[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
REINING IN THE ADMINISTRATIVE STATE:
REGULATORY AND ADMINISTRATIVE
LAW REFORM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON THE ADMINISTRATIVE STATE,
REGULATORY REFORM, AND NTITRUST
COMMITTEE ON THE JUDICIARY
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
TUESDAY, FEBRUARY 11, 2025
__________
Serial No. 119-3
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Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
58-807 WASHINGTON : 2025
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COMMITTEE ON THE JUDICIARY
JIM JORDAN, Ohio, Chair
DARRELL ISSA, California JAMIE RASKIN, Maryland, Ranking
ANDY BIGGS, Arizona Member
TOM McCLINTOCK, California JERROLD NADLER, New York
THOMAS P. TIFFANY, Wisconsin ZOE LOFGREN, California
THOMAS MASSIE, Kentucky STEVE COHEN, Tennessee
CHIP ROY, Texas HENRY C. ``HANK'' JOHNSON, Jr.,
SCOTT FITZGERALD, Wisconsin Georgia
BEN CLINE, Virginia ERIC SWALWELL, California
LANCE GOODEN, Texas TED LIEU, California
JEFFERSON VAN DREW, New Jersey PRAMILA JAYAPAL, Washington
TROY E. NEHLS, Texas J. LUIS CORREA, California
BARRY MOORE, Alabama MARY GAY SCANLON, Pennsylvania
KEVIN KILEY, California JOE NEGUSE, Colorado
HARRIET M. HAGEMAN, Wyoming LUCY McBATH, Georgia
LAUREL M. LEE, Florida DEBORAH K. ROSS, North Carolina
WESLEY HUNT, Texas BECCA BALINT, Vermont
RUSSELL FRY, South Carolina JESUS G. ``CHUY'' GARCIA, Illinois
GLENN GROTHMAN, Wisconsin SYDNEY KAMLAGER-DOVE, California
BRAD KNOTT, North Carolina JARED MOSKOWITZ, Florida
MARK HARRIS, North Carolina DANIEL S. GOLDMAN, New York
ROBERT F. ONDER, Jr., Missouri JASMINE CROCKETT, Texas
DEREK SCHMIDT, Kansas
BRANDON GILL, Texas
MICHAEL BAUMGARTNER, Washington
------
SUBCOMMITTEE ON THE ADMINISTRATIVE STATE,
REGULATORY REFORM, AND ANTITRUST
SCOTT FITZGERALD, Wisconsin, Chair
DARRELL ISSA, California JERROLD NADLER, New York, Ranking
BEN CLINE, Virginia Member
LANCE GOODEN, Texas J. LUIS CORREA, California
HARRIET HAGEMAN, Wyoming BECCA BALINT, Vermont
MARK HARRIS, North Carolina JESUS G. ``CHUY'' GARCIA, Illinois
DEREK SCHMIDT, Kansas ZOE LOFGREN, California
MICHAEL BAUMGARTNER, Washington HENRY C. ``HANK'' JOHNSON, Jr.,
Georgia
CHRISTOPHER HIXON, Majority Staff Director
JULIE TAGEN, Minority Staff Director
C O N T E N T S
----------
Tuesday, February 11, 2025
OPENING STATEMENTS
Page
The Honorable Scott Fitzgerald, Chair of the Subcommittee on the
Administrative State, Regulatory Reform, and Antitrust from the
State of Wisconsin............................................. 1
The Honorable Jerrold Nadler, Ranking Member of the Subcommittee
on the Administrative State, Regulatory Reform, and Antitrust
from the State of New York..................................... 3
The Honorable Jim Jordan, Chair of the Committee on the Judiciary
from the State of Ohio......................................... 5
The Honorable Jamie Raskin, Ranking Member of the Committee on
the Judiciary from the State of Maryland....................... 6
WITNESSES
Dr. Patrick A. McLaughlin, Research Fellow, Hoover Institution
Oral Testimony................................................. 8
Prepared Testimony............................................. 11
Patrick ``Rick'' Smith, CEO, Axon Enterprise, Inc.
Oral Testimony................................................. 17
Prepared Testimony............................................. 19
Magatte Wade, Senior Fellow for Initiatives for America, Atlas
Network, Two Liberty Center
Oral Testimony................................................. 23
Prepared Testimony............................................. 25
Stephen I. Vladeck, Agnes Williams Sesquicentennial Professor of
Federal Courts, Georgetown Law
Oral Testimony................................................. 27
Prepared Testimony............................................. 29
LETTERS, STATEMENTS, ETC. SUBMITTED FOR THE HEARING
All materials submitted for the record by the Subcommittee on the
Administrative State, Regulatory Reform, and Antitrust are
listed below................................................... 53
Materials submitted by the Honorable J. Luis Correa, a Member of
the Subcommittee on the Administrative State, Regulatory
Reform, and Antitrust from the State of California, for the
record
An article entitled, ``Trump's Actions Have Created a
Constitutional Crisis, Scholars Say,'' Feb. 10, 2025, The
New York Times
An article entitled, ``Do Regulations Really Kill Jobs
Overall? Not So Much,'' Sept. 21, 2011, ProPublica
An article entitled, ``Dean Stuart Shapiro: Federal
regulations don't really affect economic growth,'' Oct.
23, 2023, Rutgers Edward J. Bloustein School of Planning
and Public Policy
An article entitled, ``The Dangers of Deregulation,'' Dec. 2,
2019, State of the Planet: Columbia Climate School
An article entitled, ``The Envy of the World: The American
Economy Has Left Other Rich Countries in the Dust.'' Oct. 2024,
The Economist, submitted by the Honorable Jamie Raskin, Ranking
Member of the Committee on the Judiciary from the State of
Maryland, for the record
An article entitled, ``How a Start-Up Utopia Became a Nightmare
for Honduras,'' Jan. 24, 2024, Foreign Policy, submitted by the
Honorable Jesus G. ``Chuy'' Garcia, a Member the Subcommittee
on the Administrative State, Regulatory Reform, and Antitrust
from the State of Illinois, for the record
QUESTIONS AND RESPONSES FOR THE RECORD
Questions submitted by the Honorable Scott Fitzgerald, Chair of
the Subcommittee on the Administrative State, Regulatory
Reform, and Antitrust from the State of Wisconsin, for the
record
Questions submitted to Dr. Patrick A. McLaughlin, Research
Fellow, Hoover Institution
Response to questions from Dr. Patrick A. McLaughlin,
Research Fellow, Hoover Institution
Questions submitted to Magatte Wade, Senior Fellow for
Initiatives for America, Atlas Network, Two Liberty
Center
REINING IN THE ADMINISTRATIVE STATE:
REGULATORY AND ADMINISTRATIVE
LAW REFORM
----------
Tuesday, February 11, 2025
House of Representatives
Subcommittee on the Administrative State,
Regulatory Reform, and Antitrust
Committee on the Judiciary
Washington, DC
The Subcommittee met, pursuant to notice, at 10:03 a.m., in
Room 2141, Rayburn House Office Building, the Hon. Scott
Fitzgerald [Chair of the Subcommittee] presiding.
Present: Representatives Fitzgerald, Jordan, Issa, Cline,
Hageman, Harris, Schmidt, Baumgartner, Nadler, Raskin, Correa,
Garcia, Lofgren, and Johnson.
Mr. Fitzgerald. The Subcommittee will come to order.
Without objection, the Chair is authorized to declare a
recess at any time.
We welcome everyone to today's hearing on the
Administrative State and opportunities for reform. I will now
recognize myself for an opening statement.
Today's hearing will explore the Administrative State and
look for ways that we can reform the regulatory and
administrative law to work better for everyday Americans. It's
no secret that regulatory burdens have reached an all-time
high. Regulatory agencies create rules with the force and
effect of law. The number of rules that agencies create is
overwhelming.
In the final year of the Biden-Harris Administration,
unelected bureaucrats finalized over 3,000 rules. That's an
average of eight regulations per day. By contrast, during the
same period, Congress passed almost 150 laws. In other words,
the Executive Branch issued mandates with the force of law over
20 times more often than the Legislative Branch.
According to the Competitive Enterprise Institute, these
regulations impose a total estimated annual cost of two
billion--excuse me, 2.1 trillion or more than $15,000 per
American household. Some of my colleagues on the other side may
claim that because Congress cannot pass laws, agencies feel
empowered to take over. Congress was designed to require
lawmakers to think deeply about these decisions. Congress was
also designed to be accountable to the voters. If our
constituents do not like our decisions, then we are voted out
of office.
Unelected bureaucrats, by contrast, are not politically
accountable. This lack of accountability shows. When agencies
make these rules, they not only act as a legislator for the
country but often as prosecutors and judges through the
administrative process.
Agencies often bring enforcement actions into their in-
house administrative courts. The same agency that makes the
rules also decides to sue if a person broke them. Then, to
prove that a person broke the rule, the agency tries the case
before its own in-house judge in so-called, quote,
``independent agencies.'' Commissioners who directly prosecute
the case also act as judges on appeal.
The whole system defies logic at this point. The
administrative system is set up to regulate the American people
into submission, which is entirely at odds with the principles
that this country was founded on. Our Founders deliberately
split the making of laws, enforcement of laws, and judgment of
laws into three coequal branches of government. Our Founders
were convinced and concerned about exactly the same centralized
power we now see in the Administrative State.
It does not have to be this way. Last Congress, the
Judiciary Committee marked up numerous bills aimed at reforming
the Administrative State, the REINS Act, the Midnight Rules
Relief Act, the Prove It Act, the Separation of Powers
Restoration Act, and the One Agency Act, just to name a few.
All these bills were aimed squarely at the topic we are here to
talk about today, Reining in the Administrative State.
I'm proud of the work this Committee undertook last
Congress, and I hope for the sake of the American people that
we turn these proposals into law this Congress. My colleagues
on the other side of the aisle routinely oppose all attempts by
Congress to rein in the Administrative State. They also
criticize President Trump for taking steps to control the
Administrative State. They ignore that the Constitution makes
the President the leader of the Executive Branch.
They will do everything in their power to protect the
unelected bureaucrats in the Administrative State. Why? Because
these unaccountable bureaucrats do the bidding among colleagues
in the minority. This is true even though Americans rejected
their views in the most recent election.
Today we have an opportunity to hear from witnesses who
have deep experience in the regulatory reform area.
Ms. Wade and Mr. Smith are entrepreneurs and deal with the
crushing weight of regulations every day. Mr. Smith has even
faced the administrative court system and was forced to pursue
a case all the way to the Supreme Court to vindicate his
Constitutional rights. Dr. McLaughlin is an expert in
regulatory and economic analysis and has written extensively on
how damaging regulatory burdens are on the economy.
These witnesses are perfectly prepared to supply the
Members of the Committee with the required information to
better inform us as we work on possible solutions and consider
the proposals that have already been introduced. I want to
thank the witnesses for appearing before us today and look
forward to hearing what each of you has to say on the topic.
I now recognize the Ranking Member, Mr. Nadler, for his
opening statement.
Mr. Nadler. Thank you, Mr. Chair.
Mr. Chair, holding a hearing today on, quote, ``Reining in
the Administrative State,'' is a bit like rearranging the deck
chairs on the Titanic. As we speak, Elon Musk and his band of
near-teenaged accomplices are systematically working their way
through the Executive Branch knocking down agency after agency
while undermining the rule of law and shredding the
Constitution along the way.
