Monday, May 19, 2014

The Guardian of Every Other Right: Part IV

"Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries." – Ayn Rand, 1963*

James W. Ely, Jr.'s chapter, "Progressive Reform and Judicial Conservatism, 1900-1932," details the clash between a noisy, generational cadre of Progressives and the dwindling grasp of individual and property rights in the American judiciary and especially on the Supreme Court. Lately, in our own time, the Court has been called the "Supine Court," so characterized because of Chief Justice John Roberts's bizarre, pretzel-like explanation in the majority opinion in June of 2012 for upholding the Affordable Care Act (ACA, or Obamacare) as a tax levied by Congress, as opposed to Congress's power to "regulate commerce," in this instance, the power to compel "commerce" between an individual and health insurance companies. As the New York Times reported:

“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” Chief Justice Roberts wrote in the majority opinion. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

At the same time, the court rejected the argument that the administration had pressed most vigorously in support of the law, that its individual mandate was justified by Congress’s power to regulate interstate commerce. The vote was again 5 to 4, but in this instance Chief Justice Roberts and the court’s four more conservative members were in agreement.

The majority opinion on the other hand ostensively rejected the Administration's contention that the ACA's constitutional status was sanctioned by the commerce clause. Whether or not the mandatory transaction takes place within or across state lines is in fact irrelevant, even though most states forbid buying virtually any kind of insurance from an out-of-state company. The "individual mandate" crosses every state line, it's a federal mandate or compulsory "economic activity," ergo, "interstate."

Significantly, Roberts wrote (and in the meantime impugned the character of the Framers):

"To an economist, perhaps, there is no difference between activity and inactivity; both have measurable economic effects on commerce,” Chief Justice Roberts wrote. “But the distinction between doing something and doing nothing would not have been lost on the framers, who were practical statesmen, not metaphysical philosophers.”

Justice Clarence Thomas, in his 193-page dissenting opinion, among other issues pointed out that compelling "economic activity" and penalizing economic "inactivity" – that is, not buying health insurance – was not what the Framers of the Constitution had in mind when they drew up the document.

Ely does not discuss the Obamacare decision, but because of its relevance to the subject, I thought it deserved mention. So, returning to his book…..

In response to…changed economic conditions, a broad-based reform movement, known as Progressivism, emerged during the early years of the twentieth century. The objectives of this coalition were diverse and included electoral reforms designed to make the political system more responsive to the public. But the primary Progressive concern was to correct the imbalance of economic power associated with the new industrial order. Contending that the unregulated market often functioned poorly, Progressives sought to control large-scale corporate enterprise to preserve competition and mitigate the conditions of industrial employment. At the heart of the reform program lay the Progressive insistence on a more active role for both state and federal governments in regulating the economy and meeting social problems….Progressives viewed the states as important laboratories for legislative experimentation. (pp. 106-107)

Boiled down to simple terms in every respect, the Progressives would claim that an "imbalance" existed between a man who had ten dollars and a man who had only three. "Social justice" or some other Progressive euphemism would be achieved by taking three or even four dollars from the first man and giving it to the second man.

From my own readings, members of the judiciary on both federal and state levels, with few exceptions, were ignorant of the ulterior motives of the Progressives, which was a program of the incremental imposition of socialism. Again, with few exceptions, justices rarely questioned what Progressivism was "progressing" to, which was a command economy ruled by a powerful central government.

In the landmark Lochner v. New York case (1905), "the Court gave sharp teeth to economic due process by invalidating a statute that restricted work in bakeries to ten hours a day or sixty hours a week. Speaking for a five-to-four majority, Justice Rufus W. Peckham held that the law violated the liberty of contract as protected by the Fourteenth Amendment. Although he recognized that a state could enact laws to protect the health of workers, Peckham was not persuaded that the baking trade was unhealthy. (p.107)

Justice Peckham, writes Ely, suspected an ulterior motive behind the statute was not ensuring the health of bakery workers, but to regulate labor relations. He described the statute "as mere meddlesome interferences with the rights of the individual." This was the limit of his ability to articulate the ulterior motives of the Progressives in the New York legislature who had authored the statute.

