[Senate Hearing 114-33]
[From the U.S. Government Publishing Office]


                                                         S. Hrg. 114-33
 
                   EXAMINING THE PROPER ROLE OF JUDICIAL 
                   REVIEW IN THE FEDERAL REGULATORY PROCESS

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
               REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                                 OF THE

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 28, 2015

                               __________

                   Available via http://www.fdsys.gov

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs
                        
                        
                        
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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin, Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                    Keith B. Ashdown, Staff Director
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
                     Laura W. Kilbride, Chief Clerk
                     Lauren Corcoran, Hearing Clerk


       SUBCOMMITTEE ON REGULATORY AFFAIRS AND FEDERAL MANAGEMENT

                   JAMES LANKFORD, Oklahoma, Chairman
JOHN MCCAIN, Arizona                 HEIDI HEITKAMP, North Dakota
ROB PORTMAN, Ohio                    JON TESTER, Montana
MICHAEL B. ENZI, Wyoming             CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska
                     John Cuaderess, Staff Director
                  Eric Bursch, Minority Staff Director
                       Kelsey Stroud, Chief Clerk
                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Lankford.............................................     1
    Senator Heitkamp.............................................     2

                               WITNESSES
                        Tuesday, April 28, 2015

Ronald M. Levin, William R. Orthwein Distinguished Professor of 
  Law, Washington University in St. Louis, and Chair, Judicial 
  Review Committee for the Administrative Conference of the 
  United States..................................................     3
Andrew M. Grossman, Associate, Baker and Hostetler LLP, and 
  Adjunct Scholar, The Cato Institute............................     5

                     Alphabetical List of Witnesses

Grossman, Andrew M.:
    Testimony....................................................     5
    Prepared statement...........................................    52
Levin, Ronald M.:
    Testimony....................................................     3
    Prepared statement...........................................    31

                 EXAMINING THE PROPER ROLE OF JUDICIAL
                REVIEW IN THE FEDERAL REGULATORY PROCESS

                              ----------                              


                        TUESDAY, APRIL 28, 2015

                                 U.S. Senate,      
                        Subcommittee on Regulatory,        
                      Affairs and Federal Management,      
                    of the Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. James 
Lankford, Chairman of the Subcommittee, presiding.
    Present: Senators Lankford, Portman, Ernst, Heitkamp, and 
Peters.

             OPENING STATEMENT OF SENATOR LANKFORD

    Senator Lankford. Good morning. This is the second in a 
series of hearings the Subcommittee will hold examining the 
issues and solutions surrounding Federal regulations.
    I want to welcome our witnesses. Thank you, gentlemen, for 
being here today. We are fortunate today to have two witnesses 
who are experts in the field of administrative law. I thank you 
for your thoughtful written testimony and look forward to 
speaking to both of you.
    Today's hearing will focus on the role of the judiciary in 
the Federal rulemaking process. Since the founding of this 
country, Article III courts have served as the final guardians 
of our Constitution, providing independent judgment, applying 
law to the facts in the case before them.
    In the landmark decision of Marbury v. Madison, Chief 
Justice John Marshall articulated the role of judicial review, 
declaring it is emphatically the providence and duty of the 
Judicial Department to say what the law is. From that moment 
forward, it has been established the courts are entrusted with 
the duty to invalidate laws that are incompatible with our 
Constitution.
    However, as the administrative law State has expanded, the 
courts have deferred more and more to agencies, substituting 
agency judgment for their own. As a result, the modern 
administrative State has blurred the lines that once separated 
the Legislative Branch, the Executive Branch, and the Judicial 
Branch.
    For example, with more and more frequency, we see examples 
of an Executive Branch agency that creates the rules, 
interprets the meaning of those rules, and enforces those rules 
according to their own interpretation. We must ask fundamental 
questions about the constitutionality of such a scheme.
    In the realm of administrative law, Congress clearly 
intended for the courts to review delegated agency action. The 
Administrative Procedures Act requires the courts to decide all 
relevant questions of law and interpret constitutional and 
statutory provisions. Today, we have an opportunity to consider 
these and other issues in an effort to examine the proper role 
and duty of the courts in the Federal rulemaking process.
    I look forward to discussing these issues with our members 
and witnesses today, and I understand full well these are heady 
issues and difficult things to struggle with. We probably will 
not resolve this in the next hour---- [Laughter.]
    Though if we would, it would help the Nation. But, this is 
a great conversation to initiate where are we, how did we get 
here, and what are some solutions to get out of this in a way 
that actually helps what we are going to do as a Nation and as 
we function through very difficult areas of administrative law 
and deference in decisionmaking.
    With that, I would like to recognize Ranking Member 
Heitkamp for her opening statement.

             OPENING STATEMENT OF SENATOR HEITKAMP

    Senator Heitkamp. Thank you, Chairman Lankford.
    Today's hearing continues our Subcommittee's examination of 
the overall topic of Federal regulatory policy. I look forward 
to hearing from both of our witnesses today on judicial review 
of the regulatory process and how to best approach that review.
    It is critical that Congress continues to review how 
Federal agencies operate as well as how Congress interacts as a 
body with other branches of the government. This is especially 
true on the issue of regulation, regulation today that touches 
every facet of our society. In examining this issue, I think it 
is critically important to take a look at our current system.
    In the regulatory process which has matured over time, 
legislative action and judicial review--are those processes 
flexible enough to handle most circumstances? Does it offer 
fair consideration to concerns of business and everyday 
Americans? Does Congress and the Administration, both of which 
are elected by and responsible to the people, maintain that 
critical role in advancement of regulation?
    Those are just some of the fundamental questions we have to 
consider any time we delve into reforming our regulatory 
process. Our Nation needs both effective and efficient 
regulation.
    Obviously, a huge part of that regulation is what happens 
after those regulations are promulgated and how do we best have 
a system of analyzing and reviewing regulation, and as we talk 
about judicial review, one thing that we have forgotten is that 
once regulations are promulgated, nothing prevents the Congress 
from also responding if, in fact, the will of the Congress is 
not done. And, so, I think all too often, Congress abrogates 
its responsibility on oversight of regulation to the judiciary, 
creating further uncertainty and a lack of ability to actually 
respond, leaving it up to the judiciary. I think today, we are 
in exactly that situation with King v. Burwell.
    And, so, I look forward to this testimony. I think that 
this is incredibly important, and as somebody who, as a lawyer, 
practiced in this area, I look forward to hearing the shortened 
version of your testimony and I want to congratulate you both 
before we begin at the high quality of the work that was done 
on behalf of this Committee in preparing for this testimony.
    So, thank you, Mr. Chairman, for introducing this important 
subject and I look forward to the testimony.
    Senator Lankford. Thank you.
    Let me give the introduction of our witnesses and then we 
will go straight to your testimony.
    Andrew Grossman is an Adjunct Scholar at the Cato Institute 
and practices appellate and constitutional litigation in the 
Washington, D.C. office of Baker and Hostetler LLP. Prior to 
joining Cato as an Adjunct Scholar, Mr. Grossman was affiliated 
for over a decade with the Heritage Foundation, most recently 
serving as Legal Counsel to Heritage's Edwin Meese III Center 
for Legal and Judicial Studies.
    Ronald Levin is the William R. Orthwein Distinguished 
Professor of Law at Washington University in St. Louis. 
Professor Levin also currently serves as a public member of the 
Administrative Conference of the United States and Chair of its 
Judicial Review Committee.
    It is the custom of this Subcommittee to swear in all 
witnesses that appear before us, so if you do not mind, I would 
like to ask you to stand and raise your right hand. Thank you.
    Do you solemnly swear the testimony that you will give 
before this Subcommittee will be the truth, the whole truth, 
and nothing but the truth, so help you, God?
    Mr. Levin. I do.
    Mr. Grossman. I do.
    Senator Lankford. Thank you. You may be seated. Let the 
record reflect the witnesses answered in the affirmative.
    We are using a timing system today. We have received your 
full testimony, which is extensive, and we appreciate very much 
your written testimony for that. We would ask that you keep 
your oral testimony to around 5 minutes. I will be graceful in 
my protection of the clock today, since we have the two 
witnesses.
    Mr. Levin, I am very glad that you are here and we would be 
honored to receive your testimony first.

     TESTIMONY OF RONALD M. LEVIN,\1\ WILLIAM R. ORTHWEIN 
 DISTINGUISHED PROFESSOR OF LAW, WASHINGTON UNIVERSITY IN ST. 
      LOUIS, AND CHAIR, JUDICIAL REVIEW COMMITTEE FOR THE 
         ADMINISTRATIVE CONFERENCE OF THE UNITED STATES

