An Obama appointee with an agenda to bypass Congress.

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• July 29, 2013, 7:15 p.m. ET

Ron Binz's Rules for Radicals

An Obama appointee with an agenda to bypass Congress.

President Obama's rule-makers have amped up major regulators like the Environmental Protection Agency and now they're turning to more obscure outposts. Take the Federal Energy Regulatory Commission, or FERC, which oversees electric transmission and interstate pipelines. Or used to.

Now FERC has deputized itself as a Wall Street regulator. This month the commission squeezed Barclays for $435 million for alleged energy-market manipulation, the largest penalty in FERC's history and more than all of its previous fines combined. Another $410 million fine will soon hit J.P. Morgan, according to a Journal scoop.

Yet that will seem minor if the next FERC chairman is Ron Binz—the most important and radical Obama nominee you've never heard of. An electric regulator in Colorado from 2007 to 2011, Mr. Binz is the latest Presidential nominee who doesn't understand the difference between making laws and enforcing them.

No, that's unfair. Mr. Binz doesn't care about the difference. In a recent interview with the Association for the Demand Response and Smart Grid trade group, reflecting on the lessons of his Colorado job, he nodded at the "judicial role" of regulators. But then he mused about their "legislative role" too: "I saw the commission not simply as an umpire calling balls and strikes, but also as a leader on policy implementation."

This philosophy is especially troubling for a commission like FERC, which is supposed to be an even-handed arbitrator independent of the executive branch. FERC's narrow legal obligations include protecting the affordability and reliability of the U.S. power supply and electric grid—goals that are in more than a little tension with Mr. Obama's anticarbon program. The law is a nuisance when you think you're saving the planet.

Associated Press

President Barack Obama

Mr. Binz was supposed to fill a similarly neutral role in Colorado when then Democratic Governor Bill Ritter appointed him chairman of the public utility commission. Prior to his tenure, that job consisted of consumer protection and ensuring that electricity was low-cost. But Mr. Ritter wanted to do something about climate change, and Mr. Binz told the Denver Post in 2007 (using the third person) that "There's an expectation that the chair will carry a banner for the new administration."

Mr. Binz became the point man for legislation that would all but force several Denver-area coal plants to convert to natural gas though they weren't slated for retirement. He even negotiated terms directly with the Colorado power company that it was his responsibility to regulate, Xcel Energy .

Mr. Binz assured Xcel that it could pass on to rate payers, with a guaranteed return, whatever capital investment was necessary to replace the working coal assets. Documents obtained by the Colorado Mining Association under a state open records law show that Mr. Binz promised "extraordinary cost recovery." In a March 2010 email, he wrote that "I think it's more nearly a self-fulfilling prophecy—the larger (and faster) the cost burden in the Company's approved plan, the stronger the basis for the Commission to adopt extraordinary regulatory measures to assure the Company's financial health."

In other words, the more Xcel spent in the name of the Ritter-Binz political agenda, the more Mr. Binz would use the discretion he gave himself in the law he wrote to give Xcel favorable treatment. When Stockholm syndrome set in with Xcel and the company took the deal, Mr. Binz exulted that "the eagle has landed." It was great for everyone except the consumers involuntarily funding it.

Mr. Binz would almost certainly commandeer the same extralegal powers at FERC to perpetrate similar abuses, regardless of congressional intent. "Regulation needs to shift from its backward-looking focus on costs, to a forward-looking emphasis on value and desired societal outcomes," he says. In a 2012 report for the consultant Ceres subtitled "What Every State Regulator Needs to Know," Mr. Binz added that "Both regulators and utilities need to evolve beyond historical practice," and he encouraged utility commissioners to expand their mandates to include his subjective conception of the "broad societal benefits" of low- or no-carbon power.

FERC was a sleepy regulator until the Obama Presidency, but it has statutory powers that could be turned into anticarbon weapons, such as the authority to impose fines of up $1 million per day for what it claims are violations. They also include the power to block energy mergers and the construction of terminals, pipelines and transmission.

