President Donald Trump fired two Democratic commissioners from the Federal Trade Commission (FTC) last Tuesday, a move that raises important questions about the independence of regulatory agencies. If challenged in court—something the commissioners say they will do—the outcome could set a major precedent regarding presidential authority over so-called independent agencies.
Legally, this issue is murky. The statute that established the FTC says a president may remove any commissioner for inefficiency, neglect of duty, or malfeasance, a provision that the Supreme Court concluded limits a president’s power. But Trump and his team argue that such restrictions violate the Constitution’s grant of executive power, a position that FTC Chairman Andrew Ferguson supports.
There is a serious debate to be had over whether these statutory limits on presidential authority are constitutional. But even more serious is the question of how regulatory agencies can function effectively without the trappings of independence.
Leadership in some federal agencies have de facto ceded their agency independence. If the courts ultimately side with Trump and remove an important feature of independence, regulatory leaders and policymakers will need to create an alternative system that provides the effective regulatory environment that businesses and citizens need.
Regulatory independence has never meant that agencies operate outside the government’s reach. They are created by Congress, their leaders are appointed through a political process, and their decisions subject to judicial review. What makes them distinct from executive agencies are that their leaders cannot be fired at will and that their decisions are not directly overturned by the president. This design was intended at least in part to ensure that businesses and consumers experience a consistent and fair legal environment.
For decades, well-functioning independent regulatory agencies have been a stabilizing force. They’ve provided predictability in regulation, allowing companies to invest, innovate, and expand without worrying about rules whipsawing with every new administration. A business considering a multi-billion-dollar investment in infrastructure, for instance, cannot afford the risk that regulations that might be completely reversed in four years. Such instability creates risk, suppresses economic growth, and forces companies to divert resources away from innovation and toward lobbying and legal battles.
To create a regulatory environment that fosters economic growth, policymakers should prioritize four key principles: predictability, stability, legitimacy, and credibility. Regulations must be consistent across administrations, with clear principles guiding decision-making. While regulations will change over time as economies evolve, those changes should follow well-established legal and policy frameworks, not political impulses.
Regulatory legitimacy depends on whether businesses and consumers believe that decisions are made according to law and evidence, rather than political favoritism. Once the public starts to suspect that agencies are simply enforcing the preferences of the well-connected, trust in the system collapses. Credibility, or trustworthiness requires regulators to be competent, with a deep understanding of economics, law, and industry dynamics. If investors believe regulators are making uninformed or politically motivated decisions, they will shift their capital to other places.
Without these four qualities, it is often better to pursue deregulation than to allow ill-conceived rules to add economic uncertainty and distort markets. Regulation is only effective if it supports a functioning market system, driven by decisions made by consumers, investors, employees, and suppliers.
Even if the courts decide that presidents can fire FTC commissioners, that does not mean that regulatory leaders should act like partisan operatives. Agencies can still adopt and follow practices that reinforce their legitimacy and credibility. One way to do this is by ensuring that agency leadership adheres to professional standards and resists political pressure when making regulatory decisions.
Some utility commissioners have gone as far as suggesting to politicians that if they want to influence an upcoming vote, they must submit their arguments formally to ensure transparency and accountability. My understanding is that the written arguments never arrive. Instead of shifting policies to align with partisan priorities, agencies should follow a legal and economic framework that is clear, transparent, and grounded in expertise.
History provides examples of independent agencies operating effectively even under political pressure. During Trump’s first term in office, the Federal Communications Commission (FCC) rejected a proposed Sinclair Broadcasting merger with Tribune Media, despite President Trump’s public support for the merger. The agency also approved Ligado Networks’ spectrum use despite pressure from members of Congress, relying on its expert staff’s technical analysis rather than bending to outside pressure.
As the legal fight over these FTC firings plays out, policymakers and regulators should not lose sight of the broader issue.
Whether or not the courts allow presidents to fire independent commissioners, the core principles of stability, predictability, legitimacy, and credibility must be upheld or risk unnecessary economic problems. Fair, consistent, and transparent decision-making should remain the priority, regardless of how this legal battle ends.
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