Musk and his team have unprecedented access to our most
sensitive and personal data. They have gained access to
extremely sensitive tax information at the IRS, highly
restricted government records on millions of Federal employees
and their families from the Office of Personnel Management, and
personal data related to health insurance plans, workplace
safety, and health investigations, child labor, and more from
the Department of Labor. This is just what we've learned
through news articles, because all these actions have been
taken without any transparency to the American people.
Musk and his team have access to at least 18 agencies and
untold amounts of sensitive data that are attracted to bad
actors here and abroad. Musk and his assistants are not just
accessing this data. They are feeding it into AI models,
downloading it on to commercial servers, and possibly taking it
off premises. Because Musk and his team can also change our
government systems, not only is the personal information of
millions of Americans at risk, but also the systems that ensure
our safety and core government functions.
For example, Musk and his team have accessed four systems
at the Federal Aviation Administration. Experts have warned
that, quote, ``even a small system disruption could cost mass
grounding of flights, a halt in global shipping, or worse,
downed planes.'' Officials at the FAA warn that going into
these systems without an in-depth understanding could result in
death and an economic harm to our Nation.
Nevertheless, Musk indicated that the DOGE team will aim to
make, quote, ``rapid safety upgrades to the air traffic control
system.'' Just in the past few weeks, we have seen what happens
when mistakes are made in our air traffic control system when a
Black Hawk helicopter ran into a commercial flight, resulting
in dozens of deaths. Musk and his team are opening us up to
more deaths and critical economic harm.
Elon Musk is not content just to cause massive disruption
and expose us to greater risk. No. He's also using his
unfettered access to our agencies and our data to benefit
himself. For example, the Department of Labor was investigating
workplace abuse allegations at three Musk-owned companies: The
Boring Company, SpaceX, and Tesla. So, Musk and his team
invaded the agency and gained access to their information on
current and past investigations.
Just days before they got access to the Consumer Financial
Protection Bureau, Musk finalized a deal with Visa to process
peer-to-peer payments for a wallet feature on X. Because the
CFEP policies--I'm sorry, because the CFBP polices such payment
systems, the data Musk and his team accessed could give his new
X wallet feature competitive advantage in the market.
As a kicker, the Trump Administration instructed the CFPB
to halt its work, thus ensuring that there's no one to keep
Musk's new payment system from exposing personal data or
enabling fraud. Nevermind that the CFPB has produced almost $20
billion in consumer relief and has put millions back in the
pockets of Americans. The agency had information Musk needed,
so he got it. The agency would have enforced the law with a
likely impact on his wallet, so the agency's work was halted
instead.
Serious concerns have been raised about whether the people
accessing this data, many of them barely past college, have the
appropriate training and vetting necessary to handle such
sensitive data. That is an active data breach on a scale we
have never experienced before, but this time the threat is
coming from inside the house. Imagine what domestic criminals
or foreign adversaries could do if they got their hands on this
information. This is a clear and present danger, and yet our
Republican colleagues do nothing.
In addition to these structural attacks on the Executive
Branch, the Trump Administration is also reclassifying civil
servants as political employees who can be replaced with
flunkies beholden to Donald Trump, imposing loyalty tests on
national security officials, and encouraging tens of thousands
of employees to resign with promises it has no authority to
make. As a result, it is hollowing out the workforce and the
decades of experience and technical expertise that comes with
it.
Without any authorization from Congress, the Trump
Administration has also taken several other actions that have
thrown the Federal Government into chaos. It attempted to
impose, quote, ``a temporary funding freeze,'' across much of
the Federal Government that a judge has already ruled unlawful.
It fired duly appointed Democratic members of independent
agencies to deprive these agencies of a working quorum and
essentially prevent them from fulfilling their missions. To
ensure that no one is able to hold the administration
accountable from within the Executive Branch, the President
fired more than a dozen inspector generals without following
the statutory requirements for doing so. These actions are as
unconstitutional as they are dangerous.
While we witness these incursions on the rule of law and
the Constitution, my Republican colleagues do nothing. In fact,
they cheer on Elon Musk as he usurps Constitutional authority
and navigates unprecedented power to himself.
When Joe Biden was President, we heard stern speeches from
our Republican friends about the need to assert our Article I
authority. We were told that the Biden Administration was
guilty of dangerous overreach when it attempted to help people
drowning in student loans or protected our communities from gun
violence or helped shield consumers from corporate abuse, but
now that is ancient history. Now, they aid and abet shadow
President Musk while he bulldozes his way through the
Administrative State untenanted to any Constitutional statute
or authorization.
There is no check and no balance from the Republican
Congress, just feckless inaction because it serves their
purposes. They know that undermining the critical protection
provided by our agencies would be deeply unpopular, so they are
content to abdicate their responsibilities and let Elon Musk do
their dirty work.
I urge my Republican colleagues to stand up for this
institution and for the people they represent.
I yield back.
Mr. Fitzgerald. The gentleman yields back.
I now recognize the Chair of the Full Committee, Mr.
Jordan, for his opening statement.
Chair Jordan. Thank you, Mr. Chair.
Instead of stopping the stupid spending, Democrats attack
the guy who's exposing it. I think the taxpayers in this
country would just as soon we stop spending their money on dumb
things. Like, what was the example from USAID, some transgender
comic in Ireland, spending money on Bert and Ernie and Big Bird
on Baghdad TV. I think they would prefer we not to do that.
Elon Musk is exposing in the Federal Government exactly
what he exposed at Twitter when he purchased Twitter. What did
we find out there? Big Government was pressuring Big Tech to
censor Americans. You don't have to take my word for it. We had
the Twitter Files. Oh, and we also had someone else in Big Tech
send a letter to this Committee and tell us exactly what they
were doing. Mark Zuckerberg said the Biden Administration was
pressuring us to censor. We did it. We're sorry. We won't do it
again. He told the whole world that in a letter to this
Committee. So, Elon Musk is now doing that for the Federal
Government. We think that's a good thing.
Understand the fundamental difference the Left has with us
conservatives. Democrats believe it is the career-elected
bureaucrats who are supposed to run the country. We don't think
that's the way it's supposed to work. We actually think it's
the people who put their name on a ballot who get elected by
``We the People,'' who make the decisions. The guy who got 77
million votes on November 5th, says he wants Elon Musk working
for him--the elected Member who heads the Executive Branch--
working for him every bit as much as the Federal employees and
people in Treasury who were supposed to have all the answers or
in USAID who bid the career officials working for him to expose
stupid things our government is spending money on. The
Democrats are going to attack that guy? Go ahead. Go right
ahead.
We know the real consequences of having this Administrative
State, these bureaucrats run things. We have got two witnesses
here who've lived it. Ms. Wade and Mr. Smith. They're here to
talk about how that had impacted their business.
So, I appreciate the Chair having this hearing. This is
exactly the kind of hearing we have to have. I appreciate the
work the President and his team are doing to expose the stupid
things bureaucrats spend the hard-earned money of the people we
get the privilege of representing.
I yield back.
Mr. Fitzgerald. The gentleman yields back.
Now, recognize the Ranking Member of the Full Committee,
Mr. Raskin, for his opening statement.
Mr. Raskin. Thank you very much, Mr. Chair, and thank you
to the Ranking Member of the Subcommittee, Mr. Nadler. Thank
you to my colleague, Chair Jordan. Thanks to all our witnesses
for being here with us today.
I'm surprised to hear my friend from Ohio talking about the
transgender comic book from, I can't remember which country,
but if there's a form of government expenditure taking place
that we have a problem with, isn't that why the Constitutional
oversight function exists? Don't we have a whole Oversight
Committee, which you serve on, which I served on, which can do
that? Do we really need to hire a fourth Branch of Government
called Elon Musk to go out and do it for us? We're about to
enter into a budget process right now. We can deal with it
ourselves.
Mr. Chair, in the last 22 days, Donald Trump's billionaire
government has taken a wrecking ball to public institutions and
the rule of law in America. The agent of chaos is Elon Musk,
quote, ``a Special Government Employee purportedly working on
technological reform.'' More crucially, he's a big businessman
whose floundering Tesla sales in Europe create huge financial
pressures for him, according to The Business Press.
Even more crucially, he's a government contractor who
collects billions of Federal taxpayer dollars every single year
and yet has not filed a single employee ethics disclosure form
as required by law. He has accessed not only the computers
controlling his own billion-dollar payments from us, the
people, but to computers containing his contractor rivals'
contract bids, their contracts, their invoices, and their
payment systems. Yet, he has not shown us a single conflict of
interest waiver form for these multiple egregious apparent
conflicts of interest.
He and his mutant teenage racist computer hackers have
taken possession of financial payment systems at the United
States Department of Treasury, meaning data access to the
private financial records of every American citizen, every
Member of Congress, every Federal prosecutor, every regulator
who's supposed to be looking at what his business does, every
private lawyer, and every Federal judge who they're now calling
for the impeachment of because they dare to speak up for the
rule of law. What could go wrong with this situation?
Fortunately, we do still have an Article III, a working
Federal judiciary, which has issued no fewer than 12
injunctions in three weeks, 12 temporary restraining orders or
preliminary injunctions in three weeks against the illegality
of this arrangement, including an injunction against any
further unlawful seizure, possession, and corruption of
Americans' private financial data.
Now, the Elon Musk cyber raid against our data and privacy
infrastructure has set the stage for the administration's
outrageous and unprecedented violation of Constitutional
lawmaking and spending power. That's what the first hearing of
this Subcommittee should be about, Mr. Chair, the blatantly
illegal and quickly reversed freeze on billions of dollars in
Federal grants already appropriated by the U.S. Congress,
programmed by the agencies, contracted for by government
lawyers, and in the proper pipeline for payment. The flagrantly
illegal efforts to not pay Federal workers and honor our
contracts for work already rendered to condition Federal funds
on totally made-up restrictions never voted on, much less
approved by Congress, and the scandalous effort to dismantle
and neutralize entire Federal agencies, like NOAA, USAID, and
the CFPB, spitting in the face of Constitutional power
enactments and appropriations.
An appropriations act is a Federal law like any other law.
Like the law, for example, against violently assaulting Federal
police officers. An appropriations act is not a recommendation
or a bargaining maneuver with the Executive Branch. It is a
law. It must be enforced. This administration needs a
Constitutional refresher course, Mr. Chair.
The Preamble to the Constitution says,
We the people, in Order to form a more perfect Union, establish
justice, ensure domestic tranquility, provide for the common
defense, promote the general welfare, and preserve to ourselves
and our posterity the blessings of liberty, do hereby ordain
and establish the Constitution of these United States.
The very next sentence of the Constitution establishes in
Article I the Congress of the United States possessing all the
legislative power.
Some of my colleagues have taken to saying we're three
coequal branches. I beg to differ. We're not three coequal
branches. Not at all. First, coequal's not even a word, right?
That's like extremely unique. It doesn't mean anything. They're
saying three equal branches. I don't think so.
Read James Madison, ``The Federalist Papers.'' Congress is
the predominant branch. Congress is the lawmaking branch. It's
Congress. Check out Article I, section 8, ``All of the powers
we have to regulate commerce domestically and internationally,
to pass the budget, to appropriate money.'' Congress does that.
Then in Article I, section 8, clause 18, and ``all other powers
necessary and proper to the execution of the foregoing
powers.'' After all that, you get to four short paragraphs in
Article II.
