T oday’s federal government has strayed far from the design of the Founders, often for the worse. But not every deviation from the original concept can or should be fixed by the courts. That’s the message of the Supreme Court’s 7–2 decision this morning in Consumer Financial Protection Bureau v. Community Financial Services Association of America. The case provoked a spirited debate between Justices Clarence Thomas and Samuel Alito about the Court’s authority to save Congress from its own folly.
Thomas’s opinion for the Court ruled that it was constitutional for Congress to allow the Consumer Financial Protection Bureau to fund itself in perpetuity out of the Federal Reserve rather than ever have to go back to Congress for annual funding. While that undermines the crucial power of the purse, Thomas explained, a permanent appropriation is still an appropriation; Congress has nobody to blame but itself for giving away its power over the CFPB. The Constitution won’t save Congress, or fix our fiscal house; only a Congress with the political will to do so can repair its own errors. Until then, the CFPB can operate like a monarchy unaccountable to popular representatives.
Politically, there’s another lesson here: Let Democrats even once get the White House, the House, and a 60-vote Senate, and they will strip the Congress of its powers until it becomes what it now resembles — the world’s largest green room, commenting on federal operations without any sense of responsibility for them. Meanwhile, the executive bureaucracy grows ever more imperial. The CFBP’s funding mechanism was created by Dodd-Frank, passed during the heady first two years of the Obama administration. It will take a Herculean effort, likely extending over multiple election cycles, for the House to regain control over its funding.
The Throne and the Power of the Purse
Thomas’s opinion, characteristically, took care to ground the decision in the original understanding of the Constitution’s text — even, in this case, at the expense of its spirit. As the Founders understood, the power of the legislature to deny funds to the executive was not only a power over spending but a check on tyranny. Thomas and Alito both recounted in broad outline the pre-Founding history of Parliament’s centuries-long struggle to gain control over the funding of the monarchy in order to limit the powers of the king (a struggle still ongoing in the 1780s):
The ensuing power struggle culminated in the Glorious Revolution, in which Parliament stripped away the remnants of the King’s hereditary revenues and thereby secured supremacy in fiscal matters. . . . Following the Glorious Revolution, Parliament’s usual practice was to appropriate government revenue to particular purposes more or less narrowly defined. . . . Additionally, Parliament began limiting the duration of its revenue grants. . . . Limiting the duration of these and other revenue grants ensured that the King could not rule without Parliament. . . . Every year he and his Ministers had to come, cap in hand, to the House of Commons, and more often than not the Commons drove a bargain and exacted a quid pro quo in return for supply. [Quotations and citations omitted.]
Subsequent experience around the world has demonstrated the central nature of this legislative power. After 1626, the French monarchy ruled for 163 years without needing to get the consent of the Estates General, and when that body finally had to be called in 1789, the ossified French system had lost the capacity to engage in political bargaining without a lot of people losing their heads. In the 1860s, the Prussian parliament tried to rein in the king, and when the king’s chief minister, Otto von Bismarck, maneuvered the country through two successful wars in 1864 and 1866 without legislative funding, the power of the legislature was permanently broken — setting Germany on the path to decades of autocracy and ruinous war.
The Constitution, as first proposed, provided that only the House of Representatives could originate either appropriations or the raising of revenue; the convention’s final draft limited that to revenue bills. But appropriations still needed to pass the House. As James Madison argued in Federalist No. 58, by ensuring that appropriations needed the consent of a House elected every two years, the Constitution gave the House an effective popular veto over the other, indirectly elected and longer-tenured branches:
The House of Representatives cannot only refuse, but they alone can propose, the supplies requisite for the support of government. They, in a word, hold the purse that powerful instrument by which we behold, in the history of the British Constitution, an infant and humble representation of the people gradually enlarging the sphere of its activity and importance, and finally reducing, as far as it seems to have wished, all the overgrown prerogatives of the other branches of the government. This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure. [Emphasis added.]
The power to impose gridlock was understood by the Framers as a mechanism to compel compromise. But what the Framers failed to foresee was a time when Congress would voluntarily surrender its powers to the executive.
