You must buy it. Who do these politicians think they are?

For those who wonder by what authority the government can make us buy insurance against our will, the Senate bill alluded to the Constitution’s Commerce Clause: “The individual responsibility requirement provided for in this section . . . is commercial and economic in nature, and substantially affects interstate commerce.”

How would an insurance requirement affect interstate commerce? The bill said that “The requirement is essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold.”

Fallacies abound. To begin, medical insurance isn’t really interstate commerce. One of the few sensible things proposed during the public discussion on medical care is the repeal of the federal ban on interstate purchase of coverage. Residents of California are not free to buy less-fancy, less-expensive policies offered in Arizona, but are stuck with policies made more expensive by California’s overbearing regulatory regime. Interstate sales would increase competition and lower prices, but the ruling party showed no interest in that idea.

The argument has more problems. The Commerce Clause has typically been invoked against barriers to interstate commerce, but the insurance mandate would represent the first time that individuals were compelled to buy a product or service in the name of making interstate commerce more effective. Even under the most expansive reading of the Commerce Clause, how does compelling the purchase of insurance qualify as regulating interstate commerce? We really have crossed a threshold.

The nub of the argument is that unless healthy people are forced to buy coverage, the insurance market won’t work properly because the new law compels insurance companies to cover sick people for no more than they charge the healthy. Obviously, that would not be good for the insurance market.

The individual insurance mandate, then, is a solution to a problem the bill itself would create.

Guaranteed issue is the culprit, and freedom is taking a back seat to a political objective, which is to disguise a welfare program as insurance and put us on the road to government-administered rationing.

The “reformers” are quick to point out that people without insurance go to emergency rooms for medical care and sometimes don’t pay their bills, shifting the costs to the rest of us. But Shikha Dalmia, writing in Forbes, notes that uncompensated care accounts for less than 3 percent of the country’s total medical bill.

One reason for uncompensated care is that emergency rooms are forbidden to turn away patients (even in non-emergencies) who have no means of payment. Who imposed that prohibition? The government, of course. That may sound humane, but one unintended consequence is a likely contraction of charitable care. Why set up facilities for the indigent if they can turn up at any emergency room?

Again we see Mises’s Law at work: Intervention begets intervention. Government action creates problems that politicians then use to justify more government action. Undoing the first intervention would help solve the problem, but politicians have little incentive to move in that direction.

Government has suppressed the free market in medical care on both the supply and demand sides. As a result, medical services and insurance are artificially expensive, pricing many people out of the market. Instead of removing the interventions and letting the free market—including mutual-aid associations and philanthropy—lower prices and create more widespread coverage, the politicians are piling on more market-suppressing measures. Freedom is the first casualty. But we can also anticipate an aggravation of the current system’s worst features.

Forcing individuals to buy insurance is an intolerable assault on our liberty—not to mention a massive subsidy to the insurance companies. (They’re mad the penalty is not greater.) How many more usurpations can we be expected to tolerate?

* * *

Speaking of health care “reform,” only willful blindness or abject ignorance could prompt someone to say that the free market has failed. Kevin Carson explains why.

The so-called debate over health care has fallen short in even the most basic ways, such as sticking to what is actually possible. Gene Callahan calls for some maturity.

Also lacking has been any inkling that in public policy, results can be rather different from objectives. So Steven Horwitz offers a primer on the Law of Unintended Consequences.

With the economy struggling and many people still without jobs, the Federal Reserve is getting a closer look than ever before. Gerald P. O’Driscoll, Jr., examines the Fed’s conduct since the bust and doesn’t like what he sees.

Theodore Roosevelt still gets good press, but the case can be made—and Jim Powell makes it—that TR never understood the American Revolution.

John Locke is a beloved figure among libertarians, but is there less to him than meets the eye? Can he really be proclaimed the father of limited government? Joseph Stromberg’s answer may surprise you.

Our columnists keep the hits coming. Lawrence Reed has some advice for President Obama about the role of government. Thomas Szasz returns to the horrific case of Alan Turing. Burton Folsom looks at what ended the Great Depression. John Stossel warns of the hazards of government mortgage insurance. Walter Williams wonders when the Supreme Court will again find some limits to government power. And Charles Johnson, reading the claim that the health care debate has been about fundamental values, protests, “It Just Ain’t So!”

Books about private coinage, climate change, Alexander Hamilton, and the New Deal’s business opponents come under scrutiny by our reviewers.

Finally, a reader questions Kevin Carson on intellectual property in Capital Letters, while James Ahiakpor and Steven Horwitz go toe-to-toe on savings.

—Sheldon Richman
srichman@fee.org

Still, if that’s what you think, you’re wrong.

The latest entry in the genre, Thomas Woods and Kevin Gutzman’s Who Killed the Constitution?, is something different. It’s well worth your while.

Unlike some other writers, Woods and Gutzman don’t just place the blame for our present situation on a handful of bad Supreme Court decisions. Instead, they show how, in the twentieth century, all three branches of the federal government have spun out of control, completely abandoning any pretense that the Constitution constrains them at all.

Woods and Gutzman demonstrate how the executive branch claims virtually unlimited power. President George W. Bush damaged the constitutional fabric significantly, and the authors demolish the dubious constitutional scholarship of Bush’s court intellectual, law professor John Yoo. They point out, too, that presidents never have trouble finding “scholars” like Yoo to rationalize their power grabs.

But the authors also show that Bush did not do much of anything new. All presidents since at least Harry Truman have assumed they could make war without a declaration from Congress. In fact, most presidents since Theodore Roosevelt have assumed, as he did, that they can do anything they want in the absence of a specific constitutional restriction on their power. (Gene Healy’s recent book, The Cult of the Presidency, reviewed in the March Freeman, offers much additional detail on this subject.)

A Litany of Abuses

One chapter in particular illustrates this by exposing one of the worst, but most overlooked, government crimes in U.S. history: Franklin Roosevelt’s confiscation of everyone’s gold. This discussion also gives the authors an opportunity to offer an important bit of economic education as they explain why gold was used as money in the first place.

You might expect the chapter titled “Roads to Nowhere” to offer a familiar list of pork-barrel projects funded by Congress. Instead, the authors show that the federal government shouldn’t be funding roads at all, no matter where those roads go. Early presidents assumed they would need a constitutional amendment to fund “infrastructure” projects. Unfortunately, today they just assume it’s within their power and that assumption goes unchallenged.

Other chapters explore topics such as the Commerce Clause, which the courts have used to justify almost anything Congress does; the military draft, which violates the Constitution’s prohibition of slavery; presidential “signing statements” (written pronouncements by a president on signing a bill, often with the intent to modify the statute and especially to nullify its application to the executive branch), and President Truman’s attempt to nationalize the steel industry.

Two of the boldest chapters deal with what the authors call the “third rail of American jurisprudence”—Brown v. Board of Education and its aftermath. The authors show how Brown had no basis in the Constitution—and that the Supreme Court justices behind the decision knew it. Yes, the book’s authors actually say it: the Fourteenth Amendment’s text does not actually prohibit school segregation.

Even if that’s so, why attack this sacred cow when most everyone today opposes segregation anyway? Because if the Supreme Court can so utterly disregard the Constitution and the very idea of law in this decision to reach its own policymaking goals, then there really is no Constitution to speak of anymore. And that’s the point. As they say in their introduction, “the Constitution is dead.”

Beyond Redemption

Refreshingly, they don’t argue that the Constitution might be revived by electing the right people or bringing the right lawsuits. Indeed, they even suggest that our sorry result might have been inevitable—not only with this particular Constitution, but with any written constitution. After all, what do you expect will happen when you let federal officials determine the limits of the federal government’s power? That’s true regardless of who’s in office, or what they might say before being elected. Woods and Gutzman write: “People in power exercise all the power they can get, even after they have howled in the wilderness against legislating judges, imperial presidents, and the death of states’ rights.”

The authors also quote Lysander Spooner, who put the problem best when he wrote in the nineteenth century that the Constitution “has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.”

It’s a sad commentary that in the mainstream media, courts are tagged with such confusing and superficial labels as “conservative” or “liberal”—terms loaded with political baggage and often manipulated by those with an ax to grind. I prefer more clarifying questions: Does a court interpret law or manufacture it? Does it apply the Constitution according to what its text says or is it willing to abandon it to accommodate current whims, trendy ideologies, or alleged “needs” of the moment? Were our liberties more or less secure after it did its work? The Fuller Court, encompassing a parade of justices who came and went during Fuller’s 22 years as chief, was not consistent on all counts. But unlike any subsequent Court, it stretched neither the law nor the Constitution beyond what the words say. When it found law to be in conflict with the Constitution, it usually sided with the latter because liberty under the rule of law was its highest priority. It upheld the importance of a limited federal role, strengthened the role of the states in our federal system, and defended contract and property rights against a rising tide of egalitarian agitation.

Melville Weston Fuller was born in Augusta, Maine, in 1833. Both sides of his family were staunch Jacksonian Democrats—hard money and a small federal government being foremost among the principles they embraced. After graduation from Bowdoin College in 1853, Fuller was admitted to the bar in 1855. A year later he started a successful law practice in Illinois, where he would reside until his elevation to the Supreme Court by President Grover Cleveland in 1888.

As a one-term Democratic legislator in Illinois’s lower house in 1862, Fuller condemned the Lincoln administration’s arbitrary arrests, suspension of habeas corpus, and other wartime indiscretions as assaults on liberties guaranteed by the Constitution. He opposed both secession and slavery, but didn’t believe in quashing dissent and due process to vanquish them. As a Democratic activist and adviser to candidates for national office, he opposed protectionism as special-interest legislation that hurt consumers. He decried irredeemable paper money as a form of theft and fraud, even voting to forbid the Illinois treasury from receiving greenbacks as payment for state taxes. He scrutinized public spending for waste and favoritism, once earning the wrath of his colleagues by publicly opposing (unsuccessfully) a bill to give gold pens to each member of the Illinois House.

In what biographer Willard L. King terms “the greatest public speech of his career,” Fuller seconded the 1876 nomination of Indiana’s Thomas Hendricks for president in unmistakably Jeffersonian terms: “[T]he country demands a return to the principles and practices of the fathers of the Republic in this the hundredth year of its existence, and the restoration of a wise and frugal government, that shall leave to every man the freest pursuit of his avocation or his pleasures, consistent with the rights of his neighbors, and shall not take from the mouth of labor the bread it has earned.”

The 1876 Democratic Convention nominated Samuel Tilden instead of Hendricks, but many Democrats around the country remembered Melville Fuller. One of them was Grover Cleveland. The last Jacksonian Democrat to hold the highest office, Cleveland wanted a chief justice with an unblemished record of integrity who not only shared his limited-government philosophy but was also a good business manager who could fix the three-year backlog of cases at the high court.

Fuller, 55, who had argued many cases before the Supreme Court over a 16-year period, was precisely what Cleveland was looking for. The President admired the fact that in his visits and meetings with Fuller, the Illinois lawyer had never asked him for anything, even turning down three high posts within the administration. And he had taken considerable public heat in defending the President’s hard money stance and his numerous vetoes of spending bills. To thwart a possible decline by Fuller, Cleveland announced his nomination before Fuller even gave his consent. He was literally dragged into an office for which he didn’t lust but in which he quickly distinguished himself as one of its most able and important holders.

Fuller charmed his colleagues on the Court with his good humor, thoughtful scholarship, and remarkable capacity for friendly persuasion and mediation. He began a custom still in use today of requiring each justice at the start of a working day to shake the hand of every other justice. He resolved the Court’s crowded docket.

The Fuller Court should be most admired, however, for its jurisprudence. Certainly Americans who share the Founders’ vision can find much about it to applaud. Fuller himself was at the center of it, often arguing for the majority. When freedom of commerce was at issue, the Fuller Court did not carelessly allow governmental interference. For example: Prohibitionists in Iowa secured passage of a law forbidding the sale of an interstate shipment of liquor, but the Court, with Fuller himself writing the majority opinion, declared it an unconstitutional violation of the Commerce Clause.

