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The Forgotten Constitutional Freedom

Stock-Markets / Stock Markets 2015 Jun 14, 2015 - 03:50 PM GMT

By: Stephen_Merrill

Stock-Markets A Dearth of Rationality
In the United States the steady passage of new federal laws and official regulations for eighty years has created a crazy quilt of often contradictory prohibitions, subsidies and legal rights.  The United States Code now fills two long bookshelves with the Code of Federal Regulations occupying twice that shelf space in the law library.

At once, for instance, the United States subsidizes tobacco farmers for producing their harvest and then plunders and terrorizes the cigarette industry who process the product for consumer use.

When the civil rights movement for racial equality succeeded in 1964 in ending official segregation as a lawful practice, what followed were racial quotas and legal preferences in a new form of racial lawmaking.
The First Amendment right to free speech is as simple and comprehensive a limit on government as can be found in the law.  It is also the “right” most cherished by Americans. 
But to suppress free speech the Congress and the President create secrecy laws concerning government activities meant to hound potential whistleblowers into remaining silent on the threat of decades of imprisonment. 
People who speak out about official abuses are subject to the fear and blackmail fostered by the US mass surveillance state, a largely hidden branch of government that is based on different federal laws than the Bill of Rights. 

Yet, the simple mandate of the First Amendment theoretically remains the same.
How did the mountain of federal decrees become so myopic as to be comic in so many ways?  Is it true the Congress at a given time can be bought or otherwise persuaded of just about anything, even opposing things at the same time? 
Consistency in the law is no serious requirement anymore.  The law is now as transitory and confusing as the weather is.

It was not always so.

The American Way
From the passage of the US Constitution in 1792 until the time of the 20th Century Great Depression 140-years later, the Congress simply had no authority to pass laws to manage the national economy or to delve into overseeing the day-to-day activities of citizens and businesses in many ways. 
Standing in the way was the history-long dedication of the nation to free market capitalism and rugged individualism.  The American national creed was anathema to vast new powers in the Congress for directing the economy.  The nation demanded a level playing-field for all in the economy.

Beyond tradition, this lassie faire American economic model was enforced by the Constitution itself.  This fundamental American liberty to freely engage in commerce, so central to the workings of the American Dream, was the firmest of barriers against a craven, power mad Congress screwing up the plans and dreams of its citizens.

In 1905 the constitutional right to contract of every American was affirmed resoundingly by the US Supreme Court in striking down a New York maximum work-hours law.  Lochner v. New York  Even the States had to protect the constitutional right to contract.

It was the sudden abolition of this basic liberty from the operation of the Constitution in short order that has directly led to the many tyrannies and contradictions from Washington, D.C. that are strangling the nation today.

Birth of the Goliath
The goliath central government in the United States was born of desperation, as is often the case in human affairs, a forced collectivization of diverse peoples in an existential crisis, like war or economic implosion.

With the coming to office of President Franklin Delano Roosevelt in 1933 the nation remained in an economic dead-end like never before, beginning with the 1929 stock market crash. The Great Depression was the first big financial bust spawned by bubble-blowing at the Federal Reserve through cheap credit for the wealthy and powerful.
President Hoover had tried to stimulate the national economy in the wake of the bust through increased federal spending on crisis relief and the issuance of more cheap credit by the Federal Reserve, including becoming “lender of last resort” to banks. 
These new-fangled economic remedies so far clearly were not working.  Ramshackle “Hoovervilles” and soup-lines dotted the nation till the day Hoover left office.  They would be destined to last far, far longer.
The decision was made by FDR to double-down on Keynesian monetary-priming and to add a host of new work programs and economic dictates to industry and agriculture that would all allegedly lead to rediscovering economic growth through this top-down management by FDR. 
The New Deal brought the SEC, the FDIC, the NLRB, the PWA, and the infamous WPA (We Play Around), all among other snappy, so-modern acronyms.  Amid all of the optimism and faith in the bold, new government, for the first time in the history of the nation forced-collectivism by federal edict was on the rapid upswing.  Most of the States were now getting into the act, too.
What contradicted this political and cultural revolution invented by FDR and his one party Congress was the constitutional “right to contract”, the only solely economic liberty established by the Constitution and made incumbent upon the States by the passage of the 14th Amendment to the Constitution.  The Constitution guarded against the infringement of this basic liberty, even by FDR, or by any level of government.