The Constitution didn’t provide an express limit on the duration of an appropriation, other than a two-year limit on appropriations for raising armies. In Federalist No. 41, Madison defended the two-year duration against critics who said it was too long, noting that this merely extended appropriations to the same length as the House’s own term, and that it was an improvement over British practice: “The British Constitution fixes no limit whatever to the discretion of the legislature,” whereas “the American ties down the legislature to two years, as the longest admissible term.”
As the Court noted, both English and early American practice incorporated both highly specific appropriations and more open-ended ones that only set a maximum cap. From the First Congress on, there were also parts of the government that were set up “to indefinitely fund themselves directly from revenue collected.” For example, the Court cites the customs collectors and the Post Office as both being supported by the fees they collected — in each case, continuing how such functions had been funded in colonial times. All that was required to satisfy the appropriations clause was “an identifiable source of public funds and purpose.”
Fees and Powers
As applied to the CFPB, the Court concluded that the agency’s funding out of the Federal Reserve is, for constitutional purposes, the same as funding out of the Treasury, because the Fed is otherwise obligated to deposit such funds in the Treasury. Alito, joined in dissent by Justice Neil Gorsuch, argued that the CFPB’s permanent appropriation to support a regulatory agency was nothing like the fee-based funding of customs and the early Post Office, which themselves were rare exceptions to the “dominant practice” of specific, time-limited appropriations in the early republic:
Agencies that provided services to a particular segment of the public were funded by fees that were paid by the recipients of those services. . . . If these fees exceeded the costs of providing the services, however, these agencies were required to send the surplus to the Treasury, which oversaw the collection and use of such fees. . . .
This practice had deep historical roots . . . and was presumably based on the idea that the cost of providing certain services should be borne by the recipients of those services rather than the general public. At the same time, the requirement that fees in excess of what was needed to defray the cost of providing services be turned over to the Treasury ensured that Congress maintained control over the ways in which this money was spent.
Under these arrangements, therefore, Congress exercised close control over both the amount of money that the agencies in question obtained and the way in which that money was used. The agencies received and were allowed to use the amount of money necessary to provide their narrowly prescribed services.
The CFPB’s funding setup is quite different:
The CFPB gets its money via a three-step process: The Federal Reserve Banks earn money from the purchase and sale of securities, as well as from the fees they charge for providing services to depository institutions. The Federal Reserve Banks then deliver these earnings to the Federal Reserve System. Finally, the CFPB requests an amount from the Federal Reserve Board. That feature of the CFPB scheme is entirely new.
As a matter of political philosophy, Alito undoubtedly has the better of the argument that the CFPB’s broad, vague regulatory powers are wholly unlike the limited fee-for-service model of customs and postal services:
The CFPB, by contrast, is an entirely different creature. Its powers are broad and vast. It enjoys substantial discretionary authority. It does not collect fees from persons and entities to which it provides services or persons and entities that are subject to its authority. And it is permitted to keep and invest surplus funds. . . . It is undeniable that the combination of features in the CFPB funding scheme is unprecedented. And it is likewise clear that this assemblage was no accident. Rather, it was carefully designed to give the Bureau maximum unaccountability.
The Court, in the 2020 Selia Law case, struck down aspects of the CFPB’s design that made its director unaccountable to the president. As Alito notes, while that solves one problem, it also exacerbates the extent to which the executive branch as a whole need not answer to Congress:
The appropriations requirement developed to ensure that the Executive (in England, the monarch) would be accountable to the people’s elected representatives. Seila Law, however, increased the power of the Executive over appropriations. By brandishing or wielding the threat of removal, a President may push the CFPB director to requisition the amount of money that the President thinks is appropriate and to spend that money as the President wishes.
As Alito summed up:
Elements that are safe or tolerable in isolation may be unsafe when combined. In the case of the CFPB, the combination is deadly. . . . The Court holds that the Appropriations Clause is satisfied by any law that authorizes the Executive to take any amount of money from any source for any period of time for any lawful purpose. That holding has the virtue of clarity, but such clarity comes at too high a price. There are times when it is our duty to say simply that a law that blatantly attempts to circumvent the Constitution goes too far.
