A New Reason to Worry About Politicized Government

(The Bloomberg View) -- Last week, the White House issued a very dull but very consequential executive order. It mandated that administrative law judges — some 2,000 of whom inhabit the federal ecosystem — be appointed by the heads of their agencies, rather than hired through normal civil-service procedures.

The order was a reasonable response to a recent Supreme Court ruling that ALJs at the Securities and Exchange Commission are “inferior officers” of the U.S. and hence subject to the Appointments Clause of the Constitution. That means they can be appointed only by the president, courts or a department head.

As a constitutional matter, the court’s decision was defensible. But it created a bit of a mess — one that the executive order barely begins to clean up.

Administrative law judges are vital cogs in the federal machinery. They handle more than 1.5 million cases a year, helping agencies adjudicate everything from securities-law violations to benefit claims. Typically, though, they’re hired by mid-level staffers, not agency heads. Thus the problem: If their appointments have been unconstitutional, as this ruling implies, many of the cases they’ve decided could be open to appeal.

According to the White House, “hundreds” of litigants are already exploring that possibility. At the SEC, which employs five ALJs, perhaps two dozen old cases may need to be reheard — including the one the Supreme Court just ruled on, involving Raymond Lucia, a financial guru accused of fraud in marketing a retirement strategy called “Buckets of Money.”

President Donald Trump’s executive order won’t do much to ameliorate the current confusion. But going forward, it should clarify some things. The new hiring process it establishes for ALJs is unambiguously constitutional, and will also bypass the byzantine rules of the Office of Personnel Management. That’s probably wise: Allowing agencies to hire judges directly could feasibly make it easier to find qualified candidates.

That said, this case raises some unnerving possibilities.

An overriding concern is that the administrative state may be further politicized. As Justice Stephen Breyer wrote in a partial dissent, the court’s decision risks “transforming administrative law judges from independent adjudicators into dependent decisionmakers.”

It isn’t necessary to panic about this possibility — at least, not yet. Agency heads are themselves subject to the normal checks and balances of democratic politics and would be accountable for the misbehavior of their appointees. And current law protects the independence of ALJs by, among other things, ensuring that they can be fired only for “good cause.”

All the same, it’s fair to wonder if this administration, or some future one, might see the appointment of ALJs as a way to advance an agenda. Tellingly, Trump’s Justice Department switched positions halfway through this case — and came out on Lucia’s side. More worryingly, the court’s reasoning implied that existing protections for ALJs’ independence may also be unconstitutional. A judge in a separate case last year warned that going down this road “threatens to unravel much of our modern regulatory framework.”

One wonders if that’s the point — and if this dull case, so quietly decided, is a harbinger of ominous things to come.

Editorials are written by the Bloomberg View editorial board.

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