Merrick Garland: Political Pawn

Richard Epstein*

Richard Epstein

Richard Epstein

The single most important phrase that changed the politics of Supreme Court nominations was Senator Edward Kennedy’s famous and shameful denunciation of “Robert Bork’s America,” with its back alley abortions, segregated lunch counters, and rogue police. From that point on, Supreme Court nominees of either party, and even potential nominees, have risked being attacked in a similar manner. The nomination process of Clarence Thomas was, of course, quite ugly—and there were major tussles during the deliberations over John Roberts and Samuel Alito (who then Senator Obama wanted to filibuster). Now, the Republican opposition is coalescing against Judge Merrick Garland, the Chief Judge of the Court of Appeals for the District of Columbia, who at age 63 is Barack Obama’s nominee to the Supreme Court.

The resistance to Garland may prove to be misguided from a political perspective, even if permissible as a constitutional matter. But the Republicans have just doubled down in their game of political chicken by announcing that they will not give Garland a hearing either before or after the election. Whether they have enough ammunition to succeed politically is a complex question.

To help cut through the morass, it is useful, I think, to separate the politics from the man. The opposition to Garland has nothing to do with Garland himself, who is a distinguished public servant and an excellent federal judge. If he were filling a seat vacated by a liberal Democrat, there would not be much fuss. But this appointment involves a shift in control on the Supreme Court. Republicans fear that even the most reasonable liberal Democrat will tip the balance of the Court away from the conservative wing. If Hillary Clinton becomes president, she will doubtless make two or three appointments to the Court, at which point the Democrats will have a complete ideological lock on the Court for at least a generation.

That shift in control will matter most on hot-button issues. One recent example is Friedrichs v. California Teachers Association.Virtually every observer of the oral argument believed that a five-four vote was certain, meaning the Court would outlaw the agency shop for public unions on First Amendment grounds. That decision is now likely to be decided four-four, so that the perfunctory Ninth Circuit decision upholding the agency shop arrangement will prevail.

The same uncertainty exists in United States v. Texas, which is about the reach of executive power in immigration cases. There is a sharp division of opinion between the left and right on that issue. It’s a similar situation for Zubik v. Burwell, where the Little Sisters of the Poor are contesting under the Religious Freedom Restoration Act (RFRA) a requirement by the Department of Health and Human Services that they facilitate insurance coverage for contraceptive services that are against their sincere and deeply held religious beliefs. In the related case of Hobby Lobby v. Burwell, a five-four majority held, over fierce opposition, that under the RFRA, a private corporation could not be required to provide health insurance policies that covered payment for contraceptive methods that violated the religious beliefs of the individuals who owned and controlled Hobby Lobby. Zubik is surely closer to the line, and there is little doubt in anyone’s mind that a future Justice Garland would vote to sustain that regulation, given his general deference to administrative regulations. Similarly, it is likely that Garland would vote to overturnCitizen’s United v. Federal Election Commissiondecided in 2010, which featured a powerful Scalia concurrence, attacking, let us not forget, the scope of the bipartisan McCain-Feingold legislation on First Amendment grounds.

 The future is sure to hold key decisions on abortion, affirmative action, campaign financing, gun rights, unions, federal power to regulate under the commerce clause, and judicial review of administrative agencies. The betting by everyone is that a Justice Garland would line up solidly beside his four liberal colleagues on this set of issues. Ideologically, he is closer to Justices Kagan and Breyer, as opposed to Justices Ginsberg and Sotomayor, but Republicans are not concerned about these fine-spun differences. They fear the constitutional reorientation that will surely arise if Garland replaces the late Justice Scalia.

But some of the attacks against Garland have veered into the realm of hyperbole. Many conservatives do not seem to realize that some of the problems of modern constitutional law are attributable to the work of Republican judges. One example of a misguided attack against Judge Garland comes from a recent Wall Street Journal op-ed by Juanita Duggan, the head of the National Federation for Independent Businesses. She announces in the piece that the NFIB is getting off the sidelines to strongly oppose Garland’s elevation to the Supreme Court. Her chief complaint against Garland is his deference to administrative authority, especially to a pro-labor National Labor Relations Board. By the same token, though, Garland’s approach on this matter is all too mainstream. Administrative deference was also championed, after all, by Scalia.

Duggan takes aim at Garland’s opinion in Rancho Viejo, LLC. v. Norton. In that case, the Department of Interior prevented Rancho Viejo from completing an extensive real estate development because its construction could compromise the habitat of the Arroyo Southwestern Toad, which lies entirely within one state. Garland upheld the Department of Interior’s position. But, Duggan argues, this is not a matter for Congress to decide. How does the Department of Interior’s action, she wonders, fall under Congress’ power to regulate commerce among the several states?

As a matter of first principle, Duggan asks the right question, as this looks to be a local matter. But as a matter of current law, Garland was surely correct, and Duggan sadly misinformed. The first hint that something is amiss is that the Secretary of Interior was a rock-ribbed Republican, Gale Norton. The second key point is that Garland’s decision relied extensively on the 1995 Supreme Court decision in United States v. Lopez, which established the broad reach of the contemporary commerce power. But, again, remember that Chief Justice Rehnquist. wrote the expansive decision that, in the course of striking down the Gun-Free School Zones Act of 1990, went out of its way to affirm a foundational constitutional decision of the New Deal, Wickard v. Filburn(1942) on which Rancho Viejo rests. Even the conservative Douglas Ginsburg concurred in Garland opinions, while doubting that under Lopez Congress could reach the lone hiker as well as the large commercial developer. But if that is the bone of contention, the war to constrain Congressional power has already been lost, whether or not Lopez is overruled.

At this point, the entire picture is muddier than one might hope given that Republican legislators and Republican justices have contributed much to the parlous state of American constitutional law. But, in general, the Democratic justices have been consistently more off base, which is why Republicans have been so intransigent about Garland. Suppose the Republicans hold firm, and the Democrats win the presidency. At this point, the Republicans may bite their lips and vote to confirm Judge Garland, at which point they have lost nothing but time. They take the risk that President Obama would pull Garland out and nominate someone further to the left. But given his oft-repeated claim that he chose the most qualified candidate, it is not likely that President Obama would make that reversal.

The real loss to the Republicans lies elsewhere: that the public will see the Senate’s refusal to hold hearings as mean-spirited political opportunism or, worse, as an abnegation of their alleged constitutional duty to consider any nominee that the President puts forward.

On the political issue, the Republican renewed refusal to hold a hearing could cost them dearly at the polls. Granting a hearing, allowing Garland to speak, and then voting him down could easily be damaging if he makes a favorable public impression, which seems likely. Worse still, as George Will asks, is it really part of the game plan of any sane Republican to preserve the right to designate a Supreme Court nominee to the erratic Donald Trump or the liberal Hillary Clinton? The Republicans take a very substantial risk that hanging tough on the Garland nomination could cost them both the Presidency and control of the Senate, even if by some miracle they are able to deny the clueless Donald Trump the presidential nomination.

Politics aside, it is, however, quite another story for the Democrats to accuse the Republicans of breaching their constitutional duty. The applicable provision of the Constitution reads:

The President . . . shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States . . . .

This provision sets out no distinctive procedure for the confirmation of Supreme Court judges. The word “shall” imposes a duty on the President to nominate, but there is no parallel duty on the Senate. Historically, the Senate has routinely refused to consider nominees for all sorts of high offices. Indeed, early on the Democrats routinely refused to give hearings to qualified Republican nominees for the narrowest of political reasons.

There can be an endless debate as to how the Senate ought to behave, but one of the tragic legacies of the Bork confirmation hearings is a wall of distrust has killed all forms of civility between the parties. The Republicans know that if they cave today, the Democrats will, if it suits them, not reciprocate tomorrow. Unilateral disarmament on confirmation hearings is not an appealing option for the Republicans. Nor indeed is any other alternative. The stakes in this latest partisan tussle are high, and the one clear loser is the public at large as our public institutions continue to deteriorate. 

*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.

Antonin Scalia, A Most Memorable Friend

Richard Epstein*

Richard Epstein

Richard Epstein

The sudden death of Justice Antonin Scalia has elicited many tributes about his achievements. It has also sparked extensive reviews of his judicial body of work—and raised some questions about how filling his spot will affect the 2016 presidential election and the future direction of the Supreme Court. Like many others, I shall have more to say about these weighty issues going forward. But for now, I’d like to write about some of my personal interactions with Justice Scalia prior to his appointment to the Court in 1986.

Scalia graduated in the exceptional Harvard Law School class of 1960 along with the late David Currie, for many years my colleague at University of Chicago Law School. Currie helped arrange for Scalia to interview for a potential faculty position at the University of Chicago in early 1977. By that point, the election of Jimmy Carter as President had ended Scalia’s term as head of the Department of Justice’s Office of Legal Counsel, to which Gerald Ford had appointed him in August 1974.