Restricted Sherman Act

In other commerce-related rulings, the Fuller Court restricted the application of the almost incoherently broad language of the Sherman Anti-Trust Act. Regulating the terms of interstate commerce and transportation, as the Constitution provided for,was one thing, but federal meddling in manufacturing and production was quite anathema to Fuller and most of his colleagues. It was left to later Courts to distort the Commerce Clause and justify federal regulation of virtually every corner of the economy.

The Fuller Court staunchly defended the sanctity of contract by treating it, in the words of James W. Ely, Jr., a Vanderbilt University law professor and biographer of the Court,“as the controlling constitutional norm.” It resisted attempts at congressional price- and rate-fixing. It once unanimously threw out a Louisiana law that prohibited a person from obtaining insurance from a company that was not qualified to do business in that state. Its feelings in this regard were summed up in another ruling in which the majority declared that “The legislature may not, under the guise of protecting the public interest, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations.” Likewise, the Court was far friendlier to property rights in eminent-domain cases than the recent Supreme Courts.

One of the finest moments of the Fuller Court was its rejection in 1895 of a federal income tax passed the previous year. Pleas that Congress needed the money, class warfare, and egalitarian claims against other people’s wealth carried little weight with this Court. The Constitution forbade direct taxation of that kind, and that was enough to ditch it. Melville Weston Fuller never succumbed to the temptations of power and ego or discovered vast new constitutional duties for the Washington establishment to inflict on the people. He and most of his colleagues actually took seriously their oath to defend the supreme law of the land, a notion that seems sadly quaint in an age where sweeping judicial activism is a mainstream law-school principle.

So it goes. Not just tobacco, but guns, asbestos, and a cross-section of American industry described by one think tank as the Mass Tort Monster: DDT, Bendectin, the Dalkon Shield, fuel tanks, silicone breast implants, lead paint, fen-phen, and on and on.

Since 1930, litigation costs have grown four times faster than the overall economy. Federal class actions tripled over the past ten years. Class actions in state courts ballooned by more than 1,000 percent. The U.S. Chamber of Commerce estimates that the annu­al cost of the tort system translates into $809 per person—the equivalent of a 5 percent tax on wages. The trial lawyers’ share—roughly $40 billion in 2002—was half again larger than the annual revenues of Microsoft or Intel. In 2002 the estimated aggregate cost of the tort system was $233 billion, according to the actuarial firm Tillinghast-Towers Perrin. That cost represented 2.23 percent of our gross domestic product. Over the next ten years the total “tort tax” will likely be $3.6 trillion.

When costs explode, proposals for reform are never far behind. So we have been deluged by congressional schemes to curb class-action litigation, ban lawsuits against gun makers and fast-food distributors, cap med­ical-malpractice awards, and otherwise enlist the federal government in the tort-reform battle.

My objective in this article is not to document that tort reform is necessary or desirable. That has been effectively done by many others. Instead, I want to examine the types of reforms proposed—especially the extent to which they are compatible with our sys­tem of federalism.

The underlying premise is straightforward: No mat­ter how worthwhile a goal may be, if there is no constitutional authority to pursue it, then the federal government must step aside and leave the matter to the states. If Congress decides to act, it has to identify authorization for each proposed reform.

One possible source of authority is the all-encom­passing Commerce Clause. As the country grew, some people believed that many of its problems required national regulatory solutions. So Congress earmarked a specific constitutional power to justify its ambitious federal agenda. The Commerce Clause was the vehicle of choice.

But the central reason that the clause appeared in the Constitution was quite different. Under the Articles of Confederation the national government lacked the power to regulate interstate commerce. Each state was free to advance local interests and create bar­riers to trade, without regard to prejudice against out-of-state interests. The solution: a constitutional convention at which, according to Justice William Johnson, “If there was any one object riding over every other . . . it was to keep the commercial intercourse among the States free from all invidious . . . restraints.”

Today, instead of serving as a shield against interference by the states, the commerce power has become a sword wielded by the federal government in pursuit of a boundless array of socioeconomic programs. But just because products are transported across state lines and sold to customers in several states, that does not justify federal intervention. To legitimately invoke the Commerce Clause, Congress must show that federal action is both “necessary” and “prop­er” to ensure the free flow of interstate trade. When it comes to tort reform, neither criterion has been met. Substantive federal reforms are not necessary because the states are enact­ing their own reforms. Substantive federal reforms are not proper because they cannot be harmonized with tradi­tional concepts of federalism.

Tort damages, even if related to a product that crosses state lines, are very different from a tariff on inter­state trade. The objective of a tariff is to raise money and favor in-state busi­nesses by discriminating against out-of-state businesses. That maneuver is contrary to our federal system and justifies countermeasures under the Commerce Clause. By con­trast, the purpose of the tort system is to redress grievances—a state-based function for more than 200 years. Yes, if a state’s tort law favors local constituents, that might implicate the Commerce Clause. But dis­criminatory laws can still be fixed by implementing procedural federal remedies—about which more in a moment—leaving substantive tort law in the hands of the states.

Medical Malpractice

Consider the repeated attempts by Congress to impose medical malpractice reform on the states. Legislation that caps malpractice awards and limits attorney fees has been before Congress no fewer than eight times since Republicans took over the House of Representatives in 1995. The hypocrisy on both sides of the aisle has been thick enough to slice. For starters, the Democrats professed their abiding faith in federalism. They were the same Democrats who were apoplectic when the supreme court held in United States v. Lopez (1995) that states are perfectly capable of prosecuting the possession of guns near schools. Five years later, in United States v. Morrison, the Court held that victims of gender-motivat­ed violence could not sue their assailants under federal law. Predictably, both baby steps to rein in federal authority were met by cat­erwauling from the Democratic left.

But some democrats seemed to have rediscovered federalism when it comes to medical malpractice. Rep. Melvin Watt of North Carolina, for one, says: “[F]or the life of me, I can’t figure out what the federal nexus is.” Amen to that. Fans of federalism are happy to welcome Watt and any other late comers to the fold. And surely the Democrats would be joined by the Republicans, eager to affirm the GOP’s traditional respect for state sovereignty.

Well, no, actually the Republicans had a change of heart. The President called malpractice “a national problem that requires a national solution.” He added that “any time a malpractice lawsuit drives up the cost of health care, it affects taxpayers. It is a federal issue.” Rep. Tom Feeney of Florida claims to have “wrestled with the issue” of federal damage caps but decided it would be unfair if doctors, concerned about malprac­tice, denied treatment to Florida constituents. Local physicians unfairly ignore local patients. How does that raise a national constitutional question?

No doubt, Feeney is correct when he explains that outlandish jury verdicts can drive up insurance premi­ums and cause doctors to curtail services. And no doubt that scene could unfold in more than one state—per­haps threatening a malpractice mess nationwide. But not every national problem is a federal problem. State legislators, courts, doctors, and their patients are not powerless. More than three dozen states have passed damage caps. All 50 states have passed, or are consider­ing, various tort-reform proposals.

Mississippi is a case in point. Three years ago the U.S. Chamber of Commerce warned its members to avoid Mississippi’s “jackpot justice.” Doctors fled or quit; 71 insurance companies pulled out; and the state lost an $800-million bid for a Toyota plant after com­pany executives wrote that “the litigation climate . . . is unfavorable.” The result: a new law, effective September 1, 2004, which caps pain-and-suffering, medical-malpractice, and punitive damages. In addi­tion, plaintiffs have to file suit in the county where they live or where an injury occurred—no more shop­ping for the friendliest forum. Not bad for a state that became infamous as a “judicial hellhole.”

Yet Congress has evidently rejected the federalist idea that the states serve as 50 experimental laborato­ries, each of which can choose to enact malpractice reforms, or not. Instead, Congress has shamelessly dis­tended the Commerce Clause—unleashing it from the operative word “commerce.” By that artifice the fed­eral government regulates anything and everything, including noncommerce—activities like lawsuits designed to prevent or compensate for injuries, not to regulate trade.

That is especially true when we are talking about malpractice suits, in which the litigants—both plain­tiffs and defendants—are typically from the same state. Nowhere in the Constitution is there a federal power to set rules that control lawsuits by in-state plaintiffs against in-state doctors for in-state malpractice. Some of the damage awards may be shocking. But they are not commerce and they are not interstate.

If the Commerce Clause applies to anything that crosses state lines, then it applies to virtually everything. That may be the Supreme Court’s current view, but it was not the Framers’ view. If necessary, let’s amend the Constitution. But my preference is to restore sanity to state tort law—grounded in common law, supplement­ed by state legislatures, interpreted by state courts (or by federal courts applying state law). The system will not be perfect, but competitive state laws are undoubtedly better than monopolistic national rules.

Punitive Damages and the Fourteenth Amendment

Now let me turn to a second possible source of constitutional authority for federal tort reform: the Due Process Clause of the Fourteenth Amendment, which says, in relevant part, that no state shall “deprive any person of life, liberty, or property, without due process of law.” If confiscatory state court decisions have the effect of denying due process to tort defen­dants, federal courts may be empowered by the Fourteenth Amendment to intervene. And section 5 of the amendment authorizes Congress to enforce the Due Process Clause “by appropriate legislation.”

The question, then, is whether state courts have deprived tort defendants of due process. Perhaps, for example, a damage award is so excessive that it breach­es constitutional safeguards. On the other hand, maybe due process imposes no substantive limits on state tort awards, just procedural guarantees like advance notice of the rules and an opportunity to defend oneself. Or maybe substantive and procedural protections merge when damage awards are so capricious and unpre­dictable that defendants cannot know with any assurance how to conform their conduct to the requirements of the law.

To discuss the Due Process Clause, I turn to the Supreme Court’s 2003 decision in State Farm v. Campbell, which reversed a bloated $145 million puni­tive damages award against State Farm Insurance. Many of the principles debated by the Court are appli­cable not just to punitive damages but to tort reform more broadly.

Ironically, the State Farm holding, one of the most business-friendly of the Supreme Court’s recent opin­ions, overcame separate dissents from the Court’s conservative stalwarts, Justices Antonin Scalia and Clarence Thomas. That reflects the battle between some conservatives, who want to rein in runaway punitive awards, and other conservatives, who, reluc­tantly, find no federal judicial power to do so. My conclusion: State Farm was a close call, but the major­ity successfully made its case for federal intervention. That said, there are better approaches to tort reform, as detailed below.

Let’s start with the facts. Curtis Campbell’s negli­gent driving killed one person and permanently disabled another. Campbell himself was not hurt. His insurer, State Farm, refused to settle the case for the policy limit of $50,000. Instead, State Farm elected to litigate and told Campbell he had nothing to worry about. The Utah jury had other ideas and found Campbell liable for roughly $186,000—that is, $136,000 over the policy limit. Campbell sued State Farm for bad faith, fraud, and emotional distress. State Farm ultimately paid the full $186,000, but Campbell was awarded $1 million in compensatory damages and $145 million in punitive damages.

The award was short-lived. Justice Anthony Kennedy, writing for a six-member majority, put it bluntly: “This case is neither close nor difficult. It was error to [grant a] $145 million punitive damages award.” The Court said the facts of the case probably justified a punitive award of about $1 million, the same as compensatory damages. The con­duct was not all that reprehensible. Campbell was not physically injured. And comparable civil fines for fraud were only $10,000. As to the ratio of punitive-to-compensatory damages—145 to 1—Kennedy made it clear that the Utah courts had overreached. He did not impose a bright-line test, but he did say that few punitive awards should ever be higher than 10 to 1.

That was the majority opinion; now the three dissents. First, Justice Ruth Bader Ginsburg, who accused the Court of judicial activism—substituting “its judgment for that of Utah’s competent decision-makers.” No doubt the Court does assume a quasi-legislative role when it establishes guidelines for punitive damages. Apparently that bothers some “liber­als,” like Ginsburg, some of the time—like when a federal court overturns a huge award against a corpora­tion. More often, however, the “liberal” justices are accused of judicial activism, and the conservatives insist on judicial restraint.

Judicial Activism versus Judicial Restraint

Those terms are misleading. Judicial restraint does not mean deferring to a legislature or court that has exceeded its constitutional authority. The crucial question is whether a statute or common-law verdict violates the Constitution. Ultimately, that determina­tion is up to nine justices: not by imposing their own policy preferences—that would truly be judicial activism—but by applying the Constitution, based on a proper theory of that document grounded in the Framers’ notions of limited government, separation of powers, federalism, and individual liberty.