Text and Structure
The harder question is not whether the CFPB is an assault on the principles of our founding charter, but whether the Constitution’s text and structure make it the sort of assault that the Court is equipped and armed to stop. Thomas argued that it is not:
The Constitution’s text suggests that, at least in some circumstances, Congress can make standing appropriations. The Constitution expressly provides that “no Appropriation of Money” to support an army “shall be for a longer Term than two Years.” Art. I, §8, cl. 12. Hamilton explained that this restriction ensures that, for the army, Congress cannot “vest in the Executive department . . . permanent funds” and must instead “once at least in every two years . . . deliberate upon the propriety of keeping a military force on foot,” “come to a new resolution on the point,” and “declare their sense of the matter, by a formal vote in the face of their constituents.” [citing Federalist No. 26]. . . . The Framers were thus aware of the dynamic [of long-term appropriations], but they did not explicitly limit the duration of appropriations for other purposes.
The First Congress’ practice confirms this understanding. Recall that the appropriations that supplied funding to the Customs Service and the Post Office were not time limited.
Score another win for Hamilton over Madison in a contest that has raged unabated for 235 years. Perhaps more directly to the point, Thomas faulted Alito for not offering a competing textual standard for what is and is not an “appropriation.” It’s possible to imagine a clearer line, but finding one that is rooted specifically in the Constitution is another matter (this is similar to the dilemma that the Court will face in the presidential-immunity context). In Thomas’s view, “although there may be other constitutional checks on Congress’ authority to create and fund an administrative agency, specifying the source and purpose is all the control the Appropriations Clause requires.”
As to Alito’s argument that the structure of the CFPB eviscerated the congressional power of the purse in ways that breached the separation of powers, Thomas argued that the Constitution does not leave Congress disarmed: “To be sure, the Appropriations Clause presupposes Congress’ powers over the purse. But, its phrasing and location in the Constitution make clear that it is not itself the source of those powers.” While Thomas did not elaborate, Congress can still use the leverage of its control over appointments, impeachment, the debt limit, and other discretionary funding to extract concessions from the executive.
Justice Elena Kagan wrote a concurring opinion joined by Justices Sonia Sotomayor, Brett Kavanaugh, and Amy Coney Barrett, arguing for the value of not disturbing long-standing congressional practices, considering them as evidence of a settled understanding of the Constitution, and adding the implausible claim that “the CFPB’s funding scheme, if transplanted back to the late-18th century, would have fit right in.” Justice Ketanji Brown Jackson took a different tack, writing a sole concurrence to argue, “When the Constitution’s text does not provide a limit to a coordinate branch’s power, we should not lightly assume that Article III implicitly directs the Judiciary to find one.”
This isn’t the first time that the Court has effectively punted in restraining the perpetual-appropriations racket, as it did in 2020 in the Obamacare risk-corridors case, Maine Community Health Options v. United States, where the Court (with only Alito dissenting) effectively concluded that a congressional rider to eliminate the risk-corridor program of payoffs to insurance companies had . . . not actually meant anything.
The Way Out
The decay of our constitutional system is rarely clearer than when observing how American government is funded today. Vast proportions of the federal government are effectively self-funding without annual or biennial appropriations — the CFPB is dwarfed, in that respect, by Social Security and Medicare. These self-licking ice-cream cones simply operate on autopilot, unaffected by who wins or loses elections. Perpetual appropriations stand the system’s design on its head: Instead of a majority of a single house of Congress being able to say no and bring things to a halt until its consent is obtained, the appropriation needs to be affirmatively repealed by both houses and the president. That creates a bias toward spending, and channels inter-branch negotiations into blunt instruments such as brinksmanship over the debt ceiling. The result, combined with the ballooning debts created by this system, is that the portion of the budget that actually gets decided annually by the elected Congress is a small and shrinking fraction. So much for democracy. And state legislatures don’t really control state spending anymore, either, because so much money is raised through the federal tax code and then funneled to the states. Good luck voting any of this out.
If there’s an answer here, it won’t come from the courts. The voters will need to make Congress do it. And that requires both popular energy and political leadership that is hard to find in the landscape of 2024. For now, though, the Court’s answer to Congress is: This is your monster, Dr. Frankenstein.