Why Democrats Could Win In 2016

Richard Epstein*

Richard Epstein

Richard Epstein

With the hotly contested Iowa primaries only a week away, the level of political polarization is higher than it’s been in decades.Hillary Clinton and Bernie Sanders are veering sharply to the populist left as they each champion a brand of democratic socialism. On the Republican side, the rise of Donald Trump and Ted Cruz reveals the rise of a muscular conservatism that appeals to the far right. By November, this political divide will become more pronounced. No one will be able to say, to quote George Wallace’s oft-repeated remark, that there is not a “dime’s worth of difference” between the two parties.

One area of huge contention is domestic policy. The two Democratic front-runners are responding to a strong anti-market sentiment by pushing for higher taxes, more income redistribution, and more extensive regulation, targeting both large businesses and wealthier individuals. Income inequality is at the center stage. On these issues, though, the Republican candidates offer a more pro-growth agenda, but do so only in muted terms. If Republicans want to win in November, they must boldly articulate an alternative to the policies of Clinton and Sanders.

One of the most interesting political trends of recent years is the rise of progressive populism. These days, the American left uses the term “progressive” much more frequently than the word “liberal” to describe itself—which represents a symbolic shift. The word “progressive” consciously hearkens back to the era between 1900 and the election of Franklin Roosevelt in 1932. The Progressive Movement held that, in an industrial age, markets did not function adequately, that the antitrust laws did not meet the challenges of the modern industrial economy, and that the imposition of a large administrative state, technically expert but politically aware, was needed to contain powerful private sector firms. These are essentially the same claims Democrats make today, even though the economy is more regulated than ever before.

The chief targets of the Progressives were many key Supreme Court decisions that opposed their worldview. The Court’s 1895 decision in United States v. E. C. Knight blocked systematic regulation of the economy by ruling that manufacture, mining, and agriculture fell outside the limits of Congress’s commerce power, so much so that in 1906, the passage of the Pure Food and Drug Act only let the federal government regulate drug manufacture in the territories, even though it could block the shipment of adulterated or misbranded drugs in interstate commerce. Likewise, in the 1905 case of Lochner v. New Yorkthe Supreme Court sharply limited the power of both the state and federal government to impose maximum hours or minimum wage laws on the economy. Three years later, the Court struck down a federal collective bargaining statute in Adair v. United States, and seven years after that it did the same with respect to state collective bargaining law. To top it all off, in Loewe v. Lawlor (1908), the Supreme Court unanimously applied the 1890 Sherman Act to secondary union boycotts. That decision sparked a furious progressive blowback in the 1912 Presidential election, after which Loewe was overturned by Section 6 of the 1914 Clayton Act that explicitly exempted unions from the operation of the antitrust laws.

Each of these decisions contributed to the enormous growth in productivity during the period before the New Deal. But as the ideological battles raged on, the entire edifice of the Old Court was eventually struck down in a series of decisions. Most notable were National Labor Relations Board v. Jones & Laughlin Steel (1937) and Wickard v. Filburn (1942). The two cases expanded the power of the federal government to regulate all economic activities. This meant that the 1938 revisions of the federal drug act allowed Congress to expand its jurisdiction to cover manufacture within the state. In addition, Jones & Laughlin Steel brushed aside all opposition to mandatory collective bargaining at the state and federal level. And any objection to the widespread reliance on administrative agencies to run the new ambitious state was ended by key decisions such as Yakus v. United States, which in 1944 sustained a criminal conviction for a violation of price control laws, and NBC v. United Stateswhich in 1943 upheld the allocation of broadcast frequency under the flaccid standard of the public interest, convenience, and necessity.

The contrast between the progressive and classical liberal views could not be more vivid. Justice Felix Frankfurter blanched at the thought that the Federal Communication Commission could be limited to setting the rules of the road for radio broadcast. He thought their delegated powers allowed them to determine “the composition of that traffic.” A year later in The Road to Serfdom, Friedrich Hayek presented the opposite vision. The genius of a highway system was that it set the rules of the road and allowed private individuals, each in pursuit of their own mission, to enter and exit as they saw fit—a privilege that was denied to commercial carriers under the Motor Vehicle Act of 1935. By the end of World War II, the entire classical liberal synthesis had been decisively rejected.

