Judicial Activism and the Death of the Auto Industy: Part Two

The role of Supreme Justice may be one of the most powerful positions a person can hold. The Supreme Court not only has the ability to shape social policy, but our economic stability also rests firmly in its hands. By the end of this series, I hope to clearly outline the importance of strict adherence to the Constitution when interpreting law, and the devastating consequences of straying from this document. In Part One, we started to find the connections between “empathetic” court rulings and a larger federal government. We looked at some of the first distortions of the Commerce Clause and the Necessary and Proper Clause. These first changes in interpretation were so subtle, that they could easily have been overlooked by the public. By the early 1900′s, these clauses were believed to have a much broader definition than originally intended. Now, I would like to explore some of the big changes in American government that took place after these early rulings.

Stafford v. Wallace 1922

In 1921 Congress enacted the Packers and Stockyards Act to protect consumers from trade practices that were considered unfair or deceptive (i.e. price fixing). The bill was designed to regulate foreign and interstate commerce (the new definition of interstate commerce) in trades involving livestock, meat, poultry, dairy, and eggs. It forced stockyards to become regulated “quasi-public utilities” and required stockyard employees of all levels to register with the government.

The Chicago stockyards became the center of the controversy surrounding this bill in the 1920′s. Farmers would ship livestock to the stockyards. From there, the workers would sell the animals, collect commission, and send a portion of the sales back to the farmers. The commission merchant worked in a closed circuit. The product was sent to him and he sold it, all within the confines of the stockyard. Stafford and Company filed a complaint against U.S. Secretary of Agriculture Henry Wallace. They believed that the federal government had no right to regulate their business. They argued that since the sales were conducted in a specific area and confined to one state, it could not be considered “interstate commerce.” They argued that although merchandise had been shipped in from another location, their actual business was confined to intrastate commerce.

Chief Justice Taft sided with the government. He believed that the stockyards were a single point in a long stream of commerce, not an independent business. As you may remember from Part One, at this point the Supreme Court had already decided that all forms of transportation were considered “interstate commerce.” When you take this into consideration, you can see it was only a matter of time before any business that required the transportation of goods would also be considered under federal authority. Justice Taft probably believed his decision would better protect consumers. Surely, he felt genuine empathy for those who had fallen victim to some sort of “unfair” trade practice. In his quest for a better regulated industry, he failed to protect the rights of states and business owners. This case opened the door for even more government intrusion in the market place. Under this new definition of interstate commerce, all aspects of a product must originate within a state and their final destinations after sale must be within the same state in order to remain free from federal scrutiny. How many businesses can you think of, that don’t receive any part of their merchandise from another state? How many businesses will not sell their products to an out of state buyer? I think the slippery slope aspect of this case is fairly obvious.

The floodgates had been opened. Perhaps some members of the Supreme Court started to see the consequences of their decision. During the following few years, the courts attempted to limit regulation in the private sector. They faced a serious challenge. Supreme Court Justices had spent several decades loosely interpreting constitutional restraints on government. Now that the federal government had this power, they would not give it up with out a fight.

“The switch in time that saved nine”

In 1935 the battle was on between the Constitution and FDR. Since the inception of the New Deal in 1933, many of the Deal’s programs had been deemed unconstitutional. The massive works project was supposed to rebuild the economy, but some of the “relief” programs were wreaking havoc on the market place. Although price fixing was illegal, the National Recovery Administration (NRA) had the power to coordinate “price floors” with powerful heads of industry. Labor unions became intertwined with government agencies. The government became involved in wage fixing and limiting maximum work hours. The most devastating part of the new deal was the government’s involvement with monopolies. Although the National Industrial Recovery Act was touted as a way to make the market place more fair, the federal government used the power to bolster certain monopolies and cartels, which actually decreased healthy competition and industry growth. In 1935, the Supreme Court ruled that Title 1 of the act was unconstitutional and the NRA was disbanded. President Roosevelt did not take this decision lying down.

