SCOTUS Hubris is Mindblowingly Expensive
It's time for Cost-Benefit Analyses of Supreme Court rulings.
A spate of recent rulings from the United States Supreme Court has left no doubt as to the conservative supermajority’s intention to de-fang federal regulatory agencies. But, the Court’s June 28th 2024 strike-down of Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) has set the world on course for an economic catastrophe of incalculable magnitude.
Mainstream media has so far reported on this ruling as a naked power-grab, nullifying regulatory authority held until now by the executive branch, and reassigning that authority to unelected life-appointed federal judges.
My take, however, is different.
While the Friday’s Corner Post vs. Federal Reserve ruling may, if fact, be a power-grab, it will be remembered as the most economically devastating Court rulings in history.
The essence of the ruling is this: If a law authorizing regulatory authority is challenged in court as being vague, then federal judges are free to ignore the expertise of federal regulators and decide for themselves the intent of Congress when the regulatory legislation was passed. Thus, judges are free to strike down regulations without deference to true experts.
The very purpose of regulatory authority is to mitigate the frequency and severity of negative economic externalities.
A negative externality is a type of market failure, that occurs when business production-consumption decisions cause harm to a third party. For example, chemical plants make and sell valuable products that benefit society … but they also cause pollution that harms millions of people who were not party to production and sale of chemicals.
Regulators incentivize chemical producers (through fines for violating environmental standards) to build protections that safeguard the public from pollution. Of course, building-out these protections erodes profits, and regulated parties often challenge regulations in court in the hope of improving profits.
Regulators are often vilified in “business friendly” media and think tank marketing campaigns as un-elected bureaucrats wielding unnecessary and unchecked authority over business. But, in fact, for many decades regulators in the United States have been under the oversight of OIRA (The Office of Information and Regulatory Affairs), an agency within the OMB (Office of Management and Budget) that answers directly to the President.
OIRA has the authority to cost-benefit test any federal regulation. And, the President can consider cost-benefit analysis as justification for removing or simply not enforcing regulations deemed too restrictive.
The Congress has often been well justified when using vague language in regulatory legislation.
They have neither the expertise nor the time to hash-out hair-splitting legislative language and instead authorize domain experts within the executive branch to establish and enforce detailed rules that protect the public.
These experts are directly administered by a President whose authority derives from winning a national election. But, the Court’s Corner Post vs. Federal Reserve requires that, in the absence of hair-splitting legislative language, the federal judiciary constitutionally owns responsibility for interpreting the original intent of Congress in protecting the public’s health and economic welfare.
The practical consequence of this decision is that unelected judges have the discretion substitute their own non-expert opinions to replace the judgement of technical experts authorized by Congress to protect public interests.
The wisdom of the 1984 Supreme Court in deciding Chevron vs Natural Resources Defense Council was understanding that the national economy was at stake. The country faces potentially calamitous negative economic externalities on a daily basis. Protecting the public a priori from environmentally induced public health disasters, financial market collapses, unsafe food supplies, healthcare malfeasance, etc. has freed the U.S. economy from these otherwise frequent market failures, allowing American capitalism to create extraordinary wealth.
The 1984 Court protected the U.S. economy by reasonably deferring to regulatory experts in matters of public safety and welfare..
The present Supreme Court conservative supermajority has rejected the economic wisdom of the 1984 Court. The hubris implied by Corner Post vs. Federal Reserve is obvious: Six unelected jurists have determined that prior protections of public safety and welfare will, henceforth, be the Wild West, and they have appointed itself as sheriff. Unfortunately, the Constitution does not offer any practical means to deflect the oncoming stark economic consequences that ordinary Americans will suffer as businesses enhance profits through a new freedom to harm.
It is time for the public to demand that Supreme Court decisions be Cost-Benefit tested. While we cannot easily overcome the consequences when elitist dilettante Supreme Court Judges dismiss technical domain experts, we can call out judicial activism by quantifying the economic devastation of unabashed hubris. Contrary to the self-image of the Court’s supermajority, they are not always the “smartest guys in the room”, and the public will now pay through the nose as a consequence of their unbridled hubris.