You can bet that Mr. Binz will be creative and political, and don't be so sure his only target is coal. At an Edison Foundation panel this March, he called natural gas a "dead end" technology because "on the carbon basis, you hit the wall in 2035 or so." He added that "We have to do better on carbon than even natural gas will allow us to do." This is unusual in that the greens usually pretend to support gas to make outlawing coal seem more reasonable. Mr. Binz let the mask slip.

Mr. Binz is part of the White House's damn-the-voters strategy of imposing through regulation what Congress won't pass, and now he wants to glide into FERC without protest. But the Senate's advice-and-consent role is especially important because a FERC chairman has broad powers, much like a CEO's, even if other commissioners dissent—and the chairman is not supposed to carry Mr. Obama's banner. Mr. Binz's record and methods deserve far more scrutiny than they have received.

A version of this article appeared July 30, 2013, on page A14 in the U.S. edition of The Wall Street Journal, with the headline: Ron Binz's Rules for Radicals.

Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved

Charles Murray's "American Exceptionalism"

Charles Murray writes that the platforms of the Republican and Democratic Party bear no resemblance to the Founders' understanding of government.

From Charles Murray's "American Exceptionalism," published this week by AEI Press:

The common understanding of the limited role of government that united the Founders, including Hamilton, [is] now held only by a small minority of Americans, who are considered to be on the fringe of American politics. The Founders retain their historic stature, with both liberals and conservatives quoting snippets of their writings and arguing that the Founders would be on their side if they were alive today. But as a matter of historical accuracy, it cannot be argued that the Founders' views of the proper scope of government bear any resemblance to the platforms of either the Democratic or the Republican parties.

The expansion of government can be measured in many ways, from the number of people who work for the government to the number of laws and regulations that have to be obeyed. But perhaps the simplest measure of the movement away from the Founders' conception of limited government is the monetary size of government. Except for wartime, the federal government never spent more than 4 percent of GDP in any of the 140 years from the founding until 1931. As of 2011, the government spent about 25 percent of GDP.

Bombshell in IRS Scandal

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Noonan: A Bombshell in the IRS Scandal

IRS Chief Counsel office is implicated.

By 
• PEGGY NOONAN
 

The IRS scandal was connected this week not just to the Washington office—that had been established—but to the office of the chief counsel.

That is a bombshell—such a big one that it managed to emerge in spite of an unfocused, frequently off-point congressional hearing in which some members seemed to have accidentally woken up in the middle of a committee room, some seemed unaware of the implications of what their investigators had uncovered, one pretended that the investigation should end if IRS workers couldn't say the president had personally called and told them to harass his foes, and one seemed to be holding a filibuster on Pakistan.

Still, what landed was a bombshell. And Democrats know it. Which is why they are so desperate to make the investigation go away. They know, as Republicans do, that the chief counsel of the IRS is one of only two Obama political appointees in the entire agency.

To quickly review why the new information, which came most succinctly in a nine-page congressional letter to IRS Commissioner Daniel Werfel, is big news:

Getty Images

IRS Tax Exempt and Government Entities Division revenue agent Elizabeth Hofacre, left, and retired IRS tax law specialist Carter Hull testify before the House Oversight and Government Reform Committee on Capitol Hill on Thursday.

When the scandal broke two months ago, in May, IRS leadership in Washington claimed the harassment of tea-party and other conservative groups requesting tax-exempt status was confined to the Cincinnati office, where a few rogue workers bungled the application process. Lois Lerner, then the head of the exempt organizations unit in Washington, said "line people in Cincinnati" did work that was "not so fine." They asked questions that "weren't really necessary," she claimed, and operated without "the appropriate level of sensitivity." But the targeting was "not intentional." Ousted acting commissioner Steven Miller also put it off on "people in Cincinnati." They provided "horrible customer service."

House investigators soon talked to workers in the Cincinnati office, who said everything they did came from Washington. Elizabeth Hofacre, in charge of processing tea-party applications in Cincinnati, told investigators that her work was overseen and directed by a lawyer in the IRS Washington office named Carter Hull.

Now comes Mr. Hull's testimony. And like Ms. Hofacre, he pointed his finger upward. Mr. Hull—a 48-year IRS veteran and an expert on tax exemption law—told investigators that tea-party applications under his review were sent upstairs within the Washington office, at the direction of Lois Lerner.