When Scalia appeared for his Chicago job talk, he cut a large figure. The topic of the session was executive privilege vis-à-vis the Congress, an issue on which Scalia had sparred with Congress repeatedly as head of OLC. For Scalia, there was no middle ground on this question. He was a passionate and articulate defender of executive privilege, and noted, correctly in my view, that this was an issue that was not defined by party, but by role. Repeatedly, he stressed that every president of both parties had taken this view, which he thought that the constitutional system of separation of powers required.

Needless to say, he got the job, after which he made his views on that subject, and indeed every other, clear around the law school. Most striking of all, he disdained the hedges, doubts, and qualifications that are the common fare of academic debates. His most powerful article written while a member of the University of Chicago Law School faculty was the lengthy “Vermont Yankee: The APA, The D.C. Circuit, and the Supreme Court.” In it he chastised the Circuit Court of the District of Columbia for flouting both the specific commands of the Administrative Procedure Act, and a long list of Supreme Court precedents, thereby winning the adulation of large segments of the professoriate. His own administrative law decisions, including Whitman v. American Trucking Associations (2001), flow from his by-the-book attitude: “Congress, we have held, does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.”

It was clear, moreover, as the 1980 presidential campaign rolled into high gear, that Scalia thought of his academic career only as a way station along the path to a political appointment or judicial nomination. During the fall of 1980, Scalia came into my office to announce that it was time for conservatives like us to get off the sidelines and stand four-square behind Ronald Reagan, which he surely did. He did not become Solicitor General as he had hoped. But he eventually received an offer to sit on the Seventh Circuit Court of Appeals, which he turned down. Shortly thereafter, he was offered a position on the Court of Appeals for the District of Columbia, which gave him what he wanted: a direct line into the vast reservoir of administrative law cases that were concentrated in Washington and proximity to the Reagan White House, which would have the opportunity to nominate at least one Supreme Court justice.

While Scalia was on the D.C. Circuit, Policy Review published the cover story, “Beyond the Burger Court: Four Supreme Court Candidates Who Could Lead a Judicial Counterrevolution” in the spring of 1984. That list included Scalia, Robert Bork, William Ball, a staunch defender of religious liberty, and myself.

At the time, there was more than one counterrevolution in conservative jurisprudence afoot. On the one hand, all of us were unhappy with much of the then-current Supreme Court jurisprudence. On the other hand, we had radically different views about what to do about it. Scalia and Bork rightly opposed the freewheeling attitudes of the Warren Court. Many of these slipped over into the Burger Court after 1969, whose agenda in its early years was every bit as interventionist as that of the Warren Court. In 1970, for example, the Supreme Court had decided Goldberg v. Kelly, which for the first time imposed, mistakenly in my view, extensive procedural due process protections before terminating welfare privileges. Then, in 1973, the court unwisely abolished criminal statutes prohibiting abortions in the United States in Roe v. Wade.

Scalia, Bork, and I regarded these decisions as incorrect. But my reasoning was quite different from theirs. For Bork and Scalia, the watchword was judicial restraint. They believed that the Court should not embroil itself in political disputes unless there was a powerful and explicit textual warrant that supported an intervention. The most villainous Supreme Court decision of all, they believed, was Lochner v. New York (1905), which struck down a maximum hour law of ten hours per day and 60 hours per week. They saw it as representing the usurpation of power by an unwise court that had constituted itself as a “super legislature” that had the powers of both Congress and the states.

I, meanwhile, have never thought that the Constitution explicitly mandates judicial restraint. Rather, the document contains a set of terse but broad procedural and substantive guarantees that should be given their ordinary meaning as of the time, subject to the usual rules of constitutional interpretation on such implied matters as the police power, dealing with the power of the state to regulate for the health, safety, general welfare, and morals of the community. That approach yields the same negative judgments of Goldberg and Roe that Scalia had long championed. But it requires, as David Bernstein has clearly shown, a very different view on Lochner, where New York’s effort to suppress bakery competition does not fall within the ambit of any acceptable police power justifications.

The difference between my views and Scalia became visible at a debate that took place at a conference run by the Cato Institute on economic liberty in 1984. Scalia was the keynote speaker at that event, and I was listed as the first speaker on the next panel. Having no prepared remarks, I took the occasion to offer my own impromptu refutation of Scalia’s view that any embrace of economic liberties in jurisprudence was the equivalent of jumping from the frying pan into the fire. Both Scalia and I published our views thereafter in the January 1985 issue of Regulation Magazine, his under the title of “On the Merits of the Frying Pan,” and mine under the title of “The Active Virtues,” a conscious play on the “passive virtues” that had been defended in 1960 byAlexander Bickel in his Supreme Court Foreword to the Harvard Law Review.

Ultimately, the difference between us concerned the error rate of judicial interventions. Scalia well knew that there were legislative mistakes on the books, but feared that the courts would only make matters worse by intervening. I took the position that intervention was not only possible but desirable on constitutional grounds, so long as the Court did not stray beyond its textual mandate, which contained the broad takings clause—“nor shall private property be taken for public use, without just compensation.” Owing to the lax level of interpretation that had sanctioned the major innovations of the New Deal, the entire statute book was open for attack, so much so that my book Takings: Private Property and the Power of Eminent Domain advanced the bold argument that the entire meddlesome corpus of New Deal legislation was unconstitutional because of its interference with private property relations. That conclusion could not have been more at odds with Scalia’s jurisprudence, which did not give a central place to the protection of competition or my wholesale attack on legal monopolies. Indeed, at one event at Chicago, he described my views as “bizarre,” which to many people they are.

Ironically, however, my views did attract the attention of then–Attorney General Edward Meese, who was curious about how they applied to the scope of federal power under the Commerce Clause. He invited me to speak on these issues at a conference he set up at the Department of Justice.  The issue had long vexed me. In examining the sources, I became more convinced than ever that the Supreme Court’s decisions in NLRB v. Jones & Laughlin (dealing with labor) and Wickard v. Filburn (dealing with agriculture) expanded the commerce power beyond its earlier limitations to cross-border transactions, and were borne of the same desire to legitimate the cartelization of commerce of the New Deal state.

At the luncheon following the DOJ talk, I sat at a table with Ed Meese, Robert Bork, and Antonin Scalia. The conversation quickly turned to the judicial role in commerce power cases, and elsewhere in the Constitution. Scalia took a strong line in favor of judicial restraint, which thus led to his acceptance of the 1937 settlement on the scope of the commerce power. Bork, as was his wont, pushed hard and wondered whether the difficulties with political faction required a more aggressive stance to curb federal power. Just as the discussion got more intense, an aide came up to Meese and in a stage whisper announced that the President urgently wanted him to go to the White House. Meese promptly left the table, and Scalia’s nomination to the Supreme Court was announced shortly thereafter. Who knows what tipped the balance between the only two leading contenders for the first nomination, or just what would have happened if both Scalia and Bork, who was later “borked,” had been on the Supreme Court together. But history often turns on strange coincidences.

*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.

Filtering the Clean Water Act

Richard Epstein*

Richard Epstein

Richard Epstein

On August 27, the Environmental Protection Agency and the Army Corps of Engineers suffered a rare judicial setback. On that date, District Judge Ralph Erickson of North Dakota issued a preliminary injunction that blocked the enforcement of the joint “Clean Water Rule: Definition of Waters of the United States,” which was supposed to go into effect the next day. This decision limits the power of the EPA under the Clean Water Act to expand its jurisdiction by fanciful readings of the statutory phrase “waters of the United States,” defined further as “navigable waters.”

Passed in 1972, the CWA sought to “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.” Once these waters are identified, they are subject to extensive regulation, most notably under Section 404 of the CWA, which requires all private parties and local governments to obtain permits before they can engage in any activity that has some impact upon these navigable waters. Obtaining these permits is never easy, both for private and public parties.

Oftentimes county and local governments, which do not have the luxury of inaction, find themselves in an awkward position where their own routine maintenance work to clean out waste and debris from ditches can be delayed by permitting requirements. The result is that they can easily find themselves in a double bind. Act, and there are serious penalties to pay. Don’t act, and there is flooding and potential liability for harms attributable to their neglect of basic duties.

Any decision by the EPA and the Corps to expand the scope of their activities will, as the American Farm Bureau points out in painful detail, impose onerous permit requirements on literally thousands of small ditches, often on a case-by-case basis. The same concerns are raised by the expanded definition of what counts as a tributary of a river, or in some instances a tributary of a tributary. None of these definitional anxieties are eased by the constant EPA refrain that its object is to “clarify and simplify implementation of the Act,” with bright line rules no less. In reality, the new rule is replete with areas in which case-by-case determinations need to be made on whether, for example, low-lying farm areas are covered by the CWA.

To see how far the current disputes have moved from the 1972 baseline, it is instructive to go back to some basics. The key statutory definition under the CWA is keyed to “navigable waters,” which in turn are defined as “the waters of the United States, including the territorial seas.” The CWA then makes it unlawful for any person to discharge any pollutant, broadly defined to include rock, sand, and dirt, into these navigable waters. The reference to navigation and the territorial seas makes it clear that the reach of the statute is limited to discharges into large bodies of water, where navigation is possible, if not just by steam ships then at least by canoes.

