Supreme Court ruling will rein in the regulatory GOAT

After Joe Biden’s disastrous debate performance, it’s hard to imagine that the news could get worse for his administration. For Biden’s policy priorities, however, that's what happened when the Supreme Court overruled the principle of “Chevron deference” in the Loper Bright Enterprises decision the following day. 

Loper Bright reset the standard for judging federal rules, which the Biden administration has issued at an astounding pace. According to the federal government’s own estimate, the total cost of the administration’s regulatory agenda is a staggering $1.7 trillion annually. By comparison, that’s $250 billion more than Biden’s two signature legislative achievements combined — the Inflation Reduction Act and the CHIPS Act — and nearly six times the total cost of the rules that the Obama administration had imposed at this point in its first term.

To quote the former director of Congressional Budget Office Douglas Holtz-Eakin, “The Administration’s position as the regulatory Greatest Overreacher of All Time (GOAT) is firmly locked in.” 

To be sure, many of Biden’s regulatory whoppers, including the student loan bailout and the COVID vaccine mandate, had already been halted by the courts before Loper Bright under the “major questions” exception to the Chevron doctrine, which suspended the deferential standard in cases involving “vast economic and political significance.” Loper Bright has turned the exception to Chevron deference into the rule. Now all federal rules — not just the “major” ones — need to be based on statutory authorization, not the administration’s policy preferences. 

This development calls into question the current administration's policy-driven regulations on issues spanning from telecommunications to energy, securities and employment. Take, for example, the Federal Communications Commission decision to mandate Wi-Fi at taxpayer expense on school buses. The law authorizes the agency to provide Internet access to “school classrooms” and “libraries.”

Since buses are neither classrooms nor libraries, the FCC should have stopped there. Instead, it pushed through the rule based on a well-intentioned desire to expand digital access to students who lack reliable Internet at home. But under Loper Bright, such policy preferences need to be set by Congress, not by regulators contorting the statutory text to reach a desired result. 

Another suspect regulation is the Department of Labor’s $2.5 billion “Fiduciary Rule,” which requires insurance companies to train agents who sell rollover annuities on the fiduciary standard of care, even though their one-time advice does not create a fiduciary relationship under the law as written. Prior regulatory efforts to expand the scope of fiduciaries beyond what Congress intended have failed even under the more deferential standard. Thanks to Loper Bright, the current effort is even less likely to succeed. 

Another example: the EPA’s $14 billion rule requiring coal and new natural gas plants to cut carbon emissions by 95 percent by 2032. The Clear Air Act authorizes the EPA to regulate based on the “best system of emission reduction” that “has been adequately demonstrated.” But no fossil fuel plant has shown that carbon capture can be used to generate the mandated emission reductions. 

Even without Chevron, future presidents will still have the opportunity to issue sweeping new regulations. It just means that they’ll need congressional authority for their regulatory agenda. Loper Bright may be a loss for the regulatory GOAT, but it’s a win for the people. 

Hal Lambert is Founder and CEO of Point Bridge Capital. Michael Toth is Founding Partner of PNT Law, based in Austin, Texas.