To be sure, we are asking courts to decide whether an award is excessive. But judges are frequently called on to make such assessments. Conceptually, an evaluation of excessiveness in the context of a punitive-damage award requires much the same thought process as the interpretation of other murky terms throughout the Constitution, terms like cruel and unusual punishment, probable cause, unreasonable searches, and just compensation, which our courts regularly must explain.

In State Farm no statute dictated the outcome—just the common law of tort, as interpreted by judge and jury. An appellate court is uniquely qualified to review the common-law decision of a lower court. So the real debate in State Farm did not center as much on separation of legislative and judicial powers as it did on federalism: whether the U.S. Supreme Court can set punitive-damage guidelines for the state of Utah. And that debate revolves around substantive due process, the doctrine sometimes invoked by federal courts to prevent states from violating substantive rights presumably secured by the Fourteenth Amendment.

Which brings us to the dissents by Justices Thomas and Scalia. Thomas’s State Farm dissent is little more than one sentence: “The Constitution does not con­strain the size of punitive damage awards.” Scalia’s dissent is not much longer: “The Due Process Clause provides no substantive protections against ‘excessive’ or ‘unreasonable’ awards of punitive damages.” In short, the two justices believe the Constitution guar­antees defendants that the process followed in determining a punitive award will be reasonable, but not that the award itself will be reasonable.

Interestingly, Scalia and Thomas could have side­stepped the substantive due process question, but they chose not to. They could have justified federal inter­vention on procedural rather than substantive grounds. Remember that the Court was dealing in State Farm with remedies, not with liability itself. Arguably, remedies have more to do with procedure than with substance, in the following sense: Proper procedure requires advance notice of the law. Private parties must be able to determine what conduct is necessary to conform to the law’s dictates; and legal outcomes must be reasonably predictable. By violating those norms, outrageous and volatile punitive damages do not provide adequate notice and therefore offend pro­cedural due process. In State Farm the Court was correct to intervene.

State-Based Reforms

Meanwhile, the problem of confiscatory state punitive awards can be fixed without trampling on federalism. Let’s examine a few alternatives— remedies that can be implemented by the states themselves, without federal involvement.

First, take the dollar decision away from the jury. For example, the jury might be instructed to vote yes or no on an award of punitive damages. Then the amount would be set by a judge in accordance with pre-set guidelines.

Second, limit punitive damages to cases involving actual malice or intentional wrongdoing or, at a min­imum, gross negligence. Whatever the heightened standard, the idea is that accidental injuries arising out of ordinary, garden-variety negligence are unlike­ly to require the deterrence for which punitive damages are designed.

Third, states could implement procedural guarantees like those available under criminal law. In State Farm Justice Kennedy observed that punitive awards “serve the same purposes as criminal penalties [but] defen­dants . . . have not been accorded the protections applicable in a criminal proceeding.” Among those pro­tections: a higher burden of proof than the usual civil standard, which is preponderance of the evidence, and no double jeopardy. Current rules allow punitive awards for the same conduct in multiple lawsuits.

Next, broadening the discussion from punitive damages to other areas of tort law, here is a fourth reform: States should dispense with joint and several liability. That is the “deep pockets” rule that permits plaintiffs to collect all of a damage award from any one of multiple defendants, even if the paying defendant was responsible for only a small fraction of the harm. The better rule is to apportion damages according to the defendants’ degree of culpability.

Fifth, government should pay attorneys’ fees when a governmental unit is the losing party in a civil lawsuit. In the criminal sphere defendants are already entitled to court-appointed counsel if necessary; they are also protected by the requirement for proof beyond reason­able doubt and by the Fifth and Sixth Amendments to the Constitution. No corresponding safeguards against abusive public-sector litigation exist in civil cases. By limiting the loser-pays rule to cases involving govern­ment plaintiffs, access to the courts is preserved for less-affluent private plaintiffs seeking remedies for legitimate grievances. But defendants in government suits will be able to resist meritless cases that are brought by the state solely to ratchet up the pressure for a large financial settlement.

Sixth, contingency-fee contracts between private lawyers and government entities should be prohibited. When a private lawyer subcontracts his services to the government, he bears the same responsibility as a gov­ernment lawyer. He is a public servant beholden to all citizens, including the defendant, and his overriding objective is to seek justice. Imagine a state attorney paid a contingency fee for each indictment, or state troopers paid a bonus for each speeding ticket. The potential for corruption is enormous.

Last, state legislators should consider the Fairness in Litigation Act, a model statute proposed by the American Legislative Exchange Council. The act provides that the same legal rules applicable to a private claim by an injured party will also be applicable if the government sues to recover indirect losses related to the same injury.

Recall the states’ lawsuits against the tobacco industry, intended to recoup Medicaid outlays for smok­ing-related illnesses. Here is what the president of the Maryland Senate blurted to the Washington Post in describing his state’s litigation: “We agreed to change tort law, which was no small feat. We changed centuries of precedent in order to assure a win in this case.” Under the proposed Fairness in Litigation Act, the same rules of evidence, the same standards of responsi­bility, and the same burden of proof would apply to the state standing in a plaintiff’s shoes as to a plaintiff suing on his own behalf.

Federal Reforms

Finally, aside from state-based reforms, there are at least two areas where the federal government can intervene without offending long-established state prerogatives. The guiding principle is that the federal legislature and courts are authorized to act when there is a high risk that states will appropriate wealth from the citizens of other states. One federal reform consistent with that principle is to amend the rules that control state exercise of so-called long-arm juris­diction over out-of-state businesses.

Congress could, for example, preclude a local court from hearing a case unless the defendant engages direct­ly in business activities within the state. A company’s mere awareness that the stream of commerce could sweep its product into a particular state should not be sufficient to confer jurisdiction. Companies are “aware,” for example, that their products could be re-sold or transported almost anyplace. Instead, jurisdiction should be triggered only if the company purposely directs its product to the state; that is, the company itself exerts control over the decision to sell in the state. A sensible rule like that would give firms an exit option: they could withdraw from a state and thereby avoid the risk of a runaway jury or biased judge, even if the com­pany’s products somehow end up in-state. Today, feder­al limits on long-arm statutes remain lax or ambiguous. For that reason, oppressive state tort laws remain a threat to out-of-state defendants.

There is a second federal reform that is compatible with federalist principles: a new federal choice-of-law rule, which would apply even when a company cannot afford to lose business by exiting from a state. Basically, choice of law is the doctrine that determines which state’s laws control the litigation when the litigants are from different states.

Generally, plaintiffs can and will select the most favorable forum state based, in part, on its tort laws. But suppose a federal choice-of-law rule were enacted for cases involving multi-state litigants. Suppose fur­ther that the applicable law were based on the state where the manufacturer was located. A manufacturer could decide where to locate, and its decision would dictate the applicable legal rules. Consumers, in turn, would evaluate those rules when deciding whether to buy a particular manufacturer’s product. If a manufac­turer were located in a state that did not provide adequate legal remedies for defective products, con­sumers would buy from rival companies.

Would there be a race to the bottom by manufac­turers searching for the most defendant-friendly tort law? Maybe. But more likely, states would balance their interest in attracting manufacturers against the interest of in-state consumers, who want equitable product-liability laws. In effect, healthy competition among the states would enlist federalism as part of the solution rather than raise federalism as an excuse for failing to arrive at a solution.

The touchstone of federalism is not states’ rights but dual sovereignty—checks and balances designed to pro­mote liberty by limiting excessive power in the hands of either state or federal government. When a state exer­cises jurisdiction beyond its borders, discriminates against out-of-state businesses, or fails to give compa­nies adequate notice of what is required by the law, the federal government should intervene. Otherwise tort reform is not the business of Congress.

Before we make too hasty a concession, however, let’s take a closer look. Clause 1 of the section establishing Congress’s powers states, in part, “The Congress shall have power to lay and collect taxes . . . to . . . provide for the general welfare of the United States. . . .” The preamble to the Constitution also declares that one purpose of the document is to “promote the general welfare.”

What function does the phrase “general welfare” serve? We need not enter the debate over whether the phrase was intended to confer a plenary power on Congress or whether it was only to provide a context for the enumerated powers. That’s an interesting discussion, but it has no bearing on my point, for whatever its function, the phrase contains the word “general,” and the general cannot be the particular. That’s a simple matter of syntax and logic. We are thus entitled to conclude that the government may not grant privileges to special interests.

It may be argued that clause 1 of Section 8, where the term “general welfare” appears, exclusively concerns Congress’s power to tax. This ignores the fact, already noted, that the term also appears in the preamble. But let that go. Are we to believe that while Congress may tax only to serve the general welfare, it may borrow and coin money, raise a navy, regulate commerce, and do all the rest for any other purpose it pleases? That’s implausible.

Moreover, when you consider that anything the government does requires taxation, we are back to the position that all the enumerated powers must be wielded for the general welfare only. Tariffs and antidumping duties of course are kinds of taxes. An import quota isn’t a tax, but tell me how the government is to enforce quotas without taxing the population. How will it pay the customs agents, maintain their offices, and so on? If Congress may tax only for the general welfare, then it follows that anything else it does must be for the general welfare.

That principle having been established, let’s look next at protectionism. Economic theory and history teach us that protectionism perforce harms large segments of society for the benefit of a smaller segment. It is classic special-interest government action. Every time the steel industry asks for restrictions on foreign competition, some sound thinker correctly points out that granting that wish would harm the U.S. auto industry and other steel users, not to mention consumers. As the old Paul Simon song says, “One man’s ceiling is another man’s floor.” One industry’s output is another industry’s input.

The upshot is that since trade restrictions can never serve the general welfare but only particular interests (in the short run), and since the Constitution forbids the government from serving particular interests, all trade restrictions are unconstitutional.

This was driven home recently when it was reported that a group of retailers was trying to stop the Bush administration from doing American textile and clothing makers a favor by limiting competing products from China. According to the Chicago Sun-Times, “Four-decade-old quotas on textile trade are set to expire at the end of the year, ending a system that limited trade in 2,400 items, including cotton shirts and denim. The expiration is pitting U.S. textile makers, who fear more competition from China, against retailers, who want access to cheaper fabrics.”

The retailers’ concern is legitimate. If Chinese imports are not allowed to reach the level they would
have freely reached, then textile and clothing prices will be higher in the U.S. market than they would have been. That will hurt U.S. retailers, which will have fewer sales than otherwise. Of course, it will also hurt consumers, especially low-income consumers, over whom there is much hand-wringing even as they are heartlessly battered by trade restrictions.

This question thus begs an answer: how can limiting Chinese textiles and clothing be constitutional if it harms large segments of the American population? What about the general welfare?

The only possible answer would be one which shows that the restrictions don’t really hurt consumers and retailers. But a wealth of free-trade literature has existed for a couple of centuries showing that this cannot be demonstrated. Trade is beneficial. Parties don’t exchange money for goods and vice versa unless each expects to profit from the transaction. It matters not that the parties live on different sides of a national boundary. Nations don’t trade; people do. Thus coercive interference with trade necessarily harms the people so imposed on, even if it temporarily benefits some third parties. (Eventually protectionism harms even those who seek it. The most dramatic example is the Smoot-Hawley Tariff of 1930, which turned what might have been a brief recession into the Great Depression.)

Why the Commerce Clause?

If my argument is right, one may ask why the commerce clause was put into the Constitution in the
first place. We know the answer. Under the Articles of Confederation, the states to some extent imposed trade restrictions against one another. The Constitutional Convention was called, at least in part, to fix that flaw. The commerce clause was placed in the new constitution as a way of saying that the states may not “regulate” commerce, either among themselves or with foreign nations and Indian tribes. It is a mistake to read the clause as a license for the central government to interfere with free trade.

This is not to say that it wasn’t read that way from the start. The first Congress passed a tariff. Tariffs were repeatedly used to limit imports and protect American manufacturers. (They were also used to raise revenue.) But this can’t change the fact that each protective tariff, perhaps contrary to the belief of the policymakers, helped a special interest at the expense of everyone else and was thereby constitutionally defective.