FDR had had enough of the Supreme Court’s meddling in his beloved New Deal. He proposed the Judiciary Reorganization Bill of 1937. He claimed that he merely wanted to modernize the federal court system-but the most important aspect of this bill is the power it would have granted the current President. He needed to minimize the influence of some of the older, more traditional judges (we all know that nothing improves decision making like ignoring the old and the wise). If this bill passed, the Supreme Court would have an additional judge for every justice over the age of 70, upping the total number of Supreme Court Justices to 15, and packing the court with six new Justices appointed by FDR himself. Seeing as how the decisions that went against the New Deal legislation had been decided by a 5-4 vote, this would have given him limitless authority.

The legislation was publicly unveiled February 5, 1937. Congress had several weeks to consider the bill before voting. During this time, the Justices were considering West Coast Hotel Co. v. Parrish, a case that dealt with the regulation of minimum wage. In what some historians believe was a response to the court packing bill, the Supreme Court now handed down a pro-New Deal verdict. The Justices appeared to be signaling their willingness to support the ambitious President. Many believe that the decision was a politically motivated exercise in self-preservation. Associate Justice Roberts, for example, had previously been the deciding vote against the New Deal cases, now he voted in favor of government regulation. Due to the timing of the decision, his change of heart was dubbed “the switch in time that saved nine.” The Justices claimed that politics had nothing to do with their vote- however, interest in the bill had clearly waned. Detractors saw the bill for the power grab that it was, while FDR supporters viewed it as unnecessary, now that the courts were on their side. As a result, the bill was easily defeated in a congressional vote. The West Coast Hotel case is, therefore, often considered a turning point in the Court. It marked the end of our federal court system keeping the government out of the market place.

Wickard v. Filburn

With no one to hold them back, Congress passed the Agricultural Adjustment Act of 1938 (a similar bill had been passed in 1933, but the Supreme Court had ruled it unconstitutional). This bill limited the area that a farmer could devote to wheat production, and the total amount of wheat he could harvest. Lawmakers claimed that too much wheat would cause the price to drop rapidly, and the economy would be much better off if the price stayed the same (one wonders how low food prices during a depression could possibly be harmful). Of course, many people questioned the legality of limiting business in this matter. Shouldn’t a well run business have been allowed to produce as much as it could? Surely, this wouldn’t hold up in court.

In 1940, a farmer named Filburn would spark a fierce debate about this legislation. He had been told that he was only permitted to grow 11.1 acres of wheat and could harvest 20.1 bushels/acre. Filburn ignored the notice and planted 23 acres of wheat (instead of wasting the land that he owned, and had payed for) and harvested 239 bushels from the excess area. The case went before a federal district court and the decision was handed down in Filburn’s favor. The government quickly appealed to the Supreme Court.

Filburn argued that the excess wheat was stored and used to feed his household. He believed that since none of it had been sold or was ever intended to be sold, it couldn’t possibly be considered interstate commerce. It really wasn’t commerce at all. The Supreme Court rejected this reasoning and sided in favor of the Secretary of Agriculture. The Justices reasoned that if Filburn hadn’t grown extra wheat for his household, he would have been forced to buy some on the open market. Since farmers from all over the U.S. sell wheat, this did in fact have an impact on interstate commerce. No joke. That was the winning argument (Maybe you ought to think twice about planting that backyard vegetable garden!).

As you can see, by the 1940′s a lot had changed in the interpretation of the Constitution. The federal government’s involvement in the market place seemed to know no bounds. The original meaning of the Commerce Clause had long been forgotten. Since the government now believed it was their responsibility to regulate just about everything, the Necessary and Proper Clause could be used to justify even the most outrageous legislation.

At this point in history, the government had a foolproof method of enforcing legislation of any kind.

• Step 1 – Show that the activity in question has even the smallest impact on interstate commerce.

• Step 2 – Declare that this relationship places it under federal authority.

• Step 3 – Argue that if it is under federal authority, then the government must have access to all “necessary and proper” means of regulating the activity.

And there you have it, the ultimate justification for any federal program. This reasoning set the stage for even greater government expansion down the road.

As we now know, this was only the beginning of over-regulation, and wasteful government programs. In Part Three, I hope to fully bring into focus the correlation between sloppy judicial reasoning and the financial mess we are currently witnessing. I will attempt to demonstrate the dangers we face if we (1) continue to ignore the influence the courts hold over day-to-day business practices in the United States, and (2) do not demand that our representatives approve strict Constitutionalists to the bench.