Oliver Wendell Holmes, Jr., was one of the few exceptions who knew what the Progressives wanted and where they were "progressing" to: A genuinely "democratic" government that reflected public opinion and trends. Dissenting from the majority in Lochner in no uncertain terms, and "denying that contractual freedom was protected by the due process norm," he said:

"This case," he charged, "is decided on an economic theory which a large part of the country does not entertain." Holmes articulated a philosophy of judicial restraint under which the Court should defer to "the right of a majority to embody their opinions in law." Skeptical about absolute legal values, Holmes sought to preserve a wide latitude for the political resolution of economic disputes. (p. 108)

Holmes was a revered "judicial pragmatist." Ely elaborated further on Progressivism's agenda:

Rejecting the notion that legal principles were fixed, reformers demanded that law reflect social reality and the underlying needs of society. They called for a connection between law and the insights of social science. Louis D. Brandeis [Associate Justice on the Court 1916-1939, nominated by Woodrow Wilson] was among the most influential proponents of this sociological jurisprudence. A successful corporate attorney with a Boston practice, Brandeis was an articulate advocate of Progressivism. He argued that the courts should take into account of economic and social changes and consider the validity of regulatory legislation in light on contemporary social conditions….To give practical application to these reformist attitudes, Brandeis pioneered the use of social facts before the courts. (Brackets mine; p. 109)

The Court fought a rearguard action for the protection of property rights against the constant guerilla warfare-like raids by the Progressives. The Court won a string of victories against the Progressives in this period, as Ely details, but the victories were qualified because of the Court's concession that "social ills" existed and should be corrected with legislative action. Ely writes:

While seeking reform on the state level, Progressives also called on the federal government to play an active role in regulating the economy. In particular, they urged Congress to expand the use of federal power to eliminate social ills and control the competitive behavior of large corporations….Yet the prevailing understanding of federal commerce power hampered reform efforts. During the late nineteenth century, the Supreme Court drew a distinction between commerce and manufacturing, thus placing control of production beyond the power of Congress. The Court cautiously recognized a greater scope for federal authority over commerce but continued to insist that important areas of economic life could not be governed by Congress. (p. 113)

Congress need not directly dictate control of economic activities. Many federal departments and bureaus, such as the Securities and Exchange Commission, the Environmental Protection Agency, and the Department of Education exercise such control. These and other federal bureaucracies were the long-range offspring of Progressive agitation for the government to "do something" about "social" and "economic" ills and "imbalances."

Ely writes:

To implement social and economic reforms, the Progressive movement championed the growth of the administrative state. Reformers placed great faith in the administrative approach to regulatory issues.  As envisioned by Progressives, independent regulatory agencies composed of nonpolitical experts would exercise sound judgment in carrying out legislative policy….In 1913, Congress created the Federal Reserve Board to oversee banking and credit and, a year later, established the Federal Trade Commission (FTC) to police unfair trade practices. (p. 116)

In his chapter "The Gilded Age," discussed in Part Three of this review, Ely featured the passage of a federal income tax in 1894. He writes:

Critics…feared that the tax was an opening wedge for additional assaults on property rights. Conservatives promptly arranged a challenge to the newly enacted levy in Pollack v. Farmers' Loan & Trust Co. (1895), insisting that the income tax was an unconstitutional direct tax….Arguing before the Supreme Court, Joseph H. Choate, a prominent New York attorney, characterized the income tax as "communistic in its purposes and tendencies." He further asserted that this case involved "the preservation of the fundamental rights of private property and equality before the law."  (p. 102)

The 1894 tax was consciously aimed at the wealthy. The Court overturned the tax, citing the apportionment clause in the Constitution, however, not questioning the reasoning behind that clause. Fast forwarding to 1913, Ely reveals the foolhardy behavior of Congress's conservatives, who sought to quash further agitation for a federal income tax.