Would the Supreme Court buy my argument? Not likely, considering the case law since the New Deal. In the 1937 case Helvering v. Davis the court essentially abdicated its responsibility and left it to Congress to decide what’s general and what’s particular.

Not once since then have the federal courts struck down an act of Congress under the general-welfare clause. It’s one reason we’re in the mess we’re in today.

A constitution should be interpreted on the basis of its purpose and plain language. We need not resort to the imagined original intent or the private letters of its framers. The great libertarian lawyer and abolitionist Lysander Spooner made a mighty contribution to the philosophy of constitutional interpretation in his book The Unconstitutionality of Slavery. At the end of this shamefully neglected work, Spooner proffers 14 rules of interpretation, which he derives from the application of reason to the task at hand. Among the rules are “that the intention of the instrument must prevail,” that “the intention of the constitution must be collected from its words,” and “that all reasonable doubts must be decided in favor of liberty.”

The Constitution proclaims its purposes in its opening words: “to form a more perfect Union, establish justice, insure domestic tranquility, provide for the common defence, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity.”

Thus any particular clause must be read in light of these purposes. And any government action that
violates one of these purposes is at least suspect. If earlier legislators violated common sense, and hence the Constitution, we need not be bound by their errors. Protectionism cannot serve the general welfare. Therefore, it fails to pass constitutional muster and ought to be forbidden.

The Supreme Court has been deliberately neglectful of traditional American economic liberties. With the exception of some important protections for property produced in the last 15 years (to be considered later in this article), economic liberties have been at the mercy of the legislature with little or no protection from the judiciary.

While the Court has been anxious to subject legislative intrusions into civil liberty to the most rigorous constitutional standards, this has not been so in relation to, say, contract, the individualistic rigor of which has been significantly diluted. The constraints on legislative action contained in the Fourteenth Amendment have been interpreted substantively, that is, the prohibitions on the taking of life, liberty and property (possibly) without due process of law are thought to protect specific liberties or rights that the states or the federal government (in relation to the original ten amendments) ought not to transgress irrespective of the procedural correctness of the legislation.

Not so with the right to reach a freely negotiated contract with a potential employer.

But this was not always so. In the early part of the twentieth century, the Court was assiduous in its protection of economic liberties; indeed, substantive due process emerged then. The Court was particularly concerned to prevent the police power (not itself in the Constitution) being misused. It should be limited to the prevention of harm and not invoked to promote the morals and well-being of the community (though it sometimes did); such action was especially reprehensible if it interfered with contract. Its endeavors here were not primarily validated by the utilitarian value of the free market but by the Court’s reading of the Constitution and the justices’ understanding of the rights that it embodied.

The apogee of the free-market Court was reached in the famous Lochner decision of 1905 in which liberty of contract, derived from the Fourteenth Amendment, was used to strike down a New York statute that would have limited the hours per week (or day) that a baker could work.^[1] This was followed by other decisions that freed the labor market and significantly slowed the pace of the New Deal until 1937 when, under the threat of Roosevelt’s Court-packing plan, the Supreme Court upheld (in West Coast Hotel v. Parrish^[2]) a Washington state statute that regulated the pay of female hotel workers.

Equally important was a case the following year (U.S. v. Carolene Products) in which the Court separated economic rights, for example, contract, from civil liberties and disavowed any obligation to subject the former to any serious scrutiny. The latter, however, could not be left to unreliable elected legislatures. It was a doctrine that became the conventional wisdom of the Court and its modern liberal admirers.

Undoubtedly the intellectual foundation for this was provided by Oliver Wendell Holmes’s famous dissent in Lochner. The Court had repeatedly upheld interference with contract under the police power and would do so in the future, he said. The Constitution did not enact Herbert Spencer’s Social Statics. The Court did not think so either; it simply enforced constitutional rights even if they were not enumerated. (Modern liberals “discovered” the right to privacy, but it is not, strictly speaking, in the Constitution.)

Holmes’s strictures have been widely accepted, even by people whom one would have thought to be sympathetic to the reasoning in Lochner. Richard Posner (who pioneered the economic theory of law) refers to Holmes’s “magnificent dissent,” and many free-market conservatives have agreed with the decision’s economics while objecting to the Court’s implicit activism.^[3] Yet Posner strongly objected to the egregious Williamson v. Lee Optical decision (1955) in which the Court upheld an Oklahoma statute that reserved spectacle repair work for ophthalmologists and optometrists, severely restricting competent opticians.^[4] It was pure protectionism. But maybe Posner’s famed philosophical pragmatism can detect a difference between this case and Lochner, which concerned a statute clearly designed by the big bakers to drive out competition from the smaller, mainly immigrant businesses.

Of course, modern legislatures are riven with interest groups that frequently act against the public good of free competition and the rule of law, and it seems naïve of the modern liberals to entrust them with our economic liberties. Yet prominent modern liberals think there is a philosophical difference between the various liberties (Ronald Dworkin refers to the “stench of Lochner”) and write as if how we earn our living and the contracts we make have no connection with free expression, nondiscrimination, or any other civil right in the litany of “liberalism.” All sorts of individual rights are threatened by majoritarianism or the tyranny of pressure groups.

Current Institutional Weaknesses

Some of us despair of the flimsy guarantees of the familiar parchment protections, and the Constitution does, in its original form, go some way toward nurturing a kind of alternative political action (the exit option) as a protective device for freedom. The United States is a federal system, and under proper competitive conditions individuals can avoid excessive regulation and taxation and enter states that offer more amenable environments. It’s a process that theoretically would probably lead to a reduction in intervention all round, as states would be compelled to compete for citizens by offering easier conditions. The Constitution has the Tenth Amendment, which says that, apart from the responsibilities specifically allocated to Congress, all other legislative responsibilities lie with the states (or the people). But such permissiveness could scarcely survive the New Deal, and the final death knell of competitive federalism was officially sanctioned by the Supreme Court when it said, in Garcia v. San Antonio Metropolitan Transit Authority (1985), that the federal element in the Constitution consisted in the several states’ equal representation in the Senate. In other words, state autonomy did not derive from the Constitution; it was a gift generously donated by Congress with the approval of the Court. The Tenth Amendment is more or less senescent.

There is, of course, little left of the original economic liberty at the center, and where there is, as in freedom for commercial advertising, it is the almost accidental outcome of a favorite civil liberties instrument, the First Amendment. Again, it is perverse decisions by a Court supine before Congress (a position it would never adopt in civil liberties) that is to blame for the erosion of the economic liberties of the Constitution. The major example of this perfidy is its treatment of the commerce clause, which was put in the Constitution to enable Congress to guarantee free trade across state lines. Since the New Deal, however, it has become the means for the central regulation of intrastate commerce. National standards apply everywhere so the value of exit is accordingly reduced. In 1942 Roscoe C. Filburn, who raised a small amount of wheat for his own private use was fined for violating the Agricultural Adjustment Act (upheld in Wickard v. Filburn), which limited wheat production. Apparently his action had a nationwide effect since without it he would have purchased wheat on the open market. If everything affects everything else, there really is no limit to Congress’s powers.

The Court, however, offered a glimmer of hope in a recent case, U.S. v. Lopez (1995), where it refused to enforce a federal gun-control statute (forbidding the carrying of a gun near a school) on commerce clause grounds. The weapon was not imported from another state, and there was a perfectly good state (Texas) law anyway. (Congress rewrote the law to apply only to guns that passed through interstate commerce.)

With regard to liberty of contract, the days of Lochner really do belong to a different century. The Court seems to be oblivious to the needs of a free and flexible market and the imperishable rights on which it depends. Minimum-wage laws and the recent Americans With Disabilities Act are obvious examples of the breach of these simple requirements. However, all is not lost for liberty, for in a series of remarkable decisions in the past 15 years or so, the Court has abandoned its customary abject surrender to legislatures over economic matters and ushered in a new era of the protection of property against the voracious appetites of legislatures, a welcome refusal to accept that economic decisions made by elected representatives are necessarily for the public good.

Property and Land-Use Planning

Liberty of contract may not be specifically protected by the Constitution, but the right to property certainly is mentioned, and the Founders surely intended it some guarantee: the Fifth Amendment says that “private property shall not be taken for public use without just compensation,” and the Fourteenth includes the injunction that no state “deprive any person of life, liberty or property without due process of law.”^[5] For those conservatives interested in “original intent,” it is certainly the case that John Bingham, the author of the Fourteenth, believed that the amendment protected property as well as assuring rights for minorities.

However, throughout much of the twentieth century the judicial system offered very little in the way of protection for property. Of course, if a government physically occupied a piece of property (normally, but not only, land) it would have to do so under eminent domain and provide compensation. But sometimes a person’s property could be rendered virtually valueless by a regulatory taking and without compensation. The government has always had power to regulate under the common law of nuisance, but most of the oppressive land-use planning (zoning) was done under the police power. The courts seemed eager to trust public bodies with virtually unlimited power to plan, regulate, and control.

After some significant critical evaluation of state law in the 1920s, in which Justice Holmes played an important part, the pattern was set for most of the rest of the century in Euclid v. Ambler Realty Company (1926), which constitutionally validated zoning. (A village near Cleveland had introduced a zoning ordinance that restricted development of privately owned land to family dwellings.) Here the public interest was elevated virtually to the exclusion of private property rights, and the Court showed an extraordinary deference toward public authority: the ordinance was upheld under the police power. Justice George Sutherland, who wrote the opinion in Euclid, is historically associated with the allegedly free-market Court (pre-West Coast Hotel). Ambler Realty, prohibited from industrial development, lost considerably, as did the community whose use of land was henceforth determined by politicians, not the market. Although some later decisions softened the rigor of Euclid, by the later 1930s, judicial deference to elected bodies had become the norm in all takings cases.

But in the 1980s things changed significantly. In Agins v. City of Tiburon (1980) a challenge to an ordinance actually failed, but the Court still proposed standards, mainly to do with the establishment of legitimate governmental goals that must be met if municipal planning were to succeed constitutionally. In three later cases, the Court applied those norms more or less consistently to the advantage of private property holders and to the detriment of public authorities, which had hitherto been insulated from serious examination of their activities. In Nollan v. California Coastal Commission (1987) Mr. and Mrs. James Nollan wanted a permit to demolish an old cottage they owned and replace it with a two-story dwelling. The Coastal Commission agreed, subject to one condition: the Nollans should dedicate a public easement across their property. On appeal to the Supreme Court, the Nollans won because the justices (Antonin Scalia wrote the majority opinion) ruled that the regulation did not advance common goals; and while the goals may have been legitimate, the means used to achieve them were disproportionate. The “essential nexus” between means and ends had become outright “extortion.”

The next, and most famous, of the recent takings cases was Lucas v. South Carolina Coastal Commission (1992). David Lucas had spent nearly a million dollars on the purchase of beach property that he planned to develop into two vacation homes. Unfortunately, the Coastal Commission later introduced environmental regulations that rendered his investment worthless (although, as was pointed out, not quite worthless; he could still have picnicked on the beach). A lot of issues were involved apart from the question of whether it was a “taking”: for example, was there protection against retroactive laws? Were claims for partial takings admissible (early commentators on Lucas seemed to think not)? Was there protection for investment-backed expectations? And what was the importance of commercial viability?

Lucas won in the Supreme Court and was duly compensated; it was conceded that he had suffered a total economic wipeout, although some of the questions raised were not fully answered. However, it was clear that the Court from now on would be much more searching in its inquiries into the rationale of a regulation. One ironic aftermath of the case was that the Commission later tried to sell Lucas’s former property for vacation home development. The case indicated that the destruction of all investment-backed expectations should not go uncompensated and that a regulation should not eliminate the commercial viability of an asset. Implicit in the Court’s deliberations was the acceptance of the fact that utilitarian value (not that there seemed to be much in the Lucas case) of a regulation should not trump economic rights.

Some questions left unsettled in Lucas were answered by Dolan v. City of Tigard (1994). Florence Dolan, in order to get a permit to extend her electrical and plumbing store, was told that she had to dedicate part of her land to public use (to abate the threat of floods and to provide a bikeway). Dolan’s suit against these requirements was ultimately successful in the Supreme Court, and the decision provided the rationale of compensation for a partial taking; the burden imposed on her for the cost of a public benefit was ruled invalid. Of equal importance was the fact that burden of proof for the necessity of the regulation now lay with the authority. Euclid seems finally to have been buried. Although Nollan and Dolan perhaps have not been unfailingly followed in later cases, it is clear that the takings world is a very different place from what it was once.

