The Supreme Court Wants to Pick and Choose Which Agencies Can Be Independent

Last week, the Supreme Court altered the contours of who gets to shape economic policy— Congress or the president. In a pair of rulings necessitated by President Trump’s attempt to collapse the independence of congressionally established agencies, the Court upheld his removals of Democratic members from the National Labor Relations Board (NLRB) and the Merit Systems Protection Board (MSPB)—two agencies that bipartisan Congresses designed to operate independently of presidential control. The Supreme Court overturned the lower courts’ holdings that the fired members could stay in their positions until the merits of the cases were resolved. Then, in a defensive twist—or to quell potential market uproar—the Court extended a fig leaf of protection to the Federal Reserve Board of Governors, hoping to shield it from similar interference.

What we take from these rulings is a clear signal that the Court’s majority wants to pick and choose which agencies can be designed to be independent of executive branch control, and which cannot. For example, when it comes to worker protections, the majority seems to be inching toward saying that the executive branch can disregard federal statutes and remove members; when it comes to central bank functioning, the executive branch cannot. But just because this might be what this Court deems to be the right policy choice doesn’t mean that it’s constitutionally or legally defensible.

To provide some precedential context, the Court’s majority is trying to figure out how to dismantle Humphrey’s Executor v. United States, the 1935 precedent that has preserved agency independence from executive overreach for 90 years. But the Court majority is aware that this imminent dismantling presents uncomfortable questions: Isn’t the Fed different, and should it be under the thumb of the president? Given that market reaction to interference with the Fed would likely be significantly more negative than interference with the NLRB or MSPB, can the Fed be singled out for protection? Hence, the Court has a problem of logic and consistency on its hands: It is trying to figure out how to give President Trump power to collapse the independence of multimember entities like the NLRB and the MSPB, while preserving the multimember independent entity that is the Federal Reserve. 

Justice Elena Kagan takes this on in her dissent, calling the majority’s ruling a “bespoke Federal Reserve exception.” As she put it, “The Federal Reserve’s independence rests on the same constitutional and analytic foundations as that of the NLRB, MSPB, FTC, FCC, and so on—which is to say it rests largely on Humphrey’s.” Regardless of where you stand on the independence of these various agencies, they were each created by Congress and described in federal statutes, so presumably, the majority will need something else to distinguish the Fed if they decide to collapse the others.

But the Court hasn’t provided that distinction at this stage. Instead, what we have is pretty darn flimsy. Instead of offering a serious constitutional rationale for exempting the Fed, the majority leans on a single footnote—footnote 8 from Seila Law v. CFPB—to argue that the Fed is different from the NLRB and the MSPB. Again, for those who believe in the criticality of Federal Reserve independence as necessary for controlling inflation—and I put myself in that camp—a mere footnote as a rationale lacks the force of law and fails to sufficiently distinguish the Fed from other independent entities. If this is the Court’s idea of preserving central bank independence, then those who care about that independence should not be lulled into a false sense of security. If anything, this decision renders the Fed more vulnerable to political threats, not less. This kind of judicial ambiguity is particularly dangerous given this president’s on-again, off-again attempts to pressure the Fed to lower interest rates and ignore inflation. President Trump has continuously attacked current Fed Chair Jerome Powell and has floated ideas to bring the central bank under tighter executive control; there is nothing binding in this opinion that would legally require the executive branch to stop threatening to fire the Fed’s members, with collateral consequences for inflation, market volatility, financial stability, and central bank credibility. 

As Justice Kagan notes, there are several entities—more than the NLRB, MSPB, and Fed—that Congress has singled out for independence by including particular features in their authorizing statutes, such as terms for members that are not coterminous with the president or are longer in duration than that of the president. These features suggest that Congress believed that particular endeavors should be outside the realm of executive branch meddling. Indeed, the fact that the Fed, the NLRB, and the MSPB were all created with features of independence suggests that the same democratic logic that shields monetary policy from political interference also applies to worker protections, civil service integrity, and the enforcement of labor law. So if the Court wants to get into the business of deciding which entities should be independent and which should not, holding that the Fed is singularly exceptional in its independence, then it must grapple with a deeper question: Why is Congress’s safeguarding of worker representation or its safeguarding of fair employment systems any different from its safeguarding of monetary policy and regulatory policy?

The cases involving the NLRB and MSPB are now headed back to the DC Circuit Court. But this is not the end. They are likely to return to the Supreme Court, and with them will return questions about why their desire to permit the president to fire the members of the NLRB and the MSPB does not extend to the Fed. 

If the Court is going to permit a presidential bypass of congressionally designed independence when it comes to the NLRB, the MSPB, and other statutorily created entities, then avoiding a bypass when it comes to the Fed becomes a harder case to make. With this president certainly, and others to follow, ensuring durable Fed independence will require more than a footnote. It will require a more compelling and logically consistent principle—one that doesn’t rely on political expediency or market appeasement. And ultimately, it will require a broader democratic conversation about how independence and accountability should coexist, for all agencies, in 21st-century governance.