From President Biden’s first day in office, when he sent his American Rescue Plan Act to Congress, until March 11, when he signed the $1.9 trillion economic relief package into law, his top officials and allies on the Hill were laser-focused on keeping the Democrats’ slim majorities on board. But they paid less attention to one potential source of danger: the need to screen out provisions that, after enactment, could give right-wing judges openings to shred Biden’s blockbuster reform—just as, a decade earlier, hostile judges nearly managed to shred his predecessor’s signature accomplishment, the Affordable Care Act.
Days before final passage, Senator Joe Manchin of West Virginia—the moderate Democrat who wields disproportionate power over the party’s legislative agenda—pushed for an amendment that bars states that accept relief funds to use them to “either directly or indirectly offset a reduction in the net tax revenue.” Manchin’s purpose was unobjectionable. “How in the world,” he explained, “would you cut your revenue during a pandemic and still need dollars?” But the language used to implement this sensible idea should have triggered alarm, especially given the Supreme Court’s 2012 decision on Obamacare. While Chief Justice John Roberts sided with the court’s liberal wing to largely uphold the law, he imposed new limits on congressional power to tie strings to funding grants to states—limits that could jeopardize the Manchin amendment’s broadly phrased ban on “indirect” tax cuts. Evidently, no one spotted that legal red flag when the amendment was vetted and adopted.
Republican state attorneys didn’t wait to pounce. Days after the bill’s passage, 24 conservative attorneys general—led by those in Arizona, Georgia, and Manchin’s own state of West Virginia—signed a letter to Treasury Secretary Janet Yellen demanding, in essence, that her department interpret the tax-offset provision to preclude only “express” use of relief funds for “direct” tax cuts—thus reading out of the law its prohibition on “indirect” offsetting tax cuts. The letter threatened “appropriate action”—a lawsuit—if Treasury did not provide a satisfactory response. A day later, Ohio’s Republican attorney general, Dave Yost, filed suit on behalf of his state, seeking to preliminarily enjoin the “tax mandate”; the case will be heard by Trump-appointed Judge Douglas Cole, himself a former Ohio attorney general with robust Federalist Society credentials. Arizona Attorney General Mark Brnovich later filed a similar complaint in the federal district court located in Phoenix.
These Republican attorneys general ground their claims primarily in Roberts’s ACA decision. In that case, he ruled that the law gave states no politically realistic option to reject Medicaid expansion funds, and hence they were unconstitutionally “coerced” to accept certain strings the legislation attached to those funds. Roberts stressed that Medicaid funding—which states would lose entirely if they refused to expand Medicaid coverage, per the law—constituted on average 10 percent of state budgets. The American Relief Plan will provide 7 percent of Ohio’s budget for the relevant fiscal year—pretty close to 10 percent.
There is a short and easy answer to the attorneys general’s beef, precisely the explanation Manchin provided in introducing his amendment: If a state “offsets” the relief funds with a tax cut, then it did not need the funds in the first place and thus could not have been “coerced” into accepting them. But that response does not answer the Republicans’ additional complaint that, because dollars are fungible, the word “indirectly” could, if literally interpreted, bar any reduction in tax revenues, no matter how trivial and no matter how clearly unrelated to receipt of the relief funds. Indeed, the imprecise and potentially sweeping scope of the amendment could run afoul of Supreme Court precedents decades older than Roberts’s ACA ruling. These precedents liken funding grants with strings attached to contracts in which the state accepts the money subject to the conditions specified in the law. But the court held, in an oft-cited 1981 decision, that, for this contract theory to hold, those conditions must be “unambiguous,” to enable a state to “ascertain what is expected of it” and “voluntarily and knowingly accept” the terms of the deal.
In Senate testimony and a letter to Arizona’s attorney general, the administration sought to deflect these Republican complaints. Yellen signaled that she intended to narrow the scope of the tax-offset prohibition, through interpretive regulations that the relief plan specifically empowers her department to issue. It is doubtful, however, that the administration will go so far as to buy the Republican attorneys general’s demand to preclude altogether coverage of any “indirect” offsets. That would thoroughly gut Manchin’s amendment, turning enforcement into a shell game that state tax-cutters would always win.