Economic Liberties and the Constitution

While all this is encouraging, it would be foolish to imagine that the economic constitution has been rehabilitated. There are vast areas of commercial life that get no protection from the courts, and governments at all levels have pretty much a free hand. Contract law is subject to endless statutory depredations (whatever happened to employment at will?) and arbitrary antidiscrimination law has removed the market from the resolution of many of the most contentious disputes. And I haven’t even mentioned antitrust and its legal and economic absurdities.

It is also worth discussing something mentioned earlier—the hitherto serious dereliction of duty by the judiciary itself in the protection of economic liberties. Is it feasible to expect the Supreme Court to defend economic rights in today’s hostile intellectual environment (as opposed to the public world, which does not entirely consist of graduates from the country’s premier law schools)? A measure of a significant shift in the debate can be gauged in Chief Justice William Rehnquist’s opinion in Tigard: “[we] see no reason why the Takings Clause of the 5th Amendment, as much a part of the Bill of Rights as the 1 st Amendment or the 4th Amendment, should be relegated to the status of a poor relation.” And Scalia and Clarence Thomas have expressed encouraging sentiments about economic rights. But I fear it is a libertarian dream that one day economic and personal rights might be united.

Notes

1. See Bernard Siegan, Economic Liberties and the Constitution (Chicago: University of Chicago Press, 1980), chapter 1.
2. A decision presaged in Nebbia v. New York (1934).
3. Richard A. Posner, “The Constitution as an Economic Document,” in Richard A. Posner and Francesco Parisi, eds., Law and Economics (Cheltenham, England: Edward Elgar, 1997), p. 418.
4. Richard A. Posner, Economic Analysis of Law (Boston: Little, Brown, 2nd ed., 1977), p. 502.
5. See Bernard Siegan, Property and Freedom (New Brunswick, N.J.: Transaction Publishers, 1997).

Given America’s carefully crafted constitutional restrictions on central government power, how is it that intrusive federal powers over the lives of ordinary Americans took root in the twentieth century? If you had just fifteen minutes to explain it to James Madison, what would you say?

Here is what I would say:

Mr. Madison—James, if I may—I am deeply saddened by the facts I must describe. You and your colleagues anticipated many things, and the product of your labors has made possible an unprecedented degree of freedom in this country for more than 200 years. But your work is now in jeopardy: liberty is being crowded out by an ever more intrusive central government. Although many others have tried to explain how this occurred, let me give you my own insight about it—admittedly only a partial explanation, but nonetheless one that identifies a key, and often overlooked, source of liberty’s increasing peril.

As I see it, here is what happened. During the twentieth century, legislators, Supreme Court judges, and executive branch officials began to perfect techniques for deflecting and curtailing people’s resistance to actions that increased the power of the central government. You and your contemporaries well understood the dangers of overreaching government and, through the Constitution, tried to limit its power. But living in a society so recently chafing under British rule, a young nation whose people yearned for freedom, it would have been difficult to imagine how America’s own elected and appointed officials—without triggering public censure and usually without amending the Constitution—might take systematic actions to erode the explicit constitutional limits on their power that you designed.

Yet that is exactly what occurred. The techniques that emerged involved a bevy of government actions sharing one defining characteristic: they increased other people’s costs of resisting government expansion. In each case, government officials made it more difficult or costly for people to perceive, or take action to resist, federal power-expanding measures. It is what I call “political transaction-cost manipulation”: government officials’ deliberate alteration of people’s costs of undertaking collective political action in matters that affect the scope of government authority.^[1]

These federal actions have included misrepresenting the nature and consequences of government action, proceeding incrementally, concealing the cost of government actions, tying controversial measures to more popular legislative bills, hiding unpopular provisions in omnibus bills, concentrating the benefits and dispersing the costs of government action, changing the Constitution through the back door of the Supreme Court rather than by constitutional amendment, and myriad analogous strategies. As I’ll explain in a minute, diverse efforts in the twentieth century to expand the federal government’s power all have involved such strategies—implying that initial public acquiescence to new government institutions often did not reflect true public consensus. Once in place, however, institutions exercising new federal powers subsequently channeled ideological change, and nurtured special interests, in ways that supported the new regime.

Consider a few examples. The first one is sure to infuriate you, James. Remember the care you took in providing for the constitutional amendment process? You wisely and deliberately made it very cumbersome, trying to assure that the Constitution’s provisions could not be altered without great effort and widespread agreement on the desirability of the changes. In short, you hoped to make it very costly for people to alter constitutionally established limits on the central government’s power.

During the twentieth century, however, the U.S. Supreme Court often served to bypass the amendment process. Increasingly, Supreme Court decisions changed the Constitution’s long-established meaning without benefit of constitutional amendment, reinterpreting the document—sometimes literally changing the definition of its words—to broaden the central government’s powers far beyond what you and the other Founders envisioned. Confronted with such unilateral action by the Supreme Court, how could people then preserve their liberty?

Of course, they themselves could seek a constitutional amendment to spell out more concretely the original meaning of the Constitution and thereby bind the Supreme Court. But the cumbersome amendment process, meant to constrain those who would change fundamental constitutional protections, then impeded those who desired to preserve the original meaning of the Constitution. In other words, the political transaction costs that you intended to be a barrier to those who desired to change the Constitution’s substance instead served as a barrier to those who desired to uphold the Constitution’s original substance. It is a classic type of political transaction-cost manipulation.

The Commerce Clause

One example is the Supreme Court’s reinterpretation of the Constitution’s interstate commerce clause in a 1942 case called Wickard v. Filburn. As you recall, you and the other drafters gave the federal government power over interstate commerce (“commerce among the several States”) to make sure that the individual states did not erect trade barriers against one another. Commerce within the separate states, intrastate commerce, was beyond the central government’s authority. In Wickard, however, the U.S. Supreme Court proclaimed that the central government had power to regulate even the wheat that an individual wheat farmer grew on his own land, within a single state, for his own family’s consumption. The Court’s rationale was that if the farmer had not grown that wheat for his family’s consumption, he would have had to purchase wheat that might have moved in interstate commerce. Since locally produced and consumed wheat “competes with” wheat moving in commerce, this purely local activity was deemed to affect interstate commerce and thus justify federal regulation. The Supreme Court thereby threw the constitutional doors wide open, allowing the central government to embed itself into virtually any economic activity, no matter how local.

Throughout the twentieth century, this key tactic of judicial reinterpretation allowed the Supreme Court to effectively trump the constitutional amendment process that you designed. If people wanted to preserve the limits on central government power that you wisely created, the defenders of the original Constitution—not its opponents—would have to undergo the high transaction-cost process of constitutional amendment. With the deck stacked against such a costly undertaking, no amendment materialized to shield intrastate commerce or other realms from the federal government’s growing regulatory reach.

The spirit of the preceding example pervades many government actions that have eroded liberties originally protected by the Constitution. Once government officials learned that they could change the cost to others of defending their liberties, the possibilities were endless. Let me recite but a few.

Consider the federal income tax. Yes, I know that you provided that no direct federal taxes could be imposed unless they were apportioned among the states “in Proportion to the Census or Enumeration” mandated by the Constitution. But a federal income tax “without apportionment among the several States, and without regard to any census or enumeration” was legalized in 1913 by explicit constitutional amendment.

In implementing a federal income tax, government officials repeatedly increased the cost to citizens of correctly appraising and actively resisting the tax. First, it was sold to the public as a tax only on the very rich. Later, despite the government’s claim that the income tax was a “voluntary” tax system, a 1943 law required employers to take the tax money from each employee’s paycheck, before the tax was due, without the employee’s consent. This nonconsensual “withholding” of federal income taxes dramatically increased the cost to private individuals of resisting the growth of federal power. Nonpayment was no longer a feasible means of resistance to overtaxation.

Further subduing resistance, this collection method effectively hid the full magnitude of an individual’s tax payment. With passage of the 1943 withholding law, taxpayers no longer had to write a check for the full amount of income taxes due. Indeed, many came to associate the tax due date with money received from the government in the form of tax refunds rather than money paid to the government. Their tax burden thus obscured, most Americans today cannot come close to accurately stating their total federal income tax payments for the prior year.

Fundamental notions of the rule of law held sacred by your generation, James, were gradually abandoned as the federal income tax grew, with equal treatment under the law redefined to countenance treating people with different incomes—or even the same income—unequally under federal tax law. Today, with the bottom 50 percent of earners paying only 4.3 percent of the federal income taxes collected, is it any wonder that tax resistance no longer poses a viable threat to the new political power structure? With half the people paying hardly any federal income tax, the other half largely unaware of the full magnitude of their tax, and many in both categories intent on manipulating the political system to their personal advantage, a majority of the people now usually tolerate any plausible federal income-tax increase, enabling the central government’s control over resources to continue to grow. The political way to wealth thus predominates, the federal income tax now one of its primary engines.

Incremental Intrusions

All these measures were instituted incrementally, another transaction-cost-increasing strategy for minimizing resistance to expansion of federal power. For instance, the political feasibility of income tax withholding in 1943 was enhanced by prior legislation mandating employer withholding of payroll (Social Security/FICA) taxes, instituted by the 1935 Social Security Act. Employers and employees already had gotten used to it; with the tax withholding machinery already in place, the next step was that much easier.

Government officials used similar transaction-cost-manipulating strategies in securing adoption of that 1935 Social Security law. They were only able to gain passage of the law by tying it to other more popular programs such as needs-based old-age assistance, unemployment compensation, and maternal and child health services—thereby deliberately increasing the costs to people of resisting the power grab represented by Social Security. Through that program, the central government now takes 12.4 percent of the wages of every working American (up to maximum taxable earnings of $76,200) through a Ponzi-type system designed to make every retired American dependent on federal government checks, while preventing people from instead investing that money in private accounts for their own retirement.

Where is the transaction-cost manipulation in this program today, you ask? From the beginning, government officials got employees to tolerate this tax by claiming that it is “split” between employers and employees—that the employer “matches” the “contribution” of the employee, thereby doubling the amount paid into Social Security on the employee’s behalf. It is a lie. Although the employer does write a check to the government on behalf of the employee, economists have understood for decades that the employee actually bears most of the burden of the so-called “employer’s half” of the Social Security tax in the form of lower wages; so employees actually bear nearly the full 12.4 percent burden of the payroll tax. But most Americans today continue to believe the long-repeated lie.

Moreover, although the federal government continues to claim that people who have paid their payroll taxes throughout their working lives have a contractual “right” to their Social Security benefits, the Supreme Court long ago explicitly stated that they have no such right.^[2] There is more (for instance, people are forced to pay income taxes, unwittingly in most cases, on the Social Security payroll taxes extracted from their paychecks—money they never even received!), but I must move on.

As you can see, James, government officials no longer embrace the views of people who think as you and I do. Discussion of the original meaning of the Constitution, limits on the power of government, fundamental human liberties not “granted” by the government—many federal officials regard such perspectives as plainly anathema to their financial and ideological interests. How might the government limit the prevalence of these supposedly offensive views?

Increasingly, government officials have used public education for that purpose. As in the other cases, the relevant laws were both passed and implemented by manipulating political transaction costs. For example, federal officials leveraged the National Defense Education Act (1958) into law by means of the Sputnik scare, using false claims of national emergency to build a program that channeled federal funds to virtually all types of educational programs. Senator Strom Thurmond of South Carolina clearly identified the divergence between the rhetoric and the reality of the National Defense Education Act:

This bill . . . although it purports to be for the specific purpose of promoting the national defense, is, in actuality, general Federal aid to education . . . . [T]his bill will not appreciably contribute to the national defense. Neither the scholarship program nor the student loan program are limited in any way to persons undertaking a course of study considered to be critical to our national defense. Under either of these programs, a participating student might study social welfare work, automobile driving or, for that matter, flower arranging.^[3]

While continuing to deny the growing federal control over public education, government officials used this law and others that followed (such as the 1965 Elementary and Secondary Education Act) to influence the curriculum and thereby change the worldview of countless millions of Americans.

