1992 OLC Memo: President, In Face of Senate Filibuster, Should Not Use Unilateral Authority to Change Unambiguous Law

August 7th, 2014

Yesterday, the WSJ recalled an episode on congressional intransigence and executive power‘ from 1992. President George H.W. Bush campaigned on cutting capital-gains taxes. But the Democrats led a filibuster to block it in the Senate. Many, including the WSJ, urged the President to take unilateral action to use treasury regulations to obtain what the Congress would not do. It’s remarkable to read this January 1992 WSJ editorial. The shoe is indeed on the other foot:

The odds of a capital-gains tax cut are higher today than they were last week, regardless of how Congress reacts to President Bush’s State of the Union. That’s because the White House has just discovered that the executive branch isn’t doomed to acting like a pitiful, helpless giant.

The Administration has been discussing an argument, which holds that President Bush can issue a regulation on his own to index capital gains. This would end the absurdity of a tax on “gain” defined as the difference between the purchase and selling prices, even if inflation eroded the dollar faster than the property appreciated.

This idea emanated out of the Justice Department’s policy shop and first appeared last week in a Washington Times column by Paul Craig Roberts. It is based on the distinction between laws passed by Congress and regulations issued solely by the executive branch.

The argument here is that President Bush has the authority to index capital gains because the procedures for measuring gains are determined by regulation, not by law. Congress, of course, never said that capital gains must be defined as the inflated gains (the reasons for its reluctance to say so explicitly are fairly obvious).

The Journal also boasts that it supports “inherent impoundment and line-item veto.” Even better it finds that it is “unlikely that anyone would have standing to sue to block indexing.” My, how the times have changed.

In August 17 1992, Chuck Cooper wrote a member for the National Chamber Foundation arguing that the Treasury Department had the legal authority to make this change. (I wasn’t able to find a copy of this memo). It seems that the White House Counsel was pushing this idea. However, both the Treasury Department and the Office of Legal Counsel rejected this proposal.

You can find the OLC memo here. There are strong parallels to debates over immigration, DACA, and executive power. I explore these themes in Congressional Intransigence and Executive Power.

Starting at page 153, the memo addresses the argument that the executive branch should be able to take this action due to the fact that “Congress favors the concept of indexing capital gains.” Even though it was never passed into law. In other words, the fact that there is support in Congress, but Congress hasn’t passed a bill, should strengthen the case for unilateral action. The memo finds this reasoning “substantially flawed.”

First, as the Treasury Memorandum points out, although Congress has repeatedly considered proposals explicitly to index capital gains for infla­tion, it has never enacted themId. at 15-18.27 It is a strange twist of logic to conclude that because Congress has rejected a proposal many times, Con­ gress therefore favors that proposal. Second, even assuming that a majority of both Houses would in fact be willing to enact such legislation, it by no means follows that they would welcome an administrative agency’s decision to bring about a similar outcome by regulatory action alone.

It is bizarre to think a bill defeated in Congress provides a basis for the President to do it anyway. But that is the President’s repeated explanation about DACA. The Dream Act would have passed the Senate, but for the filibuster, so he will do it anyway.

The memo continues:

More fundamentally, the attitude of a majority of the members of the current Congress is completely irrelevant to the question whether an agency’s interpretation of existing law is or is not correct. Like the courts, the execu­ tive branch must interpret the law as it finds it, not base its interpretations on conjecture as to how Congress might act. Thus, although agencies must follow the “will of Congress” in interpreting statutes, “[t]he ‘will of Con­ gress’ we look to is not a will evolving from Session to Session, but a will expressed and fixed in a particular enactment.” West Virginia Univ. Hosps., Inc. v. Casey,499 U.S. 83, 101 n.7 (1991). Furthermore, it is an elementary principle of constitutional law that the policy preferences of individual mem­ bers of Congress, even if they happen to comprise majorities of both Houses, are legally meaningless until they crystallize into “bicameral passage fol­ lowed by presentment to the President.” INS v. Chadha, 462 U.S. 919, 954-55 (1983). See also NCF Memorandum at 80 n.43.