For many years, the definition of the waters of the United States received that traditional meaning. For major bodies, it makes sense to require a permit before discharging refuse or waste into a river, as lawsuits after the fact are a poor substitute for avoiding pollution in the first place. Permits that limit planned discharges are an effective way to organize pollution control.

For many years, the traditional definition of navigable waters held, but soon came under judicial attack that led to its total transformation. In its 1975 decision in Natural Resources Defense Council v. Callaway a federal district court issued a one page opinion that simply declared that Congress by using the phrase “‘the waters of the United States, including the territorial seas,’ asserted federal jurisdiction over the nation’s waters to the maximum extent permissible under the Commerce Clause of the Constitution. Accordingly, as used in the Water Act, the term is not limited to the traditional tests of navigability.”

At this point a court order held the CWA hostage to the vast expansion of commerce power inaugurated by the New Deal that covered much more than interstate transportation and communication. Now, all productive activity within the United States, including agriculture, mining, and manufacturing fell under federal power. But Callaway offered no explanation as to why that jurisprudence has to be crammed into a statutory definition that works its way back to the 1899 Rivers and Harbors Act, passed when federal commerce power jurisdiction was far more limited.

Nonetheless, this one judicial decision started a massive expansion of the scope of the CWA, as the Army Corps speedily went about making sure that anything that was water related was in fact subject to the permitting process of the CWA. When the stoked up version of the regulations reached the Supreme Court in its 1985 decision in United States v. Riverside Bayview Homes, the new definition of navigable waters included all wetlands, which were in turn “those areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions.”

The regulation was unanimously upheld in a strongly statist opinion by Justice White. He first concluded that there was no need to give a narrow definition to the waters of the United States to avoid a potential problem that the government action might take private property without just compensation, and he then further concluded that it was an “easy” decision to conclude that the Corps had acted well within its regulatory powers.

Spurred on by that decision, the Corps continued to expand its jurisdiction. The only modest setback along the way was in the 2001 Supreme Court decision in Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers, where the Court balked at letting the Corps impose its “migratory bird rule,” by which the Corps sought to control intrastate waters “which are or would be used as habitat” by migratory birds.

But that one victory did not slow down the rest of the Corps operations. The massive nature of this new regulation is made plain in the introductory paragraph of Justice Antonin Scalia’s 2006 plurality opinion in Rapanos v. United States:

In April 1989, petitioner John A. Rapanos backfilled wetlands on a parcel of land in Michigan that he owned and sought to develop. This parcel included 54 acres of land with sometimes-saturated soil conditions. The nearest body of navigable water was 11 to 20 miles away. Regulators had informed Mr. Rapanos that his saturated fields were “waters of the United States,” that could not be filled without a permit. Twelve years of criminal and civil litigation ensued.

Justice Scalia was right to think that the case itself represented a massive and unwarranted expansion of government power under the CWA. But his opinion only carried four votes. Four dissenters led by Justices Breyer and Stevens took the position that Congress had indeed exercised its maximal powers of the waters of the United States so that the entire matter was best left in administrative hands. Thus, as is often the case, the decisive vote was cast by Justice Kennedy who sought to split the difference by deciding the proper definition required that “to constitute ‘navigable waters’ under the Act, a water or wetland must possess a ‘significant nexus to waters that are or were navigable in fact or that could reasonably be so made.”

Justice Kennedy’s wobbly position duly became the applicable standard. But just what does it mean? Justice Kennedy himself did not know, so he punted the entire matter back to the lower courts to figure out exactly what his “significant nexus” test meant. It does not take the benefit of hindsight to realize the fatal mistake in that decision. Jurisdictional rules have to be clear, and the substantial nexus test is a pure matter of degree. That test might have had some bite if Justice Kennedy said that the Corps did not come close to meeting the standard in Rapanos. But his remand signals the exact opposite conclusion, that significant in law could be turn out to be rather puny in practice.

Note that in claiming permit power, the Corps did not make any claim that Rapanos’s activities actually had any perceptible negative effect, real or anticipated, on the navigable waters of the United States. What the permitting process therefore did was to put the burden on Rapanos to try to prove the negative in a setting in which there is at most a de minimis likelihood that filling in dirt could result in damage to navigable waters located long distances away. At this point, the systematic mistake of a CWA on steroids is that it alters for the worse the standard common law rule that in private disputes an injunction against certain activities will be issued only on a showing of actual or imminent harm, at which point the activity is stopped until the situation is corrected. There is little unnecessary wastage under this rule, but no real loss in environmental protection.

Unfortunately, after Rapanos, the permit process was quickly untethered from any actual pollution. Now permits could turn on how an agency, as Justice Scalia notes, views the “economics,” “aesthetics,” or “recreation” of a proposal, and “in general, the needs and welfare of the people.” These standards are so fluid that virtually any result is consistent with them, and Kennedy’s mysterious requirement of some significant nexus does little in practice to hem in that discretion.

The great vice of the CWA permit system is its overkill: these exhaustive requirements are imposed in countless small cases where there is no risk of any harm. The result is a huge addition to administrative costs, and a delay in various projects. Nonetheless, it is this mindset that the EPA and the Corps seek to use to expand their power, without so much as offering a word of explanation as to just how much benefit can be obtained from this massive investment of private and public funds in the permitting system.

In light of the long history of deference to administrative agencies, it was somewhat of a surprise that Judge Erickson decided to put some teeth back into the significant nexus test. But in this instance, Erickson had enough ammunition to support the conclusion that the expanded definitions could not achieve their stated purpose, and that the rule therefore should be struck down as “arbitrary and capricious,” a tough standard under current administrative law. He took especial umbrage at the proposed rules that targeted “intermittent and remote wetlands” without showing their nexus to navigable waters of the United States, and further challenged a rule under which waters that are located within a 100-year floodplain or “within 4,000 feet of the high tide line or ordinary high water mark of a traditional navigable water, interstate water, the territorial seas, impoundment, or covered tributary” will require a “case-specific determination of a significant nexus.” So much for those clear and objective EPA standards.

The great tragedy of this case is that the litigation battles would never have taken place if the basic constitutional and statutory framework had not been twisted beyond recognition by earlier decisions. But under current law, litigating regulations like the CWA definitions is an exercise in the theater of the absurd. Let us hope that a modicum of common sense remains so that the EPA and Corps are sent back to craft a rule that makes economic and environmental sense.

*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.

The Folly of "Fair" Housing

Richard Epstein*

Richard Epstein

Richard Epstein

This past week, the Department of Housing and Urban Development (HUD) issued a long and convoluted final rule, entitled “Affirmatively Furthering Fair Housing” (Final Rule). This rule sets out the new terms and conditions which all local governments will be required to meet if they receive federal funds to advance their local housing programs.

These obligations are not made out of whole cloth, but were explicitly set out in the Fair Housing Act of 1968 (FHA), which has two separate parts. The first is a general command prohibiting all private parties from “discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions because of race, color, religion, sex, familial status, national origin, or handicap.”

The second, which applies to government agencies that receive public funds, imposes the additional obligation that they take proactive steps (which the new rule rebrands as “meaningful actions”) to eliminate “historic patterns of segregation, achieve truly balanced and integrated living patterns, promote fair housing choice, and foster inclusive communities that are free from discrimination.”

The tedious Final Rule, which has been hailed as “historic and overdue,” is an intellectual shipwreck. Its empty and vacuous commands are incapable of rational implementation. Yet notwithstanding HUD’s pious denials, the department is sure to continue its history of contentious litigation brought to chastise and correct local governments whose actions have not met its standard. One inherent difficulty in both the previous and current versions of the Final Rule is that its objectives are often in deep conflict with one anther.

HUD gives backhanded recognition to this point when it notes: “The Fair Housing Act does not prohibit individuals from choosing where they wish to live, but it does prohibit policies and actions by covered entities and individuals that deny choice or access to housing or opportunity through the segregation of persons protected by the Fair Housing Act.” But it does not grasp the magnitude of this concession. It turns out, of course, that most individuals do not wish to live in communities that meet HUD’s sterile definitions of "truly balanced and integrated communities.” They often prefer to live with individuals with whom they share common value in neighborhoods that offer the social support and companionship that they so clearly want.

It is not that everyone wants to live in racially homogenous communities. Quite the opposite. Edward Glaeser and Jacob Vigdor offer substantial evidence that racial separation has declined over the past 50 years, largely if not wholly apart from HUD’s affirmative action interventions. HUD offers no evidence of the potency of its affirmative action program in its Final Rule. But so long as some preferences for living with like individuals persist, there is little doubt that people will tend to cluster in communities with people of the same race, ethnicity or economic class, which tends to facilitate the kinds of interactions that they want. It is still important to recall Thomas Schelling’s seminal 1969 study, “Models of Segregation,” which shows how extensive racial separation can take place even when most people of both racial groups prefer to live in neighborhoods which are integrated, but in which they prefer to constitute a majority.