My friend Mr. Jordan has been quoting the first sentence
all over TV. He thinks that he somehow has a knockout argument.
He says the executive power shall be vested in a President of
the United States of America. Yes, indeed, Mr. Jordan, that's
where the executive power is vested. What is the executive
power? The core responsibility of the President of the United
States is to take care that the laws are faithfully executed.
Right? Not defied, not violated, not trashed, and not
rewritten. To take care that the laws are faithfully executed,
which is precisely what's not happening today.
As they say, oh, well, Elon Musk, he's got all the power of
the President. Donald Trump himself could not be doing what
Elon Musk is doing in Washington today. He can't evaporate AID.
He can't nullify the CFPB. He can't destroy an agency set up by
us on a bipartisan basis in Congress. Nobody in the Executive
Branch has that.
Yes, the President is on top of the Executive Branch, but
we're the lawmaking power. Who sorts out the conflict if
there's a conflict? The courts do. What have the courts been
saying? They've said a dozen times in three weeks that they're
violating the Constitution of the United States and the laws
passed by Congress.
That's what's going on in America today. That's what we
should be having a hearing about. Not some eerie academic
conversation about the Administrative State, whatever they mean
by that.
I yield back, Mr. Chair.
Mr. Fitzgerald. The gentleman yields back.
Without objection, all the opening statements will be
included in the record.
We'll now introduce today's witnesses.
Dr. Patrick McLaughlin. Dr. McLaughlin is a Research Fellow
at the Hoover Institution at Stanford University and a visiting
Research Fellow at the Pacific Legal Foundation. He authored
more than 30 peer reviewed studies on a variety of topics,
including regulatory economics, administrative law, and
international trade.
Mr. Patrick Smith. Mr. Smith is the Chief Executive Officer
and founder of Axon Enterprise. Axon offers a variety of
products and services, mostly law enforcement and public safety
entities. These products and services include TASER devices,
body cameras, de-escalation training, and evidence management
and reporting software.
Ms. Magatte Wade. Ms. Wade is the Cofounder of Prospera
Africa, a governance platform for special economic zones, and a
Senior Fellow at the Atlas Network, an organization of African
free market think tanks. She was named by Forbes as being one
of the 20 youngest power women in Africa. I get that right? A
young global leader by the World Economic Forum and is a TED
global Africa fellow.
Professor Steven Vladeck. Mr. Vladeck is the Agnes Williams
Sesquicentennial Professor of Federal courts at the Georgetown
University Law Center. Professor Vladeck focuses on Federal
courts, the Supreme Court, national security law, and military
justice.
We welcome our witnesses and thank them for appearing
today.
We will begin by swearing you in. Would you please rise and
raise your right hand?
Do you swear or affirm under penalty of perjury that the
testimony you are about to give is true and correct to the best
of your knowledge, information, and belief, so help you God?
Let the record reflect that the witnesses have answered in
the affirmative.
Thank you. Please be seated.
Please know that your written testimony will be entered
into the record in its entirety. Accordingly, we ask that you
summarize your testimony in five minutes.
Dr. McLaughlin, you may begin.
STATEMENT OF DR. PATRICK A. McLAUGHLIN
Dr. McLaughlin. Thank you. Chair Fitzgerald, Ranking Member
Nadler--
Mr. Fitzgerald. Microphone, sir.
Dr. McLaughlin. Thank you. Chair Fitzgerald, Ranking Member
Nadler, and the Members of the Committee, thank you for the
opportunity to testify today. My name is Patrick McLaughlin,
and I am a Research Fellow with the Hoover Institution and a
visiting Research Fellow with the Pacific Legal Foundation. I
appreciate the chance to discuss how regulatory reform can
promote economic growth, encourage innovation, and reduce
unnecessary burdens on businesses and consumers.
Let's begin by acknowledging that regulations can play an
essential role in achieving policy objectives, such as
protecting public health and the environment. When regulations
pile up over time, without systematic review, this regulatory
accumulation has costly consequences. Compliance becomes more
complex, businesses face mounting overhead costs, and
entrepreneurs struggle to navigate the maze of over one million
regulatory restrictions that are currently on the books.
Projects like the RegData project, which uses AI to
quantify various aspects of regulation and make the data
publicly available, have permitted economists to study the
effects of regulatory accumulation and its counterpart
deregulation. I'd like to review some of those findings today.
First, I want to emphasize the magnitude of the economic
effects of regulatory accumulation or the other side of the
same coin, deregulation. In my written testimony, I cited a
study that I coauthored published in 2020 in the economics
journal Review of Economic Dynamics, that this study found that
regulatory accumulation, the buildup of rules over time,
distorts business investments, expenditures on things like
research and development, new machinery, and new buildings.
These are the same activities that, in the long run, tend to
increase productivity and drive economic growth.
We found that, on average, Federal regulatory accumulation
slowed overall GDP growth by eight-tenths of a percentage
point. Considering GDP growth is, in the U.S., typically 2-3
percent annually, losing nearly one percentage point represents
a massive loss. Other studies have found even larger effects.
Second, I want to highlight the regressive effects of
regulatory accumulation. Higher levels of regulation are
associated with increased levels of poverty and income
inequality. Specifically, a 10 percent increase in Federal
regulations is associated with a 2.5 percent increase in the
poverty rate and a four-percent increase in income inequality.
When you dig a little deeper, it's easier to understand
why. Regulations affect households directly in many ways, even
when those regulations are targeted at businesses. For example,
regulations typically increase the production cost of goods,
and some of those costs are, of course, passed on to the
consumer in the form of higher prices.
One study found that a 10 percent increase in total
regulation leads to a nearly one percent increase in consumer
prices. Furthermore, the study found that the effects of those
price increases are regressive; that is, the poorest income
groups experience the highest proportional increases in the
prices they pay.
Regulations also affect households by diminishing their
economic opportunities. Multiple studies have found that higher
levels of regulation are associated with fewer total firms and
lower levels of employment.
Finally, despite the fact that I'm an economist, I want to
offer a positive message. We have seen these negative effects
caused by regulatory accumulation can be reversed. Several
States and provinces of Canada have already begun the hard work
of reassessing existing regulations to see which ones truly
benefit the public versus which ones are outdated, redundant,
or impose costs that can't be justified by the benefits. By
identifying and removing regulations that no longer serve their
intended purpose, we can free up resources for more productive
uses.
Deregulatory efforts seem particularly effective when
coupled with tools like regulatory budgeting or sunsetting. The
Province of British Columbia, along with several other States,
have experimented with tools like this. In British Columbia,
they are one of the first jurisdictions to use regulatory
budgeting to deregulate, and they cut 40 percent of regulations
in a three-year period. Then they capped future regulatory
growth with a one in, one out type regulatory budget. The
result was a sustained boost to economic growth. A recent study
found that the province's growth rate increased by just over 1
percentage point because of the deregulatory efforts.
In closing, deregulation has the potential to invigorate
the economy, spur innovation, and lessen the disproportionate
burdens placed on smaller firms and vulnerable populations.
Thank you, and I look forward to answering any questions
you may have.
[The prepared statement of Dr. McLaughlin follows:]
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Mr. Fitzgerald. Thank you, Dr. McLaughlin.
Mr. Smith, you may begin.
STATEMENT OF PATRICK ``RICK'' SMITH
Mr. Smith. Thank you, Chair Fitzgerald, Ranking Member
Nadler, and the entire Subcommittee for having me here today.
It's an honor. My name is Rick Smith. I am the CEO and founder
of a company called Axon. We're an American company in Arizona
that employs over 4,000 people today.
I appreciate the opportunity to testify, because the
unchecked power of the government led to serious consequences
for my company, for my employees, and deeply for me personally.
No bureaucracy can be allowed to act as prosecutor, judge, and
jury without checks and balances and oversight.
Many fine Americans work at the FTC with the best of
intentions. Yet, the agency wields unchecked power in ways that
can crush innovation, stifle economic growth, and deny basic
Constitutional rights. This overreach was not the intention of
our Founders.
The work of this Committee is critical to ensuring that all
Americans do receive the due process protections they deserve
and are guaranteed under the Constitution.
I started Axon over 30 years ago in a garage with a dream
to bring Captain Kirk's phaser to life, to provide a real
alternative to deadly force. We can do better than bullets.
When I first introduced TASER technology, people laughed at the
idea. No one thought they would work, except my dad. He put in
his life savings. I nearly wiped him out.
At the edge of losing everything, after seven long years,
we finally turned the corner. Today, you see our yellow TASER
devices on almost every police officer in America. They've been
deployed millions of times, and together with the body-worn
cameras, another technology that we invented, they're used
across the globe, from the London Met to Sydney, Australia.
I've challenged my team to go further. We've published a
public ``moonshot goal'' to cut gun deaths in policing 50
percent over a 10-year period. We believe we can do this
through more effective, less lethal alternatives and changing
police through more advanced VR training.
These aspirations in our mission were severely disrupted
when we came up against the unfettered power of the FTC. In May
2018, we acquired a small, failing body camera competitor that
was losing a million dollars a month. Competitor after
competitor passed on this deal. For 18 months they tried to
sell the company. We were the buyers of last resort.
We bought this money losing company because it saved
critical public safety agencies, including the NYPD, from
serious disruptions if their body camera programs were allowed
to fail. The $13 million price we paid was well below the legal
threshold for FTC review.
What followed were months of requests for information,
mountains of legal filings, and a growing sense of disbelief
that this money losing deal had drawn such a disproportionate
government response. We offered to write off our entire
investment. In fact, we offered to put in another $13 million
in cash, effectively doubling our losses. Shockingly, we were
told this was not enough. The FTC demanded that we also hand
over our most valuable assets.
First, license all our intellectual property creating a
full-cloned competitor, then to hand over our most valuable
customers to be chosen by the FTC. Most alarmingly, we were
asked to write a blank check. This was such an outrageous
request our lawyers said hold on, ``did you say blank check?''
The government said ``yes, you heard us correctly, you will
write a blank check. You will fund this new competitor until we
tell you that you are done.'' I learned that over the previous
20 years the FTC had won 100 percent of cases in its in-house
forum.
Over our dinner table at home, I shared this terrifying
situation with my family, and my elementary school twins said,
Hey, dad, we're learning about the Constitution and the
Declaration of Independence. The colonists said the courts back
then were beholden to the king, and so they set up a new
country in the Constitution where the courts must be
independent. This is unconstitutional. You should sue them.
From the mouths of babes.
I was like, wow, this is so clear and obvious that it is
what we must do. So, we preemptively sued the FTC in Federal
court challenging their Constitutionality and saying, hey, just
sue us here where we've got a shot to tell our story. In April
2023, after four years of disruptions to our business, the
Supreme Court ruled unanimously 9-0 in our favor, allowing our
challenges to proceed in Federal court. In response, the FTC
dismissed its complaint against us rather than defend its
outrageous actions and demands against us in front of an
impartial Federal judge.
As our 9-0 decision in the Supreme Court demonstrates, this
is bigger than one company or one case. Every American, whether
an individual, small or large corporation, should have the
right to a fair trial before an independent judge before the
government can strip them of their livelihood, their property,
or their rights. It's a bedrock principle of justice.
Thank you for your time, and I look forward to answering
your questions.
[The prepared statement of Mr. Smith follows:]
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Mr. Fitzgerald. Thank you, Mr. Smith.
Ms. Wade, you can begin now.
