence Thomas.
At its core, the case turned on how to define the word “appropriation” as used in Article I, Section 9 of the Constitution, which provides, in pertinent part, “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law … .”
The case began as a challenge by an industry trade group—Community Financial Services Association of America—attempting to prevent the bureau’s payday-lender rule from taking effect. But the particular merits of that rule were quickly submerged by foundational constitutional considerations.
Before the lower courts, the challengers pointed to the anomalous way in which the bureau gets its annual operating budget. The Dodd-Frank Wall Street Reform and Consumer Protection Act, the 2010 law enacted when Democrats held the White House and both houses of Congress, created what can fairly be described as an agency without analogue. (It was named for its sponsors, then-Sen. Chris Dodd, D-Conn., and then-Rep. Barney Frank, D-Mass.)
The CFPB is vested with a broad portfolio of legislative and executive enforcement power, is headed by a single director, and enjoys the unique ability to determine and draw its own annual “non-appropriated” funding directly from the Federal Reserve, up to 12% of the latter’s annual operating expenses.
By contrast, the vast majority of other agencies must go annually before Congress to request the necessary funds.
Community Financial argued that the bureau’s perpetual financial independence from Congress violated the appropriations clause and the U.S. Court of Appeals for the 5th Circuit agreed, holding that the bureau was unconstitutionally funded and that the rule was, by extension, invalid.
For all the red flags these features raise for skeptics of agency independence, the court nonetheless held that bureau’s funding was constitutional.
The 7-2 vote was a comfortable win for the bureau, but the lopsidedness of the outcome is a little misleading, given that case produced four separate opinions: one majority, two concurrences, and one dissent. A methodological focus on history united three of the four opinions, including the dissent. But the particulars of that history divided the justices in multiple different directions, and the divisions were particularly sharp within the court’s Republican-appointed majority.
Thomas surveyed the history of legislative control over government expenditures from the Stuart monarchs of 17th-century England to the practices of the first Congress after the Constitution’s ratification. Although he acknowledged that the animating principle in this history was one of legislative control over government funding, he noted the variety of ways in which that principle had been embodied in legislation.
Key to Thomas’ understanding of the constitutional limits was the historical practice of lump-sum appropriations as well as the existence of some self-funding agencies that was extant since the Founding, including the post office and Customs.
Those, Thomas said, evidenced the need for appropriations laws to designate a source of funding and a purpose for the expenditure. But he saw no warrant for applying a time limit to all appropriations, particularly where the only textual time limit on appropriations related to military funding (another provision of the Constitution specifically limits military funding to two years).
Justice Elena Kagan joined Thomas’ opinion in full but wrote separately to supplement the historical basis for the decision. Whereas Thomas was concerned with the pre-Founding historical currents that would have influenced the drafters of the Constitution, Kagan looked to the post-ratification history of appropriations. Claiming for herself the mantle of “tradition,” Kagan sought to reconcile the Founding with the present by pointing out how freewheeling Congress’ appropriations had at times been.
That approach, sometimes called constitutional “liquidation,” demonstrates the way in which past exceptions to general practice tend to become the rules of the future.
Determining the meaning of constitutional provisions written in 1787 through evidence well beyond the Founding is not originalism, and surely that does not bother Kagan. But it is striking that Kagan’s concurrence garnered the votes of two Republican appointees, Justices Brett Kavanaugh and Amy Coney Barrett.
Justice Ketanji Brown Jackson’s approach was the outlier. Eager to stake out her claim as being the justice more-textualist-than-the-textualists, Jackson penned a few pages’ worth of concurrence, insisting that the raw words of the appropriations clause were sufficient to resolve the dispute in the bureau’s favor—the implication being that laborious review of the mixed historical record was not just tedious, but unnecessary.
That approach has a tempting clarity to it. There are plenty of opportunities to mischaracterize history, especially when the analytical aperture ranges from Runnymede in 1215 to fiscal year 2022 (referenced by Kagan). But it’s far from evident that the term “appropriation” is self-defining in the way Jackson insists.
Not only rights, but limits can be discerned in the Constitution by structural implication.
Clarity itself is not a constitutional virtue, as the lone dissent by Justice Samuel Alito, joined by Justice Neil Gorsuch, reminds us. Alito maintained that while the majority’s holding “has the virtue of clarity,” such clarity “comes at too high a price.”
“There are times when it is our duty to say simply that a law that blatantly attempts to circumvent the Constitution goes too far,” Alito wrote.
And circumventing the appropriations clause is exactly what the 111th Congress attempted to do when it insisted that the CFPB’s funding would be “non-appropriated.” As for history, Alito was quick to note that bureau has no historical precedent anywhere in the annals of Anglo-American governance.
While Alito draws different inferences than the majority from the history of appropriations, in the main, he is unwilling to countenance a legislative attempt to avoid what the Constitution instantiates: the principle of legislative control.
For several years, the court has steadily adopted an approach to ambiguous constitutional provisions based on a close examination of history. It has done so in cases involving the establishment clause, the Second Amendment, and the 14th Amendment’s due process clause, among others.
History offers judges more in the way of guidance and limits than an airy conception of humanity (e.g., Obergefell v. Hodges), but the degree of historical guidance can vary considerably with any given dispute. Further, whether the historical evidence tends one way or another depends much upon the instincts of the judge. Judges who are self-conscious about restrained decision-making will require greater historical support before endorsing a view.
Here the court determined that, as in the debates over substantive due process, principles can fail to translate into concrete constitutional rights or limits for want of enough historical particulars to ground them.
Whether that is correct in this case is debatable. There seems to have been enough overlap between the desire for restraint and the desire to save the CFPB to make up a majority.
Those looking to the court to enforce constitutional norms that favor legislative control over policymaking are undoubtedly disappointed, even if they concede the general validity of the majority’s approach. A Congress that has this much leeway in the matter of appropriations has considerable power to create novel agency structures and then place those agencies beyond the regular means of popular influence.
The de facto power to restructure the federal government in this way sounds more like the absolute sovereignty that belonged to the British Parliament than America’s constitutionally constrained Congress.
If this is really all that the appropriations clause offers in the way of limits, then it is hardly the “most complete and effectual weapon” in Congress’ arsenal, as James Madison believed.
Those hoping for greater public control of the administrative state must now await rulings in Securities Exchange Commission v. Jarkesy; Loper Bright v. Raimondo; and Relentless v. Department of Commerce, all expected before the end of June.