HUD is willfully blind to these complications. No matter how many terminological changes HUD makes in its report, it does not deal candidly with the serious risk that voluntary choices by ordinary individuals will undo the scripted program that HUD wants to impose on neighborhoods and communities. Indeed, even if by some magic stroke, the construction of new projects could result in “truly balanced and integrated living patterns” at time one, it is highly unlikely that those patterns will persist as individual choices will continue to undermine HUD’s desired end-state regimes.

The point here is an old one in political theory. In his famous book Anarchy, State, and Utopia, libertarian philosopher Robert Nozick pointed out that “patterned principles,” of the sort that HUD wants to impose, cannot survive in a world where individuals are entitled to acquire and exchange property with each other for mutual advantage. The logic of his historical theory of justice is that each voluntary exchange produces gains for the parties to it, and then sets the stage for further transactions with the same effect. The net result is a set of unpredictable outcomes whose process helps assure that the results will be socially desirable.

In similar fashion, Friedrich Hayek has long warned of the fatal conceit of central planning, which stems from the simple observation that government edicts are only the first step in a complex interactive process. When, as with HUD, these edicts work at cross purposes with the desires of local communities and their individual residents, the grand plan will surely be subverted by the responsive actions taken everywhere down the line. The HUD Final Rule concludes that its diktats and datasets will provide local communities the needed aid in formulating their new plans. But the guidelines are so squishy that HUD could favor local governments it likes while making life difficult for those that it does not. Nothing in the report indicates what safeguards if any will be put in place to prevent partisan sentiments from taking hold.

One way in which it is possible to gauge the inherent difficulty is to look at some past litigation that HUD has initiated from its grantees. One case of special note involves the prolonged litigation in New York State in United States ex rel. Antidiscrimination Center v. Westchester County, which settled in 2009. Over a six-year period, Westchester had received about $52 million in federal funds, which were subject to these same basic statutory obligations.

A private community group challenged Westchester’s plan under the federal False Claims Act for not meeting its HUD obligations. In a bruising opinion by Judge Cote, the County was called out for not meeting those obligations because it chose to construct more affordable housing, even though its choice of housing projects were said to increase segregation. The ultimate settlement required the County to spend $52 million of its own money to build affordable housing in white municipalities, and to pay millions more in fees to the relator and the attorneys who brought the case.

Exactly which municipalities within the county had to bear the burden was not settled by Judge Cote’s decision, which only created yet another round of divisive negotiations that to this day have not been brought to an amicable resolution. Yet the only comment that the lengthy HUD Final Rule makes about that and similar unfortunate litigation is that “courts have set forth how the section applies to specific policies and practices of HUD program participants”—a whitewash if there were ever one.

The sorry episode should come as no surprise to anyone who has followed the 40-year saga that commenced with the New Jersey Supreme Court’s decision in Mount Laurel in 1975. In that case, the Southern Burlington County N.A.A.C.P. sued the Township of Mount Laurel, not for racial discrimination, but for its failure to provide a fair share of housing for low and moderate income families in the state. Once again, the utter vagueness of the standard, coupled with the fierce resistance of local governments, stymied the program for years.

The fundamental mistake in Mount Laurel was to leave intact the local zoning laws that kept out low income residents, and instead force the township to come up with positive programs to create exceptions to its basic zoning wall—which it did, after a fashion, by rear guard actions that included designating for the new housing a wetland located behind an industrial park far removed from water and sewer connections. Ultimately, when affordable housing was built in Mount Laurel, few members of minority groups wanted to stray so far from their home base. Local widows occupied a large number of the units.

The sad truth is that this unbroken level of failure will be taken to a new level by HUD’s Final Rule. Yet HUD is unable to explain how the huge conditions attached to its grants will build a single unit of new housing for anyone anywhere. What is needed is a complete reorientation in approach that starts from the proposition that it is far easier and more sensible to remove barriers to entry than it is to subsidize forced entry by judicial decree once those local barriers are allowed to remain in place. Indeed, the only winners out of HUD’s new initiative are government administrators, lawyers, and pro-housing activist groups that salivate at the prospect of hauling the next Westchester County into court.

The Supreme Court recently had the opportunity to clip HUD’s wings in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc., an opportunity not taken when the liberal majority of the court, which by a narrow five-to-four vote, unwisely upheld the ability of HUD to use a disparate impact standard. This standard is the source of much mischief, since it can be held that discrimination was “because of race, color, religion, sex, familial status, or national origin,” even in the absence of any intention to discriminate on any of these grounds. HUD’s Final Rule cites this case for the bland proposition that “the Supreme Court also acknowledged “the Fair Housing Act's continuing role in moving the Nation toward a more integrated society.”

The heavy level of HUD oversight made it highly unlikely that Texas engaged in any form of discrimination whatsoever. Indeed, even the five-member liberal majority recognized that HUD’s fixation could lead to serious problems:

It would be paradoxical to construe the FHA to impose onerous costs on actors who encourage revitalizing dilapidated housing in our Nation’s cities merely because some other priority might seem preferable. Entrepreneurs must be given latitude to consider market factors. Zoning officials, moreover, must often make decisions based on a mix of factors, both objective (such as cost and traffic patterns) and, at least to some extent, subjective (such as preserving historic architecture).

The majority then remanded the case for further consideration, which in all likelihood will lead to less invasive oversight of the Texas agency. But in an odd way, HUD’s aggressive call to arms in its new Final Rule pays scant attention to any of the Supreme Court’s cautionary words. Indeed, HUD’s Final Rule is conclusive evidence that it is blissfully unaware of the trade-offs that stand in the path of sensible housing reform. There is little now that can be done to invalidate the entire Final Rule on facial grounds. But a self-help remedy remains in place. Every state county or municipality organization should think long and hard before taking a dime in HUD money.

*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.

Raisin' a Raw Deal

Richard Epstein*

Richard Epstein

Richard Epstein

Thanks to the Supreme Court’s decisions on Obamacare and same-sex marriage, public attention has been unfortunately drawn away from Horne v. Department of Agriculture, which deals with the Agricultural Marketing Agreement Act of 1937, under which the government stabilizes crop prices, like those of raisins.

Under the law, a Raisin Administrative Committee, consisting mainly of raisin growers appointed by the Secretary of Agriculture, requires each farmer to give, free of charge, a certain fraction of their crop to the United States government. Once received, the government can sell them in noncompetitive markets, give them away, or dispose of them “by any means consistent with the purpose of the program”—which means keeping prices high by limiting the supply of raisins for sale and destroying those that cannot be otherwise safely disposed. To complete the circle, net profits from the program, less government expenses, are distributed back to the raisin growers.

Stripped of New Deal newspeak, the marketing program institutes a textbook government-run cartel. Like monopolies, cartels raise prices, reduce output, and undermine social welfare, which would normally make them targets under the antitrust laws. Indeed, cartels are even more dangerous than a single-firm monopolist. The monopolist chooses efficient means of production to maximize his profits, even though, socially, the results are inferior to those generated by a competitive market. But a cartel cannot survive unless it offers some accommodation to inefficient producers that would, if left uncompensated, sell their commodities below the cartel price. Hence, like OPEC, the Department of Agriculture lets a central committee set quantity restrictions to keep all players happy. Franklin Roosevelt loved cartels for the votes they brought in, just as he opposed monopolies because they made ideal targets for his populist rhetoric.

The New Deal’s defense of cartels in agriculture exerted a transformative effect on American constitutional law. These cartels could only work on a nation-wide basis, so the Roosevelt administration persuaded the Supreme Court that the Commerce Clause of the Constitution was not limited to cross-border transactions between states, but reached first intrastate sales and, ultimately, the production and consumption of crops on individual farms as enshrined in Wickard v. Filburn.

 For the next seventy-plus years, these cartels worked with clock-like precision, until the Hornes, farmers in California, challenged their operation, first in 20022003 when they refused to turn over 47 percent of their raisin crop over to the government and then again in 20032004 when they refused to turn over 30 percent. The government fined the Hornes $480,000 for the value of the raisins, to which they tacked on an additional penalty of $200,000.

The fine and the penalty were challenged by the Hornes on the ground that the government seizure of their raisins constituted a taking under the Fifth Amendment, which states that “private property [shall not] be taken for public use, without just compensation.”

The most amazing part of this saga is not that the Hornes won, but that no one involved in the litigation used the word “cartel.” The Hornes had to avoid the term whose use would undermine their claim. A cartel arrangement is not just a naked taking. Its offset turns out to be the higher prices that the Hornes and other cartel members can fetch for their remaining stock of raisins in the open market, which should count as a form of in-kind compensation under the Takings Clause. Under traditional antitrust lingo, they are cheaters who work under the cartel umbrella. All power to them!