Seeking to defeat a direct challenge to the Pollock decisions, Senate conservatives in 1909 proposed a constitutional amendment enabling Congress to tax incomes without apportionment among the states according to population. They mistakenly calculated that the proposal would fail to win ratification by the states. The Sixteenth Amendment voided the Pollock decisions, and Congress promptly used its new power to levy a graduated tax on individual incomes over $3,000 as well as a flat tax on corporate income. The burden of the individual income tax fell on less than 3 percent of the population [that is, the wealthy]. (Brackets mine; p. 117)

There is an interesting history behind the ratification of the Sixteenth Amendment. Ratification required that three-fourths of the 48 states approve of it. However, then Secretary of State Philander Knox appeared to have jumped the gun and proclaimed the amendment adopted. We the People ends a narration of the shenanigans behind the ratification:

These last five states, along with Kentucky and Oklahoma, have particularly strong implications with regard to the fraud charge against Knox, in that he cannot be excused for not knowing they shouldn't have been counted. Why was he in such a hurry? Why did he not demand that they send proper documentation? They never did. Further review would make the list dwindle down much more, but with the number down to 20, sixteen fewer than required, this is a suitable place to rest, without getting into the matter of several states whose constitutions limited the taxing authority of their legislatures, which could not give to the federal govern authority they did not have.

The results from the six states Knox had not heard from at the time he made his proclamation do not affect the conclusion that the amendment was not legally ratified. Of those six: two (Virginia and Pennsylvania) he never did hear from, because they ignored the proposed amendment; Florida rejected it; two others (Vermont and Massachusetts) had rejected it much earlier by recorded votes, but, strangely, submitted to the Secretary within a few days of his ratification proclamation that they had passed it (without recorded votes); West Virginia had purportedly approved it at the end of January 1913, but its notification had not yet been received (remember that West Virginia had violated its own constitution, as noted above).

Ely has his own conclusions:

By breaching the time-honored norm of an even-handed tax policy, the Sixteenth Amendment opened the door for tax policies designed to redistribute wealth. Moreover, it provided an enhanced revenue source from which the federal government greatly extended its reach over American society. (pp. 118-119)

Ely lists the multi-pronged attack not only on the Constitution, but on the Supreme Court and other federal courts.

First, scholars associated with the Progressive movement sought to weaken the aura of sanctity surrounding the U.S. Constitution and the Supreme Court. Foremost among this intellectual challenge was the publication in 1913of Charles A. Beard's An Economic Interpretation of the Constitution of the United States. Beard pictured the drafting of the Constitution in conspiratorial terms….

Second, Progressives challenged the centrality of property rights in the American constitutional order. Legal theorists allied with the Progressive movement assailed the Lockean idea that property was a pre-political natural right. These scholars maintained that property should be reconceptualized as a creation of society that did not entail any fixed set of rights. [Sound familiar? President Obama echoed that falsity, many commentators claiming his statement was quoted out of context, including] This new pattern of thought attempted to undermine the very notion of property and cast doubt on its high constitutional standing….

Third, the Progressives asserted that the Supreme Court exercised a vast discretion over the validity of social and economic measure and complained about "judicial supremacy." Progressives maintained that federal judges were simply substituting their economic views for the judgment of popularly elected legislatures….

The Progressives devised several proposals to curb federal judicial power. Some reformers favored amending the Constitution to strengthen popular control of the judiciary….(Brackets mine; pp. 122-123)

Ely's chapters, "The New Deal and the Demise of Property-Conscious Constitutionalism," and "Property Rights and the Regulator State" deserve separate discussion. This will be done in Part Five of this review.

The Guardian of Every Other Right: A Constitutional History of Property Rights, by James W. Ely, Jr .. New York: Oxford University Press, 2007. 216 pp.

*From "For the New Intellectual," in For the New Intellectual: The Philosophy of Ayn Rand, by Ayn Rand. New York: Signet, 1963. 224 pp.

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