    Mr. Levin. OK. Chairman Lankford, Ranking Member Heitkamp, 
thank you for the privilege of testifying today.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Levin appears in the Appendix on 
page 31.
---------------------------------------------------------------------------
    All of us agree, I know, that judicial review of the 
regulatory process provides an essential check on abuses by the 
Executive Branch. In the past, Congress has from time to time 
passed legislation that opened up access to judicial review by 
removing unfounded jurisdictional barriers. That legislation 
was necessary in its time, and today, the Administrative 
Conference is continuing to work on proposals for improvements, 
such as the reform of Court of Federal Claims jurisdiction that 
I have discussed in my written statement.
    On the whole, however, the existing system for judicial 
review of regulations is functioning pretty well, in my 
judgment, and it does not seem to need a major overhaul. And, 
in that context, I am going to discuss two pending ideas for 
change that, in my judgment, are not promising.
    One of them was advanced by Dr. Jerry Ellig at a hearing of 
your Committee 2 months ago. He proposed that the methodology 
that agencies use in conducting cost-benefit analysis should be 
made judicially enforceable. This is a dubious idea, in my 
view, because courts are not expert in the complex and subtle 
techniques of policy analysis and also because it is not 
necessary.
    The administrative law system has for many years operated 
with a better alternative. Studies that are produced through 
regulatory analysis are routinely included in the 
administrative record and courts do consider whether the 
ultimate rule is reasonable in light of that record. Well, 
experience shows that review can be quite probing and it gives 
agencies a strong incentive to conduct their analyses 
carefully.
    The second topic that I have been asked to address is the 
doctrine known as Auer deference. Essentially, this doctrine 
means that the Federal courts should generally hesitate to 
overturn an agency's interpretation of its own regulation. 
Agencies do not get a blank check, but they do get some leeway 
to allow them to implement their mandates effectively.
    Since 2011, however, several Justices of the Supreme Court 
have called Auer deference into question, most recently in 
Perez v. Mortgage Bankers Association last month, and so I want 
to briefly describe why I disagree with their critique.
    Justice Scalia, who has led this charge, has criticized 
Auer deference on separation of powers grounds as well as 
policy grounds. The constitutional argument is that fundamental 
separation of powers principles are offended when the task of 
writing laws and interpreting laws rests in the same hands.
    It is true that administrative agencies routinely write 
regulations and interpret them later, but they have done this 
for decades and the court has never seriously questioned the 
constitutionality of that arrangement. Of course, the 
Constitution does mandate some divisions of responsibility 
among the branches, such as between the roles of Congress under 
Article I and the President under Article II. But, Justice 
Scalia's principle has not been traditionally recognized in the 
very different context of the relationship between courts and 
agencies.
    So, if we are going to adopt a new principle of this kind, 
we need to ask whether the extension of doctrine would serve a 
convincing modern day purpose. And, supposedly, it does. 
Critics of Auer argue that the doctrine gives the agency an 
incentive to write vague regulations because the agency can 
then interpret them without the restraints of rulemaking 
procedure, but still receive deferential review.
    Well, the problem with that theory is that its proponents 
have never cited any evidence that agencies actually do write 
vaguer regulations because of this incentive. The incentive may 
exist, but so too does a rulemaking agency face countless other 
incentives pressing in various directions, ranging from the 
political program of the Administration to the desire to 
satisfy stakeholders. We simply have no clear sense of how much 
difference the Auer incentive makes, if it makes any at all. 
And, to me, that abstract argument against deference is far too 
weak to justify throwing out a judicial review doctrine that 
has been well accepted for decades.
    Finally, even if it were a good idea to abolish or modify 
Auer, I believe Congress should leave that job to the courts. 
Case by case development of doctrine can be sensitive to the 
enormous variety of situations that can arise in this area, but 
a statutory response is likely to be too inflexible and give 
rise to unintended consequences.
    That completes my statement and I will be happy to respond 
to your questions. Thank you again for asking me to testify.
    Senator Lankford. Thank you. Mr. Grossman.