Nonetheless, the government did not wish to make an open admission that the Marketing Act fortifies cartels, lest they undermine the stabilization myth that helps shield these cartels from public disapproval. And the Supreme Court, which has already blessed these grotesque arrangements, could ill-afford to undermine the legitimacy of its own earlier rulings, including Wickard, which props up the modern welfare state, including Obamacare.

Right off the bat, Chief Justice Roberts’ entire takings discussion has a surreal quality because it ignores the real victims of this program, the public at large. The Court instead focuses only on the Hornes’ claim that the government seized their raisins, which is of course a paradigmatic taking that under current law is unconstitutional.

In its opening salvo, the government claimed that personal property, such as raisins, receive less constitutional protection than real estate. The Chief Justice rightly slapped that claim down, noting that the comprehensive phrase ”private property” includes all forms of wealth in private hands, even patents. The constitutional text offers no warrant for dividing the field into first and second-class forms of property. Once raisins received full protection, the government could not justify its marketing program by saying that the residual cash that came back at the end of each annual cycle removed any constitutional taint from the program. That residual cash from the program cannot possibly meet the standard of full and fair market value (that is, the measure of just compensation), and the Chief Justice rightly rejected Justice Sotomayor’s odd dissent that there is no taking at the front end because some compensation is offered at the end of the day.

From that point on, Justice Roberts entered choppy waters. He is no judicial revolutionary, and thus throughout his opinion he tries to make peace with the tattered constitutional jurisprudence that has long embraced a distinction between physical and regulatory takings. The latter restricts the ability of a property owner to use or sell his property, but leaves him undisturbed in the possession of his land. The Hornes are, of course, on the right side of that distinction given that the government tried to physically seize their raisins.

Yet Justice Roberts was unable to defend the line between physical and regulatory takings. Exhibit A was the Court’s 1980 decision PruneYard Shopping Center v. Robins, which, waving a free speech banner, held that there was no taking of a shopping center when its owner was forced to admit protestors on his property against their will. The right way to treat this case is as a partial physical taking of the property once the owner lost his right to exclude others from his property.

But Justice Roberts wrongly reimagined this deliberate entrance as a regulatory taking by equating partial use by others with a restriction on how one can use one’s own property. He then compounded the error by falsely claiming that the owner’s use of the shopping center was “largely unimpaired,” without ever explaining why PruneYard filed suit in the first place. Hence, he concluded the ersatz regulation did not go “too far.”

That last unfortunate phrase was lifted from Justice Holmes’ famous opinion in Pennsylvania Coal v. Mahon and has bedeviled the field ever since. With physical takings, the rule is that the government pays for whatever it takes, be it large or small. With regulatory takings, the Holmes distinction says that the property owner cannot claim that a taking occurred as a result of regulation so long as he retains some residual value. Yet Justice Roberts never explains why two forms of government action, both susceptible to potential massive abuse, should receive such different constitutional responses.

The point is painfully evident in agricultural markets, because the government could achieve most of its objectives by restricting through regulation the total amount of raisins each farmer could grow on his own land. The unified theory that the Chief Justice recognizes is needed for land and personal property now gives way to the indefensible intellectual distinction between physical and regulatory takings.

Once that distinction is buried, ironically, it turns out that the Hornes are the wrong plaintiffs in this case. The compensation for their physical taking consists not solely in the residual cash payout they receive. It is also the higher price that they can charge for their retained crops that makes them whole: if it did not, the cartel would collapse tomorrow. Accordingly, the proper challengers to the marketing orders are the consumers who should have a typical antitrust–type claim for collusion against the raisin market, which ironically they cannot bring under the misguided 1943 Supreme Court decision in Parker v. Brown that insulates government-sponsored cartels from the antitrust law.

Roberts’ reticence to tackle fundamental issues was equally evident in his unhappy resolution of the third question of whether the government could require a surrender of some portion of a farmer’s crops in order to sell the rest in interstate commerce. His answer—it cannot—is correct, but his analysis is not.

The doctrine of unconstitutional conditions has long made it impossible for the government to condition the granting of one right on the willingness of an individual to surrender a second, and then call the entire transaction “voluntary.” In many cases, this government “choice” given to private parties is tantamount to the choice that the robber gives to his victim: “your money or your life.” The government therefore must justify any condition it imposes by showing that it relates to the protection of a legitimate public interest. By way of example, the government can condition the sale of goods into interstate commerce so that they do not explode on public roads. But it cannot condition them on someone’s agreeing to waive their Fourth Amendment rights against search and seizure, or on payment of tribute to competitors anxious to preserve their monopoly position.

Unfortunately, a wretched 1984 Supreme Court decision, Ruckelshaus v. Monsanto, allowed the government to condition the licensing of a dangerous fungicide for sale on the willingness of its owner to share trade secrets, a constitutionally protected form of property, with his competitors. Justice Harry Blackmun blithely claimed that any firm that rejected the condition could always sell goods in foreign markets. Chief Justice Roberts, however, refused to overrule Monsanto with the glib remark that “raisins are not dangerous pesticides; they are a healthy snack,” without delving into whether Monsanto was wrong, which it was given that its transfer of trade secrets was no more warranted for dangerous products than safe ones

In the end, Horne counts as a partial victory over the government. But its long-term value is undercut by the confused tangle of legal doctrine that Roberts decision left in place. To be sure, the Chief Justice conveniently ignored the offsetting benefits from the marketing, and struck down the fines and penalties in the individual case. It now remains to be seen whether every raisin grower is free to defy the government mandate, or whether the government can switch to acreage restrictions or other devices to achieve the same end.

The public always pays a high price for muddled law. It leads to uncertain outcomes in future cases. And worse, it results in the perpetuation of indefensible constitutional doctrines. The line between physical and regulatory takings is essential to propping up the most destructive government initiatives, both state and federal. And the use of exactions and other unconstitutional conditions leads to massive abuses by government regulators. Chief Justice Roberts had the chance to go beyond incrementalism in the face of massive doctrinal disarray. We are all the poorer that he shunted off to one side the larger issues about New Deal programs that Horne should have brought front and center. 

*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.

Hard Questions on Same-Sex Marriage

Richard Epstein*

Richard Epstein

Richard Epstein

It doesn’t take a weatherman to tell which way public opinion blows. The huge uptick of support for same-sex marriage has beendescribed as swift and broad, to which we can add, in all likelihood, lasting.

In my view, every time the defenders of the traditional view of marriage speak in public on behalf of a ban, they lose the support of neutral third parties. The problem is that they are trying to tell other people how they should lead their own lives, and are using the power of the state to do it. Their justifications are far from compelling. They talk about the need for procreation in marriage, though many straight married couples use contraceptives. They talk about the risks to parenting, when there is no evidence that suggests that gay and lesbian couples are worse parents, especially when compared to dysfunctional couples in traditional marriages or single parents of limited financial means. Their arguments against same-sex marriage thus fall flat to modern ears, so that the basic support for same-sex marriage only grows.

The transformation of public opinion dovetails nicely with the recent Supreme Court decision in Obergefell v. Hodges, in which Justice Anthony Kennedy’s Olympian opinion echoed the social tidal wave in favor of same-sex marriage. Kennedy did not bother to articulate what standard of scrutiny, high or low, controls the case. In his mind, the case for an inclusive definition of marriage is so strong that the ban on same-sex marriage cannot survive under any standard of review. Analytically, however, he provided only weak answers to an even more fundamental question: What judgments should be left to democratic processes and what judgments should be insulated against majoritarian politics?

This problem has special urgency here because of the unbroken historical record that defines marriage as a union between a man and a woman. Justinian’s Institutes of the sixth century AD, for example, apply the rules of marriage only to human beings, but treat them as part of “that law which nature teaches to all animals.” That code of law states: “Marriage, or matrimony, is a binding together of a man and woman to live in an indivisible union.”

The defense of the traditional understanding of marriage that was raised forcefully by Judge Jeffrey Sutton in the Sixth Circuit(and picked up by Chief Justice John Roberts in his pointed dissent in Obergefell) raises the question of how can the Court read the Constitution to invalidate the universal definition of marriage as between a man and a woman? Tradition is a legitimate ground on which to defend social legislation elsewhere, so why not here?

The best way to go is to try to understand why the traditional definition of marriage was universal. The defenders of traditional marriage claim that the purpose of marriage is procreation, which is impossible with same-sex couples. Kennedy denies that there is any good fit between marriage and procreation: After all, many men and women wish to marry when they do not or cannot have children, so the state could never condition a marriage license on couple’s commitment to have children.

Nonetheless, this response underestimates the role of procreation in defining marriage. Historically, procreation was widely regarded as the essential purpose of marriage. Indeed, the words in Genesis 1:28, “be fruitful and multiply and fill the earth and subdue it,” read as much like a command as a blessing. Within this framework, same-sex relationships are different: They can never add offspring to society, but they can reduce them by taking both men and women out of the reproductive market, and thus undercut that social imperative. The preservation of society through reproduction is strongly tied to traditional marriage, but not to same-sex marriage. So why condemn the traditional view as arbitrary when it tends to advance a desirable societal end?