Granted, there is a difference between Chevron deference and the President’s prosecutorial discretion–but not much. Invariably in both cases the Executive is entrusted to comply with the law on his own accord. The citation to Chadha is right on. Policies don’t become law without bicameralism and presentment.

I would hope an Obama Justice Department would come to the same conclusion on immigration. DACA was considered many times, and ultimately defeated by a Senate filibuster. Even if it enjoys majority support, that doesn’t give the President a “green light” to do it himself. Although, in such a case, OLC can just be bypassed to find a favorable ear, even by the AG himself.

In case you wish to read further, the memo also has an interesting discussion about how executive branch lawyers view Chevron (pp. 137-140). 

      The sole issue presented by your request is whether Treasury may, by amending its regulations, reinterpret the statutory term “cost” to mean the price paid as adjusted for inflation. The NCF Memorandum argues that Treasury may do so. In making that argument, the Memorandum relies heavily on analysis of the Supreme Court’s decision in Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 467 U.S. 837 (1984). (2) Chevron announced a two-step rule for courts to follow when reviewing an agency’s construction of a statute that it administers. The court must always first examine “whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Id. at 842-43. If, however, “the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Id. at 843. As the Court noted in Chevron, “‘[t]he power of an administrative agency to administer a congressionally created . . . program necessarily requires the formulation of policy and the making of rules to fill any gap left, implicitly or explicitly, by Congress.'” Id. (quoting Morton v. Ruiz, 415 U.S. 199, 231 (1974)). But any such “gap” must be created by Congress: “assertions of ambiguity do not transform a clear statute into an ambiguous provision.” United States v. James, 478 U.S. 597, 605 (1986). (3)

      The NCF Memorandum’s central argument rests on the proposition that “cost” is an ambiguous term. In essence, the Memorandum argues that Congress, in using that word, left a “gap” in the statutory scheme to be filled by Treasury in the exercise of its rulemaking power under the Code. Specifically, the NCF Memorandum asserts that the “meaning of ‘cost’ is sufficiently ambiguous to permit the exercise of administrative discretion” to interpret cost in a manner that takes account of inflation, id. at 23, and consequently that in light of Chevron, “a regulation indexing capital gains for inflation should and would be upheld judicially as a valid exercise of the Treasury’s interpretative discretion under the [Code],” id. at 1. (4)

      Chevron is a profound expression of principles that flow from the doctrine of separation of powers. The decision recognizes the appropriate roles of each of the three branches of government. Congress writes laws; the executive branch interprets and enforces them. Congress may, however, leave greater or lesser scope for Executive action. Thus, Congress often leaves to the executive branch the task of filling in the gaps in the statutory scheme through interpretation, and courts must then defer to the Executive’s reasonable interpretations. As the Chevron Court explained:

While agencies are not directly accountable to the people, the Chief Executive is, and it is entirely appropriate for this political branch of the Government to make such policy choices — resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities.

467 U.S. at 865-66.

     Chevron is thus a powerful analytical tool for the smooth administration of complex statutes and for the defense of agency actions under such statutes. It is not, however, unlimited. Chevron also teaches that when Congress writes legislation in specific terms, if it does not leave policy choices to be resolved by an administrative agency, then Congress’s decision binds both the executive branch and the judiciary. To repeat: “If the intent of Congress is clear, that is the end of the matter.” Id. at 842. In particular, Chevron does not furnish blanket authority for the regulatory rewriting of statutes whenever a dictionary gives more than a single definition for a statutory term or whenever some arguably relevant discipline assigns a specialized, technical meaning to such a term. Such a reading of Chevron would eviscerate the well-established rule of construction that statutes must be accorded their plain and commonly understood meaning. (5) Indeed, it would lead to a legal regime in which many statutory terms with widely understood meanings would be deemed “ambiguous.” In this regard, we fully concur in your conclusion that “[i]f the plain meaning doctrine could be applied only to words that have only one conceivable meaning, it would have precious little utility as a principle to resolve conflicting interpretations of statutes.” Treasury Memorandum at 7-8. (6)