   TESTIMONY OF ANDREW M. GROSSMAN,\1\ ASSOCIATE, BAKER AND 
     HOSTETLER LLP, AND ADJUNCT SCHOLAR, THE CATO INSTITUTE

    Mr. Grossman. Mr. Chairman, Ranking Member Heitkamp, and 
Members of the Subcommittee, thank you for holding this hearing 
today and for inviting me to testify.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Grossman appears in the Appendix 
on page 52.
---------------------------------------------------------------------------
    My statement today, like my written testimony, focuses on 
the intersection of the constitutional separation of powers and 
administrative law. This is, I think, a surprisingly hot topic 
of late, and it should be.
    As the Chief Justice wrote in a recent dissent, the Framers 
could hardly have envisioned today's vast and varied Federal 
bureaucracy and the authority administrative agencies now hold 
over our economic, social, and political activities. We must be 
attentive, he said, to, quote, ``the danger posed by the 
growing power of the administrative State, and it is Congress, 
in particular, that must pay attention, because it is Congress 
that authorizes the components of the administrative State and 
it is Congress whose intentions are thwarted when agencies come 
to view their authorizing statutes as springboards and 
statutory restrictions as speed bumps. The citizen confronting 
thousands of pages of regulations,'' the Chief Justice 
observed, ``can perhaps be excused for thinking that it is the 
agency that is really doing the legislating. That should be no 
small matter to the actual Legislative Branch.''
    I agree with the Chief Justice that deferential judicial 
review of agency actions is responsible, in part, for this 
phenomenon. Congress, after all, plays no role in the execution 
of the laws, and so it is the courts that provide the vital 
check on agencies to ensure that they carry out Congress's 
will. Yet, for so many years, that aspect of judicial review 
took a back seat to concerns over judicial activism, which, to 
be fair, was and is a real concern. But, it is possible that 
the courts over-corrected and went beyond mere judicial 
modesty, and now, slowly but surely, the pendulum seems to be 
swinging back the other way.
    The most visible sign of this is the Supreme Court's 
growing uneasiness with so-called Seminole Rock or Auer 
defense, which applies to agencies' interpretations of their 
own regulations. I tend to agree with Professor John Manning's 
view. The deference of this sort raises serious separation of 
powers concerns because it allows a single body to both make 
and execute the law.
    One would expect this to encourage vague regulations so 
that agencies maintain maximum interpretative flexibility, and 
there is some evidence that this has actually been the result 
in certain instances. Other consequences include the 
elimination of any independent check on policymaking, reduced 
notice of the law to the public, fewer restraints on agencies 
when enforcing the law, greater variation in application of the 
law, and reduced accountability, as agencies hide major 
policies in open-ended language or discover them there.
    These criticisms have found a receptive audience on the 
Supreme Court, as Professor Levin has described. To date, four 
Justices have written separately to express their willingness 
to reconsider Seminole Rock. Of course, it takes five to tango 
on the Court. There is no way to tell at this point whether the 
next case will topple Seminole Rock.
    Yet, the Supreme Court does not have the final word on 
these things. Congress does. And, Congress could, by statute, 
direct the courts to defer to agency interpretations only to 
the extent of their power to persuade, that is, the old 
Skidmore standard. As discussed in my written testimony, 
rejecting Seminole Rock would have the benefits of fortifying 
the constitutional separation of powers, improving notice of 
the law and ultimately advancing individual liberty. It is a 
reform at least worthy of serious consideration.
    Another issue worthy of consideration, and one that cannot 
be rectified by the courts, is the Administrative Procedures 
Act's (APA) exemption of interpretative rules from ordinary 
rulemaking procedures, including notice and comment. The great 
breadth of this exception made good sense in the 1940s. If this 
Congress was trying to rein in agency excesses and regularize 
their conduct, it recognized the value in providing informal 
guidance.
    But, as Justice Scalia explained in his recent separate 
opinion in Perez, by supplementing the APA with judge-made 
doctrines of deference, the court has revolutionized the import 
of interpretative rules' exemption from notice and comment 
rulemaking. Agencies may now use these rules not just to advise 
the public, but also to bind them.
    The solution, I think, is to align the scope of the 
exception with its purpose by limiting judicial defense to 
rules promulgated through notice and comment. Again, such 
interpretations could still receive deference according to 
their power to persuade, but there is no reason to go beyond 
that.
    Finally, let me address Chevron deference, which counsels a 
court to defer in certain circumstances to an agency's 
reasonable interpretation of statutes it administers. First, 
let me say that the mood of deference that accompanies Chevron 
has lately worked a sea change among executive agencies. The 
search for meaning in Congress's commands has been replaced 
with a hunt for ambiguities that might allow the agency to 
escape its statutory confines.
    In my practice, I see this quite regularly of late with the 
Environmental Protection Agency (EPA's) major rules, which seek 
out, or sometimes invent, ambiguity as an escape hatch from 
seemingly clear statutory language. And, it is not just the 
EPA. The Federal Energy Regulatory Commission (FERC), the 
Internal Revenue Service (IRS), the Federal Communications 
Commission (FCC), and others have all adopted this non-
interpretative interpretative approach to bring to fruition 
regulatory policies that just a few years ago were considered 
dead because they could not pass Congress. How quaint that now 
seems.
    Chevron's impact on judging, however, is more difficult to 
pin down. That said, the Chevron formula does have a certain 
logical appeal. If actual gaps in statutes are to be filled up 
between the courts and the agencies, I know which I would 
choose to do it. But, the problem is that there are not gaps 
every single time a court chooses to defer. So, what to do 
about it.
    Well, I agree with Justice Scalia, Chevron's chief advocate 
and not one known for excessive deference, that the fox in the 
hen house syndrome is to be avoided not by abandoning the idea 
of deference, but by taking seriously and applying rigorously 
in all cases statutory limits on agencies' authority. But, how?
    One way to do that is to pack the Federal bench with more 
Scalias. Another is to avoid capacious authorizations of agency 
power and trim back those that rely more on unstated 
understandings than text.
    But, what about changing Chevron? Well, nothing I have seen 
suggests that it would do much good. That does not mean, 
however, that it is not a fit topic for discussion and debate. 
It surely is. At the very least, it would be a worthwhile task 
to identify and consider reforming those statutes that are the 
most subject to abuse. More hearings like this one will be 
necessary for Congress to begin to reclaim what it has lost.
    Again, I thank the Committee for the opportunity to offer 
these remarks and I look forward to your questions.
    Senator Lankford. Thank you for your input.
    We are going to have one more formalized round of 
questions, and in the second round, I will be more open and we 
will have a more open dialogue as we walk through this 
together. I appreciate very much this ongoing conversation.
    There is a real challenge that we have to face on this, and 
that is the difference in separation of powers and that where 
we are going. It is not where we are and where we have been, 
but it is also where we are going.
    You gentlemen are extremely aware of where we have been on 
this. The question is, what is the next step? How far does this 
go? With new rules dealing with interpretative rules, the 
agencies continue to make decisions. Mr. Grossman, as you had 
mentioned, the search for ambiguity in statute to try to pass 
things in policy through agency action that could not have 
passed through Congress, it seems to be an ongoing push to 
happen with agencies, and now the challenge is, does this 
continue to go this way?
    My opening question to you is do you see that pattern where 
the agencies are seeing more of the gaps than they are seeing 
what to actually do with an existing statute?
    Mr. Grossman. Mr. Chairman, once the genie is out of the 
bottle, I think it is very difficult to put it back in, and 
what we have seen of late is agencies, to varying extents, 
abandoning the traditional understandings that served as a 
restraint on agency power.
    It was always the view that big policy decisions, and there 
is some disagreement over what necessarily constitutes big, but 
the big decisions were channeled through Congress, and there 
were political reasons for that, but there were also reasons of 
simple restraint and understanding. Those informal 
understandings were not necessarily things that were expressed 
in clear statutory text. They are there by implications and 
they reflect the inherent authority of agencies, in other 
words, the boundaries of their actual power that Congress has 
authorized them to exercise.
    When those limitations, those traditional understandings, 
fall away and the courts are sometimes wary of enforcing them, 
although sometimes they do, the agencies, in many instances, 
have taken that as a carte blanche to undertake questions that 
previously would have been channeled through Congress.
    So, yes, I think that we are going to see a lot more of 
this, and I fear that it is something that is going to occur 
not just in Democratic administrations, but also in Republican 
administrations. I do not see how you go back.
    Senator Lankford. I do not know how to fix the 
predictability of law and of regulations to do business and to 
do investment. That is the concern, is if it is a Democrat 
executive and all the regulations suddenly turn this way, and 
then a Republican executive and everything shifts back the 
other way, there is no stability and predictability. You can no 
longer go to Congress and try to get some insight of where we 
are going in policy. It moves by the whims of the executive, 
and that, to me, is a real concern for planning and for 
business and for our free market system. The predictability and 
the boundaries of that is very significant.
    Let me just bring up a ``for instance.'' It is fairly 
unlikely, I would say, in 1972, that Congress contemplated the 
Waters of the U.S. regulation that is now coming down from EPA 
and from the Corps of Engineers. The administrative agencies 
have twice brought out a Waters of the U.S. rule, twice been 
knocked down by the courts. It is coming out in a new version 
again. It is difficult to read the Clean Water Act and to find 
this new version of navigable waters included into it, but yet 
there it is, suddenly within an agency promulgation.
    Where does this continue to go in the days ahead? Mr. 
Levin, do you want to comment on that?
    Mr. Levin. Yes. I have a somewhat different perception of--
--
    Senator Lankford. Sure.
    Mr. Levin [continuing]. Of the big picture from Mr. 
Grossman's, I think. I do not know when this earlier era was in 
which agencies never tested the limits of their authority. I 
think they always have done it and it is what an executive 
agency naturally would do, and it is, therefore, the role of 
the courts to bring some appropriate standard of review to bear 
in order to provide some check on what they do.
    Now, Chevron has emerged as one of those accepted checks in 
our system, and Auer has served for years as its regulatory 
counterpart. In the days when Chevron first came out, it was 
promoted primarily by Republican-appointed judges. Mr. Grossman 
points this out in his testimony. It was hailed as the right 
way to go. These days, you are getting more criticism of 
agencies and the assumption that Chevron is not up to the job, 
but I really suspect that if a Republican wins the Presidency 
and starts promoting deregulatory measures, that you are going 
to see a newfound appreciation for the virtues of deference. A 
lot has to depend----
    Senator Lankford. Which is, by the way, my concern, is that 
we constantly have this back and forth, as I just mentioned. 
You cannot do long-term investment on a project if you really 
do not know what the regulations are, or if they are based on 
just the whims of the executive.
    Originally, we are basing everything on statute, and now it 
becomes who is the smartest person, and the courts seem to have 
this new approach--and you can correct me if I am wrong here, 
but the approach is you know more about this subject than I do. 
I am going to defer to you because you have greater knowledge 
and insight on the subject. But, that also assumes that they 
have taken into account all the rest of it.
    Notice and comment is not just about acquiring quantity and 