Engines of Propaganda

The results now dominate U.S. culture and politics. Public schools have become engines of propaganda supporting a vastly expanded presence of the central government in the lives of ordinary Americans. Deliberate reshaping of the values and ideologies of the children is thus another manifestation of government manipulation of political transaction costs, changing young people’s information costs in ways that actively curtail resistance to expanding federal authority.^[4]

Today, ideologies shaped by public schooling allow government power to continue to grow. Federal influence over the minds of American children grew enormously with the 1994 Goals 2000: Educate America Act; the National Skill Standards Act; the Educational Research, Development, Dissemination, and Improvement Act; the School-to-Work Opportunities Act; the Improving America’s Schools Act; and the 1998 Workforce Investment Act. In securing passage and acceptance of this legislation, political transaction-cost manipulation was again an important tool. Ordinary Americans were encouraged to perceive these laws as strengthening the academic rigor of public schools. Yet underneath that veneer of appealing rhetoric, the new laws established federal powers and policies that contravened the wishes of many affected communities, weakened the academic rigor of public schools, and accorded the federal government increasing influence over the education, ideological orientation, and career paths of American children.

Under the rubric of “parental assistance,” Goals 2000 even required federal grant recipients to fund “Parents as Teachers” and “Home Instruction for Preschool Youngsters” programs, defined to include “regularly scheduled personal visits” with parents of preschool children by government-supported “certified parent educators.” The federally promoted slogan embracing “outcome-based education” turned out to denote social outcomes desired by federal authorities, not academic outcomes desired by parents.

Medical Incrementalism

Federal officials have used similar tactics to gain increasing power over Americans’ medical care. Culminating a decades-long incremental process, passage of the original 1965 Medicare bill was accomplished only by tying the legislation to politically irresistible Social Security benefit increases, once again increasing the costs to private individuals (and legislators) of resisting the measure. As the quest for expanded federal power over people’s medical care continued, the same transaction-cost-increasing techniques were employed again and again. The 1996 Health Insurance Portability and Accountability Act (HIPAA), for instance, tied popular provisions increasing the portability of people’s health insurance to unpublicized requirements for a “unique health identifier” for each American, to be used in conjunction with an HIPAA-mandated uniform national electronic database of personal medical information. The 1996 act empowered the federal government to require detailed information, at its discretion, regarding what lawmakers called “encounters” between doctors and patients. As a result of HIPAA provisions misleadingly labeled “administrative simplification,” doctors now may be required to divulge detailed health information regarding patients’ physical and mental health for inclusion in the national electronic database, identified by each patient’s unique health identifier. Swayed by the appealing political rhetoric that accompanied the 1996 bill, most people embraced it, only to be startled two years later when the U.S. Department of Health and Human Services began to implement the mandated unique health identifier.

Equally alarming is the systematic surveillance of ordinary Americans now being carried out by the federal government, also largely a product of political transaction-cost augmentation. For instance, when Congress passed the Bank Secrecy Act in 1970, misrepresentation again was instrumental. How could people know that this innocuous-sounding bill contained provisions requiring banks to make permanent copies of the checks, deposits, and other financial transactions of each and every bank account holder? Detailed portraits of law-abiding individuals were thereby created at the behest of the central government.

Similarly, by increments, the federal government authorized widespread federal, state, and local government use of Social Security numbers (SSNs), even though they were approved in 1935 only when officials assured Americans that the numbers would be used exclusively to identify their Social Security accounts. During the 1980s and 1990s, a docile citizenry further acquiesced as the federal government, by increments, required parents to get SSNs for very young children—now even newborns—in order to claim them as “dependents.” SSN-based dossiers now can be developed on young children, tracking them from infancy forward through newly authorized federal databases describing their educational experiences, medical histories, future jobs, financial transactions, the very fabric of their private lives. Imagine the power thereby put in the hands of federal officials, and the diminution of Americans’ freedom to speak their minds without fear of government reprisal. It is no longer the country you envisioned, James.

As your generation so well understood, people in a free society must decide how much power to cede to the central government, where to draw the line between the private and public spheres. Your generation allowed the central government but little power, influenced as you were by ideologies of liberty and by awareness of the personal costs of expanded central power. My generation, by contrast, ceded enormous power to the central government, having lost ideologies of liberty through public education and by long-standing exposure to an extensive government presence in their lives.

In my view, James, one overarching mechanism making this transformation possible has been government officials’ manipulation of political transaction costs. In each case that I have studied in detail—Social Security,^[5] income tax withholding,^[6] Medicare and its progeny,^[7] public education,^[8] government data collection,^[9] even asbestos regulation^[10]—government officials seeking new federal powers have deliberately increased the cost to private citizens of understanding the proposed measures and taking political action to resist them. The particular transaction-cost-increasing strategies have varied, but they all have served to reduce or deflect resistance to the growth of government.

Contrived Costs

Some years ago I developed a taxonomy of these strategies showing that government manipulation of political transaction costs falls into two broad categories: manipulation of private agreement and enforcement costs (meaning the costs to individuals of reaching and enforcing collective agreements on where to draw the line between governmental and private spheres of action) and manipulation of information costs relevant to people’s decisions regarding where to draw that line.^[11] Both categories involve the creation of what I call “contrived” political transaction costs.

As you can see, all the examples given above fall into these broad categories. One type of agreement and enforcement cost identified in the taxonomy involves “unilaterally changing the locus or scope of government decision-making authority in ways that shift the transaction-cost burden entailed in effectuating or forestalling change in the role of government.” It sounds cumbersome, but you get the idea: the Supreme Court’s unilateral expansion of the Constitution’s interstate commerce clause, sidestepping the constitutional amendment process, is a prime example in this category. Income tax withholding and the purported “splitting” of the payroll tax described above involve a type of information-cost manipulation captured in the taxonomy as “forms of taxation that change people’s perception of the tax burden imposed on them.” Incrementalism, such as that practiced in increasing the federal government’s power over public education and health care, is shown to be a separate form of government manipulation of political information costs. And the use of mellifluous-sounding titles for hurtful legislation is an example of information-cost manipulation involving “semantic efforts to alter public perception of the costs and benefits of government activities.” I promised that this would take just fifteen minutes, so I can’t describe all the categories and examples that I have suggested elsewhere. But the main point is clear.

Mr. Madison, we are losing the liberty for which your generation committed their “Lives . . . Fortunes, and . . . sacred Honor” in part because government officials have perfected techniques for reducing effective resistance to liberty’s erosion. Those techniques characteristically have entailed government manipulation of political transaction costs. Today, no matter how many angry citizens call radio talk shows, few take serious political action to oppose government’s expanded role, in part because of the artificially increased personal costs of so doing. Federal officeholders, in turn, continue to find the strategy appealing because it frequently enables them to obtain results they want without resort to overt coercion, relying instead on changing people’s individual incentives to resist.

No conspiracy underlies these developments. Rather, they reflect personal incentives (political, economic, and ideological) impelling self-interested federal legislators, Supreme Court justices, bureaucrats, and other executive branch officials to create transaction-cost barriers for people who hold different political views.

Mr. Madison, a constitutional counter-revolution has occurred, without a shot being fired, and with barely a whimper from an increasingly ill-educated populace. Unfortunately, the longer it endures, the less the likelihood of liberty’s restoration, owing to the ideological changes that accompany long-standing exercise of expanded government power. As the twentieth century ends, let us hope that government-spawned transaction-cost barriers to liberty-restoring change have not permanently tipped the scales against the freedom that we both hold so dear.

Notes

1. Transaction costs, in the more traditional setting of economic markets, include contract negotiation and enforcement costs that are attributable to the multiparty character of market exchange. The political analog of market exchange is collective political action that alters the role and scope of government. Political transaction costs, as that term is used here, therefore denote transaction costs borne by individual decision makers (such as voters or legislators) in undertaking collective action that alters the effective power of government—costs of reaching and enforcing collective agreements that define the role and scope of government. To individuals, political transaction costs comprise all their costs of perceiving, and of acting on their assessment of, the net costs of particular government actions and authority. Alternatively, such political transaction costs could be labeled “constitutional-level” transaction costs, as I have done elsewhere, to emphasize their influence on the nature and extent of government authority over private decision-making tolerated by the public. For a more complete discussion, see my “Government Manipulation of Constitutional-Level Transaction Costs: A General Theory of Transaction-Cost Augmentation and the Growth of Government,” Public Choice, Vol. 56, No. 2, pp. 131-52 (1988).
2. Flemming v. Nestor, 1960. See also Helvering v. Davis, 1937.
3. U.S. Senate, Committee on Labor and Public Welfare, National Defense Education Act of 1958, Senate Report No. 2242, 85th Congress, 2nd Session (August 8, 1958), p. 51.
4. See Thomas Sowell, Inside American Education: The Decline, the Deception, the Dogmas, (New York: Free Press, 1993), pp. 36-37, 296-97; John R. Lott, “An Explanation for Public Provision of Schooling: The Importance of Indoctrination,” Journal of Law and Economics, Vol. 33, pp. 199-229 (1990); and Paul A. Cleveland, “Economic Illiteracy,” Ideas on Liberty, April 2000, pp. 32-33.
5. Charlotte Twight, “Channeling Ideological Change: The Political Economy of Dependence on Government,” Kyklos, Vol. 46, No. 4, pp. 497-527 (1993).
6. Charlotte Twight, “Evolution of Federal Income Tax Withholding: The Machinery of Institutional Change,” Cato Journal, Winter 1995, pp. 359-95.
7. Charlotte Twight, “Medicare’s Origin: The Economics and Politics of Dependency,” Cato Journal, Winter 1997, pp. 309-38, and “Medicare’s Progeny: The 1996 Health Care Legislation,” The Independent Review, Winter 1998, pp. 373-99.
8. Charlotte Twight, “Federal Control Over Education: Crisis, Deception, and Institutional Change,” Journal of Economic Behavior and Organization, December 1996, pp. 299-333.
9. Charlotte Twight, “Watching You: Systematic Federal Surveillance of Ordinary Americans,” The Independent Review, Fall 1999, pp. 165-200.
10. Charlotte Twight, “From Claiming Credit to Avoiding Blame: The Evolution of Congressional Strategy for Asbestos Management,” Journal of Public Policy, Vol. 11, No. 2, pp. 153-86 (1991).
11. Charlotte Twight, “Political Transaction-Cost Manipulation: An Integrating Theory,” Journal of Theoretical Politics, Vol. 6, No. 2, pp. 191-218 (1994).

The act was part of the 1994 Omnibus Crime Bill. It established both a federal right to be “free from crimes of violence motivated by gender” and a federal remedy for violating that right: namely, a new tort claim that included both compensatory and punitive damages. The federal claim was not meant to replace punishment by state criminal statutes but to supplement them.

In 1995, Christy Brzonkala became the first person to sue under the act, over a rape that allegedly occurred in her dormitory room while she was a student at Virginia Polytechnic Institute. The men accused—two football players named James Crawford and Antonio Morrison—had been cleared by both a university judicial committee and a criminal grand jury. Nevertheless, Brzonkala brought a case against them in federal court. In 1999 the U.S. Court of Appeals for the Fourth Circuit (Richmond, Va.) ruled against her, saying that Congress had exceeded its constitutional authority in passing VAWA.

U.S. v. Morrison eventually came before the Supreme Court. In its decision the Court stated that the issue under consideration was “Did Congress exceed its powers when it gave victims of sex crimes the right to file civil lawsuits against their attackers?” The Court answered yes. Writing for the 5-4 majority, Chief Justice William H. Rehnquist concluded that a federal civil remedy for such crimes could be justified by none of the constitutional provisions invoked by those who defended the act.

Two constitutional arguments were used by defenders: first, that violence against women interferes with interstate trade and thus violates the Commerce Clause by which Congress may regulate interstate commerce to ensure the free flow of goods and services, and second, that the Fourteenth Amendment protects citizens against violation of due process, which occurred in Brzonkala’s case because the state courts were indifferent to violence against women. Both parts of the Constitution had also been used to support the act during lengthy congressional hearings.