STATEMENT OF MAGATTE WADE
Ms. Wade. Good morning. Thank you, Mr. Chair, for having
me. Distinguished Members of the--sorry. Can you hear me now?
All right.
Thank you again, Mr. Chair, for having me here, and for the
distinguished Members of the Committee, for this opportunity to
testify today. This matter is a personal matter to me, and I
want to explain why.
My name is Magatte Wade. I'm a Senegalese-American
entrepreneur. I've been living in the U.S. since 1998, and I
became a U.S. citizen in 2018. I'm also an author of ``The
Heart of a Cheetah,'' a book that talks about African
entrepreneurship and prosperity. It has been addressed--it has
been endorsed by Nobel laureate like Vernon Smith, development
economist as Bill Easterly, and Whole Foods founder John
Mackey.
I am a cofounder of Prospera Africa, an initiative that is
out there to create something similar to what you guys would
call here for freedom cities in America. I have been doing
business, obviously, both in Africa as in the U.S. In the U.S.
in the States of California, Texas, and New York.
Mr. Raskin, your words earlier really, really worried me,
and I will tell you why. When you say we are here and we should
be here to talk about Mr. Elon Musk and all the
unconstitutional things that he's doing, and you said we
shouldn't be here to talk about regulation or anything like
that, first, I want to say then why did you have me here? As an
entrepreneur, my time is valuable. I came here because I
thought we were going to talk about the regulatory State and
why it matters. So, you need to make up your mind on that. I'm
deeply offended by what you said there.
Furthermore, I will tell you why I came when I was invited
to speak on this. Because right now, everybody in this country,
these issues of regulation, overregulation, have been made into
a matter of partisanship. Are you from the Left or are you from
the Right? I don't care, because where I come from, the
overregulation causes us to be where we are.
My continent, Africa, is the poorest region in the world
today because it happens to be the most overregulated region in
the world. So, if you don't see the value of overregulation, if
you need and want to wait until this country becomes like most
African countries--I don't know. I love this country and I
don't want to see it go down there.
So, also, just so you know, what does overregulation mean
for regular people? It means death. Death, literally. People
are packing themselves into little fishermen's boats trying to
leave nations that are overregulated, therefore no jobs, and
then they have to leave and go seek jobs someplace else.
By the way, English is only my fourth language, so when I
trip on words, please excuse me, you all.
So, as a consequence of this perspective of mine, I'm aware
of the fact that even in the U.S. it is difficult for a
businessperson to be fully compliant with all the laws. In
Senegal, I usually have to pay lawyers to make sure that I'm
compliant all the way. It costs a lot of money and a lot of
time and makes me very noncompetitive.
Everything I do is for the sake of African prosperity.
There is no sense in which anyone can call me a greedy business
person. Yet, most of us are subject to the potential of
punitive power of the public officials. As an African
immigrant, I am very familiar with the many informal small
businesses that are run by other Africans in the U.S. Of
course, the biggest one of them for me at least is occupational
license. You see this hair of mine, the lady who braids it most
of the time is an immigrant lady who got here. She's not doing
anything criminal or anything like that, but her business is
going to be illegal because of all the laws and the licenses
she has to get to do this, something that she learned to do
since she was 12 back home. Here she's sustaining herself, not
touching the welfare or anything like that. This is paying her
bills, the bills of her children, and the people that she had
left home.
Are we people that should those people be penalized? I
don't think so.
To take a different issue. Austin where I live right now.
The housing prices were rapidly rising due to excessive land
use regulations until recently. Last year, I testified for the
Texans for Reasonable Solutions to deregulate land use
regulations, and they made really great progress in reducing
the growth in housing cost. We estimate that there is between
30-40 percent of the housing costs that are due to excessive
regulations in some areas.
When I moved to the U.S., I lived in San Francisco. I loved
that city, yet I can't live in that city anymore for what that
city has become, and it primarily has to do with the high cost
of housing due to the regulations.
Take another example. My husband is an immigration
entrepreneur who was a leader in the microschool space before
it became a thing. If you want a new renaissance in education,
you need to minimize your regulations pertaining to new school
creation so smaller education entrepreneurs can also get in the
game and challenge your status quo. I ask again, do we really
want to be penalizing these entrepreneur educators?
Mr. Fitzgerald. Ms. Wade, your time has expired. We're
going to have some followup questions, obviously, though, but
thank you very much.
Ms. Wade. Thank you.
[The prepared statement of Ms. Wade follows:]
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Mr. Fitzgerald. Professor Vladeck, you're recognized.
STATEMENT OF STEPHEN I. VLADECK
Mr. Vladeck. Thank you, Mr. Chair. Thank you for the
opportunity to testify this morning. I must confess to at least
a modicum of surprise that of all the topics for this
Subcommittee to investigate at this moment in American history,
it has picked this one.
Certainly, we can all agree that one of Congress' and this
Committee's most important Constitutional functions is holding
the Executive Branch to account. I would thus happily
celebrate, if not affirmatively endorse, well-conceived efforts
to rein in the Executive Branch, especially in response to
specific abuses of existing statutory and Constitutional
arrangements, perhaps like the ones summarized by my fellow
witnesses.
Given what has transpired over the first three weeks of the
new administration, a hearing focused on the proposed
legislation being discussed this morning and not on what is
happening across this city and across this country as we sit
here today strikes me as far more than just a missed
opportunity. Indeed, if this Committee was genuinely interested
in reining in abuses by the Executive Branch, it strikes me
that there are at least four distinct and far more pressing
areas to which it should focus its attention.
First, the first three weeks of the second Trump
Administration has witnessed a more systemic and sustained
assault on Congress' Constitutional primacy with respect to
appropriations and spending than anything we've seen before. It
would take more time than I have this morning to list all the
examples, but we're seeing the Executive Branch repeatedly
violate clear statutory spending requirements and prohibitions,
whether under the Impoundment Control Act, various statutes
setting up and funding the USAID, NIH appropriations riders, or
otherwise.
The Constitution is unusually clear about appropriations,
Mr. Chair. Contrary to the comments made by Chair Cole last
week, these statutes are all laws that have binding teeth for
purposes of the Supremacy Clause. Indeed, uniquely with respect
to appropriations, the Constitution expressly requires that
Congress play the primary role in Federal policymaking. In each
of these areas, then, the Executive Branch is not just breaking
the law; it is usurping this body's single most important
policymaking power.
Second, we've also seen unprecedented efforts by the
President to assert control over the entire bureaucracy and
quite overtly to do so in the name of loyalty to the President
rather than fidelity to the Constitution.
Third, and speaking of unprecedented, we've seen the
President use the guise of an office located within the
Executive Branch to take unitary control over virtually all of
the Federal Government spending and personnel management
functions, again, apparently in violation of an array of
statutes limiting who may have access to those systems and for
which purposes.
Finally, I'd be remiss in not also noting the various
actions this administration's undertaken against private
persons that flatly contravene existing statutory and
Constitutional protections, such as the attempt to narrow the
scope of birthright citizenship, a right protected not only by
the 14th Amendment but by a statute Congress enacted in 1940.
Other examples abound, but I suspect the point has been
made. In three weeks, we have seen a more sustained assault by
the President on this institution's Constitutional prerogatives
than we've seen in the first 250 years of our Republic.
To be sure, we've also seen the Federal courts pushing back
against these abuses, in many cases aggressively, but the
courts can't and shouldn't be expected to go it alone. Some
have tried to defend this rash of unlawful behavior on the
grounds that the Executive Branch is rooting out fraud and
other abuses. Of course, if that were actually the goal, we
should have expected some discussion by the Department of
Defense.
At a more basic level, this Committee and Congress as a
whole has spent much of the last 160 years setting up
sophisticated accountable inner branch mechanisms for holding
the Executive Branch to account in precisely these spaces. It's
not like fraud, waste, and abuse have became problems only over
the last four years. That includes inspector generals. It
includes DOJ offices designed to root out corruption and
others.
Rather than lean into those checks, the President's
response has been to fire most of the inspector generals,
including those he appointed, and the head of the government
agency that protects whistleblowers. Maybe there's an argument
that this is a good policy. I'm skeptical. That's an argument
that should be made to this body in its consideration of new
legislation, not through repeated assertions of executive fiat.
The result of the Executive's assertion of authority and
Congress' abdication of responsibility has been not just an
unprecedented breakdown in the separation of powers, but a
growing and seemingly unending list of negative real-world
impacts on everyday people who may no longer have access to
experimental medication, who may no longer receive timely storm
warnings, who may no longer be able to receive the government-
subsidized healthcare Congress has provided for more than 60
years, and so on.
Even farmers who signed contracts with the USDA to be
reimbursed for modernizing their infrastructure with guarantees
that the Federal Government would cover part of their costs are
now on the hook for expenses they can't afford and projects
they can't complete.
Everywhere you look there are stories like this one. This
is not just an administrative law crisis, Mr. Chair; it is a
government credibility and credit crisis.
Against that backdrop, it strikes me as more than a little
ironic that this Committee believes the most important thing it
can and should be discussing today is whether to enact the
legislation being proposed. It seems to me instead that these
topics deserve more of our attention, and I would look forward
to participating in those discussions. Having this hearing
sends exactly the wrong message about the institutional
autonomy, Constitutional authority, and democratic
responsibility of the legislature, the branch of the government
that the Constitution quite deliberately put first.
[The prepared statement of Mr. Vladeck follows:]
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Mr. Fitzgerald. Thank you, Mr. Vladeck--Professor Vladeck.
We'll proceed now under the five-minute rule with some
questions. I'm going to recognize myself for five minutes.
Mr. Smith, according to what you just told us in your
testimony, Axon spent approximately $20 million defending its
acquisition of VIEVU against the FTC, which was more than the
acquisition price itself, I guess, is the way you described it.
You were willing to spend that money because you believe that
every American has the right to due process.
Why is due process so important to you as a business owner
having lived through it and experienced it the way you have?
Mr. Smith. This may seem cliche, but it's more important to
me as an American, and I hear the passion in people's voices.
There are many things we can disagree on, but I think progress
can happen when we can find bedrock principles that we all
agree on. The systems of checks and balances, for example, is
so critical to a functioning democracy. What I came to
understand with the FTC was, in fact, there was a system that
has gotten out of balance where there is no check and balance;
where there is no independent judiciary; where that agency can
act as judge, jury, and prosecutor, and they presented me with
a situation where they either threatened me to go into court,
where there is a zero percent chance over 20 years of having a
fair trial where I could win, or to effectively seize my
company's most valuable assets, give us an unlimited liability,
and place all my 4,000 employees and all our customers at risk.
So, that's why I'm here today is I'm now very passionate
about this. I was disappointed when the FTC dropped their case
against us, because I felt the system was so unfair, I wanted
to see it make its way back up to the Supreme Court. When they
dismissed their case, I jumped at the chance to come and
testify before Congress today, because together we have an
opportunity to fix the checks and balance by just simply having
independent judges review every case when the government is
going after an American.
Mr. Fitzgerald. Very good.
Dr. McLaughlin, in a lawsuit challenging the FTC's
premerger notification rule, business groups claim that the
FTC's rule will cost over seven times the amount that the FTC
estimated in its final rule. This is kind of a consistent
problem that we see. The FTC estimates that it will cost
billions.
The FTC has not articulated how it will use the information
to better enforce the antitrust laws, and the FTC has never
articulated past examples of missed enforcement that would
justify the rule.