saying you have done your due diligence because you have a 
thousand different letters that you have responded to and you 
know more about this subject than I do. There seems to be more 
to it than that in the notice and comment and the interaction 
between, does this line up with the statute? Is this what is 
the least expensive, best available, I mean, all the different 
dynamics that we have with administrative law that you know 
extremely well. That is the ongoing challenge, is where does 
this go?
    Mr. Levin. Right. So, I think we have the rulemaking part 
and we have the judicial review part. The rulemaking process 
does have built-in steps in it, as you describe. The judicial 
review part comes in as a check based on some standard of 
review. The Chevron test or Auer test is generally seen among 
administrative lawyers as the relatively predictable standard 
of review.
    If you substituted Skidmore review for it, then you have 
what Justice Scalia calls the totality of the circumstances 
approach, in which you cannot predict very well at all how a 
court would respond to a given administrative ruling. And if 
you took away all deference and just left decisions up to the 
unfettered decision of judges, I think predictability would be 
impaired even more. So, we have some degree of stability in our 
system right now that tends toward what you are driving at.
    Senator Lankford. I am going to defer to the Ranking 
Member, but I wanted to say, when we come back around, I want 
to get a chance to talk about agencies and the appeal process, 
because we also have an issue with agencies now receiving--and 
it has been for a while, but if someone wants to appeal a 
rulemaking, they appeal that rulemaking to a person literally 
sitting in the cubicle next door to the person who made the 
previous rule and made the previous decision, and trying to get 
an outside opinion is becoming more and more difficult. And, 
so, I want us to be able to talk about that some as well as 
multiple areas.
    But, I want to recognize Ranking Member Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    Very complicated history and a very long history and how 
you look at this, unfortunately, frequently, as through maybe 
too political of a lens than what it should be as we are kind 
of looking at predictability. And, one of the concerns that I 
have is that we are focused on, in this discussion, on judicial 
review. Why is judicial review necessary if, in fact, the 
agency makes a mistake?
    Congress plays a role in correcting agency mistakes, it 
seems to me, and that is one thing that if you are on the court 
and you are trying to figure out what congressional intent was 
and whether, in fact, congressional intent was followed through 
these kind of interpretative rules or rulemaking process, you 
must be extraordinarily frustrated, thinking, why can Congress 
not cleanup their own mess? Why do we have to do it? And, I 
think that is one of the frustrations that I have in all of 
this. I think, many times, the issues that are deferred to the 
agency are issues that are too controversial or too difficult 
for Congress to decide themselves.
    And, I am going to build on the Chairman's example, Waters 
of the United States. We recently had a hearing in the 
Agriculture Committee to talk about Waters of the United States 
and I asked a simple question. After a lot of critique about 
that rule and about the rulemaking process, I asked a simple 
question, which was, what are Waters of the United States? Not 
one person could offer an answer. It is incredibly complicated.
    And, I am not pleased with the process that was used in the 
controversy around that rule, but I am sympathetic that, 
frequently, this body spends way too much time kicking the can 
down the road by taking something that is very controversial 
and putting it in the lap of the agency as opposed to doing our 
due diligence and our responsibility.
    But, I want to talk a little bit about interpretative 
rules, because it has become the buzzword for agency overreach. 
And, having been involved in an earlier life in the tax world, 
I guess I would ask you, Mr. Grossman, do you think IRS letter 
rulings should be subject to rulemaking standards?
    Mr. Grossman. I think the answer is yes, to the extent--
that they are going to be given any greater degree of deference 
than Skidmore deference. That said, I think an IRS letter 
ruling, given the way that the tax code is structured, is 
something that in most instances--not all instances, but most 
instances--is something that is going to hold up.
    Senator Heitkamp. Are you concerned at all--with that 
answer, are you concerned at all that it will, in fact, even 
further delay certainty to a businessman who simply says, I 
want to know if I do this what the long-term tax treatment will 
be, and I understand that you might be saying things that could 
be more broadly applied and representing your interpretive 
rule, but I need this answer today, not 3 years from now.
    Mr. Grossman. Yes. Senator, I certainly do take into 
account that concern, and it is a real and a legitimate one. I 
think I would have two responses to that.
    One is to identify with your earlier remarks that a lot of 
these areas where there is uncertainty in the law is due to 
either complexity wrought by Congress or to vagueness or 
ambiguity wrought by Congress. The tax code, I think, is a 
capital example of that in terms of its complexity.
    Second, Congress can, in some instances, affect the way, 
legitimately, that judicial review and deference is 
operational. If Congress decides that certain types of tax 
rulings are entitled to a greater degree of deference to 
promote certainty, that is fine. That is something that 
Congress has the authority to do. That does not necessarily 
mean that it needs to be the case across the board. I think 
that is a policy issue for Congress to decide.
    Senator Heitkamp. I think one of the concerns that I have 
about all this is where we have burdensome and unnecessary 
regulation, we also have delay in providing regulatory 
certainty, and that delay could be further extended if we, in 
fact, look at every instance of interpretation of a statute as 
being subject to the rulemaking process. Would you not agree 
that we could have the potential of actually delaying critical 
certainty if we expand the way you are suggesting we expand the 
definition of what constitutes a rule subject to rulemaking?
    Mr. Grossman. No, actually, I would not agree with that, 
and the reason is because the rules that--litigation, when a 
court applies a particular standard of deference or standard of 
review, really applies to relatively very few cases and it sets 
the rules and the framework that an agency works under going 
forward and that governs people going forward. And, so, when 
there are understandings of the way that statutes work and the 
way that courts are going to resolve them, it is actually very 
few interpretations and very few instances that are involved in 
legal controversies----
    Senator Heitkamp. Yes----
    Mr. Grossman. It is the tip of the iceberg.
    Senator Heitkamp. Mr. Levin, what would be your response to 
my question?
    Mr. Levin. I think I would agree with what I took to be the 
thrust of your question, which is that people need guidance, 
and they have questions in their mind. They want to know where 
the agency stands. They do not want to wait for an agency to 
conduct an entire notice and comment proceeding in order to get 
an answer. They want an answer immediately. Agencies will 
respond by putting out informal statements that say, here is 
the position we would take. You are not bound by it, but at 
least you know what our position is.
    If we were to say that those statements have to go through 
the notice and comment process, you would see many fewer of 
them and that would be less responsive to the public's need for 
an understanding of what the agency's position is and, 
oftentimes, they do not want to fight it, they just want an 
answer.
    If you were to say, well, those statements can be issued, 
but they have no weight because the courts will not defer to 
them, then the recipient of the advice would say, well, this 
does not do anything for me because I have not gotten 
anything----
    Senator Heitkamp. It is kind of worthless.
    Mr. Levin. Right. So, if I can only trust what comes out 
through the notice and comment process, it is saying I cannot 
trust what the agency told me. If you are hostile to the 
agency, you would say that is great because they will not get 
deference, but if you just want an answer, you want to know, 
how can I conduct my business in a way that the agency will not 
challenge, then it is not good news.
    Senator Heitkamp. And, not to delay it, but controversial 
opinions or controversial decisions from agencies can always be 
reviewed by Congress. We know what they are. But, there is a 
reason why controversy exists, and frequently, this body is the 
most at fault for not providing certainty in terms of direction 
to agencies.
    Mr. Levin. I agree.
    Senator Lankford. Senator Portman.
    Senator Portman. Thanks, Chairman Lankford, for holding 
this hearing, and thank you, gentlemen, for giving us your 
wisdom here this morning.
    The Code of Federal Regulations (CFR) is now about 180,000 
pages long. It is increasingly complicated. We deal with 
complicated issues in Congress, understandably. A lot of those 
go to the agency for decision. Congressional oversight is rare, 
let us be frank, and so the agencies have taken on more and 
more responsibility and power and, by the way, have created, as 
Ranking Member Heitkamp said, a lot of uncertainty out there. I 
just had a meeting yesterday on some of this uncertainty as it 
affects my State of Ohio and our economy.
    So, for better or worse, in my view, the most effective 
line of defense against executive overreach is often the 
courts, and the question is, what should the courts' rule be, 
and you all have differed this morning on what you see as 
appropriate. I feel strongly that Congress should do more in 
terms of writing legislation that is clear. That would be good. 
Often, by the way, even when we try to do that, as in the case 
of the Affordable Care Act, the Administration tends to come up 
with its own, not just interpretation, but changes in statute 
by executive action. But, that is what this debate is all 
about.
    There are regulatory guidelines already in place and I 
think the public, rightly, expects agencies to make decisions 
based on an informed and objective manner. Executive Order (EO) 
12866 is the famous one. It requires agencies adopt a 
regulation only upon reasonable determination that the benefits 
of the intended regulation justify its costs, and that agencies 
design regulations in the most cost effective manner to achieve 
the regulatory outcome, and that they tailor its regulations to 
impose the least burden on society.
    And, having been Director of the Office of Management and 
Budget (OMB) at a time when the Office of Information and 
Regulatory Affairs (OIRA) struggled with some of these issues, 
this is incredibly important that we have some guidelines for 
the agencies.
    I will say that there is a lot of research out there, 
including some research that you all have done, indicating that 
some of this regulatory analysis is completed, some of it is 
not. Often, the agencies just fail to use the robust economic 
analysis, particularly independent agencies, of course, who are 
not subject to it because they are not within the ambit of the 
executive.
    So, that is what we are focused on here, or at least I am, 
and the Regulatory Accountability Act (RAA), as you know, is 
bipartisan. It is something we worked on the last few years 
that attempts to put some more balance in here and to provide 
more judicial review in an effective way to be sure that 12866 
and other standards are actually met. The idea of the 
Regulatory Accountability Act is to, frankly, get the courts 
more involved in ensuring that these standards are met.
    And I know in your comments, Professor Levin, you said that 
the proposals that, quote, ``would empower the courts to 
invalidate a rule based on the basis that an agency did not 
sufficiently comply with the procedural requirements,'' such as 
those I just mentioned, you have concerns about that. Your 
reason seems to be, I think, that courts are generalists and 
they do not have the ability or the expertise to be able to 
evaluate questions like--did the agency conduct an analysis? 
Was the analysis adequate given the circumstances and 
information available? Has the agency provided a factual basis 
for its conclusions or has it simply stated a summary 
conclusion unsupported by facts?
    I guess my opinion is that we do need the courts to do 
that, and I know you also say that the courts should be able to 
review Regulatory Impact Analyses, which are sometimes 
extremely long and technical documents, as you know. If the 
courts can review those, I guess my question for you would be--
and you say they should be able to review them to determine 
whether there is a rational basis for the court action. If 
courts have the competence to do that, I guess, why do you not 
think they can do the kind of analysis on the technical side 