The New Deal victory ushered in a period of consolidation and retrenchment. The Republicans swept back into power in 1946, and that year saw the passage of the Administrative Procedure Act, still very much alive today, to rein in the widely perceived excesses of administrative power under the earlier New Deal statutes. One year later, Congress passed, over a Truman veto, the Taft-Hartley Act that limited the scope of the original 1935 Wagner Act, but which by no means undid the earlier law. And so the stage was set for a longish period of American legal scholarship where the major task of academic lawyers was to make sure that the new administrative state operated with dispatch and good sense. The enterprise should not be belittled today, given the vast difference between an administrative state that tolerates corrupt union elections and one that seeks to give union members a fair shot at appointing the leaders whom they prefer.

Yet, what was notable about this activity was that Congress set the major parameters of regulation, and the courts took the faithful implementation of the law as their task. The mood of the time was captured in the famous mid-twentieth-century course entitled The Legal Process, led by Harvard professors Henry Hart and Albert Sacks, which taught students the virtues of an incremental adjustment of the legal system to the new challenges that it faced. Moving back to first principles was decidedly second-tier. Instead, both left and right made peace with the major innovations of the New Deal, which they sought to rationalize and understand.

Yet the turn away from theory could not last. Even with the apparent mid-century serenity, the rising pressure on race relations, culminating with the 1954 desegregation decision in Brown v. Board of Education, forced questions of theory to the fore on matters of race. And it was only a short time thereafter that this more reflective mode of inquiry made its way into other areas. The rise of the law and economics movement in the 1960s and 1970s was important because it provided various intellectual tools that mounted a challenge to the unquestioned sway of regulation over large swathes of the economy.

Thus in 1959, Ronald Coase wrote the Federal Communications Commission, which had the temerity to argue that the market could do a better job in allocating spectrum use than the FCC, which never created coherent administrative criteria for frequency allocation. In 1962, James Buchanan and Gordon Tullock wrote The Calculus of Consent, which showed how easy it was for majoritarian institutions to fall prey to faction and intrigue. Writers like Henry Manne stressed the importance of the market for corporate control, which was inconsistent with the cozy relationship between big government and big business exemplified by the legal protection afforded to AT&T before its monopoly was broken up in 1982. And so it happened that competition, not regulation, became the new watchword for the overall legal system.

Today, the classical liberal challenge to the New Deal view of the world is stronger than ever. Underneath any piece of New Deal legislation lays the grubby reality of cartel formation in labor and agricultural markets. Fortunately, the high court is taking halting steps to return to the pre–New Deal state of affairs now that Friedrichs v. California Teachers Association may well undermine coerced union contributions and Horne v. Department of Agriculture has already punctured the invulnerability of the raisin cartel.

Yet the progressives have simultaneously revived New Deal principles by advocating for greater regulation to jump-start the flagging economy. In addition, the rise of “critical legal studies” and an ever-greater concern with race, gender, and inequality has moved much of the legal community further to the left. At the same time the law and economics community fractured, giving rise to strong pro-regulatory movements.

None of this conceals the vulnerability of the progressive agenda. Of course, the economy is in vast need of prompt and powerful improvement. But in order to prescribe a cure, it is necessary to diagnose the underlying ailment. Back in 1935, it was hard to find any coherent intellectual opposition to the ever-greater surge of government power. It was all too common then to confuse the size of a firm with its market power, and to assume that any restriction on the contractual freedom of the employer necessarily improved the position of the employee. Anyone who reads the Findings and Policies of the NLRA should be struck by its misguided and outdated argument that its vast administrative apparatus could increase the efficiency of the economic system or the real income of employees.

The tragic feature of today’s populist revival is that it uses obsolete economic and political philosophy to propel the case for additional layers of regulation. These are likely to prove more counterproductive than the initial New Deal blunders because the second round of regulation comes off a diminished economic base. The current slow growth environment and the reduction of labor market participation only compound the miseries of the poor and the vulnerable, whom the progressives want to protect. Yet as long as the Republican candidates fail or refuse to address this challenge, the odds will only increase that the next president will be deeply committed to policies that will cement the Obama legacy of economic stagnation and political turmoil. The intellectual tools to combat these false hopes are available. Let us hope that the Republican nominee will deploy them to maximum advantage. 

*Considered one of the most influential thinkers in legal academia, Richard Epstein is known for his research and writings on a broad range of constitutional, economic, historical, and philosophical subjects.

