Chevron Overturned Part 2: Regulatory Agencies Lose “Agility”

Proponents of the Chevron Doctrine fear the regulatory agencies’ loss of “agility”, but we all know that’s code for loss of power.

July 8, 2024

By: Bobby Casey, Managing Director GWP

Last week we addressed the overturning of the Chevron Doctrine. This doctrine deferred to the regulatory agencies to interpret the rules if and when things were ambiguous.

It should never have passed in the first place, but that it was overturned is a bit of reprieve for a regulation-weary nation like the US. It’s no that the regulations will go away. They won’t. But the scope of the regulations will be limited to the letter of the law, leaving its interpretation to the courts.

The shrewd lawyers in congress likely penned a lot of their bills in such a way that it gave the agencies a lot of creative license. So while the volume of the regulations will likely remain or grow, the scope of them will be limited.

Wyoming is celebrating since they have been butting heads with the EPA for years. The EPA dropped 125 regulations on them with another 98 waiting in the wings. That state is in what appears to be perpetual litigation with the federal government over environmental issues that come down from some bureaucrats in Washington.

Remember, Chevron wasn’t just about the EPA. It was a doctrine that had sweeping application to all federal agencies. This includes, but is not limited to the FDA, the CDC, the ATF, the IRS, and the SEC.

The Food and Drug Administration controls everything from the classification of drugs to the classification of proteins. It proudly regulates $0.21 of every dollar spent in the US. The revolving door between the private sector and government regulatory agencies is no secret. Finding loopholes and workarounds will be more difficult for these interlopers.

Companies and opponents of controversial drugs may also target the FDA’s decisions on whether to approve new drugs, challenging actions that rely on interpreting ambiguous federal law. “So much of the statute around drug approval includes really vague language,” said Holly Fernandez Lynch, an assistant professor of medical ethics and law at the University of Pennsylvania.

Even Medicare and Medicaid will need to tighten up:

The Supreme Court’s Chevron ruling could also invite more challenges to Medicare and Medicaid programs. Officials often use novel interpretations of the law to set new, at times divisive, policy, such as defining terms for Medicare drug negotiations or crafting changes to the Medicaid drug rebate program, experts said.

The ATF defines terms for fire arms as the technology advances, but they wouldn’t have as much latitude in shifting those definitions. The grievance is that congress is too slow to write specific laws to clarify its intent, and the Chevron doctrine facilitated a quicker determination for these terms:

The ATF issues rules in response to advancements in firearms technology, as it’s done in recent years with bump stocks, ghost gun kits, and pistol braces. Now it would be up to the courts, whose judges are not necessarily firearms experts, to interpret federal statutes.

Congress can pass legislation directly addressing these areas of law, something the court’s conservative justices suggested when it struck down the ATF’s bump stock rule earlier this month. But Congress is slow to action and hampered by political polarization.

Remember the stronghold the CDC had on the US during the pandemic? Again, the theme is that compelling congress to say what they mean, and mean what they say clearly in their bills takes too long and precludes the agility of regulatory agencies to act on the people. Correct. They are unelected officials.

That scrutiny could also affect agency powers to nimbly respond to health emergencies such as the coronavirus pandemic, said Andrew Twinamatsiko, a director of Georgetown’s Health Policy and the Law Initiative at the O’Neill Institute.

Ask yourself about the 80,000 new IRS agents. What do you think becomes of them? They can perform their audits, but here’s the issue: there’s no real legal consensus for how to interpret the tax code.

Since the Inflation Reduction Act passed in 2022, the Treasury Department has been racing to roll out regulations related to billions of dollars of clean energy tax credits that provide huge incentives for things such as the manufacturing of batteries or the purchase of electric vehicles. The Treasury Department has received pushback from some lawmakers who contend that it has not followed the intent of the law.

Although Congress creates the tax code through legislation, the I.R.S. has wide latitude in how the tax laws are administered. Accounting experts have suggested that the court’s ruling could complicate the agency’s ability to administer the tax code without specific direction from Congress.

FinCEN (Financial Criminal Enforcement Network) like the IRS is a bureau of the Department of Treasury. They have been involved with regulating cryptocurrency… as has the SEC (Security and Exchange Commission). The SEC has been in a back and forth battle with many crypto platforms about whether crypto is a currency or a security. This could have some implications on the way crypto is treated or recognized under the US law.

The repercussions of this ruling are ​immediately palpable within the U.S. Securities and Exchange Commission (SEC). Under the leadership of Chairman Gary Gensler, the SEC has been​ notably assertive, navigating the legally ambiguous terrain of the cryptocurrency market. The decision strips the SEC of some‍ agility in enforcing compliance among crypto companies, which​ have historically contended that their offerings do⁢ not constitute securities as classified by the SEC.

All of these agencies and their regulations are in play. While the overturning of Chevron isn’t retroactive, it puts a lot of regulations on the chopping block because phrases like “in public’s best interest” and “reasonableness” are too subjective.

Wherever your interests lie, and whatever regulations or regulatory agencies you might be up against, the future of these regulations will be important and interesting to watch. Chevron allowed a lot of unaccountable enforcement to unfold… it gave bureaucrats a lot of latitude, while providing inordinate amount of cover for Congress.