that would be involved with an approach that I support, the 
RAA-type approach? Will not the adversarial process, aided by 
experts, if necessary, help distill some of these issues for 
judicial review? And, I guess, the final question is, do the 
courts not already conduct similar analyses under these 
statutes--the Regulatory Flexibility Act, the National 
Environmental Policy Act (NEPA), NEPA has this. If not, how 
does that task differ, in your opinion?
    Mr. Levin. Thank you for that question, Senator Portman. As 
I mentioned in my statement, I have publicly supported a bill 
that you have offered to extend the OIRA process to the----
    Senator Portman. Independent agencies.
    Mr. Levin [continuing]. Independent agencies.
    Senator Portman. Yes. Thank you for that.
    Mr. Levin. At the same time, I have also participated in 
comments, along with the American Bar Association (ABA) 
Administrative Law Section, on various versions of the 
Regulatory Accountability Act. Some points we made there--and 
this was primarily directed at the House bill, but had some 
overlaps with your bill from last session, S. 1029--a concern 
is that if you add new procedural requirements across the board 
on agency rulemaking, you will be adding unwarranted complexity 
to the administrative process because of all the additional 
mandates that agencies would need to perform.
    What we have today is a process in which the court can look 
at the analysis documents that were generated through the 
executive oversight process; and also, those documents go into 
the record and the stakeholders from all sides can critique 
them, can add their own evaluation. Those comments are also 
part of the rulemaking record, and so the court has quite a bit 
of input from multiple directions on the issues raised as to 
the regulatory analysis process.
    So, I do not think there is any lack of input to the courts 
as to things they could look at, but if you add on top of all 
that additional mandates to the agencies to conduct the 
following studies, make the following findings, and you do it 
in the across-the-board way that much of the RAA did, I think 
that adds unwarranted complexity to the process.
    Senator Portman. I guess what I would ask you is, do you 
think that under statutes where the court does have that 
ability to actually enforce its opinion as to the Regulatory 
Impact Analysis, do you think that the Toxic Substances Control 
Act (TSCA), for instance, or the Federal Insecticide, 
Fungicide, and Rodenticide Act (FIFRA), or Safe Drinking Water 
Act, do you think that in those areas where the courts already 
have the ability to review the regulatory costs and so on, do 
you think those are not working? Do you think the court does 
not have the ability to carry that out? And, if you do not 
believe that, then why would it not apply to other regulations?
    Mr. Levin. What I am saying--excuse me, what the ABA Ad Law 
Section said, and I was a part of it, I am not speaking for 
them today, but I am reviewing what was said in the document--
--
    Senator Portman. Yes.
    Mr. Levin [continuing]. Is that in those particular 
contexts, Congress itself made a judgment that there is a 
specific need for a certain set of criteria to be applied, 
certain evidentiary standards to be used, and the like. And, I 
do not actually mean to argue that in those situations where 
Congress found that need, that it is a bad piece of 
legislation, and it is a fact that the courts have enforced it. 
I have, on the other hand, thought that to apply this across 
the board to the entire regulatory apparatus is an unwarranted 
extension, because now you would be adding more layers of 
analysis without regard to a specific finding that that agency 
has problems that justify that treatment.
    Senator Portman. Thank you. My time has expired. Thank you, 
Mr. Chairman, for the deference, and again, I thank you both 
for your testimony and thanks for working with us on this. We 
want to get this right, and the notion is to have cost-benefit 
analysis, but also have it be enforceable through some kind of 
judicial review, and I think it is urgent that we find that. 
Thank you.
    Senator Lankford. Senator Ernst.
    Senator Ernst. Thank you, Mr. Chairman. Thank you, 
gentlemen, for appearing before us today. I do appreciate your 
testimony.
    You may be aware of the case in front of the U.S. Court of 
Appeals for the D.C. Circuit on EPA's clean power plant that 
Attorneys General (AG) many States are challenging, and I had 
recently read an article that mentioned a letter sent by the 
State of West Virginia to the D.C. Circuit and they were 
concerned about comments from the EPA Administrator Gina 
McCarthy, and the comments that she made basically were 
insinuating that the administration has thought for quite some 
time that they do have the authority to force States to 
implement these energy plans and that it is only a matter of 
time before the EPA's proposed rule becomes final. So, she 
seems to believe that she can go ahead and force States to do 
this, even before the proposed rule is final.
    And, then, this is really concerning to a number of folks 
who have written, they have entered their comments, they have 
submitted those public comments, and they are hopeful that the 
agency is actually reviewing those comments and will take them 
into consideration before the final revised rule. And, in this 
case, a number of States contend that the EPA altogether lacks 
the authority to issue the regulation at issue.
    So, I would just like to get your perspective on this 
issue. I know Senator Lankford had already addressed the fact 
that--and I believe that agencies are really exploiting the 
alleged ambiguity and relevant laws, really, to get to their 
point. But, particularly in instances where the head of an 
agency forecasts the content of a final rule, do you think it 
is appropriate for courts to wait on a final rule, then, before 
addressing the merits of the rule if the agency is already 
stating they are going to implement it?
    Mr. Grossman. Senator, first of all, the example that you 
put forward, EPA's clean power plant, is truly an exceptional 
example and I think it exemplifies the problem with the mood of 
deference and how that has affected agency operations.
    The court case you are talking about, Murray Energy, before 
the D.C. Circuit, the Department of Justice (DOJ) on behalf of 
the Environmental Protection Agency has adopted, or has put 
forward four or five separate rationales as to why it is they 
believe that the statute is ambiguous, some of which defy 
commonly understood notions of grammar and meaning. And, the 
interpretive mission that the agency has embarked on there, in 
other words, to search out ambiguity in any possible way they 
can find it, under a rock, behind a tree, is something that 
really ought to be of concern.
    Now, what makes this an extraordinary case, and I think 
possibly a very rare exception from the ordinary rule of 
finality, is the fact that the agency is actually acting right 
now. Although EPA has only put forward a proposal, the agency's 
Administrator, has said that they do plan to go forward with 
the final rule, but not only that, the agency has outlined 
deadlines for States and for regulated parties that force them 
to begin taking major and expensive action at this time before 
a final rule is released. This is a very unusual circumstance.
    And, when I say it requires them to, I want to put emphasis 
on the word ``requires.'' It is not possible to comply with the 
rule as EPA has proposed it and as EPA has indicated it intends 
to finalize it, without taking substantial action concerning 
billions of dollars' worth of investment right now at this 
time.
    So, in these very unique and very strange circumstances, I 
think there is a case for judicial review prior to finalization 
of a rule. In general, that would be a far-fetched proposition, 
but this may be the one instance that proves the rule.
    Senator Ernst. Thank you.
    Yes.
    Mr. Levin. Your comment about the letter from the Attorneys 
General made me think of a case I teach every year in 
Administrative Law called the Association of National 
Advertisers v. FTC, decided by the D.C. Circuit back in 1979, 
which essentially said that there is virtually no such thing in 
the rulemaking context as prejudgment of the kind that we would 
talk about in the context of adjudication. Agency heads always 
have opinions. They are expected to have opinions. They could 
not function without a policy direction about where they want 
to go. It would be an abuse of discretion to launch a 
rulemaking proceeding if you did not have some context of where 
you wanted to go.
    So, the courts simply will not say the agency head 
expressed a strong opinion, therefore, it is an impropriety. 
Rather, they say, go ahead, take the position that you are 
going to take, but remember there will ultimately be judicial 
review of whether it stands up on the merits.
    So, I do not think it was improper for the Administrator to 
make the comments. There is a separate question, whether the 
plan itself is legal, which will ultimately be sorted out and 
judicial remedy will be available.
    Mr. Grossman is right that it is not commonplace to bring a 
case before the courts while it is simply a proposal, and I 
guess the case remains to be decided as to whether it is soon 
enough. All I know is the press reports in which judges 
appointed by Republicans were incredulous that a case could be 
filed like this while it was just a proposed rule. But, maybe 
they will change their mind during the deliberative process and 
agree with Mr. Grossman. The signals did not sound that way.
    Senator Ernst. Well, it is an extreme case, I understand, 
but it really goes back to something that I have hit on many 
times in this Committee, the fact that we have entities out 
there, we have a public that is out there that is responding to 
public comment. They are entering what they believe is to be 
the proper course of action, of course, anything that might be 
detrimental to their businesses, to their individual lives, and 
we have many agencies that are not, I believe, taking those 
into consideration as they move forward, and this is exactly 
one of those examples.
    Mr. Levin. Right. So, in the Mortgage Bankers case decided 
last month, the Supreme Court reaffirmed what had been common 
law and administrative law for many years, which is that an 
agency in a rulemaking process has a duty to respond to 
comments from the public. So, that will be part of the ultimate 
decision of whether they are acting lawfully.
    Senator Ernst. Absolutely. Thank you, gentlemen, for your 
time today.
    Thank you, Mr. Chairman.
    Senator Lankford. Senator Peters.
    Senator Peters. Thank you, Chairman Lankford and Ranking 
Member Heitkamp, for this hearing, and thank you to our 
witnesses. We certainly appreciate your testimony here today.
    The one issue that I want to raise, and something that I am 
particularly concerned about, is the impact of judicial 
vacancies on our capacity for the judicial reviews being 
discussed today. There are currently 54 vacancies in the 
Federal courts and only 14 have nominees pending at this time. 
There are another 26 future vacancies that we know are coming 
within a year and only three of those have nominees pending. If 
the courts are asked to increasingly review agency issued 
regulations, this will obviously quite substantially increase 
the workload of an already overloaded Federal bench.
    Until 2 weeks ago, this Senate had not confirmed a Federal 
judge. There are currently 17 judicial nominations that the 
Senate needs to act on, and even more vacancies without 
nominees. I think an important first step is for the Senate to 
address these vacancies on these pending nominations, but even 
if all these vacancies were filled, the nonpartisan Judicial 
Conference of the United States has recommended that Congress 
create 82 new Federal judgeships to properly address the 
current caseload.
    Earlier this month, the Wall Street Journal reported that 
pending cases are up 20 percent since 2004, with over 330,000 
cases pending before Federal courts. Of those, over 30,000 have 
been pending for 3 or more years.
    So, given this backdrop, Mr. Levin, do the courts have the 
resources to provide adequate review of all cost-benefit 
analyses that are now being produced by agencies, and what is 
this going to do to this already pretty extensive backlog?
    Mr. Levin. I entirely agree that there is a problem of 
undue vacancies on the courts. I would hope that both the 
nomination process and confirmation process could be expedited 
to allow that to happen.
    There is a mismatch many times between what the laws 
require judges to do and the resources made available for them 
to do it. I think that is a generic problem. Adding to the 
obligation to work through cost-benefit analyses to a greater 
extent than they do now would aggravate it, but it would 
aggravate it in the same way as many other things could 
aggravate it.
    So, my critique is not so much that they would not have 
time, but that it is not the task for which they are best 
suited. And, given all the pressures on the courts these days 
to make time for the cases they do have, you want to be very 