Is this type of potentially burdensome regulation that
Congress--we should sit down and analyze this and potentially
act on it?
Dr. McLaughlin. Thank you. You're referring to the new HSR
rules, of course, and I did take a look at those as a reference
point. The paperwork burden estimate from the FTC may indeed be
low compared to what other people estimate it to be. It's worth
pointing out that those estimates, similar to what Mr. Smith is
pointing out, are produced by the same people who want to
produce the rule. So, maybe there's a conflict of interest
there.
I would also point out that, even though that paperwork
burden may be what the FTC estimated or may be seven times
larger, it still is very small compared to the overall burden
of regulation, and that's my main point here. The big burden
here is the totality of regulation much more than any
individual rule's consequence.
Mr. Fitzgerald. Right. Let me just follow that up. So, the
Separation of Powers Restoration Act, or SOPRA, would enshrine
the Court's rejection, the Chevron deference, and clarify other
deference's that have allowed agencies to act as informal
legislative bodies. The key point is probably that SOPRA would
require judges to conduct de novo review of agency statutes,
the regs, the guidance documents.
Can you talk about how enshrining judicial review in law
may slow the pace of regulations for administrative agencies?
Dr. McLaughlin. I think it would end up at least leaving
some percentage of rules aside, and it would work like this.
Agencies are going to now be aware that there's no deference
anymore, no judicial deference of any sort that they can rely
on to push a rule forward. Some percentage of rules will
probably just not get pushed forward at all. They will choose
not to take that risk of pushing something forward that
previously could have stood up because of the different
deference documents. What percentage that will be, I don't
know.
Mr. Fitzgerald. Yes. The delaying factor is built in to the
system which could actually assist Congress in having the time
to examine and take a deeper look on some of these things
before they simply become law is the problem, right?
Dr. McLaughlin. Yes. There's going to be plenty of room,
hopefully, in different reforms for Congress to play a more
active role, and I think that my research in the area has shown
it's necessary for another set of minds to be looking at the
different analyses and regulations coming out of the agencies.
Mr. Fitzgerald. Thank you.
I'll now recognize the Ranking Member for five minutes.
Mr. Nadler. Thank you, Mr. Chair.
Professor Vladeck, while the Republican majorities in the
House and Senate stand aside and do nothing to stop the Trump
Administration's incursions on Constitutional authority, the
courts have begun to step in and block some of these unlawful
actions. Not content merely to undermine Constitutional
authority in the face of these, quote, ``decisions, senior
administration officials have now tried to question the
legitimacy of the courts themselves.''
For example, in response to a court order blocking Elon
Musk from accessing sensitive Treasury Department data, Musk
said that the judge who made the ruling, quote, ``needs to be
impeached now.'' Vice President JD Vance stated that, quote,
``judges aren't allowed to control the Executive's legitimate
power.'' President Trump said, quote, ``no judge should,
frankly, be allowed to make that kind of decision. It's a
disgrace.'' The White House called the judgment absurd and
judicial overreach.
Now these vague threats to judicial independence have
seemingly crossed the line into actual defiance of a court
order. Yesterday, a Federal judge in Rhode Island ruled that
the White House had defied his order to unfreeze billions of
dollars in Federal grants.
Can you describe the Constitutional crisis we would face if
the Trump Administration continues to ignore valid court
orders?
Mr. Vladeck. Sure. Congressman, we've never seen a crisis
quite of that scope. The famous quote about Andrew Jackson and
John Marshall is apocryphal. Andrew Jackson actually did not
frustrate the Supreme Court's decision in Worcester v. Georgia.
The only example we have of a President ever openly defying
a decision by a justice was Lincoln at the outset of the Civil
War refusing to comply with the writ of habeas corpus issued by
Chief Justice Taney by himself, not by the full Supreme Court.
We've never seen a President who said, OK, the Supreme Court
has told me I have to stop doing something, I'm going to keep
doing it.
The critical point at that point is we would have a
breakdown, Congressman, not just in the rule of law and the
separation of powers. We'd have a breakdown in the courts,
because the Executive Branch depends on the courts when it's
the plaintiff to prosecute crimes, to bring civil enforcement
action.
So, the point of no return would be a point when the courts
are no longer willing to even do the Executive Branch's regular
business because the Executive Branch won't abide by the
court's judgments.
Mr. Nadler. In your testimony, you briefly described four
areas that this Committee should be focusing on right now to
address the unprecedented power grab by President Trump and
Elon Musk, or maybe I should put that in reverse order. Can you
please elaborate on these suggestions?
Mr. Smith. Sure. It seems to me that this Committee, both
historically and currently, has both the power and the mandate
to engage in rigorous oversight of what the Department of
Justice specifically is doing; how the Executive Branch is
complying or not complying with the various statutes; of the
firings of inspector generals; of the firing of the Special
Counsel Hampton Dellinger, who is the head of the
whistleblowing agency within the Federal Government.
This Committee has the power, of course, to consider
whether legislation should be proposed to rein in some of these
claims, to backstop existing statutes, or perhaps even if the
majority is so inclined, to authorize what the President is
doing. The point, Congressman, is that what we have seen over
the first three weeks is the President suggesting that this
Committee and all of Congress is completely unnecessary for him
to do what he wants to do.
Whether it's through oversight hearings, whether it's
through withholding legislation, whether it's through passing
legislation, whether it's through the bully pulpit that Members
of this Committee on both sides are so skilled at using, it
seems like there is a much more important story to tell about
what is happening right now to the separation of powers in this
country than the admittedly important stories of my fellow
witnesses. Those are all problems, but what we're seeing is a
structural attempt to reallocate power the likes of which we've
never seen before, and that's where this Committee has a
responsibility.
Mr. Nadler. Mr. Smith has argued for an independent
judiciary. If we allow the Trump Administration to skirt court
orders, does the independent judiciary really function?
Mr. Vladeck. I guess I am one, Congressman, who still
thinks that the line is holding. We have more examples
historically of what I would call slow walking compliance with
court orders by the Executive Branch, the likes of which seems
to be happening right now. I would not put it past the
possibility, Congressman, that part of the lack of compliance
we're seeing is because of incompetence, not malice. It seems
to me that we are not at the point yet where the Executive
Branch is affirmatively refusing to comply with Federal court
orders.
Mr. Nadler. If we get to that point?
Mr. Vladeck. Then, it would be incumbent on this Committee
to pursue Articles of Impeachment, and I would hope that there
would be a sufficient Members of the Majority who would think
that this was part of their Constitutional responsibility, that
the politics of the moment would give way to the politics of
our Constitutional order.
Mr. Nadler. Thank you, Mr. Chair. I yield back.
Mr. Fitzgerald. The gentleman's time is expired.
Mr. Nadler. Thank you, Professor.
Mr. Chair, I yield back.
Mr. Fitzgerald. The gentleman's time is expired.
Now, I'll recognize the gentlewoman from Wyoming for five
minutes.
Ms. Hageman. Thank you.
I guess I would take your testimony a bit more seriously,
Mr. Vladeck, if you actually had ever complained or brought--
shown any light on the Biden Administration's efforts to
forgive the student loans in violation of the law and court
order.
Ms. Wade, I appreciate your passion for this issue. It is
something that is incredibly significant, and I think the
caterwauling that you hear on the other side is what happens
when you shine a light on the scurry little things that live
under most rocks that most of us find rather disgusting.
The 2024 version of CEI's 10,000 commandments found that
Federal regulations, total compliance costs, and economic facts
are at least $2.117 trillion annually. U.S. households pay an
average of $15,788 annually in a hidden tax, which consumes 17
percent of income and 22 percent of household expenses. The
Biden-Harris Administration imposed over $1.7 trillion in
cumulative regulatory costs on the economy, surpassing all
predecessors.
The issue of overregulation in this country is absolutely
real, and it is people like you that are affected, regardless
of whether Mr. Vladeck feels that you should have a voice in
these proceedings.
Mr. Smith, I want to turn to you, because I think people
need to understand what ALJs, administrative law judges, and
administrative law courts actually do in the system. If you
want to talk about unconstitutionality, Article III establishes
an independent judiciary to protect citizens from loss of life,
liberty, and property without due process of law. Over the last
50 years or so, a variety of Federal agencies have created
their own court systems led by administrative law judges. It
would come as no surprise to anyone that agencies enjoy
outsized success in proceedings before these ALJs. After all,
they're wearing the same jerseys. They're on the same team.
In Article III courts as provided by the Constitution, the
SEC only wins about 58 percent of its cases. Between Fiscal
Year 2011-2014, the SEC, however, won an average of 90 percent
of its cases in front of ALJs. The FTC, who you went up
against, wins over 90 percent of its cases before its own ALJs.
Yet, Lina Khan, who was the head of the FTC under the last
administration, lost almost every single case she ever brought
before an Article III case--or an Article III court.
When Axon was forced into the FTC administrative law court
or ALC proceedings, were you provided with the same protection
and rights you would expect in an Article III court, such as
due process, the right to a trial by jury, that sort of thing?
Mr. Smith. Absolutely not. It was a foregone conclusion.
Frankly, it was described to me by my attorneys as hopeless.
There was a zero percent chance over the previous 20 years of
getting a fair trial. Even once we came out, if it went to
appeal, the appellate process would be only reviewing the FTC's
version of events. They get to write the entire record, and you
never get a day in court. Maybe you get an appellate review to
see if they made an error in the law, but we would never have
gotten a chance for an independent arbiter to hear our claims.
Ms. Hageman. I would think that the people on the other
side and Mr. Vladeck would be concerned about the violation in
Constitutional rights that you just described, but apparently
they're more concerned about protecting the unelected
bureaucrats and their ability to send millions of dollars to
things that we don't want to pay for, such as trans comic books
for people in Peru.
The FTC enjoys over 90 percent success rate in proceedings
before the ALJs, as we just talked about. What I understand is
that you were forced to spend $20 million defending yourself in
these FTC proceedings. Having been an administrative law
attorney for many years, I describe this as the process is the
punishment. Would you agree?
Mr. Smith. The process was a heck of a lot of punishment.
However, it was nowhere near what was being threatened. I mean,
for a $13 million acquisition, the government was basically
looking to seize a billion dollars' worth of intellectual
property, as well as half our customers and an unlimited
liability.
The process was terrible, but we had to go through it
because the alternative was even worse.
Ms. Hageman. As you likely know, in this Congress I have
introduced the Seventh Amendment Restoration Act, which
provides Americans with the right to remove their cases before
an ALJ to an Article III district court.
Do you think that this is something that would have helped
you in pushing back and fighting back against the FTC in these
horrific proceedings?
Mr. Smith. I have to say that this proposal is beautiful in
its simplicity. It actually would fit what we've all talked
about, the system of checks and balances functioning properly,
that an American should be able to say, my goodness, if I have
the government coming after me, may I please have an
independent judge where I can plead my case and have a chance
of prevailing.
Ms. Hageman. Thank you, Mr. Smith; thank you, Ms. Wade;
thank you, Dr. McLaughlin for being willing to come here and
expose this horrific situation, this horrific administrative
situation that we're dealing with.
I yield back.
Mr. Fitzgerald. The gentlewoman yields back.
We now recognize the gentleman from Maryland, the Ranking
Member of the Full Committee, Mr. Raskin.
Mr. Raskin. Thank you, Mr. Chair.