In April 2010, Hull was assigned to scrutinize certain tea-party applications. He requested more information from the groups. After he received responses, he felt he knew enough to determine whether the applications should be approved or denied.

But his recommendations were not carried out.

Michael Seto, head of Mr. Hull's unit, also spoke to investigators. He told them Lois Lerner made an unusual decision: Tea-party applications would undergo additional scrutiny—a multilayered review.

Mr. Hull told House investigators that at some point in the winter of 2010-11, Ms. Lerner's senior adviser, whose name is withheld in the publicly released partial interview transcript, told him the applications would require further review:

Q: "Did [the senior adviser to Ms. Lerner] indicate to you whether she agreed with your recommendations?"

A: "She did not say whether she agreed or not. She said it should go to chief counsel."

Q: "The IRS chief counsel?"

A: "The IRS chief counsel."

The IRS chief counsel is named William Wilkins. And again, he is one of only two Obama political appointees in the IRS.

What was the chief counsel's office looking for? The letter to Mr. Werfel says Mr. Hull's supervisor, Ronald Shoemaker, provided insight: The counsel's office wanted, in the words of the congressional committees, "information about the applicants' political activities leading up to the 2010 election." Mr. Shoemaker told investigators he didn't find that kind of question unreasonable, but he found the counsel's office to be "not very forthcoming": "We discussed it to some extent and they indicated that they wanted more development of possible political activity or political intervention right before the election period."

It's almost as if—my words—the conservative organizations in question were, during two major election cycles, deliberately held in a holding pattern.

So: What the IRS originally claimed was a rogue operation now reaches up not only to the Washington office, but into the office of the IRS chief counsel himself.

At the generally lacking House Oversight Committee Hearings on Thursday, some big things still got said.

Ms. Hofacre of the Cincinnati office testified that when she was given tea-party applications, she had to kick them upstairs. When she was given non-tea-party applications, they were sent on for normal treatment. Was she told to send liberal or progressive groups for special scrutiny? No, she did not scrutinize the applications of liberal or progressive groups. "I would send those to general inventory." Who got extra scrutiny? "They were all tea-party and patriot cases." She became "very frustrated" by the "micromanagement" from Washington. "It was like working in lost luggage." She applied to be transferred.

For his part, Mr. Hull backed up what he'd told House investigators. He described what was, essentially, a big, lengthy runaround in the Washington office in which no one was clear as to their reasons but everything was delayed. The multitiered scrutiny of the targeted groups was, he said, "unusual."

It was Maryland's Rep. Elijah Cummings, the panel's ranking Democrat, who, absurdly, asked Ms. Hofacre if the White House called the Cincinnati office to tell them what to do and whether she has knowledge of the president of the United States digging through the tax returns of citizens. Ms. Hofacre looked surprised. No, she replied.

It wasn't hard to imagine her thought bubble: Do congressmen think presidents call people like me and say, "Don't forget to harass my enemies"? Are congressmen that stupid?

Mr. Cummings is not, and his seeming desperation is telling. Recent congressional information leads to Washington—and now to very high up at the IRS. Meaning this is the point at which a scandal goes nowhere or, maybe, everywhere.

Rep. Trey Gowdy, a South Carolina Republican, finally woke the proceedings up with what he called "the evolution of the defense" since the scandal began. First, Ms. Lerner planted a question at a conference. Then she said the Cincinnati office did it—a narrative that was advanced by the president's spokesman, Jay Carney. Then came the suggestion the IRS was too badly managed to pull off a sophisticated conspiracy. Then the charge that liberal groups were targeted too—"we did it against both ends of the political spectrum." When the inspector general of the IRS said no, it was conservative groups that were targeted, he came under attack. Now the defense is that the White House wasn't involved, so case closed.

This is one Republican who is right about evolution.

Those trying to get to the bottom of the scandal have to dig in, pay attention. The administration's defenders, and their friends in the press, have made some progress in confusing the issue through misdirection and misstatement.

This is the moment things go forward or stall. Republicans need to find out how high the scandal went and why, exactly, it went there. To do that they'll have to up their game.