cautious about passing any legislation that would materially 
increase it.
    Senator Peters. Well, it is clear, given this law, putting 
in a number of cost-benefit analysis requirements for the 
courts would be a heavy burden for them when already we are 
looking at delays of 3 or more years for 30,000 cases and 
330,000 cases pending. Certainly, there are other things that 
can add to the backlog, but this would add a significant burden 
that would continue to slow down the system and allow judges to 
deal with important areas of justice that they have to deal 
with each and every day----
    Mr. Levin. So, I am agreeing with that and then saying, and 
it is more than that.
    Senator Peters. It is more than that, and let us go to 
that. Where they may have the time and the resources and the 
necessary expertise, as you have alluded to, it seems that many 
times that they are being asked to review some pretty highly 
technical regulations, including things that are based on 
significant scientific expertise, how can the courts deal with 
that? How best can they deal with those kinds of issues?
    Mr. Levin. Well, it takes a lot of time to study those 
records, to write those opinions, to reach agreement on a 
panel. I would suggest that, to some degree, the answer is to 
give a reasonable amount of deference to the agency that has 
the specialized expertise in the area, so they do owe a hard 
look, as it is called, to see if the agency acted reasonably. 
But, I think they need to draw the line short of making all 
those decisions again on their own.
    And, so, putting some confidence in the agency and the 
political process in which the agency operates can be 
desirable, because I share Senator Heitkamp's point that it is 
important to remember that the agency answers to Congress and 
they answer to the public so that is a source of constraint 
that suggests that a court should not try to do everything in 
the review process. They should look to see if it is 
reasonable, but they should not try to decide themselves all 
the scientific questions.
    Senator Peters. So, in addition to the delays that occur 
because of the already overloaded courts and also the need to 
get some very sophisticated information in order to make well-
reasoned decisions, I am also concerned that because of all of 
that, which would slow down the process, that would likely mean 
significant delays in the rulemaking process because of these 
increased procedural requirements that some folks are talking 
about.
    So, would mandating additional judicial review have a major 
chilling effect on the rulemaking process, do you believe?
    Mr. Levin. I think so, but in the sense that if you give 
the agencies more tasks to do and no more resources to do them, 
that will strain their resources. So, your point about adequate 
funding for the courts should be paired with adequate funding 
for the agencies because their budgets have been cut. The 
discretionary spending has been reduced at the same time that 
Congress continues to add more expectations for them. And, so, 
there is a mismatch there, as well.
    Senator Peters. And, as that has slowed down and as 
rulemaking has a chilling effect, although companies and 
industries are going to be expecting some rulemaking, as you 
know, uncertainty has an incredibly detrimental impact on 
economic activity on businesses. So, now you have the 
uncertainty as to what is going to happen with rules, and those 
are going to take much longer with some of these proposals. I 
suppose you could also see there could be an increase in 
litigation. Would you expect that this might increase 
litigation, if we have more proposals and more procedural 
requirements for rulemaking?
    Mr. Levin. If you add new requirements and make them 
judicially reviewable, that is more or less by definition an 
invitation to more litigation to test whether the agency 
measured up under those standards.
    Senator Peters. So, in a sense, we have an overburdened 
court without the resources to deal with the issue that is 
going to delay rulemaking, which will cause uncertainty, which 
will have a negative impact on the economy as well as 
increasing litigation in the courts. If I can summarize what 
you are saying.
    Mr. Levin. Yes.
    Senator Peters. Great. Thank you.
    Senator Lankford. For the Committee and those of you all 
here at the dais and for you, the second round, it is the 
tradition of this Committee--what I mean by tradition is we 
have done it once, so---- [Laughter.]
    So now we are just going to keep doing it. [Laughter.]
    The second round of questioning is open, and so every 
microphone is open and we are open to have open colloquy here 
and with you, and so it is a less formal round of questioning 
on that.
    The challenge that I see on this is how to continue to give 
Congress its legislative powers that are required by the 
Constitution, which I think all of us want to see the clear 
separation of powers in Congress to the part that says all 
legislative powers shall reside in Congress actually has 
meaning, as well, and to continue to be able to practice that.
    So, my question is, where there is ambiguity in the law 
now, deference is given to the Executive Branch rather than 
deference to the Legislative Branch, meaning if it is unclear, 
if there is ambiguity, the courts would look at it and say, I 
am going to trust the people in the agencies because Congress 
did not complete this, rather than saying, this has to be on 
hold until Congress brings clarity. So, the assumption is 
Congress will not clarify, so the agencies must clarify, rather 
than this is unclear in the statute, Congress needs to go back 
and bring clarity. Until then, it is on hold, or no, you cannot 
move this. Why is the deference given to an agency from the 
Judicial Branch rather than the deference given to the 
Legislative Branch?
    Mr. Grossman. If I could, it is a very good question. The 
idea, I think, is, to begin with, there is this background 
assumption underlying the deference canons that the Congress 
has intended to delegate to the agencies interpretative 
authority to fill up the details of statutes where Congress has 
not specified particular details. That assumption may or may 
not prove correct with respect to different statutes, but that 
really is the core idea underlying both Chevron as well as Auer 
deference, that is what Congress's intent is.
    Second, in terms of why the Legislative Branch itself is 
not deferred to, I think the way to look at that is, obviously, 
the Legislative Branch itself cannot participate in an official 
basis in litigation and express its views other than by 
enacting laws. And, certainly, enacting laws is, by far, the 
best way to clarify and resolve ambiguities in statutes.
    But, where that does not happen and where it is not 
possible and where you have ambiguities or vagueness, the 
question is, to what extent are those questions of statutory 
interpretation going to be decided by courts who may be looking 
at, trying to wring from a particular statutory scheme every 
ounce of meaning they possibly can from it. In other words, 
when you have something that appears to be an ambiguity, if you 
apply all the traditional tools of statutory interpretation, 
the ambiguity might be substantially narrowed so that an agency 
has at its disposal several possible choices, but perhaps not a 
wide range of choices.
    And, I think that is really where the disagreement is in 
this particular debate. There are always going to be 
ambiguities, and when there are genuine policy decisions to be 
made, it probably makes sense, in general, for those to be made 
by the agencies. But, the real question is the scope of their 
authority to do so.
    Senator Ernst. Can I jump into that, please?
    Senator Lankford. Yes.
    Senator Ernst. Something that I did not have the time to 
address, and I think it fits well here as we talk about 
constitutional authority, whether it is the Judicial Branch, 
Executive Branch, Legislative Branch, but if both of you could 
just take a moment and visit a little bit about sue and settle, 
when the agencies maybe decide not to defend themselves, or 
someone sues and they decide to settle out of court. It is done 
behind closed doors. It really takes away the transparency, I 
think. Decisions are made behind closed doors but do not 
involve a lot of the different members that we have spoken 
about. So, rules and regulations are made behind closed doors 
and the public is not aware of what is going on behind those 
closed doors.
    Mr. Levin. I wanted to respond to Senator Lankford, and 
maybe I can also respond to you, Senator Ernst. On Senator 
Lankford's point, I really do not think that there is a lack of 
deference to the Legislative Branch because the legislature can 
intervene and make a decision through legislation when it 
chooses. I think the problem is that it too infrequently uses 
that authority, I think is the point Senator Heitkamp made 
earlier----
    Senator Lankford. Let me just jump in there. The standard 
to actually interrupt a rule is as high or higher than it is to 
making a law in that sense. So, if you have, let us say, a 
divided Congress or Congress and the White House, and the White 
House through their agencies have put in a policy, have found a 
vagueness in a rule, have put out a rule, Congress wants to 
respond to that. They now have to get 67 votes in the Senate to 
be able to overthrow that, when at the beginning they would 
only have to get 60 for cloture or 51 for passage. So, now, you 
have this very high standard because you assume the White House 
is going to veto any kind of change in their policy that they 
put in place. If you have a politically divided House and 
Senate, then the agencies can basically move at whatever will 
they want, knowing that one area is not going to check them.
    So, the unusual standard here, as I understand the 
legislature has a responsibility in that and has the ability to 
be able to do that, but it is the capacity to be able to get 
that done where there is a vagueness and the agencies have more 
leeway. Does that make sense?
    Mr. Levin. It does, but I think what you are saying is it 
is too bad that we have bicameralism and----
    Senator Lankford. No, sir, I am not saying that. 
[Laughter.]
    Most definitely not saying that.
    Mr. Levin. I misunderstood.
    Senator Lankford. What I am saying is it is too bad that 
the executive now makes a rule, enforces the rule, and 
interprets the rule. What I am saying is, it is too bad that we 
are now creating a system where only one branch runs everything 
and the judicial branch gives deference to them and the 
legislative, when they have differences in political opinions, 
which the American people do, does not get to speak to that. 
That is what I am saying is the problem.
    Senator Heitkamp. And, if I can just jump in here, but 
taken that is kind of the problem, that politically, and let us 
at least acknowledge that the President is politically 
accountable for decisions that he makes, maybe not in his 
second term, but----
    Senator Lankford. Right.
    Senator Heitkamp [continuing]. He is politically 
accountable and has an obligation to listen to what people 
believe and we all go there. But, the solution of turfing this 
or making the court the ultimate arbitrator of these decisions 
has its own limitations.
    And, I think it is interesting that the two cases we are 
talking about today, direct regulations that we have 
referenced, which is Waters of the United States and clean 
coal, the EPA CO2 regulation, both of those situations are 
presented because of Supreme Court decisions. So, you already 
had a review process that may not necessarily have dealt with 
deference, especially on CO2, because the question was EPA had 
decided not to regulate CO2 and the court reversed that 
decision and said, yes, you have jurisdiction to regulate CO2, 
and that began this process that we are in.
    When you look at the opinions in Waters of the United 
States you have four deciding that EPA is wrong, you have four 
deciding EPA is right, and you have a decider in the middle who 
said, well, I am going to side with the four that said EPA is 
wrong, but I think you ought to maybe think about doing it this 
way. And, so, there is huge uncertainty that is created, and 
ironically in those two cases, created because of Supreme Court 
decisions.
    And, so, I understand and appreciate the concern. I am as 
vehement about Waters of the United States and CO2 regulation 
as anyone on this panel. But, I think that we are asking to put 
a really heavy burden on the courts when, as Senator Peters was 
talking, courts are ill equipped at this point, just in terms 
of resources, to play that role, and is that--what role does 
the court have in all of this?
    And, we are really talking about a standard, because, 
should it be Chevron deference or Auer deference or whatever it 
is, at the end of the day, what capacity does the court have, I 
think is the question, either in terms of resources or ability, 
especially given the two examples we are having here where the 
Court did not provide additional clarity, in fact, may have 
made it even more difficult to find clarity.
    Senator Ernst. And, again, I would like to jump back in. 
And what happens when it is not the court, but behind closed 