In just the last 22 days, it seems at this point like 22
months, they've sacked 17 inspector generals, the major
corruption fighters in Federal agencies. They've illegally
tried to freeze government spending that has been appropriated
by the Congress of the United States. They've fired heads of
four independent agencies, and they've shut down work
completely, at least four agencies, paying thousands and
thousands of Federal workers to do nothing because they want to
try to bring the work of the Federal Government that doesn't
directly profit from them to a screeching halt.
Meanwhile, Musk and his completely unvetted and untrained
night crew of assistants have gained access to at least 18
Federal agencies, stolen reams of the American people's data
from the agencies, and fired thousands of workers in violation
of civil service due process, trampling all the checks and
balances and rights to individual adjudication that Mr. Smith
just referred to.
All these actions are profoundly disturbing, but it's the
data grab that is rocking the American people right now. The
capture of this data represents an unprecedented hack into our
most sensitive information and the profound risk it is for all
Americans.
Professor Vladeck, Musk and his team say that they accessed
these sensitive and confidential data sets--some of them might
include classified information for all we know to root out
fraud. How do we actually root out fraud in the government?
Mr. Vladeck. So, historically, Congressman, as you know,
the way that we root out fraud is through a series of
overlapping and interlocking mechanisms. The inspector generals
are the first line of defense within the agencies. The idea is
that their job is to provide regular audits of what the agency
is doing.
There are various statutes that allow private citizens to
seek to investigate fraud and to make claims against the
government when they think there is fraud; the False Claims Act
at the top of that list.
Then, Congressman, there's this Committee, and there's its
companion Committee in the Senate that uses oversight functions
to ensure that the government is complying with its statutory
obligations, its obligations, Congressman, to investigate fraud
in all its spaces.
Mr. Raskin. Well, to illegally wipe out all these inspector
generals--and it was in direct and admitted violation of the
Federal statute which says that the President has to come to
Congress first and set forth the rationale for why they're
being fired 30 days before it happens. In doing that, what will
the effect be on actually trying to root out waste, corruption,
fraud, and self-dealing in the agencies?
Mr. Vladeck. So, the reality is that you're going to have a
split between fraud, waste, and corruption that has no
coordination, that has no involvement from senior officials in
the agency--which I suspect the agencies might still have some
interest in going after fraud, waste, corruption, and abuse
that the senior officials in the agency are aware of because
now they're the only people in a position to do anything about
it.
The reason why Congress historically separated the function
of the heads of agencies from the inspector general is that the
inspector general would be in a position to review even the
senior leadership of agencies when it came to these concerns.
That's the biggest thing we lose when you fire--
Mr. Raskin. All right. So, if they're undermining the
infrastructure that's set up to actually try to target fraud
and waste and abuse, why are they accessing all the data of the
American people?
Mr. Vladeck. That's a question this Committee ought to ask
them, Congressman. I'll just say--and I think this is an
important point--we can all surely agree that rooting out
fraud, waste, and abuse in the Executive Branch is actually a
noble goal and it's a goal that we should all be invested in.
The way to do it is to either (1) use existing mechanisms or
(2) come to this body, Congress, this Committee, and suggest
why the existing mechanisms need to be reformed as opposed to
starting from scratch.
Mr. Raskin. Well, Elon Musk is the wealthiest person on
Earth, or at least he was before the collapse of Tesla in
Europe recently, but he's a very wealthy man. Could he benefit
financially from accessing all the data in the United States
Department of Treasury computers?
Mr. Vladeck. I would think anyone who has contracts with
the United States and with other governments would benefit from
having access to that information.
Mr. Raskin. A Federal judge in New York just ordered Musk
to destroy the data they had illegally obtained from the
Treasury Department. This is the judge they're all now talking
about impeaching.
Who can ensure that Musk has followed the order of the
court and destroyed this data?
Mr. Vladeck. It seems to me that there are two
possibilities, Congressman. The courts are first, and I think
Congress, and this Committee in particular, are second.
Mr. Raskin. We're reading reports that Musk has fed
Americans data, private data into AI models. He's also making a
bid for another company in artificial intelligence, just going
ahead and doing his business while he's purporting to do the
business of the American people.
What dangers are posed by the feeding of our data into an
AI system if that were to happen?
Mr. Vladeck. There are multiple levels of danger, and I
know that the time has expired. I'll just say that I think the
most obvious dangers are the possibility that this data will
become accessible, not just to our government operations, but
to our enemies overseas, and they'll use that for malicious
persons.
Mr. Fitzgerald. The gentleman's time has expired.
I now recognize the gentleman from North Carolina, Mr.
Harris, for five minutes.
Mr. Harris. Thank you, Mr. Chair, and thank all you on the
panel for sharing today.
I want to speak to Ms. Wade for just a moment. In your
testimony, you explain how the regulations in New York and
California made it difficult for your businesses to flourish,
so you moved to Austin, Texas. I just want to give you an
opportunity, and appreciate you coming and sharing today. Was
there a specific moment when you realized you needed to move
your business to a more business-friendly State?
Ms. Wade. Thank you for the opportunity.
Yes. It started when I was in California--because first I
was in California, then New York, and then Austin. It started
when I was in California. When the cost of--and you see, this
is when people ask, was it some special thing? It was not a
special thing. It's one of those things. It's death by a
thousand cuts, literally.
What people don't realize is we've got millions and
millions and millions of lines of code. Each law, each
regulation is a line of code. To be compliant, it's almost
impossible. I know that every day I'm probably violating the
three violations a day thing that people talk about. I know.
If I had some opponents, they could look easily into my
four businesses or the nonprofits that I have and they will
find something. Not because I was being facetious, not because
I wanted to be against the law, but because the law is so darn
complicated that you're bound to make mistakes, even if you
have lawyers and attorneys. It happens all the time.
So, at some point going to California, I eventually went to
New York. New York was no better. Actually, I would argue--yes,
it was definitely no better. I had to look around and really
now take it seriously, the ranking of the freest States in the
country. Eventually, that's how I landed in Austin, Texas,
literally.
Mr. Harris. Well, although you have 50 State regulatory
environments to choose from, you're still subject to the
Federal regulations wherever you go in the United States.
Despite the improvements in your business since the move to
Austin, what challenges would you share with us still persist
even at the Federal level?
Ms. Wade. Again, I get that question even about Africa,
what would you address? I say to people, by now things have
gotten so bad, Representative, but if you want to hear the
truth from me, I believe that the best thing for me; it's no
longer about talking about what the Fed has done wrong. It's
talking about what they could do right going forward.
Going forward, I would argue that the House is so--the
foundation of the House is so rotten. The Founding Fathers
really were going for competitive jurisdictions, and we've been
eating away at that, eating away at that.
Now there's cumbersomeness everywhere, so much that the
easiest and best thing to do for Congress would be these zones
that we call them, in my case, Prospera zones, that is what I'm
doing in Africa. Because in Africa we have a worst-case
situation than even the U.S. The best way to do this is to
basically, at the Federal level, can we find zones where we
apply a general repealer. Basically, repeal all the commercial
laws and have a chance to start fresh.
That's really what I'm advocating for at the Federal level
in the United States today. Let us create these zones where we
can actually start fresh and create areas where we have new
miracles of growth that can happen. Now, let Texas compete with
these zones. I think it's going to be the fastest way to clean
things up because, otherwise, we're just going to be sitting
here in these circles complaining all day long about this law
here, that law here, which I would argue, that's nothing.
At this point we've got to be radical, we've got to be
bold. Because if something is not done quickly, radically, I'm
afraid, Mr. Raskin, soon you're not going to have a United
States of America to speak of. The only reason why we speak of
the United States of America anywhere is because of the power
of the U.S., power of the U.S., because of economic power of
the U.S. If U.S. keep going down this path of overregulation,
this country will be poor, and poor Nations have no say.
That would be what I recommend. If we continue down this
path, if we don't do anything, this country might not be spoken
about in a few years.
Mr. Harris. I agreed. Unfortunately, our government today
is a far cry from what our Founders intended. Today, unelected
bureaucrats are some of the biggest spenders in Washington, and
Congress has got to take back the power of the purse through
commonsense regulatory reforms. The REINS Act requires
Constitutional approval of any Federal agency rule with an
impact of $100 million or more before they take effect.
Dr. McLaughlin, I want to ask you, in your view, would
implementing the REINS Act bring Congress more in line with
what the drafters of the Constitution intended?
Dr. McLaughlin. Yes, it would. Ultimately, regulations stem
from Constitutional authority, and the REINS Act lines up with
that line of thinking.
Mr. Harris. In your research and a lot of things you've
spoken about the economic impact of Federal regulations, let me
just ask, what effects on the economy would the REINS Act bring
if it were to become law?
Dr. McLaughlin. I think it'd be subtle. Some of the threats
of using the REINS Act would be more effective than actually
using it. When agencies are aware that the REINS Act can be
used, I think they'll act differently.
Mr. Harris. Thank you very much.
Mr. Fitzgerald. The gentleman's time has expired.
The gentleman from California, Mr. Correa, is--
Mr. Correa. I want to thank you, Mr. Chair.
I especially want to thank our witnesses for being here
today. I appreciate your testimony today. I only have five
minutes, so I'll try to be quick.
I'll start out with Mr. Smith. I want to ask you a yes or
no question, sir. The FTC started its investigation into your
acquisition of VIEVU in 2018. Was that case started by the FTC
under the Trump Administration?
Mr. Smith. I'm--
Mr. Correa. The answer would be yes.
Mr. Smith. Embarrassingly, yes.
Mr. Correa. Yes.
Mr. Smith. Sorry. I was trying to do the math there.
Mr. Correa. Thank you. It's a yes/no. Thank you.
Ms. Wade, I'm going to agree with you. Back home, my
neighbors in Orange County, they don't really care about the
details of regulation. All they want to know is, is our water
safe to drink, our cars safe to drive, our medication safe to
take, and our children safe at school. Of course, is the air
they breathe, is it clean and safe.
This is a picture of Los Angeles back in the sixties and
seventies. Regulations made this air in Los Angeles, Orange
County, much cleaner. I was a kid then. I can tell you, trying
to play out on the playground in those times was painful.
Literally, you had to stop playing because your chest would
hurt, all of us.
Regulations, some are good, some are really good.
Ms. Wade. May I say something to that, please?
Mr. Correa. No, ma'am. It's my time.
Ms. Wade. OK. I wanted it to be noted--but I wanted to say
something and say no.
Mr. Correa. The Supreme Court--ma'am? Ma'am? Ma'am?
Ms. Wade. Thank you.
Mr. Correa. You've got other people that may ask you a
question.
Mr. Fitzgerald. Mr. Correa, please continue.
Mr. Correa. Thank you.
The Supreme Court, when it comes to regulations, has made
things worse. The Members of Congress are willing to go along
with the President, essentially giving up more of our express
authority to the President.
Are there cases of overregulation? Absolutely. Full-on
deregulation is not the answer. It'll probably create more
havoc, uncertainty for businesses, and imperil the health and
safety of many Americans.
Mr. Vladeck, U.S. Government civil servants take an oath of
loyalty to the Constitution and the United States. Does this
oath of loyalty apply to all civil servants, including CIA,
FBI, food inspectors, immigration frontliners, Social Security,
and Medicare employees?
Mr. Vladeck. Everyone.
Mr. Correa. These civil servants could be making much more
money in the private sector, yet they work for the Federal
Government because they believe in the mission of helping
citizens and small business in this great country.
Please tell us what this oath of office means in the
context of how civil servants should be carrying out their
duty.