Consider This A Warning: The Republican Primaries Have Already Begun

Thomas Warns*

Republicans have already begun their quadrennial battle over Ronald Reagan’s legacy. It seems that with less than two years to go before Iowa and New Hampshire choose the next Presidential candidate, the frontrunners within the GOP have already begun a tug of war over who will bear the standard as the next Reagan.

Two of the frontrunners are Senators Rand Paul and Ted Cruz, according to a Conservative Political Action Conference straw poll. The CPAC straw poll placed Rand Paul first with 31% of the vote, followed by Ted Cruz in a distant second place with 11%. Of course one can question how closely this particular conference mirrors the true GOP primary electorate, considering Barry Carson finished third with 9% of the vote and only 30% of the attendees responded that marijuana should be illegal in all cases. Still, those are the numbers we have to work at.

Sensing that the two will be juxtaposed frequently over the next two years, Senator Cruz decided to fire the opening salvo. He declared that the United States has a “responsibility to defend our values.” He further added that we should be reluctant to deploy military force abroad, but that we should remain play a “vital role, just as Ronald Reagan did.” Senator Cruz has made it clear in no uncertain terms that he is more hawkish than the libertarian-leaning Senator Paul, though less hawkish than Senator John McCain.

Senator Paul fired back with a scathing op-ed on Breitbart which failed to mention Mr. Cruz even once but was unquestionably aimed at him. The piece opens rather bluntly: “Every Republican likes to think he or she is the next Ronald Reagan. Some who say this do so for lack of their own ideas and agenda.” He then warns about people turning Reagan into something he wasn’t to serve their political agenda, before adding in a later interview with Sean Hannity that he believes in “peace through strength,” yes – just like Reagan.

The argument to a certain extent speaks more to Reagan – and what to look for in a Presidential candidate – that it does about either of the 2016 frontrunners. By and large, more hawkish Republicans like Senator Cruz and more dovish Republicans like Senator Paul can both point credibly to President Reagan’s acts in office to support their stances. On the one hand, Senator Cruz can point to President Reagan’s tough talk against the “Evil Empire,” or his willingness to intervene in a variety of overseas affairs. On the other hand, Senator Paul can credibly point out, as he does in the op-ed, that President Reagan received substantial criticism from Republican hawks when he agreed to meet with Mikhail Gorbachev or when he pulled the U.S. out of Lebanon following the bloodshed of the Beirut barracks bombing.

The reason they can both point is because Reagan realized that both hard and soft power have a place and a time for their use, and any sort of categorical hardline stance on foreign policy is bound to produce the wrong results in one situation or the other. On the domestic front, we have a relative wealth of information about how the economy is working and can spend plenty of time debating which programs to fund and which to cut; in contrast, foreign policy demands that a President deal (or not deal) with one hundred and ninety-five other countries, each with its own unique culture, history, political scene, and leader, sometimes on their schedule, and with relatively limited information about the situation. Reagan realized this fundamental difference and reacted differently to each situation, which is why his actions are used to justify both an interventionist and non-interventionist foreign policy. If either frontrunner cherry-picks only part of Reagan’s legacy, he does a disservice to himself, to the former President, and to the GOP.

Insofar as Senator Paul seems to understand this delicate balance in his op-ed, he is correct. Chest-beating for the sake of a political agenda is not helpful for the Republican Party. But neither is the “heads buried in the sand” isolationism which some accuse Senator Paul of advocating. In reality, Senator Paul favors non-intervention, but is not a complete isolationist to the point of detriment to the U.S. In fact, much like Senator Cruz, he favors isolating Russia as punishment for Putin’s actions towards Ukraine but holding back military action. Senator Paul recommended that President Obama consider forcing Russia out of the G-8 (hardly an isolationist idea), and Senator Cruz agreed. The only minor difference in opinion is that the Kentucky Senator is wary of giving money to a Ukrainian government with a corrupt history, whereas the Texas Senator has said he would wait to hear the recommendations of the Senate Foreign Relations Committee before deciding.

It may not make for good election politics, but a strong candidate must acknowledge their willingness to use a variety of approaches towards friends and foes abroad – just like Reagan – rather than drawing back into unequivocal hardline stances on one side or the other. Since Rand Paul’s op-ed seems to understand that nuanced part of Reagan’s legacy better, his early status as frontrunner seems deserved.

*Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."