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Trump's Supreme Court nominee could be good for the economy

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President Donald Trump isn't planning to announce his choice to replace Ruth Bader Ginsburg until Saturday, but the debate has already begun over the views of one of the two women most often mentioned as the nominee. Unfortunately, the discussion is not focused on the issue where a new justice is likely to have the most impact: the Supreme Court's treatment of administrative law, which has a huge effect on the economy.

Either of the leading candidates — Amy Coney Barrett and Barbara Lagoa, both currently federal appellate judges — would be well to the right of Chief Justice John Roberts. That sets up Justice Brett Kavanaugh to be the next swing vote on the court, and hundreds of thousands of words have been spilled trying to read the tea leaves on whether Kavanaugh would be willing to overturn Roe v. Wade. (By my reading, the slight consensus is that he would be willing to chip away but not reverse the landmark ruling protecting the right to an abortion.)

Far fewer words have been deployed on both Roberts's and Kavanaugh's inclination to change economic and administrative law. Since Roberts became chief justice, the U.S. Chamber of Commerce has won 70% of the cases it has argued before the court.

Nor have the court's newest conservatives been shy about their hostility to the administrative state. In particular, liberals fear that a conservative majority would seek to overturn what's known as Chevron deference, which holds that federal agencies should be allowed to interpret the laws they administer so long as their interpretation is reasonable.

So agencies can, among other things, shift their interpretations when presidential administrations change, or expand the scope of a law to include issues that Congress may not have been aware of it when it was enacted. It was Chevron deference, for example, that allowed the Environmental Protection Agency in 2015 to interpret the Clean Air Act as giving it the right to regulate carbon emissions.

From the standpoint of economic growth, an end to Chevron deference would almost certainly be a boon. The proliferation of agency-generated regulations has often been cited as a barrier to innovation.

As the economist Michael Mandel has argued, rarely is there a single regulation responsible for a lack of growth. Instead, he likens the steady accumulation of regulations to pebbles in a stream, building up and creating an ever-expanding gauntlet that a new product or technology has to navigate.

At the same time, sometimes a lack of regulation can attract economic activity. In some areas where regulators were arguably derelict in responding to a new innovation — fracking comes to mind — productivity growth has been more rapid than some economists thought possible.

Notably, Justice Antonin Scalia was (at least in his earlier days) a defender of Chevron deference, arguing that Congress often intends to delegate its authority and the courts ought to respect that. More recent conservative judicial thinking has suggested that because legislators have differing and often contradictory aims, the whole concept of congressional intent is problematic.

Instead, these conservative scholars say, judges are bound to interpret the law as written. This philosophy undercuts the rationale of Chevron deference and implies it's up to the courts to say what precisely the law is — and for administrators to follow that interpretation. Both Lagoa and Barrett adhere to this interpretation, and if confirmed seem inclined to at least severely curtail if not reverse Chevron. Moreover, the solid 6-3 majority and relative youth of the conservative justices could mean that any new ruling would remain precedent for the foreseeable future.

Add it all up, and the most meaningful impact of Trump's appointee could be to rein in the administrative power of the federal government for decades to come.

Smith is a Bloomberg Opinion columnist. He was formerly vice president for federal policy at the Tax Foundation and assistant professor of economics at the University of North Carolina. He is also co-founder of the economics blog Modeled Behavior.

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