Freeman

ARTICLE

Unrestrained Appetites, Unlimited Government

That pesky Commerce Clause.

MAY 01, 1998 by JEFFREY R. SNYDER

Filed Under : Regulation, Subsidies, U.S. Constitution

The federal government was supposed to be limited to a few defined powers. The Tenth Amendment to the Constitution—“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people”—confirms it.

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.

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