Mr. Vladeck. Well, Congressman, for generations it is
meant, for better or for worse, that civil servants don't work
for the President; they work for the government. That the
mission is to do what is in the best interest of the
Constitution of the United States, not the best interest of the
current holder of the Chief Executive Office.
We won't always agree about how those civil servants carry
out those missions. We won't always agree about what it means
to be faithful to the Constitution. The mere agreement that
this is the goal, the mere agreement that this is--
Mr. Correa. The oath and loyalty to the United States.
Mr. Vladeck. We're all going to have different visions of
what that is, Congressman, but at least we all agreed that this
was the purpose.
Mr. Correa. Professor Vladeck, let me cut you off. In your
testimony, you said, quote, paraphrase,
In three weeks, I've seen a more sustained assault by the
President on this institution's Constitutional prerogatives
than we've seen in the first 250 years of this Republic.
Please elaborate. That's a very strong statement.
Mr. Vladeck. It is, Congressman. It's not one I make
lightly and it's not one I wish we were in a position to have
to even be discussing today.
When I looked at how much power the President is claiming
to not spend money that the Congress has appropriated, to defy
statutory limits that Congress has imposed, to fire officials
who Congress has insulated from removal, to take control of the
bureaucracy in ways that politicize everything down to line
attorneys in the Department of Justice, we might have seen
flash points of that, Congressman--
Mr. Correa. Professor Vladeck, everybody talks about
inspector generals. For my folks back home, can you explain to
us what an inspector general does?
Mr. Vladeck. So, the inspector general is a government
officer who is meant to look inwards at the agency of which he
or she is the inspector general and is meant to ensure that the
agency is not engaged in fraud, waste, or abuse. They can do
that on their own prerogative, they can do that at the request
of employees, they can do that at the request of outsiders.
Mr. Correa. So, if they're fired, what's the message here?
Mr. Vladeck. I think the message is that we don't want
someone to look that carefully at what we're doing.
Mr. Correa. Thank you very much, Mr. Chair. I'm out of
time. If I can, I'd like to ask unanimous consent to have the
following documents entered into the record.
Mr. Fitzgerald. Granted.
Mr. Correa. The article from The New York Times called,
``Trump's Actions Have Created a Constitutional Crisis,
Scholars Say.'' Second, ProPublica article, ``Do Regulators
Really Kill Jobs Overall? Not So Much.'' The third article
released from Rutgers University, ``Federal regulations don't
really affect economic growth.'' The fourth from the Columbia
Climate School, ``The Dangers of Deregulation.''
Thank you.
Mr. Fitzgerald. Granted, without objection.
Mr. Raskin. Mr. Chair, I have one UC request too, if that's
OK.
Mr. Fitzgerald. The gentleman is recognized, yes.
Mr. Raskin. This is an article from The Economist last
year, October 2024, ``The Envy of the World: The American
Economy Has Left Other Rich Countries in the Dust.'' Cover
story.
Thank you.
Mr. Fitzgerald. Granted, without objection.
Mr. Fitzgerald. I will now recognize the gentleman from
California, Mr. Issa, for five minutes.
Mr. Issa. Thank you.
I really appreciate the testimony of my colleague from
California since it looked like it was testimony and nothing
more.
The interesting thing is that that oath he talked about,
every State employee in California takes a similar oath. The
odd thing is the district attorneys take an oath to the
California Constitution and the United States Constitution,
which means that they understand that sanctuary city law is
unconstitutional, that it's wrong, and that interfering with
Federal employees trying to execute, in fact, would be a
conflict of their oath. So, I know the gentleman means well,
but people sign oaths. How many take it seriously? The answer
is not nearly enough of our Federal employees.
Just yesterday we dealt with the recognition that some
people at the FBI, either agents or staff, had willfully
disclosed ICE's actions in a way that could cause them to be
shot or killed by the MS-13 people they were attempting to
round up as both criminals and illegal immigrants.
Oaths are a wonderful thing, but with all due respect to my
colleague, who's left the room, let's talk about faithfully
executing the Constitution.
Mr. Smith, on the subject that we're here on, are you aware
that the Federal Trade Commission has nearly a 100 percent
success rate in their administrative court?
Mr. Smith. Yes, certainly.
Mr. Issa. Are you aware that, even if an administrative
judge was to not find you guilty, so to speak, that the
Commission can overrule that and basically make you guilty?
Mr. Smith. Yes. I believe they do almost all the time.
Mr. Issa. Are you aware, under the last four years of the
Federal Trade Commission, they had far less than a 50 percent
chance of surviving if they went to a Federal court with a
judge and a normal process of due process?
Mr. Smith. I believe that.
Mr. Issa. The reality is, you've got a kangaroo court at
the Federal Trade Commission, and with all due respect, it
doesn't really matter who's in the White House, the Federal
Trade Commission has asserted its authority far beyond the
intent of Congress.
Mr. Smith. I agree.
Mr. Issa. Now, in your case, you struck a chord with the
Supreme Court. Basically, the recognition that when they start
getting into Constitutional issues, they don't have that right,
period, that the Article III judges do have that right, and you
don't have to exhaust all the kangaroo court procedures before
getting to the Article III court. Is that true?
Mr. Smith. It is, yes.
Mr. Issa. Let's ask the question for you and the others
here. Wouldn't we be better off if, knowing that the Federal
Trade Commission is not faithfully executing the intent of
Congress, the statutes, and the Constitution, that you didn't
have to wait and spend millions of dollars and perhaps lose an
acquisition, and you were simply able to go to where you have a
right, which is the Article III judges themselves if it's a
Federal law?
Mr. Smith. One hundred percent, yes.
Mr. Issa. Here's the last question, and I'd like each of
you to opine on it briefly. The REINS Act attempts to say for
major regulations. Is there any reason that any of you can find
that Congress should not be able to at any time by a simple
vote second-guess, in other words, second-guess a regulation
that has been made by an agency that says it's the will of
Congress but, in fact, cannot substantiate that it is?
Bearing in mind, the same numbers that it takes to pass a
law are the same numbers it takes to object to a regulation.
You, Mr. Smith, first.
Mr. Smith. Seems reasonable.
Mr. Issa. Ms. Wade?
Ms. Wade. Likewise. Seems reasonable.
Mr. Issa. Doctor?
Dr. McLaughlin. Yes. Absolutely, the REINS Act--yes, I
agree.
Mr. Issa. Yes, sir?
Mr. Vladeck. There's a longer conversation to have,
Congressman, about legislative vetoes after INS v. Chadha. One
of the things that I'm struck by is I don't know--
Mr. Issa. Wait a second. I was asking a more narrow
question than a legislative veto.
If, in fact, regulations were considered by Congress de
novo and they simply said, will we support that regulation--
it's not a veto if you ask is that regulation consistent with
Congress, and you go through the process of the House, the
Senate, and the White House. Is there anything inherently
wrong--
Mr. Vladeck. I'm sorry, Congressman. I misunderstood. I
thought you were skipping presentment.
No. Of course, Congress can do anything to overturn a
regulation through bicameralism and presentment, and I wish
Congress would do it more.
Mr. Issa. Right. Now, Doctor, I'm going to close with this
very briefly. If, in fact, Congress doesn't have the will to
sustain a regulation, effectively holding a vote and not
getting a majority would be the equivalent of saying we don't
want that law. Isn't that correct?
Dr. McLaughlin. That does sound correct, yes, sir.
Mr. Issa. Thank you. I yield back.
Mr. Fitzgerald. The gentleman yields back.
I now recognize the gentleman from Illinois, Mr. Garcia,
for five minutes.
Mr. Garcia. Thank you, Chair Fitzgerald.
What we're experiencing right now is a five-alarm fire of
the Administrative State, and not for the reasons that my
colleagues across the aisle are saying. Instead, in the first
few weeks he's been President, Trump and his pal Elon, an
unelected bureaucrat, are bulldozing key watchdog agencies
instead of protecting people from government overreach. They're
destroying the mechanisms to protect them.
As it turns out, their approach is so unpopular with the
American people that they've had to save face a couple times by
pretending to abandon course. That happened with the government
funding freeze. What people want is for corporations to be held
accountable, not for their Medicaid benefits to disappear then
used to fund tax cuts for the ultra-wealthy.
What my constituents want is for their civil rights and
liberties to be respected, not Elon Musk's teenage fanboys
prying into their personal information. What their actions
prove is that DOGE isn't about efficiency of the Administrative
State or for the American people. Instead, it's about allowing
corporations to abuse workers with fewer rules and ripping off
consumers with more impunity than they already do.
Take the National Labor Relations Board. Since the Great
Depression, the NLRB has had a proud history of protecting the
rights of employees to bargain collectively. In fact, the NLRB
has repeatedly ruled against Tesla for violating labor laws,
including retaliating against workers for union organizing and
focusing employees to delete pro-union tweets.
On January 27th, the Trump Administration made the
unprecedented decision to illegally fire NLRB board member Gwen
Wilcox. Federal law states that the NLRB members may be removed
for neglect of duty or malfeasance in office but no other case.
Yet, neither was cited as the basis for Ms. Wilcox's firing.
So, my first question for Professor Vladeck. Based on your
legal expertise, how does this action validate statutory
protections for independent agency members, and what does it
mean for American workers?
Mr. Vladeck. It's pretty clear that it violates the
statute, Congressman. I think the question that's going to
arise in litigation is arguments that this statute's
unconstitutional, but we're not there yet. The courts haven't
said as much.
What does that mean? It means that you lose the capacity
even in this administration to have meaningful enforcement
through the NLRB and through its processes of our Federal labor
laws, which, of course, tilts the scales in one direction
toward the folks who are alleged to have violated those laws.
Mr. Garcia. Thank you.
Moving on to the CFPB. It's an independent agency created
to protect consumers from predatory financial practices,
including hidden fees and data privacy violations. It's won
back 17.5 billion for Americans since its creation in 2008.
In just two weeks before Trump took over, the CFPB sued
Capital One for cheating people out of interest payments,
ordered a major auto lender to return 10 million to customers,
and ordered Cash App to refund 120 million to customers.
Predictably, billionaires who want to get rich off predatory
practices don't love this agency. As of this weekend, Trump and
his cronies shut it down.
Professor Vladeck, from a legal perspective, can you
explain the importance of independent agencies like the CFPB
which have a statutory mandate to protect consumers and when
they're eliminated, who gets hurt?
Mr. Vladeck. So, for over a century, Congressman, Congress'
position has been--and I think it's been borne out--that
independent agencies and independent commissions are better
situated to look out for things like the securities market, to
look out for things like consumer protection, than Presidents
of political parties who have donors, political allies to try
to support.
Who gets hurt? I think the folks who get left in the
balance are the folks who don't have access to the White House,
the folks who don't have the ability to persuade this President
that it's in his interest to support them. I think that's
increasingly the members of the American working class,
Congressmen, Democrats, and Republicans alike.
Mr. Garcia. Thank you, sir.
Finally, Mr. Chair, I ask unanimous consent to enter into
the record an article from Foreign Policy, dated January 24,
2024, that reports that the economic zones, which have been
referenced by one of our witnesses today and she was just
celebrating, were found to have no transparency or
accountability mechanisms bear an astonishingly level of
autonomy which the U.N. has expressed concern for human rights.
They have created private courts, private police forces, and
private ties, law systems, which have no place anywhere in the
world and certainly not in the U.S.