Historically, this point found a constitutional home. Even though the traditional “morals” head of the police power is nowhere mentioned, it had long been used to give the state extraordinary leeway in regulating all sorts of sexual relations, as was detailed in Justice Byron White’s now-widely-reviled 1986 opinion in Bowers v. Hardwick, whose historical accuracy remains unquestioned. As late as 1961, all 50 states outlawed all forms of sodomy, even though many bans fell into desuetude. But throughout it all, no one, anywhere, has suggested that it would fall in the power of the state to abolish the traditional institution of marriage altogether. The overall consequences for child rearing would be disastrous.

It is fair to respond, as Kennedy does, that the advocates of same-sex marriage do not wish to ban marriage but to partake in it, so that there is nothing to fear from the decision except the fuzzy sentiments of individuals opposed to the practice. That is a good reason to ask the legislature to change the definition. But it is less clear that it is a good reason to allow courts to preempt the democratic process. On this point, the Kennedy response is to say that there has already been “far more deliberation” than the Sutton opinion acknowledges in every conceivable forum. In Kennedy’s view, the endless discussion has led to an “enhanced understanding” of the issue—namely his—which displaces the vote as a way to resolve the debate. The dignitary interests of these couples is so strong that it is “demeaning to lock same-sex couples” out of marriage.

Yet at no point does he ask whether the criminalization of polygamous marriages under the Supreme Court’s 1878 decision inReynolds v. United States—an uncommonly ugly invocation of the morals head of the police power—should be overturned given how it demeans and punishes polygamous families. His blinkered view of autonomy lets him attack the restriction of marriage to persons of opposite sexes, but not its limitation to two people.

The Scalia dissent scores big points in attacking Kennedy for judicial hubris, by insisting that the whole point of democracy is not just to inform the justices but to let the people decide on the issue. So Kennedy, like everyone else, must explain why a nationally consequential decision on same-sex marriage should be taken out of the democratic process. His answer is that it involves the assertion of a “fundamental right,” a term that he nowhere defines. Thus, when the fundamental rights of persons are violated, “the Constitution,” he writes, “requires redress by the courts, notwithstanding the more general value of democratic decisionmaking.”

At this point, his analysis turns wobbly. Kennedy eagerly talks about the “dignity” of the individual in two-person marriages. And he lauds the Court’s 1967 decision in Loving v. Virginia for striking down the ban of interracial marriage between a man and a woman, on the combined strength of the Due Process and the Equal Protection Clauses of the Fourteenth Amendment. The libertarian foundations of Loving are also evident.

But why stop there when the concept of liberty goes a lot further? In particular, Kennedy never explains why his notions of dignity and autonomy do not require the Supreme Court to revisit its 1878 decision in Reynolds upholding criminal punishment for polygamy, which is still on the books. Nor does he ask whether the dignity of workers could, and should, be used as a reason to strike down the full range of labor regulations on both wages and hours that make it flatly illegal for two individuals to enter into a simple employment contract on mutually agreeable terms.

To his credit, Chief Justice Roberts—no libertarian—sees the connection, and thus uses his condemnation of the 1905 Supreme Court decision, Lochner v. New York, for striking down a maximum hours law, as a cudgel to explain why the Constitution has nothing to say about same-sex marriage. Unfortunately, Roberts lurches too far in the opposite direction. Historically, the case for economic liberties is far stronger than that for same-sex marriage because labor never got entangled with the morals head of the police power. Indeed, much recent scholarship, especially by David Bernstein, shows the dubious special interest, anticompetitive politics that Lochner helped thwart. It would be a lot easier to accept the Kennedy position if he were prepared to embrace a concept of liberty for all by overturning Reynolds and restoring Lochner. But on those areas, inexplicably he flips back to the democratic side, without ever defining the state interest in squashing the operation of competitive labor markets.

It gets worse because in the wake of Obergefell, we have to ask what the next step in the struggle over same-sex marriage will be. By insisting that same-sex marriage is a fundamental right, Kennedy has consciously introduced an equivalence between race and sexual orientation. How far is he prepared to go? In the 1983 case of Bob Jones University v. United States, the Supreme Court upheld an IRS decision to deny tax-exempt status to schools engaging in racial discrimination. The Court acknowledged that it could not outlaw the Church’s practices, which were protected as a free exercise of religion. But the differential tax treatment was fine because “the Government has a fundamental, overriding interest in eradicating racial discrimination in education.”

Can the IRS now deny tax exemption to the Roman Catholic Church on the ground that it rejects, on religious grounds, same-sex marriage? If so, that judicial notion of “fundamental interests” works effortlessly both to expand and contract state power. It can insulate the exercise of some liberties from state control, but allow other liberties to be burdened by differential treatment of other liberties, including those expressly embedded in the Constitution.

The point here is not idle speculation. Here are three data points. In Martinez v. Christian Legal Foundation (2010), a five-to-four majority with Justice Kennedy concurring, held that it was perfectly proper for Hastings Law School, a public institution, to deny the tiny Christian Legal Foundation the full benefit of school facilities largely because of its opposition to same-sex marriage. The government can offer its subsidies to some groups but not to others, and in so doing, force small isolated groups to subsidize powerful gay rights organizations. Religious intolerance best describes that outcome.

Since then, the situation has only gotten worse. Last year there was public outrage at the Supreme Court’s decision in Burwell v. Hobby Lobby, which upheld claims under the Religious Freedom Restoration Act that a closely held company did not have to supply contraceptives to its female employees in a fashion inconsistent with its owners’ religious beliefs. And more recently, claims for religious autonomy have been crushed in state court decisions that have fined individuals who have refused on religious grounds to make wedding cakes for same sex couples. No one seems to be concerned with the autonomy and dignity of those under the state’s thumb. They will have to abandon their chosen profession to honor their religious beliefs. I see no evidence that gay and lesbian rights advocates are prepared to back off of these statist claims.

The hard question is how Justice Kennedy—now the swing vote on all matters “fundamental”—thinks about this issue. Here the evidence is decidedly mixed. To be sure, his opinion in Obergefell talks about the importance of letting religions “teach” the central principles of their faith. But as Justice Thomas’s dissent points out, a religion that is allowed to teach its beliefs may be forced to give up its tax-exempt status if it puts those beliefs into practice, and its adherents can be hounded by the state if they decide to run their personal lives in accordance with their religion. We thus face a serious risk in the aftermath of Obergefell: liberty in gay rights will turn out to be a one-way street. Some liberties will be guaranteed for some people while other liberties will be squashed for others. As I write, the gay rights movement is gearing up to expand the scope of the antidiscrimination laws in housing and labor markets.

No one says that democratic theory is easy to understand. But there is nothing in the Kennedy opinion that offers any assurance that the religious beliefs and practices of the shrinking religious minority who are opposed to same-sex marriage will be respected by the Supreme Court. As a libertarian, I support same-sex marriage. As a libertarian, I fear the totalitarian overtones sounding from the next round of gay rights initiatives.

*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.


The Supreme Court decided, in a 6-3 decision by Chief Justice Roberts, that federal subsidies are available on exchanges set up by the federal government, despite potentially conflicting statutory language. The Chief Justice's decision was joined by Justices Kennedy, Ginsburg, Breyer, Kagan, and Sotomayor. 

The Chief Justice's majority opinion noted: "Petitioners’ arguments about the plain meaning of Section 36B are strong. But while the meaning of the phrase “an Exchange established by the State under [42 U. S. C. §18031]” may seem plain “when viewed in isolation,” such a reading turns out to be “untenable in light of [the statute] as a whole.” Later, the Chief Justice added:

After telling each State to establish an Exchange, Section 18031 provides that all Exchanges “shall make available qualified health plans to qualified individuals.” 42 U. S. C. §18031(d)(2)(A). Section 18032 then defines the term “qualified individual” in part as an individual who “resides in the State that established the Exchange.” §18032(f)(1)(A). And that’s a problem: If we give the phrase “the State that established the Exchange” its most natural meaning, there would be no “qualified individuals” on Federal Exchanges. But the Act clearly contemplates that there will be qualified individuals on every Exchange. Cite as: 576 U. S. ____ (2015) 11 Opinion of the Court. As we just mentioned, the Act requires all Exchanges to “make available qualified health plans to qualified individuals”—something an Exchange could not do if there were no such individuals. §18031(d)(2)(A). And the Act tells the Exchange, in deciding which health plans to offer, to consider “the interests of qualified individuals . . . in the State or States in which such Exchange operates”—again, something the Exchange could not do if qualified individuals did not exist. §18031(e)(1)(B). This problem arises repeatedly throughout the Act. See, e.g., §18031(b)(2) (allowing a State to create “one Exchange . . . for providing . . . services to both qualified individuals and qualified small employers,” rather than creating separate Exchanges for those two groups).1 These provisions suggest that the Act may not always use the phrase “established by the State” in its most natural sense. Thus, the meaning of that phrase may not be as clear as it appears when read out of context.