The Commerce Clause and VAWA

The Commerce Clause (Article I, Section 8, Clause 3) delegates to Congress the power to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” The clause gave a broad grant of authority over commerce to Congress without clearly delineating restrictions on that power. The purpose was to overcome the tendency of states to interfere with trade through tariffs, which had caused great problems, especially for the smaller states, under the Articles of Confederation. Interstate commerce was deemed to require uniform laws to encourage nationwide trade. According to Roger Pilon in the Cato Handbook for Congress (www.cato.org/pubs/handbook/hb105-3.html), “Framers gave Congress the power to regulate—or ‘make regular’—commerce among the states. It was thus meant to be a power primarily to facilitate free trade.”

Court decisions dating from the days of Franklin Roosevelt’s New Deal have interpreted the clause so as to grant Congress the right to regulate virtually anything that affects interstate commerce. As a result, Pilon observes, Congress used the regulation of commerce among the states “for all manner of social and economic purposes, actually frustrat[ing] the free flow of commerce.” For example, the Church Arson Prevention Act of 1996 gave the federal government power to prosecute those who burned down churches on the grounds that such arson impeded “individuals in moving interstate.” With such broad interpretations, Congress has repeatedly used the Commerce Clause to regulate non-economic conduct that crosses state lines, such as child custody. Advocates of states’ rights have opposed Congress’s expanding power under the Commerce Clause because the increased federal authority often infringes on areas that have traditionally been under the jurisdiction of the states.

In recent years, the Court has begun to take a different view, producing a tug of war between it and Congress. In 1995 the Court ruled (5-4) in U.S. v. Lopez that Congress had exceeded its authority under the Commerce Clause in passing the Gun-Free School Zones Act of 1990, which prohibited the possession of a firearm within 1,000 feet of a school. In defending the act before the Court, the Clinton Justice Department argued that guns and crime disrupt education, which in turn disrupts the employment opportunities of students and thus interstate commerce. Chief Justice Rehnquist, again writing for the majority decision, stated, “Under the theories that the Government presented, . . . it is difficult to perceive any limitation on federal power, even in areas such as criminal law enforcement or education where states historically have been sovereign. Thus if we were to accept the Government’s arguments, we are hard-pressed to posit any activity by an individual that Congress is without power to regulate.” (In September 1996, Congress passed a revised Gun-Free School Zones Act, confining it to guns that pass through interstate commerce.)

VAWA was another example of an expansive reading of the Commerce Clause. Advocates stated that violence against women and fear of violence reduced women’s productivity and mobility as employees. Women commonly lose their jobs after being injured, it was argued. The cost of sexual violence to the national economy was estimated at between $5 billion and $10 billion.

In 1999 the Fourth Circuit Court of Appeals rejected this reasoning on the grounds that to extend the Commerce Clause “beyond the context of statutes regulating economic activities and uphold a statute regulating noneconomic activity merely because that activity, in the aggregate, has an attenuated, though real, effect on the economy, and therefore presumably on interstate commerce, would be effectively to remove all limits on federal authority, and to render unto Congress a police power impermissible under our Constitution.”

The Supreme Court agreed.

The Fourteenth Amendment and VAWA

The second argument for the constitutionality of VAWA was based on the Fourteenth Amendment, by which Congress may protect citizens against state violations of their rights. Section 1 of the amendment states in part, “nor shall any state deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.” During the 1994 congressional debates on the act, dozens of studies were cited to support the contention that women were hindered from seeking relief for crimes such as rape because state judicial systems did not consider them as serious as other violent crimes. Brzonkala claimed that the state courts had denied her due process because of their indifference to violence against women. Thus she sought relief in the federal courts.

Chief Justice Rehnquist disagreed with this logic and found, instead, that the Fourteenth Amendment prohibited discrimination only by the states and not by private individuals. The proper defendant under the amendment would have been the state of Virginia, not Morrison. Moreover, he held that following the logic of VAWA would “completely obliterate the Constitution’s distinction between national and local authority.”

Political observers may be astonished to hear politically correct feminists appealing to the Constitution, which they often vilify as a “dead white male document” drafted by slaveowners. In fact, the Commerce Clause and the Fourteenth Amendment were arguments of convenience and part of a well-established campaign to use civil litigation as a weapon against “gender-motivated” violence. VAWA attempted to use federal remedies if state ones proved unsatisfactory. In her book Toward a Feminist Theory of the State, Catharine MacKinnon describes what she calls “Feminist Jurisprudence,” writing, “Civil remedies in women’s hands would be emphasized.”

The civil court system—which deals with private harms—affords at least two advantages for PC feminists. First, it allows women to punish “abuses” that fall outside the criminal statutes. Second, it has less stringent standards than the criminal court system.

To address the first advantage: men who are not criminals, and so are of no concern to the police, can nevertheless be punished through civil money damages. For example, sexual harassment laws are rooted in Title VII, the fair employment provision of the Civil Rights Act of 1964, which provides civil penalties. Perhaps the first example of radical feminist use of the civil courts comes from the Minneapolis Anti-Pornography Ordinance of 1983, which would have given individual women or groups of women the right to sue producers or distributors of pornography for damages. (The ordinance was vetoed by the mayor.) Through such local measures, radical feminists have tried to equate pornography with discrimination on the basis of sex, thus bypassing First Amendment concerns.

The second advantage of the civil courts is that they are far less stringent than criminal ones. This factor is particularly important for crimes such as rape that are notoriously difficult to prove. In a criminal court the alleged victim must sustain her case beyond a reasonable doubt. Civil court requires only a preponderance of the evidence, which can mean as little as 51 percent certainty. Moreover, in civil court, the rules of evidence are more relaxed. Therefore, a rape case dismissed by a criminal court may well succeed in a civil action. In the matter of Brzonkala, the defendants did not even reach criminal court: a grand jury found insufficient evidence to indict. Nevertheless, VAWA allowed her to bring civil suit against them. In short, it allowed her to pursue a criminal case that was too weak to be admitted into criminal court.

Statutory Vagueness

Ominously, VAWA does not clearly delineate what constitutes “gender-motivated violence,” allowing the term to cover conceivably any situation of abuse that involves sexual hostility. This is promising for feminists who routinely consider even words and images to be a form of sexual violence. Such logic led Supreme Court Justice Sandra Day O’Connor to state, “Your approach . . . would justify a federal remedy for alimony or child support.” Arguably, that is precisely what radical feminists wanted and hoped to achieve through VAWA.

Such feminists want a war on “gender violence” similar to the War on Drugs—that is, zero tolerance backed by maximum force. To this end, VAWA attempts to create a special class of crime defined by ideology. A major tenet of radical feminism is that violence against women is part of a political campaign that men as a class inflict on women as a class. The fact that real violence against women—murder, battery, rape—has been steady and steeply declining since 1990 in no way affects their passionate cry for harsher enforcement. Facts are often irrelevant to ideology. In refusing to expand congressional power under the Commerce Clause, the Supreme Court decision inadvertently dealt an unexpected blow to this feminist agenda. It was unexpected because the Supreme Court tends to overturn rather than to uphold earlier rulings in the cases it hears. Moreover, Justice O’Connor has a strong track record of ruling in favor of “women’s rights,” yet she voted with the majority.

No wonder National Organization for Women (NOW) president Patricia Ireland felt betrayed. She declared, “The Supreme Court has said not just that women’s right to be free from violence is not protected by the U.S. Constitution but that the Constitution actually prohibits Congress from providing such protection. I’ve never seen a more compelling argument for a constitutional amendment guaranteeing women’s equality.”

NOW further proclaimed, “The Rehnquist Court’s ruling in U.S. v. Morrison is a setback for women’s rights and a triumph for those that seek to roll back 30 years of federal civil rights law under the guise of states’ rights . . . . For them, ending violence against women takes a back seat to preserving states’ rights to deal with violence—or not deal with it at all.”

Impact of U.S. v. Morrison

With the likes of NOW and Hillary Clinton calling for a restoration of VAWA, the issue is not likely to vanish from the political scene. But it is a mistake to view the Supreme Court decision as an attack on women in any manner. As Senator Joseph R. Biden, Jr., an advocate of VAWA, declared, “this decision is really all about power: who has the power, the court or Congress?”

The case was a victory for those who wish to limit congressional power. In rejecting VAWA, the U.S. Court of Appeals stated, “Such a statute . . . cannot be reconciled with the principles of limited federal government upon which this nation is founded.” Morrison constitutes a stop sign in the recent political drive toward nationalizing selected crimes, a return to fundamental constitutional considerations and to the rule of law. William Mellor, president of the Institute for Justice, explained that the decision addressed “whether or not the Congress operates under enumerated and, therefore, limited powers; or whether it has authority to basically regulate any activity it sees fit.”

The most loudly debated question surrounding the Morrison decision will be its impact on violence against women. Some have argued that VAWA’s civil-rights remedy would not have benefited many women anyway. In cases of rape, for instance, the perpetrator rarely has real assets that can be attached in a judgment. Arguably, the real beneficiaries of VAWA would have been women who bring “deep pocket” defendants to court: for example, well-to-do women in divorce proceedings who might use the law as leverage, or women who have complaints against entities such as universities.

VAWA’s greatest value to its proponents may be as an ideological symbol. It symbolizes and institutionalizes the political belief that women must receive special protection from men. When confronted with violence and its redress, VAWA said that women are not to be treated as individuals but are to be accorded privileges as the members of a class. Yet Curt Levey, an attorney for the Center for Individual Rights (CIR), which represented Antonio Morrison, commented that “although today’s decision will be viewed as a historic setback for feminist advocacy groups, it is a victory for American women, whose safety is best preserved by strengthening local law enforcement, rather than by relying on federal bureaucrats.”

The Supreme Court’s decision was not a blow to women’s equality or safety, which was not at issue. It was an attempt to check the seemingly infinite and unenumerated powers claimed by Congress. As Michael E. Rosman, CIR general counsel, put it, “The court is now requiring Congress to toe the constitutional line.”

The federal government, of course, does not at present respect its constitutional limits. The chief culprit, in this regard, is the massive social legislation and regulatory apparatus enacted under Congress’s constitutional authority “to regulate Commerce . . . among the several states” (Article 1, Section 8, Clause 3).

That clause, as interpreted by the Supreme Court, has been the source of constitutional authority for the great expansion of federal control over health, morals, education, crime, labor, environmental conditions, and retirement and unemployment insurance programs. For example, provisions of the Civil Rights Act of 1964 outlawing racial discrimination by private individuals were upheld as a valid exercise of Congress’s power under the interstate commerce clause. In Katzenbach v. McClung (1964), the Court held that racial discrimination, in the form of refusal to serve blacks at privately owned restaurants, imposed burdens on interstate commerce that Congress could seek to eliminate.

The Court took this tack because the Constitution does not grant Congress a general police power to legislate in the realm of public morals. That is, Congress has no authority to pass such a law simply on the basis that racial discrimination is a moral abomination, or even on grounds that the institutionalized treatment of a racial class as subhuman is apt to result in social upheaval, riot, or other breaches of the public peace. Yet let it be found, or reasonably suspected, that this discrimination impedes commerce, why then (but only then!) Congress may act. Apparently, the Court would have us believe that the Founders granted the federal government authority to enact all manner of social legislation—provided only that it is good for business.

An analysis this cynical ought to suggest that the Court’s “interpretation” of the commerce clause is an expedient fabrication and that the clause was never meant to serve as backdoor authority for social legislation. No such luck.

The New Deal

The commerce clause became the carte blanche for social legislation through a series of cases upholding New Deal legislation in the 1930s and 1940s. In those cases the Supreme Court interpreted the clause as permitting Congress not just to regulate commerce (actual interstate trade in goods and services), but also to regulate anything that had a “substantial effect” on commerce. The watershed case which held that Congress could regulate purely private, individual, and noncommercial conduct was Wickard v. Filburn (1942).

In its simplest terms, Wickard held that Congress had authority under the interstate commerce clause to prohibit Filburn, the owner of a small farm, from growing, storing, and consuming his very own wheat on his very own property. For this reason, it is often selected by libertarians (and occasionally conservatives) as a patent illustration not only of the Supreme Court’s egregious failure to uphold the Constitution, but also of the now nearly unlimited scope of congressional power.