Mr. Fitzgerald. Granted, without objection.
Mr. Garcia. Thank you, sir. The title is ``U.S. Investors
Could Bankrupt Honduras, With Biden Administration Support.''
I yield back.
Mr. Fitzgerald. The gentleman yields back.
The gentleman from Kansas, Mr. Schmidt, is now recognized
for five minutes.
Mr. Schmidt. Thank you, Mr. Chair.
I want to thank all the witnesses for being here and for
their patience.
We heard a lot of words today. I marked these, Ms. Wade,
when you said them the first time through. I think perhaps the
most important words we've heard today were in your prepared
testimony. You said,
I'm here to provide a sense of urgency regarding the need for
streamlined regulatory and administrative rules.
Then, you said,
A large powerful firms can afford armies of lawyers and
attorneys to stay compliant; smaller entities do their best and
try not to slip up.
Mr. Chair, that is what this hearing is about, and I want to
thank you for calling this today.
Look, this stuff can get mind-numbingly dull, especially
when you get into the academic literature surrounding
administrative law. There's a fairly new book out. It's in
plain English. It's not aimed at an academic audience. I don't
know if our witnesses have had a chance yet to read Justice
Gorsuch's new book, ``Overruled: The Human Toll of Too Much
Law.''
I see Mr. Vladeck has a chuckle. Apparently, he thinks
Justice is insufficiently brilliant on this subject matter. I
have a different point of view.
One of the things that appears in that book is a chart
drawn from the Regulatory Studies Center at George Washington
University. I've asked the staff to place it on the screens for
us. This is a chart of the number of pages in the Federal
Register starting in 1950. Take a look at that chart. It's a
zero-based chart. It's not cutting off the top. It's about
10,000 pages of regulatory law in the United States in 1950.
The year I was born, 1968, and it exploded after the Great
Society to about 50,000 pages. It is today pushing 200,000
pages of binding regulatory law.
Mr. Chair, that is why the folks I represent in Kansas
sound a whole lot more like Ms. Wade and Mr. Smith than they do
like Professor Vladeck or some of my colleagues on this
Committee. They're not worried about the academic impact and
theory. They're worried about what it means for their day-to-
day lives, and can they stay compliant, and can they continue
to operate, and can they pursue the American Dream.
I have a couple of questions for our witnesses. Let me
start with Mr. Smith. Mr. Smith, as Kansas Attorney General, I
took a number of cases all the way to the U.S. Supreme Court
challenging various Federal regulatory actions. I know how
burdensome it can be.
I'm thinking of one when we challenged an Obama-era
iteration of the Waters of the U.S. rule. We started in
district court in Georgia, we ended up MDL in, it was Ohio,
fighting about whether we'd started in the right court. We had
to await a Supreme Court decision on the jurisdiction issue.
We went back to Georgia after that all happened. We finally
got an injunction and the administration appealed, and then we
were three Presidents later before the political system finally
overtook the litigation.
You talked about how much money you spent fighting your one
battle. Could you have used that money more effectively in some
other manner?
Mr. Smith. Oh, goodness yes. We could have put it into
research and development, building new products, innovating--
entering new markets with sales investments, lots of places
that would have had a return for our investors.
Mr. Schmidt. Did the regulators pay your attorney's fees
when that was all over?
Mr. Smith. No, sir, they did not.
Mr. Schmidt. I see.
Dr. McLaughlin, let me ask you this. I was intrigued by my
colleague's, Congressman Issa, line of questioning. I was
especially intrigued when he went down the panel, and I believe
all four of our witnesses agreed--Professor Vladeck
enthusiastically, if I'm not mistaken; I don't want to
mischaracterize it. As long as there's bicameralism and
presentment, I think your words were you would like to see
Congress do more of overseeing and deciding whether to keep
particular regulations.
So, my question for you, Dr. McLaughlin, is this. The
Congressional Review Act currently has what is functionally a
fixed lookback window. Right now, it's a regulation came in
around August of last year or later, we can use the CRA's
mechanisms to decide whether we want to keep it or reject it as
an elected body exercising the Article I power that is
ultimately the basis for the regulatory action in the first
place.
Is there any reason we ought to limit ourselves to this
functionally six-ish month lookback? We got a bill on the floor
this week that would make it a year lookback. Would that be
better?
Dr. McLaughlin. There's no reason not to extend the
lookback, in my opinion. Extending the CRA would allow more--
we're talking about midnight regulations, effectively, that the
CRA--
Mr. Schmidt. We don't have to be, right? Why are we worried
only about midnight? It's great to be worried about midnight,
but why not 6 p.m.? Why aren't we worried about a regulation
that was promulgated in 1994 if it no longer makes sense, and
you have bicameralism and presentment, and this body wants to
reject that regulation? Or in 1958? Or in 1973? What's the
rationale?
Dr. McLaughlin. I don't think there is a rationale for not
extending it farther back. I think that we're just stuck in a
situation of inertia.
Mr. Schmidt. We've always done it this way. Would you
encourage us to take a look at amending the Constitutional
Review Act to give this body the authority under its procedures
to reject agency regulations regardless of when they were
promulgated?
Dr. McLaughlin. Well, as a scholar, I'm hesitant to endorse
any specific bill, but it does seem like it would have positive
economic consequences.
Mr. Schmidt. Just asking for the concept. Thank you very
much.
Mr. Chair, thank you.
Mr. Fitzgerald. The gentleman yields back.
I now recognize the Chair of the Full Committee, Mr.
Jordan, for five minutes.
Chair Jordan. Thank you, Mr. Chair.
Ms. Wade was making this point earlier. I thought it was
well stated, talking in a broad sense. To lead the world
diplomatically, to lead the world militarily, you first have to
lead the world economically. To lead the world economically,
you need some basic things. You need readily available energy
at affordable cost, and you need freedom. That's Ms. Wade's
point.
You know what? We had a lot more freedom when that chart
that Mr. Schmidt just put up there was a lot lower in
regulations, which would help people like Ms. Wade and Mr.
Smith, the entrepreneurs who make our economy go and go and go,
able to do their thing.
Ms. Wade, you wanted to respond to one of the Democrats. I
forget who was asking it or saying something. You wanted to
respond. I'm going to give you a chance to respond, then I'm
going to go to our economist and to Mr. Smith.
Hit your microphone.
Ms. Wade. Can you hear me?
Chair Jordan. Yes, we got you now.
Ms. Wade. Thank you so much.
I want to respond to two things. Mr. Garcia is gone, but I
wish he was here, and the same with Mr. Correa, I think it was.
So, I'll start with Mr. Garcia when he brought up, oh,
these prospera, these zones, she wants them here. No space for
them here in America. Well, guess what? It is going to happen
in America.
That article that you brought up Foreign Policy, I just
would like the same way that article is going to be included, I
would like for the FAQ that I'm going to send you to be
included in there as well so we can refute all those claims
that are made in articles like that.
If anything, these zones were put in place by the
Government of Honduras itself in this situation. Government of
Honduras. If anything, we know by now that organizations like
the USAID, funding NGOs have been actually undermining these
type of initiatives because these are antibusiness, NGOs. So,
USAID is hurting us, there you go.
Then, Mr. Correa, who is not here--I wish he was here--when
he had the nerve to tell us that these regulations are here to
help us. I just would like him to answer me to this situation.
Around 1800--since the 1800s, it was known that lead pipes that
are being used are were toxic, bad, causing probably brain
damages in children. As early as 1800 it was known. Then, you
tell me why until 19--it took until 1986 for it to be taken
care of.
In the meantime, you had the mayor of Chicago who made it
mandatory for people--builders to use lead pipes for the water
pipes. Where did the government really help us here? Where? I
wish Mr. Correa was here. Government is helping us? These
regulations are helping us? Give me a break.
I see you looking at [inaudible] like this. I will send you
my reports on this, Mr. Raskin.
So, thank you so much for giving me that opportunity to
respond, because it irks me when I see us sitting in these
rooms and when I hear your fights, I don't hear government
working for the people. I see government working for
government, whatever the heck that sounds like. OK?
I would like, for one, that it is about my my safety and
about my well-being. In situations like this and as many others
that--it is clear that these regulations are not put in place
with us in mind. That needs to stop.
The fact that, Mr. Raskin, you're here--this whole time
we've been here, you've just been complaining about the
process. I'll call it the process. Again, I'm not agreeing,
disagreeing with your issues right now around Musk and the
process, but following Mr. Vladeck, the process that you're
following, at some point what is the end game? Isn't the end
game to make us, the American people, better off. Isn't it?
Isn't it?
No. I hear you saying that the stuff that would make us
better off doesn't matter. All you care about right now is a
process of Musk and his associates are not doing this the right
way. The goal--is the goal moral and right or not? If you say
it is, as I think you should be saying, then the fight
shouldn't be about needing to take Musk down or Trump down.
Let us rethink that if you want, but keep your eye on the
ball, and your ball should be me. It should be me. I'm sorry.
It should be me.
Chair Jordan. Yes.
Ms. Wade. It should be me. How do we make me better off?
Thank you, Mr. Jordan.
Chair Jordan. You bet. By me, you mean the American people?
Ms. Wade. That's what I mean by that.
Chair Jordan. Dr. McLaughlin--and we appreciate that.
Dr. McLaughlin, in college I majored in wrestling, but
you're supposed to get a degree in college, so I got one in
economics. One of the terms I remember was this term called
opportunity cost. Can you tell us really quick what the
opportunity cost is?
Dr. McLaughlin. It's the things you don't do because
something else requires your resources.
Chair Jordan. It was Mr. Smith spending millions of dollars
fighting some--
Dr. McLaughlin. Right. Exactly.
Chair Jordan. --stupid bureaucrat regulation where, if he
fought it there, he'd have to go--the very bureaucrats who made
the rule, tell him to do things, he'd have to go to their
court, and he had to go to other courts. He could have been
expanding our economy and building his business.
No, he had to deal with the bureaucrats who the other side
thinks are the experts and should run our government. Isn't
that what opportunity cost--when you boil it all down, that's
what Mr. Smith had to deal with. Is that right?
Dr. McLaughlin. Yes, sir. That's what my research finds, is
when businesses get deflected from investing in R&D and
expansion, that big economy does not grow, and it's because
regulations are making them spend their resources on other
activities.
Chair Jordan. Which makes it tougher for our country to
lead, to Ms. Wade's point. If you're making it tougher for the
people who grow our economy, make us stay the economic
superpower, it's tougher than to lead militarily,
diplomatically, and that's what it all does. That's what the
Chair--why he's having this hearing--that's what he's trying to
change.
We got a bill on the floor tomorrow, midnight rules bill.
It gets rid of a bunch of these stupid rules that these
agencies do. We can get rid of packages of them instead of one
at a time. That's a good thing.
I appreciate the Chair's work on this Committee, and I
yield back.
Mr. Fitzgerald. The Chair yields back.
That concludes today's hearing. We thank our witnesses for
appearing before the Committee today.
Without objection, all Members will have five legislative
days to submit additional written questions for the witnesses
and additional materials for the record.
Without objection, the hearing is adjourned.
[Whereupon, at 11:45 a.m., the Subcommittee was adjourned.]
All materials submitted for the record by Members of the
Subcommittee on the Administrative State, Regulatory Reform,
and Antitrust can be found at: https://docs.house.gov/
Committee/
Calendar/ByEvent.aspx?EventID=117869.
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