The Chief Justice's opinion concluded that, "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt."

Justice Scalia's dissent, joined by Justices Thomas and Alito, was blistering. The second most senior Justice wrote: 

"Words no longer have meaning if an Exchange that is not established by a State is “established by the State.” It is hard to come up with a clearer way to limit tax credits to state Exchanges than to use the words “established by the State.” And it is hard to come up with a reason to include the words “by the State” other than the purpose of limiting credits to state Exchanges. “[T]he plain, obvious, and rational meaning of a statute is always to be preferred to any curious, narrow, hidden sense that nothing but the exigency of a hard case and the ingenuity and study of an acute and powerful intellect would discover.” Lynch v. Alworth-Stephens Co., 267 U. S. 364, 370 (1925) (internal quotation marks omitted). Under all the usual rules of interpretation, in short, the Government should lose this case. But normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved."

In perhaps the most memorable line, he expressed frustration as he wrote "Having transformed two major parts of the law, the Court today has turned its attention to a third. The Act that Congress passed makes tax credits available only on an 'Exchange established by the State.' This Court, however, concludes that this limitation would prevent the rest of the Act from working as well as hoped. So it rewrites the law to make tax credits available everywhere. We should start calling this law SCOTUScare." 

The decision marks the second decision in three years to uphold the law from a potentially fatal attack. In 2012, the Supreme Court ruled in NFIB v. Sebelius that the individual mandate was constitutional not under the Commerce Clause of the Constitution, but rather as a tax. 

The Other Commerce Clause

Richard Epstein*

Richard Epstein

Richard Epstein

This past week, by a narrow five-to-four decision, the Supreme Court decided the neglected but important case of Comptroller of the Treasury of Maryland v. Wynn. The question in Wynn was: may Maryland give only a partial tax credit to its citizens on out-of-state income that has been already taxed in the state where it was earned?

A peculiar feature of Maryland law divides its income tax into two components: one state and one county. Like other states, Maryland’s state tax credits the local citizen for the taxes paid elsewhere, so that the citizen only pays tax on the difference if Maryland’s tax rate is greater than the out-of-state rate. But even though Maryland also collects the county tax, it refuses to credit taxes paid elsewhere, thereby imposing a double tax on that portion of the out-of-state income. Justice Samuel Alito, writing for himself and the odd coalition of Chief Justice Roberts, and Justices Kennedy, Breyer and Sotomayor, struck down Maryland’s double taxation because it “is inherently discriminatory and operates as a tariff” on out-of-state income.

Justice Alito held that Maryland’s tax fell under the “negative” or “dormant” commerce clause (DCC). That odd phrase emerges from the convoluted Supreme Court jurisprudence over the proper scope of Congress’s Commerce power: “Congress shall have the power to regulate . . . commerce with foreign nations, among the several states and with the Indian tribes.” In its more familiar role, the Commerce Clause operates as a direct source of Congressional power. The modern New Deal interpretation dates back to National Labor Relations Board v. Jones & Laughlin Steel (1937) and Wickard v. Filburn (1942), both of which in my view stretch the language of the Clause far beyond its natural meaning to allow the United States to regulate all forms of manufacture, agriculture, and mining that takes place within any single state. In contrast, the correct interpretation, widely rejected today, restricts the scope of the clause to interstate transactions, i.e. those that involve two or more states, such as the shipment of goods, the transport of persons across state lines, or interstate communication.

The constitutional underpinnings of the dormant commerce clause are also suspect as a textual matter, because it leaves unexplained why the existence of the federal commerce power, standing alone, is sufficient to block state regulation or taxation on some matters even in the absence of any federal legislation that covers the state’s proposed field of action. In Wynn, Justice Scalia denounced the DCC as “a judicial fraud,” only to announce that he will strike down on DCC grounds only those state laws that explicitly discriminate against out-of-state parties, which the Maryland law does not. Justice Thomas does him one better, taking the view that the DCC should be scrapped.

Justice Kagan, in a strong opinion, attacked the majority on the more limited ground that current DCC doctrine did not require Maryland to abandon double taxation of its citizens’ out-of-state income. Unlike out-of-state residents, Maryland citizens can protect themselves within the political process. She therefore concluded that two people who earn the same amount of income could be required to pay the same amount for receipt of local services, even if one of them earned his income outside the state. The avoidance of double taxation was in her view not a trump that invalidated the Maryland scheme.

Wynn is a challenging case because its four major opinions examine the critical question whether the constitutional desire to forge a national union justifies the judicial creation of a constitutional law that has only shaky textual foundations. I know of no categorical way to answer that question. In this second-best world, much depends not only on the textual foundation of a particular doctrine, but also upon its substantive contribution, if any, to the well-being of the nation.

It is just here that we can see the strong contrast between the affirmative and dormant commerce clause cases. The expansive New Deal interpretation of Congressional power poses a serious threat to the integrity of our federal system. The central constitutional challenge of 1787 was to form a government strong enough to rule, but not so strong as to snuff out the liberties of its citizens. Limiting the affirmative power of the federal government to cross-border transactions had the salutary effect of using federalism to foster a unified competitive common market in which goods made in one state could be sold in another state in direct competition with local goods. The inability of the federal government to regulate the production of goods at its source thus blocked the dangerous creation of nationwide cartels.

The erroneous assertion of federal power in Jones v. Laughlin allowed the federal protection of nationwide unions that have long exerted their debilitating monopoly power, which in turn has let them launch crippling strikes and raise the costs of goods and services above competitive levels. Similarly Wickard v. Filburn sanctioned the organization of nationwide agricultural cartels that to this day shrink farm output and raise prices above competitive levels. Undoing both these decisions could only help restore the economic vigor of our flagging nation. The return to the original understanding facilitates the system of limited government championed by the founders.

In contrast, the DCC frees nationwide competitive forces from state disruption. Justice Scalia is quite correct to note that the case law on the DCC is far from the model of intellectual consistency. But the good news about key DCC clause decisions is that they have largely blocked provincial state rules of taxation and regulation from disrupting the national economy. It is therefore imperative not to focus on the close question raised by the Maryland tax scheme, but to place this case in its broader constitutional framework, by looking first at the really flagrant interferences with a nationwide economy that could luxuriate in the absence of the DCC.

Thus in Baldwin v. Seelig (1935), a unanimous Supreme Court invoked the DCC to strike down New York’s Milk Control Act, which required Vermont milk sellers to receive the same minimum prices for milk paid to New York producers in order to stifle interstate competition. “If New York, in order to promote the economic welfare of her farmers, may guard them against competition with the cheaper prices of Vermont,” the court held, “the door has been opened to rivalries and reprisals that were meant to be averted by subjecting commerce between the states to the power of the nation.”

That sentence was quoted in the important 1949 decision of Hood v. du Mond, where Justice Jackson—who had written Wickard some seven years before—struck down yet another New York dairy regulation that allowed New York’s Commissioner of Agriculture and Markets to deny a permit to Hood to expand his New York facilities to serve the Boston market on the ground that it was “against the public interest” because it tended “to a destructive competition in a market already adequately served.”

The DCC has thus advanced the overall vitality of the United States as an economic union by preventing states from using either overt or covert strategies to undermine cross-border competition. One technique the Supreme Court has used, albeit erratically, to serve this end is the so-called internal consistency test. Justice Scalia ridicules this judicial adoption of the German philosopher Immanuel Kant’s first formulation of the categorical imperative: “Act only according to that maxim whereby you can at the same time will that it should become a universal law without contradiction.” He insists that Kant’s insight bears no connection to “the text or structure” of the Constitution.

Score one for Kant, for Justice Scalia is mistaken on the structural issue, as illustrated by the 1987 case of American Trucking Associations v. Scheiner. Scheiner involved Pennsylvania’s flat axle tax levied on all heavy trucks that used Pennsylvania roads. That fixed figure gave an implicit subsidy to Pennsylvania trucks, which on average used Pennsylvania’s highways five times as often as trucks licensed elsewhere. Justice Stevens, over a Scalia dissent, struck the tax down because it flunked the internal consistency test, which asked what would happen if all other states adopted the same approach, to which the answer was that flat axle taxes would create the same kind of “rivalries and reprisals” that Cardozo identified in Baldwin v. Seelig. In contrast, a truck tax based on miles driven within the state gave no advantage to local trucks, if imposed by all states even at different rates. The Kantian formula has desirable practical implications.

Indeed the dangers of the Scalia position is evident from the earlier taxation case Moorman Manufacturing v. Bair, a 1978 case involving state taxation of firms that do business in multiple states. Virtually all states allocate tax burden by combining three measures: property, payroll, and sales. The Supreme Court, however, let Iowa compute its taxes on just one of these factors—sales within the state. That decision is correct if the DCC only reaches explicit forms of discrimination against out-of-state firms.