Yet a close reading of the case redirects attention away from the Supreme Court as the villain responsible for the loss of limited government, and reveals more precisely the reason for that loss. More troubling still, a close analysis of Wickard indicates why term limits, balanced budgets, prohibitions on unfunded mandates, or similar institutional devices will not re-establish limited government, and points to the daunting nature and magnitude of the reform necessary to limit government power.

The Political Perils of Growing Wheat

Roscoe C. Filburn was a farmer in Ohio who maintained a small herd of dairy cattle and a flock of chickens, and sold milk, poultry, and eggs. He also grew a small acreage of winter wheat each year, sold a portion of the crop, used part to feed his poultry and livestock, consumed a small amount at home, and kept the remainder as seed for next year’s crop.

Under the Agricultural Adjustment Act of 1938, the secretary of agriculture established a quota for wheat planted by Filburn in the fall of 1940 of 11.1 acres and a normal yield of 20.1 bushels an acre. Filburn sowed 23 acres, harvesting 239 bushels in excess of his allowance. Under the act, this excess was subject to a penalty of 49 cents a bushel ($117.11 in all). The penalty could be avoided only by storing the excess wheat as required by regulations promulgated by the secretary or delivering the wheat to the secretary for storage.

Filburn neither stored nor delivered his wheat. Instead, he sued to prevent the imposition of the penalty by seeking a declaration that Congress lacked the authority to restrict his right to grow and consume, on his own property, as much wheat as he saw fit. He argued specifically that regulation of his wheat production exceeded the authority of Congress to regulate interstate commerce because the activity was not commerce. He further argued that his activities were local and not interstate in character, and that those activities had at most only an indirect effect on interstate commerce. He relied on prior cases that had held that such activities as production (which would encompass farming), manufacturing, and mining, first, were not commerce, and, second, were strictly local (or intrastate) activities, and thus not subject to regulation by Congress under the interstate commerce clause.

The government argued that the act regulated only marketing of wheat, a commercial activity, and alternatively, that if the act did go beyond the regulation of marketing, it was sustainable as a “necessary and proper” implementation of Congress’s power to regulate interstate commerce.^[1]

The Supreme Court first noted that its recent decision in United States v. Darby (1941), holding that Congress had the power under the commerce clause to regulate the production of goods intended for commerce, did not dispose of Filburn’s claim, because here the Agricultural Adjustment Act “extends federal regulation to production not intended in any part for commerce but wholly for consumption on the farm.” The Court then set about putting questions of this sort to rest once and for all.

Reviewing its major decisions under the commerce clause, the Court concluded that the scope of power granted under that clause should not be determined by a mechanical application of legal formulas: whether the activities were entirely intrastate or local; whether they constituted production, consumption, marketing, manufacturing, or mining; or whether those activities had a direct or indirect effect on interstate commerce.

Instead, the Court concluded, Congress may regulate any local, noncommercial activity “if it exerts a substantial economic effect on interstate commerce.” Henceforth, the reach of Congress’s power under the commerce clause was to be determined solely by “an economic measure,” and not at all by the nature of the activity being regulated.

The purpose of the regulation of wheat under the Agricultural Adjustment Act was, the Court noted, to keep the price high for the benefit of wheat farmers. America’s farmers produced more wheat than Americans consumed and were unable to export all the excess at favorable prices. Because of the glut on the world market, the world price was approximately 40 cents a bushel.

The act increased the price in America by limiting its domestic supply through the imposition of production quotas. (Presumably, import of cheaper foreign wheat was prohibited or made uneconomical through high tariffs.) The law worked: in 1941, the court noted, farmers who “cooperated” with the program received an average price of $1.16 per bushel—almost three times the world market price.

Yet that goal would have been undermined, if not undone, without regulating the amount of consumption of home-grown wheat. Farm consumption of home-grown wheat amounted to more than 20 percent of average production. Were such a large portion of production and consumption left uncontrolled, the Court noted, oversupply and a resulting decline in price could not be prevented. Because the isolated personal activities of farmers like Filburn could, in the aggregate, have a substantial effect on trade in wheat at increased prices, the Court held, regulation of the amount of wheat a farmer could grow for consumption on the farm was within the power of Congress under the commerce clause.

As a result of the decision in Wickard, the commerce clause became the escape hatch through which Congress could enact social legislation. Although previous generations had understood that the Constitution reserved the police power to the states, the commerce clause became the loophole that, for all intents and purposes, eviscerated and made a mockery of the Tenth Amendment and the doctrine of enumerated powers.

The Court had swept aside substantially all jurisdictional limits on federal legislative authority and created the constitutional authorization for federal regulation of nearly all human activity. Henceforth, the only remaining significant limitations on the power of Congress were the restrictions contained in the rest of the Bill of Rights.

Democracy, or the Personal Becomes the Political

The Agricultural Adjustment Act had provided that whenever it appeared that the nation’s wheat supply would exceed normal requirements for domestic consumption and export by 35 percent, the secretary would proclaim a compulsory marketing quota for the forthcoming year. But that quota would become law only if approved in a national referendum by a supermajority of at least 66.7 percent of the very farmers who would be subject to the law. (Note that if any other group of businesses agreed on limiting services or products in order to increase prices, the activity would be a violation of the Sherman Anti-Trust Act.)

Lured by the promise of obtaining an artificially high price for their wheat through legal restrictions on production, Filburn’s fellow wheat farmers approved the secretary’s quotas by 81 to 19 percent. It is unclear whether Filburn himself voted for these restrictions. In any event, it was irrelevant, for he became bound by the “will of the majority,” regardless of what that majority knew or understood, and regardless of how ill-considered or unprincipled its actions were.

The quotas on wheat production that Filburn contested, then, were not mandated by a socialist Washington bureaucracy eager to bestow the benefits of a centrally planned economy on the nation’s farmers, treading upon the hallowed freedom and independence of those “sturdy yeomen” whom Jefferson praised and idealized. Far from it: the nation’s farmers eagerly approved the restrictions, happily trading their freedom and independence for the government’s promise of a few dollars more.

These yeomen were stalwart in one sense, however. They did not let the fact that the government’s largesse would come at the expense of suffering consumers stop them from doing what had to be done.

That the farmers themselves voted for the quotas underscores perhaps the most important consequence of the Court’s decision in Wickard. When it swept aside the limits that formerly prevented Congress from passing such laws—regardless of how many people wanted them—nearly all Filburn’s private conduct became subject to simple democratic control. Henceforth, not only Filburn’s economic activity, but any private conduct that might, when considered together with all other similar conduct, have a “substantial effect” on interstate commerce would be subject to the will of the majority. It mattered not how trivial the activity was in isolation, unless the law was prohibited by one of the remaining provisions of the Bill of Rights.

Last Recourse

Filburn made two final arguments against the quotas, both predicated on a violation of his Fifth Amendment right to due process. The first related to the procedure by which the quotas had been approved. Before the referendum, Secretary of Agriculture Claude R. Wickard made a radio address urging the wheat farmers to approve the quotas. He did not mention, however, that legislation awaiting the President’s signature would increase the penalty for excess wheat from 15 cents to 49 cents a bushel.

Filburn argued that the secretary’s failure to mention so material a piece of information invalidated the referendum. This is a fascinating argument, for it suggests that the farmers voted for the law only because they were planning not to obey it. It implies that each farmer believed he would realize the benefit, higher prices, of his fellow farmers’ compliance while profiting by growing extra wheat. At 15 cents a bushel, the penalty was still over 60 percent below the world price of 40 cents. Farmers could grow excess wheat, pay the penalty, and still sell it at a small profit. Filburn’s argument tacitly suggests that the farmers only approved the restrictions because they thought they could trump the system. Had each farmer known that the penalty would be so high that he would really have to adhere to the quota, Filburn’s argument suggests, few farmers would have voted for it. The Court held that the defects in the secretary’s speech were not a basis for invalidating the referendum.

Filburn’s final argument was that the quotas deprived him of his property (his own wheat) without due process of law in violation of the Fifth Amendment. The Court quickly disposed of that argument: the law did not deprive Filburn of any property. Rather, it transferred additional property to him, in the form of increased prices that he would not otherwise have realized. (Obviously, the people deprived of property, i.e., money, were the nonfarming consumers. But of course that was with due process, for Congress had voted for and the President had signed the bill.) Filburn was in no position to complain about a law that conferred a benefit upon him. The Court said:

It is agreed that as the result of the wheat programs [Filburn] is able to market his wheat at a price “far above any world price based on the natural reaction of supply and demand.” We can hardly find a denial of due process in these circumstances, particularly since it is even doubtful that [Filburn's] burdens under the program outweigh his benefits. It is hardly lack of due process for the Government to regulate that which it subsidizes. That [Filburn] is the worse off for the aggregate of this legislation does not appear; it only appears that if he could get all that the Government gives and do nothing that the Government asks, he would be better off than this law allows. To deny him this is not to deny him due process of law. (Emphasis added.)

No Subsidy Without Regulation

This is one of the more neglected lessons of Wickard. Yet on this point the Court was absolutely correct: “It is hardly lack of due process for the Government to regulate that which it subsidizes.” The federal government cannot give you what you want (high wheat prices) unless it regulates you (controls the amount of wheat you can grow, even for personal use), and if it is conferring a benefit on you, you have no basis for complaining of the regulation. Be careful what you seek to enact into law.

You cannot both remain free and expect the government to give you what you want; for it is only by controlling you that the government can insure that you will get what you want. There is no subsidy without regulation; the price of legislated benefits is personal freedom.

It was a trade that the farmers in Wickard were apparently eager to make, evidently confident that the lost freedom was but a bauble far and away surpassed by the gains to be realized from a legally restricted market for their goods. As Filburn’s “but we didn’t know . . .” due-process argument indicates, however, it is a fine question how much that desire for legislated benefits hangs on the perception that the restrictions are at someone else’s expense.

The Source of Unlimited Government

It is unbridled desire to coerce others into serving their ends that causes grown men to rationalize the distortion of the words in founding documents (and lesser laws) and that eventually destroys all institutional barriers limiting government power. If the barriers erected by the Constitution ultimately proved powerless to keep this will to coerce within limits, there is no reason to believe that any other parchment barriers, such as term limits, supermajority requirements for tax increases, prohibitions on unfunded mandates, or the rest of the Bill of Rights, will have any greater capacity to contain that force.

Fundamentally, then, the problem of limiting government is not merely a question of institutional devices designed to prevent the creation or excesses of a ruling class, or the co-opting of law by “special interests.” The problem is not just certain people or certain groups, and not just a question of balancing one group against another, or of increasing “representation” to magnify the number of voices vying for the prize that participation in a majority confers.

No, the problem is that each stands ready to conscript his fellow citizens into his service, that each denies equal liberty to all others and will use force to achieve his ends. The problem is the limits of man’s—each man’s—capacity for acting morally.

Justice for All

While it is possible to criticize the Supreme Court’s decision in Wickard for failing to uphold the Constitution, there is no doubt that the decision was just. The Court refused to permit the farmers to escape from the consequences of their own actions.

But it can also be said that Wickard worked justice on a national scale, for the rest of us. With the full power of the federal government at last able to reach virtually all individual conduct, we were free to form shifting, ad hoc majorities to impose all manner of national social and economic restrictions on one another, to seek and compel the subsidization of one another’s activities, to coerce participation in schemes like Social Security, and to pursue cultural hegemony through coerced conformity to “lifestyle” mores (such as bans on smoking). Like the nation’s farmers, we were now free to seek legislated benefits, both material and psychic, confident that the laws we desired would be at someone else’s expense.

Little noted at the time, however, was the fact that if we were free to vie endlessly with one another to become legally protected predators, we would also be bound to labor perpetually to avoid becoming legal prey. The decision in Wickard wrought a terrible and lasting justice: by giving us what we wanted, the Court insured that we would all get exactly what we deserved.

Notes

1. Article 1, section 8, clause 18 of the Constitution confers upon Congress the authority “To make all laws which shall be necessary and proper for carrying into Execution the foregoing Powers,” which include the power to regulate interstate commerce.