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Regulatory: President Obama shifts to unilateral executive action

The president uses his executive authority to influence government programs.

Frustrated with his inability to obtain legislation from Congress, President Obama recently shifted the focus of policymaking to emphasize steps he could take unilaterally under Article II of the Constitution as head of the executive branch. This initiative follows the model created by President Clinton in 1995 to 1996, when he faced a similar stalemate with the newly elected House Republican majority. Though mocked as playing “small ball,” the Clinton initiatives cleverly targeted smaller constituency groups whose support the president needed – and ultimately received – to gain re-election.

President Obama started this campaign on October 24, announcing that the Federal Housing Finance Agency would permit homeowners to refinance their mortgage even if the mortgage was 25 percent higher than the current reduced value of the property.

On October 26, he announced that 5.8 million people holding both direct federal student loans and private loans guaranteed by the government could consolidate their debts loans into a single, lower rate federal, with repayments capped at 10 percent of discretionary income. Congress had authorized such repayment options starting July 1, 2014, but the president unilaterally advanced the starting date.

On October 28, the president issued two memorandums:

  1. Heads of executive agencies must help small businesses create jobs by establishing a common website capturing all information regarding the government’s small business programs.
  2. Public-private research partnerships will accelerate  to help develop new technologies.

On October 31, the president sought to address pharmaceutical shortages and prevent possible price gouging. The head of the Food and Drug Administration must use his authorities to require manufacturers to provide advance notice of process problems that could create drug shortages.

In reality, the president possesses little ability to order changes in government programs based on his own, unilateral authority. In the non-defense sphere, Congress rarely delegates statutory powers to the president (the Superfund statute is an exception). Rather, because Congress has substantial persuasive influence over agency heads, it prefers to grant authority to them. The president cannot issue a legally binding order requiring agency heads to make changes, but can only issue a directive that is politically-enforceable (i.e., termination) instructing them to use their discretion in carrying out his policies to the extent possible.

The basic principle governing the president’s exercise of executive authority is set forth in Justice Jackson’s concurring opinion in the Steel Seizure Case, Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), which established a three-part test for determining the degree of authority the president possesses in a particular case. The president’s authority is greatest with an explicit Congressional authorization, weakest in the face of a Congressional prohibition and indeterminate if Congress has not directly addressed an issue. In this broad middle area, the president has substantial room to instruct agency heads how to exercise the discretion provided by a statute, as long as they do not take a prohibited act or fail to take a required act.

Under the Youngstown case, one of the president’s recent actions may push the envelope. In 2010, Congress amended existing laws to permit the secretary of education to modify student loans beginning in 2014. The president’s announcement raises the question of whether the secretary possesses authority to approve refinancing in 2011. If the statute is deemed ambiguous, the secretary may be able to proceed. But if the law is deemed to implicitly prohibit such loan modifications before that date, the president’s instruction may not provide the secretary with the necessary authority.

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John Cooney

John F. Cooney is a partner in the Washington, D.C., office of Venable.

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