doors when settlements are made----
    Senator Heitkamp. Yes.
    Senator Ernst [continuing]. Where does that fit into this?
    Senator Heitkamp. And that is a problem, Senator, 
regardless of who is--it could be corporate America could be 
behind the closed door----
    Senator Ernst. Exactly.
    Senator Heitkamp [continuing]. It could be the 
environmentalist behind the closed door. I am always concerned 
about friendly lawsuits that make a policy decision and say, 
now we are enforcing a consent decree and not interpreting a 
statute. And, I guess, Mr. Levin, it would be interesting to 
hear your perspective on the friendly lawsuit possibility.
    Mr. Levin. The question has been kicking around for a long 
time, and one of the problems is a lack of clear factual 
information about the extent of any abuse, and it is often the 
subject of heated charges in both directions. But, I would say 
that Congress should be careful in this area and develop clear 
factual basis for any action it might take.
    Senator Heitkamp. But, do you share our concern that this, 
in fact, could happen and maybe has happened in the past?
    Mr. Levin. It could. But, I think the number of accusations 
exceeds the number of ones that can be substantiated.
    Senator Heitkamp. Verified.
    Mr. Levin. So, I do not want to dismiss it----
    Senator Lankford. But, are affected parties brought to the 
table? So, if a consent decree is made within a group and then 
suddenly that new regulation was imposed, was appropriate 
comment given to the affected parties or do they suddenly have 
the imposition of a new regulation?
    Mr. Levin. Oh, I think that is a fair question to ask and 
parties should have the opportunity----
    Senator Lankford. That is the prime concern. It is not just 
the transparency. It is that affected parties are not given the 
opportunity for comment.
    Mr. Levin. In concept, I do agree.
    Senator Heitkamp. Correct.
    Mr. Grossman. Senator, if I may, I actually testified on 
this particular issue before the Senate Judiciary Committee in 
the last Congress, and my testimony recounts in substantial 
detail a number of instances of abuse of the settlement process 
with regulatory agencies. I agree that it does not happen all 
the time, but there are instances where it has happened.
    In response to that testimony as well as other policy 
interests, there was introduced, I think it is called the 
Sunshine and Settlements Act, which does not alter any 
substantive rulemaking standards or anything of that sort but 
simply provides a procedure so that parties who are interested 
can become aware of these circumstances and can participate in 
ways such that their views are taken into consideration.
    Senator Lankford. Going back to consent decrees and Senator 
Ernst, is it inappropriate to ask any agency not to be able to 
make a consent decree if you are changing a discretionary 
authority to a mandatory authority? Is there a problem with 
that, to just limit--you cannot make a consent decree that 
changes substantively something that was discretionary to 
mandatory?
    Mr. Grossman. Well, I think there are two ways to look at 
it. On the one hand, when an agency has the discretionary duty, 
it could just say, fine, we are going to go ahead and carry out 
that particular duty, whether it is to regulate a particular 
pollutant or undertake some other regulatory action.
    The one issue that really arises in terms of transferring 
these things from discretionary duties to mandatory duties is 
the power to basically bind future administrations----
    Senator Lankford. Right.
    Mr. Grossman [continuing]. In other words, to remove their 
policy discretion. This is something that we saw quite a bit of 
during the transition from the Carter Administration to the 
Reagan Administration, where the Carter Administration in its 
final days had agreed to regulate a laundry list of particular 
substances and the Reagan Administration spent pretty much 
their entire first term trying to get out from under that and 
ultimately was unable to do that in a very contentious series 
of cases in the D.C. Circuit.
    And, that led at the time Attorney General Ed Meese to put 
forward a Meese memorandum that actually limited agencies' 
authority to bind their successors. He realized that this would 
reduce the power of the Reagan Administration to bind whatever 
administration came thereafter, but his view was that it was 
the right thing to do.
    Senator Lankford. OK. So, short answer. Do you agree that 
changing a discretionary to a mandatory is a good limitation? I 
know that was part of the Meese memo, as well.
    Mr. Grossman. Mm-hmm.
    Senator Lankford. Is that an appropriate limitation on a 
consent decree, to say, yes, we can do consent decrees, but 
they are not unlimited in their ability. You cannot change the 
discretionary to a mandatory and control, basically, the 
actions of the next administration based on a consent decree 
that did not have outside input from affected parties?
    Mr. Grossman. I think, in general, that is correct. Look, 
the question is a very nuanced question----
    Senator Lankford. Sure.
    Mr. Grossman [continuing]. Because of the scope of 
agencies' authority to carry out certain actions. But, I 
certainly agree with you that the power to bind a subsequent 
administration is----
    Senator Lankford. What about changing line items of 
spending, that you could do a consent decree to change line 
items of spending? Obviously, that is congressional intent just 
got altered. Should a consent decree allow an agency to alter 
spending line items?
    Mr. Grossman. No, of course not. I think the distinction, 
and the only reason I am hesitant, is because many duties that 
agencies take as being discretionary are things that, frankly, 
in statutes are specified as non-discretionary. Congress may 
say ``shall'' and the agencies decide, well, we have too much 
on our plates, and so we are going to take the ``shall'' and 
read it as a ``may.'' And, so, in those circumstances when an 
agency acknowledges that they, in fact, do have a non-
discretionary duty, it is difficult to say whether their 
decision to recognize what is in the statutory text is 
necessarily a mistake. So, it varies from case to case.
    That said, there are plenty of cases where that is not 
actually what has happened, and so for those cases, I think the 
thrust of your questioning is exactly right.
    Senator Lankford. OK.
    Senator Heitkamp. When you look at this, I think we all 
know that things are controversial. I mean, we could talk about 
the fiduciary rule now coming out of the Department of Labor 
(DOL). I mean, I could probably give you the top 10 most 
controversial regulations making their way through the 
regulatory body.
    But, underneath all of that is a tremendous amount of 
regulation that goes on that is--you can argue whether it is 
necessary or not, but it is critical that we have agencies that 
are able to do that work in a timely fashion to give the 
certainty to the constituency stakeholders that they need in 
order to function.
    And, one of the problems that we have is we react to things 
like the Waters of the United States, we react to CO2 
regulation in a way that then gives broad brush strokes that 
may, in fact, have stopped us from moving forward and giving 
predictability that we would otherwise have. Do you see what I 
am saying? We take the controversy and we redesign the system 
to deal with what is controversial and that may, in fact, put 
way--too much onerous burden on the everyday regulation that 
has no controversy, and I guess I would like to hear your 
response to that, Mr. Levin.
    Mr. Levin. Oh, I agree. I think that was implicit in some 
of what I was saying to Senator Portman, that one can look at 
particular areas and say there is a special need, but if you 
extrapolate it governmentwide, you will be affecting functions 
that were not really that controversial but that Congress has 
said should go on, and adding procedures on such a broad basis 
can weigh down the process in that way.
    Senator Heitkamp. Mr. Grossman.
    Mr. Grossman. I agree with you. I would also add that, a 
lot of uncertainty comes in areas that can be resolved by 
agencies. You noted, for example, the Waters of the United 
States rule. If EPA and the Army Corps of Engineers wanted to, 
they could write a rule tomorrow that would win nine votes on 
the Supreme Court and it would be, relatively speaking, a 
pretty easy thing to do.
    What happens is that they have policy interests that are 
not necessarily compatible with the different views that have 
been expressed on the Supreme Court and that is why you have 
the uncertainty and the complexity in that area. I think in 
some cases where agencies are really trying to test the very 
limits of their statutory authority, and in some cases while 
disregarding traditionally understood limits on that authority, 
that is when you wind up with a lot of uncertainty in major 
areas.
    Senator Heitkamp. Right. And, it goes to my argument, which 
is Congress needs to take responsibility for clarifying 
ambiguity in things that are as controversial, I think, as CO2, 
as controversial as Waters of the United States, maybe the 
fiduciary rule that is coming out of the Department of Labor 
right now. And, when we do not do that, that just becomes an 
invitation for further expansion of agency authority. When we 
do not act effectively, we are basically writing a blank check.
    And, so, the only entity, in my opinion, that can fix a 
legislative problem from the agency is Congress. And, by 
putting too much responsibility on the courts because maybe we 
think the political solution is too tough, we are abrogating 
our legislative responsibility not just to the agencies, but 
also to the judiciary.
    And, you made a great point, I think, Mr. Grossman, when 
you started out, because you talked about judicial activism, 
which for years was a buzzword, saying they have too much 
authority, they are being too interpretive. Now, we are talking 
about executive agency activism and the real problem is 
legislative inactivism in helping resolve a lot of these 
controversies, it seems to me.
    Mr. Grossman. I do not disagree, really, with any of that. 
Congress really should be the first mover in pretty much every 
instance, particularly when you are dealing with major 
questions.
    That said, one point that may get overlooked in this 
discussion is something that economists refer to as the 
endowment effect. It matters who has a right to begin with. So, 
when we are starting now where we are, where we have a large 
body of laws, many of which contain very capacious language of 
delegation and authorization, under our current systems of 
deference, the agencies view themselves as being the ones with 
that first mover ability because they operate under this very 
broad, unbounded language that is only limited by sort of 
traditional and settled understandings rather than necessarily 
clear statutory barriers. And when those understandings fall 
away, the agencies view themselves as having a great deal of 
authority that Congress may well never have intended. So, that 
is the endowment they have.
    And, yes, you are right. Congress certainly can, in some 
instances--technically speaking, constitutionally in every 
instance--reverse those decisions. But, the problem is, there 
are enormous hurdles and veto gates that make it very difficult 
to do that when agencies start with that endowment. I mean, it 
matters who has what at step zero.
    Senator Lankford. May I ask you, what happens if Congress 
passes some sort of mandate, which I know you have affirmed 
before you do not think is a good idea, say we are not going to 
do Skidmore--or, I am sorry, we are not going to do Chevron 
deference. We are going to do something more like Skidmore 
deference. That is going to be the policy and we will try to 
push it back there. Obviously, Congress has the authority to do 
that. What happens if that occurs?
    Mr. Grossman. Well, as I discussed in my testimony, my 
general answer is I do not know. There is some reason to 
believe, based on empirical research, that the difference in 
judicial outcomes would not be very large. My hope would be, 
and it is my hope and it may be an idle hope, would be that it 
would change the mood that currently affects agency rulemaking 
and that agencies would recognize that they may well be subject 
to greater checks and that deference is not necessarily 
something they can count on at every instance.
    Do I know that would be the case? No, I do not. As I 
discuss in my testimony, it seems to me the best answer is 
really rigorous application of Chevron step one, but that is 
something, I think, that it would be very difficult for 
Congress to legislate.
    Senator Lankford. So, where is the check, as I have 
mentioned before, for an agency or an independent agency that 
they both create the rule, they interpret the rule, they 
enforce the rule, and if you want to appeal the rule, you are 
appealing the rule to the person sitting next door to the 
previous person that gave you the previous decision. There is 
no place to go outside.
    Banking is a good example of that. There is really no place 
to go to be able to get another opinion outside of this 