Note, however, the risk that this position holds. The use of the uniform three-part test meets the internal consistency standard. There are no competitive distortions if all states combine all three measures in the same proportions, no matter how each sets its combined rates. But once Iowa can deviate from this formula for some short-term revenue advantage, other states could follow suit with ad hoc formulas. Why open the door wide to strategic behavior, in the absence of any offsetting systematic advantage? Any state can reach its revenue target by using the standard tripartite formula. Yet it is manifestly difficult to get all states to agree to that formula voluntarily. Preserving the current equilibrium avoids that difficulty.

At this point, the trade-off seems clear. Justice Scalia and Justice Thomas ignore the enormous systematic advantage that comes from using the DCC to preserve an open common market within the United States. The longstanding use of the DCC should, as I have argued in my book The Classical Liberal Constitution, count as part of our “prescriptive Constitution,” precisely because it advances the cause of economic competition that the broad assumption of a unitary Congressional power frustrates. Justice Scalia has his guns directed at the wrong judicial doctrine. Justice Thomas, to his credit, has long taken just this position on the affirmative commerce power, most notably in his concurrence in the 1995 Supreme Court decision in United States v. Lopez. Thus on taxation matters like those in Wynn, Justice Alito kept the DCC on course by striking down the Maryland tax.

*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.

Schuette v. Coalition to Defend Affirmative Action: The intellectual confusion that surrounds affirmative action today

 Richard Epstein

Schuette v. Coalition to Defend Affirmative Action, which is now before the United States Supreme Court, illustrates all the treacherous crosscurrents in modern equal protection law.  The case involves a challenge to Michigan’s Proposal 2, which, on its face, amends the  Michigan constitution by calling for an everything-blind standard that would effectively end affirmative action programs in the public space.  Its key provision reads:

(1) The University of Michigan, Michigan State University, Wayne State University, and any other public college or university, community college, or school district shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.

The language of this state constitutional provision of course tracks the language found in both Title II and Title VII of the Civil Rights Act of 1964, which deal with public accommodations and employment relations, respectively.  Consequently, the successful challenge in the lower court to this Proposal, at the very least, has to raise eyebrows. It is worth discussing some of the serious historical and analytical issues that this perplexing case raises.

Equal Protection in Principle

 I undertake this task with a certain degree of unhappy trepidation. I agree with neither the majority nor the dissent in the Sixth Circuit, and think that the Supreme Court should make a sharp break from its previous approach to this entire set of constitutional problems.  Let me say something of my views before turning to the particulars in the case.  As I see matters, the key distinction that should govern equal protection law rests on the fundamental distinction between the way in which the state runs its own affairs, and the way in which it legislates how private individuals and firms should be able to run theirs.

The argument behind this position starts by asking what the fundamental conception of the Fourteenth Amendment’s equal protection guarantee requires.  In answering this question, all too often the word “protection” drops out of the equation, so that the provision is treated as though it is a general guarantee of equality in all areas of human life.  But give the term “protection” its proper due, and it becomes clear that the provision, tucked in as it is after the Due Process Clause, is primarily concerned with the standard protections that all persons, whether or not citizens, should receive under the criminal law.  That protection runs in two directions – one towards the accused and the second towards his or her victim.  In the first case, this means that no person can be singled out for special prosecution under standards not applied to others. Second, the law cannot refuse to prosecute some people because it does not wish to extend its protection to particular victims of criminal behavior.  These are no small guarantees in a society rife with the risk of differential application of the criminal law.  For instance, the dangers that the Equal Protection Clause were intended to address reared their ugly head in the Old South after the disastrous 1876 decision in United States v. Cruikshank, in which the Court held that enforcement of the criminal code was to be left to the states themselves, even those with thoroughly corrupt racial politics.

Evidently, this parsimonious account reasons that there is no role for the Equal Protection Clause to play in dealing with the generalized distribution of government benefits.  This point is well known to students of property law. The great 1892 case of Illinois Central Railroad v. Illinois made clear how difficult it was to cobble together a public trust doctrine out of the raw constitutional materials. Further, among the public benefits that government distributes is K-12 education, which means that this rendering of equal protection guarantee throws Brown v. Board of Education into doubt.

Brown itself was much mooted on legal grounds, but socially the overwhelming weight of respectable opinion, then and now, was that segregation had to end.  But what was the legal rationale?  In 1954, no one thought that affirmative action in education was in the cards. Consequently, the consensus was that a strong decision in favor of a color-blind principle would create all the needed social gains without feeding red meat to the defenders of segregation.  But the political wars have gone decisively in the other direction, so that today affirmative action is pervasive in education and other areas of private life.  Indeed, I think that it is especially important to note the very high levels of support for these programs inside the private institutions that adopt affirmative action.  This institutional support gives at least some indication that the overall social benefit from these programs are large enough to quell doubts about any downside, such as a decline in the academic credentials of admitted students.  As a libertarian on matters of association, I think that these university decisions make it clear that the color-blind guarantees found in Title VII and other places were a mistake in large measure because they inhibited the affirmative action programs that had substantial support in the fifteen or so years after the passage of the 1964 Civil Rights Act.  Indeed, as a political matter I part company with Ward Connerly and others and think that private institutions should be able to choose their own racial policies, and that public institutions, although subject to some clear constitutional constraints after Brown, should be given some wiggle room as well.  I would therefore vote against Proposal 2.

Proposal 2

But by the same token, these views do not make Proposal 2 unconstitutional.  I am reluctantly persuaded that the majority of the Sixth Circuit got this issue wrong.  The Sixth Circuit’s first argument stemmed from its opening salvo, which compared the position of the person who seeks alumni preferences and the person who seeks to reinstate the affirmative action program.  The former has all sorts of informal avenues open to him and need not contend with overturning a constitutional provision.  The latter cannot use those options given the statute, and thus has impaired access to government.

This stick-figure account of racial politics after Proposal 2 ignores the many ways in which (as happened in Texas) defenders of affirmative action can switch to different formulas for admission that go by high school ranking or other criteria of the sort, which recently received a qualified blessing in Fisher v. University of Texas at AustinThese groups are politically active and highly astute.  It is hard to credit any claim that the bulk of work on this issue will be done by any individual student applicant when there are larger political forces at play.

The second half of the argument looks to decisions like Hunter v. Erickson, which announced the view that it was a per se violation of the Equal Protection Clause for the City of Akron, Ohio to amend its city charter to prevent its council from implementing any ordinance on the hot-button topic of racial, religious, or ancestral discrimination in housing, unless it first obtained the approval of the majority of Akron voters.  The clear concern here was that the popular voting sentiment would line up four-square against the fair housing law that the Akron City Council might wish to pass.

Proposal 2, however, does not seek to shift the locus of political power from the covered state institutions to the state legislatures, let alone to any group intent on undermining race relations with programs that have a disparate impact on black citizens.  Rather, it enacts a substantive constitutional provision that takes the issue out of ordinary politics altogether and results in a color-blind program that presents no political risk and contains no uncertain or hidden bias.  At this point, the question is why this provision runs off tracks if Title II and Title VII are constitutional.  One possibility is to shift the focus from Hunter v. Erickson to Reitman v. Mulkey (and indeed to the odd disposition of the Supreme Court in Hollingsworth v. Perry, the Proposition 8 Case). There, a color-blind rule that allowed all individuals to choose to whom to sell or lease property was struck down on the ground that it was tainted with racial animus because it had overturned the Unruh Act, which was a 1969 fair housing ordinance.

For my part, Reitman represents the worst of constitutional law.  The case indefensibly assumes that the motives of partisan supporters should doom a statute which is otherwise eminently defensible in principle, and which may well be defended by persons who think that various forms of racial discrimination are abhorrent, but also think that the principles of freedom of association are more important.  Fair housing laws do abridge freedom of association for all persons, regardless of race, and it would be frightening indeed if the racial preferences of some legislators would doom a statute that many people, myself included, think will lead to superior social outcomes.  If market institutions were not unconstitutional before the passage of the Unruh Act, they certainly did not become unconstitutional once the act was repealed.

To repeat, I think that Proposal 2 is a mistake, and would vote against it.  But I do not think that we have reached the point where colorblind legislation should be regarded as unconstitutional because of its supposed effect on the political process.  Any public institution that employs either a colorblind or affirmative action policy within the institutions that it supports and operates should be responsive to the will of popular majorities in a democratic society.  Where the state loses its power is in its ability to force private institutions to follow what the public dictates.  I think the endless array of fair housing laws are indeed unconstitutional except in those situations, which almost never arise, where a credible claim can be made that a given party has monopoly power in some given market.  That was the older rule that used a nondiscrimination rule to offset monopoly power, but never otherwise.  It is a long argument, for another day.  Subject to this qualification, the public/private distinction should have some real bite.  I believe that this issue will come back to the Supreme Court in some form no matter how the Court comes out in Schuette.