Not long ago, any such
regulations to “clarify” an imperfectly drafted statute would have routinely been
upheld. Since 1984, the Supreme Court has required federal judges to “defer” to agencies’ interpretations of statutes
they administer. Yet such restraint (known as “Chevron deference,” after one of
the parties to the 1984 case) may no longer be available to turn back these
challenges to the American Relief Plan. This is because Roberts, in a 2015
decision rejecting a second existential ACA challenge, held that courts must on their own, without Chevron deference, interpret
statutory provisions that involve “a
question of deep economic and political significance that is central to [the]
statutory scheme.” The Republican attorneys general will argue that the tax-offset amendment
fits the Roberts’s carve-out from Chevron deference—a plausible claim, though
by no means a sure winner.
More concerning, a legal battle over the amendment could trigger a radically far-reaching judicial rebuff. The amendment grants broad authority to the Treasury to interpret statutory language, providing the Court’s right-wing justices a tempting opportunity to deliver on a threat to kneecap the so-called administrative state.
In a 2019 dissenting opinion in Gundy v. United States, Justice Neil Gorsuch
proposed recharging
the so-called “nondelegation” doctrine, which delineates Congress’s authority to
give agencies discretion to carry out broad statutory mandates. Since the New
Deal, this doctrine has been interpreted parsimoniously, to require judges to uphold
any delegation of authority, so long as it “lays down an intelligible
principle” for the agency to follow, as reaffirmed most
recently in a 2001 decision by none other than the model conservative jurist, the late Justice Antonin Scalia. “We have almost never felt qualified to second
guess Congress regarding the permissible degree of policy judgment that can be
left to those executing or applying the law,” he had admonished. Flaunting the
newly emboldened conservative bloc’s rightward lurch, Gorsuch dismissed Scalia’s
deferential restraint as a “misadventure” and a “blank check” to federal
bureaucrats. Gorsuch avowed that the Constitution requires that statutes
merely “assign to the executive only the responsibility to make … factual
findings … and not policy judgments.” As Justice Elena Kagan’s majority
opinion observed, that formula would make “most of Government … unconstitutional.”
Kagan’s observation was not hyperbolic. Federal agencies routinely make “policy judgments” to carry out statutory mandates, such as the actions taken by the Federal Reserve and the Centers for Disease Control and Prevention, among others, to stem the coronavirus pandemic, or by the Environmental Protection Agency to curb an oil refinery that’s raining oil on surrounding residents. The policymaking functions these and other federal agencies have long carried out are widely taken for granted—unsurprisingly, since they are essential to government’s capacity to meet the most basic needs and interests of all Americans.
But Gorsuch’s “nondelegation” infatuation cannot be dismissed. Four of his current colleagues—enough to form a majority—have at one time or another signaled support for his bid to, as Justice Samuel Alito ominously put it, “reconsider the [nondelegation] approach we have taken for the past 84 years.” In fact, recognition that the Constitution empowers Congress to delegate broad and hugely consequential policymaking authority was evident as far back as 1791, when President George Washington signed into law the first National Bank of the United States, and 1816, when President James Madison (a Jeffersonian Republican who had initially opposed Washington’s 1791 decision) approved legislation that delegated, to the second National Bank, significantly enhanced regulatory powers and macroeconomic policymaking responsibilities.
The two red-state lawsuits filed against the American Rescue Plan don’t take issue with other parts of the law, no doubt to avoid provoking outcries that their suits would wrench billions of dollars from suffering people’s pockets. Still, it will hardly be surprising if one or another of these 25 Republican attorneys general gives a hyperpartisan district judge an opportunity to knock out, or at least put on hold pending two years or more of legal wrangling, much or even all of Biden’s hugely popular law. Such a suit, in combination with Ohio’s, could then unleash other new right-wing activist judges, including members of the Supreme Court, to cut a broader swath through other essential, existing, and future progressive legislation.
Repeatedly, liberals have been startled by the right’s increasingly audacious weaponization of the courts. Ten years ago, they complained about being “ambushed” by the court’s invalidation of the law’s mechanism for inducing states to accept its expansion of Medicaid coverage—with two liberal justices joining the decision. But ACA supporters could have drafted the law to avoid most or all of the damage, if only they had taken seriously the conservative legal movement’s growing conviction that, in the words of libertarian scholar Lynn Baker, “the biggest threat to state autonomy is, and has long been, Congress’ spending power.” Now the Democrats have made the same mistake. The bid to maim the American Rescue Plan could have been averted if its drafters had been attentive not just to esoteric conservative scribblers but major Supreme Court precedents. Once again, the party’s semantic negligence has put the fate of a landmark law in the hands of its adversaries.