particular group of regulators, and so you may disagree with 
this opinion of this regulator, you may appeal it, but that 
same regulator is now going to come back and is going to bring 
more things on you in the days ahead. Where do we build in a 
structure where there is not a due process outside of that 
entity?
    Mr. Grossman. Two responses. First of all, talking about an 
agency's interpretation of their own rules, that is something 
that, I agree with the thrust of the questioning. That is 
something, I think, is worth considering, and I think could 
have some effect, and probably a positive effect.
    With respect to areas where judicial review is sometimes 
difficult to obtain and certain types of decisions are left 
within the agencies, it is a difficult question. There are some 
areas where, due to the statutory schemes that Congress has 
enacted, you effectively have procedural dead ends where it is 
difficult to get a final definitive judicial interpretation of 
the extent of an agency's authority.
    It seems to me that where those exist, and there are fewer 
than they were in the past, those are ripe areas for Congress 
to consider what the proper procedure is.
    Senator Lankford. OK. Mr. Levin, do you have any comments 
on that?
    Mr. Levin. Well, I think that if you were to change the 
Administrative Procedure Act to provide that all agencies' 
interpretations of law will be decided under Skidmore, I think 
you could be confident that it would cause enormous confusion, 
not just because Congress had enacted something new, and not 
just because the phrasing may be difficult to work out, as, I 
believe, has actually been the case with the recent bills, but 
also because the Skidmore test itself is considered to be one 
of the most indeterminate in all of American law.
    Senator Lankford. Is Chevron applied consistently?
    Mr. Levin. I would say in relative terms, Chevron is widely 
viewed as the more determinant and predictable standard.
    Senator Lankford. But, is it consistent?
    Mr. Levin. I do not think any standard is applied 
completely consistently I also think that there are judgment 
calls to be made and judges will bring other considerations to 
bear no matter what standard you provide. But, I would still 
say Chevron is considered a relatively determinate, Skidmore a 
relatively vague and indeterminate one.
    Senator Lankford. OK, so the challenge I still come back to 
is when there is the difficulty that sits before a judge, and 
there are moments, clearly, there are many moments where 
something is big, significant, and however you are going to 
determine significant, it is sitting before a judge to 
determine whether this agency is going to get deference to be 
able to make this rulemaking and to be able to finish this out 
with whatever the rule was, when it is vague, why is the 
assumption not given to Congress to say, the agency cannot act 
on this. Congress has to provide clarity.
    Why is the decision, yes, the agency is smart, they have 
done the research, they have done this, they are creating new 
ground. They are moving out into a new area that Congress may 
or may not have intended in the past. But instead of waiting on 
Congress to act, the agency is given forward motion and 
Congress has basically said, if you want to change the forward 
motion of this agency, Congress can then go back, pass a law, 
override a veto of the President, but until they can get a 
Presidential override, this agency gets deference to keep 
moving as far as they want.
    Mr. Levin. I could be mistaken, but it sounds as though you 
are proposing a judicial revival of the so-called non-
delegation doctrine, which is a theory that an agency cannot 
act until Congress provides specificity. That is a theory that 
has gotten some support in 1935 and never since because the 
courts simply find themselves unable to deal with that.
    Senator Lankford. There are a lot of small areas of that.
    Senator Heitkamp. Yes.
    Senator Lankford. I am talking about major areas. There are 
major issues that have significant changes that now it is the 
battle to go take something back rather than to try to pass it.
    Senator Heitkamp. But, let us stick with the Waters of the 
United States example. So, now you have this controversy. The 
regulation is moving forward. It is at OIRA, I believe, and so 
we are waiting. I do not think Congress should wait. I think 
Congress should play a role in making this determination.
    But, when you say, so, now let us say the court, instead of 
issuing the opinion that they issued, said, OK, hold off. We 
are not going to--you cannot do anything. You cannot interpret 
this until Congress interprets it. In the meantime, I have a 
farmer who wants to title their land and they have applied for 
a permit, or they need to know if they have to apply for a 
permit. And, so, in the real world--I am saying, in a 
theoretical world, that is fine, but these regulations have 
practical effect every day. And to say, we are simply going to 
stop--and, I think, the court would say that. We cannot just 
stop and say, put everything on pause, because we have real 
practical applications.
    Let us take King v. Burwell. So, what happens if the court 
says, we are going to stop until Congress acts. That creates a 
tremendous amount of uncertainty to the folks who have gone to 
the exchange, that is the Federal exchange, and have relied on 
the tax incentives on that exchange.
    And, so, I guess, my point in this is that, theoretically, 
where I have been arguing Congress needs to act, it also is 
probably not a path forward for what I would call a stay of any 
executive action pending the Congress doing its due diligence 
and fulfilling its responsibilities has huge impact in the real 
world.
    Mr. Levin. And, I do not want this comment to sound overly 
critical, but it is a fact that Congress has been much less 
productive over the past several years----
    Senator Heitkamp. That is OK, if you are overly critical. 
We are, too.
    Mr. Levin. Very well. But, it does not need to be, because 
I could just make the descriptive point that when you have the 
last two Congresses at historic levels of non-activity, the 
most--passing fewer laws than any other Congress in recorded 
history--it puts a great deal of pressure, in effect, on both 
the Executive Branch and the Judicial Branch to see if they can 
find ways for the government to go on and do what it needs to 
do and fill gaps.
    Senator Lankford. So, the question really is does it put 
pressure on the Executive Branch or does it give the Executive 
Branch opportunity?
    Mr. Levin. Both. That is another way of putting it.
    Senator Lankford. But, that is the issue and that is the 
challenge, is that when we have--and there will be moments 
again, multiple moments, but under the trend that we are 
heading in the judicial deference, when we have divided 
government, which will happen a lot in America in the days 
ahead, does that create opportunities from here on out for the 
Executive Branch and all agencies to move through the vagaries 
of every rule that they can find, create as many policies as 
they can to have that deference, because they are smarter and 
they have done comments, whether they have acted on those 
comments or not, and to be able to move unchecked.
    Mr. Levin. Well, they have the authority that they have, 
and so there will be arguments about whether they have exceeded 
that authority. Courts will review those questions. The point I 
was making was that in the absence of legislative input, for 
better or worse, there will be impetus on both of those 
branches to make it possible for functions to be performed, 
and----
    Mr. Grossman. Oh, sorry. If I could, I mean, I agree with 
Professor Levin regarding the incentives, but I would note that 
the incentives actually work both ways. To the extent that the 
Executive Branch can take actions that reduce pressure on 
Congress to act, the result, understandably, will be inaction, 
and I think a paramount example of that is the numerous 
executive fixes that have been made to the Obamacare, the 
Patient Protection and Affordable Care Act. And, I am not 
talking about controversial things like the exchange credits. I 
am talking about deadlines, mandatory deadlines that were set 
in law, and taxes that were set at certain rates and things of 
that nature, where--numbers and ``shall'' and things like that 
were altered.
    Senator Heitkamp. Where the first analysis probably was, 
who is going to sue us if we do it, right?
    Mr. Grossman. Well, I think in many cases, the analysis 
that the executive agencies undertook was that nobody would 
have standing to sue them. And, so, you might have had an 
opportunity for Congress to come together, potentially, to make 
some number of fixes to this type of statute. But as it was, 
since the Executive Branch was making those fixes, there was 
absolutely no pressure at all on Congress to do that.
    Mr. Levin. I would not say there was no pressure on 
Congress to do it. I would say that it was not heeded. But, the 
upshot was that the agency had and has a program that it has 
been told to implement.
    Senator Heitkamp. Well, I mean, if you take my example of 
King v. Burwell, if the judiciary decides we are tired of 
patching this together, what happens?
    Mr. Grossman. Well, I think King v. Burwell is really a 
very troubling case. I mean, it is troubling, first of all, in 
its implications, and I think everyone should acknowledge that, 
that if people who do depend on exchange subsidies lose them, 
that is, if that happened suddenly, that can have real 
consequences.
    But, it is also troubling because the way we got into this 
area was that the agency, by interpreting the law in a very 
implausible manner, changed the facts on the ground. In other 
words, it acted aggressively and the result was to put us in 
this bind, where if the court decides in a certain way that is 
probably the most natural reading of the text, there will be 
dislocation and consequences. And, I think that is really an 
example of where we wind up when you have excessive deference--
--
    Senator Heitkamp. Right----
    Mr. Grossman [continuing]. That agencies feel that they are 
able to do that.
    Senator Heitkamp. And the court does not live in a vacuum. 
I mean, the court understands real world implications of their 
decisionmaking. They are not going to not consider the actual 
consequences. But, I think it is going to be a very interesting 
decision.
    Mr. Levin. Well, I think it is, but could I also add that I 
do not agree with the proposition that the position the 
government took was implausible. I think they took the position 
that they believed with great conviction was intended by 
Congress all along. If it is the case that for the Supreme 
Court to adopt Mr. Grossman's reading would cause great 
disruption, that seems like a good reason to believe that the 
IRS got it right because it would be disruptive to have the 
world the way the challengers are urging.
    Senator Heitkamp. And, we should acknowledge that there is 
a split in the circuit on the actual interpretation of that 
statute, not just agency interpretation of it.
    Mr. Levin. Right.
    Senator Lankford. Versus the plain text reading, which is--
--
    Senator Heitkamp. Yes.
    Senator Lankford. The discussion now is over, was that the 
intent and was the intent actually put into the statute. When 
you read the statute in its plain reading, and we can have a 
great discussion about this, but when you read the plain text, 
it reads one way, and when you hear speeches, you hear 
something different. To say the speed of how the law was 
written and done, did that line up with it, that is a whole 
different issue for a different day and for a different 
hearing, but we will---- [Laughter.]
    Mr. Levin. We could go on in that vein indefinitely if we 
wanted to.
    Senator Lankford. We could. This will be settled somewhere 
around June 25, there will be a decision up here one morning on 
the website and try to find some sort of resolution of what 
happens next from there.
    I appreciate your testimony and your preparation for this. 
As promised, we did not resolve all of this. What I hope we did 
is be able to gather some ideas. We do need to find some 
resolution.
    I am very concerned about the direction this continues to 
go in the back-and-forth nature of regulations unchecked on it 
without some consistency to business and individuals and 
families and cities and States trying to figure out where we 
are really going. So, literally, policies and regulations 
change at the whim of the executive rather than have some 
ongoing consistency. It is the nature of our great republic, 
that you have predictability in law. And, if we no longer have 
predictability in law and regulations, where things are going, 
it is a problem to us long term.
    So, I appreciate very much. I do believe that other 
individuals that were not on the dias will have 15 days to be 
able to submit any kind of questions or opening statement they 
might want to put on the record.
    I appreciate you being here and being part of this 
conversation.
    With that, this hearing is adjourned.
    [Whereupon, at 11:31 a.m., the Subcommittee was adjourned.]
                            A P P E N D I X

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