The “right to contract” stood its ground at the apex of American law for a time during this historic 20th Century clash, striking down New Deal forced-collectivism along the way. The NRA (National Recover Administration) designed to limit industrial competition and to set prices at a higher rate was held unconstitutional. Schechter Poultry Corp. v. United States   The AAA (Agriculture Adjustment Administration) designed to reduce crop sizes and to raise prices was also struck down, among other laws.  United States v. Butler
Eventually though the battle would be lost in 1937 by the supporters of a bottom-up economy through the official crowning of the Congress and the States, by the US Supreme Court, as two all-powerful forces for the nation under the Commerce Clause powers of Congress to “regulate” interstate commerce and the “police powers” of the States.  The critical vote opening the dam wide was, you know it, 5-4.  West Coast Hotel v. Parrish upheld as constitutional a minimum-wage law for women and children only enacted in the State of Washington.
As one might expect, the Great Depression then deepened while under the official federal stranglehold, all of the way until President Harry Truman’s post-war resuscitation of American capitalism in 1945 finally.  Sadly, that new life for the free market economy proved to be on a short lease, now controlled by Congress.   
So, the path was opened back in the 1930’s, by the legitimization of the New Deal, for the potential of big government run amok, a quite self-fulfilling prophecy over time once made possible.  An overly empowered legislature is always the coming death knell for a republic and, ultimately, for democracy itself.

And there is but a single person in this key political drama from long ago, aside from FDR, a person never elected to any office, who is often said to be personally, singularly responsible for the near century-long decline of American liberty and now prosperity itself on the continent our forefathers founded, America’s seeming Benedict Arnold of modern times.

A Guardian’s Life
Owen Roberts began his career as a Philadelphia lawyer, but he much preferred his part-time work as a law professor.  At the end of his career retired Justice Roberts returned to the Pennsylvania School of Law, as the Dean now, while being paid a salary of $1 a year.
Roberts was for a time the President of the American Philosophical Society.  There can be no doubt of Roberts’ powers of mind and persuasion.

Roberts also served on the governing board of the Boy Scouts of America and of the Smithsonian Institute.  He became an espionage prosecutor.  Later he investigated the preparedness of the US Navy in Pearl Harbor at the time of the Japanese sneak attack.
Roberts rose to fame with his investigation of the Teapot Dome affair where official corruption in Washington, D.C. was exposed.  A congressman was convicted of taking a $100,000 bribe for awarding two Navy oil reserve leases to an oil company without a competitive bid.  The man paying the bribe conversely was later acquitted.  The oil tycoon also foreclosed on the congressman’s home for “unpaid loans” that turned out to be the bribery money.  The tycoon did end up though in jail himself, on a charge of jury tampering.
Justice Roberts was appointed to the US Supreme Court by President Hoover in 1930.
If there is a part of the Constitution that Justice Roberts can be best remembered as a guardian for, it is the central command of the Fourteenth Amendment, the juncture in American history when everyone became always equal before the law. 
Justice Roberts issued a dissenting opinion in the Japanese-American internment case that is one for the ages. He found that no citizen can be ordered to leave their home based on their ancestry alone and then be convicted of failing to comply with such an order even during a time of world war.  Korematsu v. United States, 323 U.S. 214 (1944)
Earlier in Cantwell v. Connecticut, 310 U.S. 296 (1940), Justice Roberts wrote the opinion that first applied First Amendment protections at the level of state and local government. 
Justice Roberts was an open advocate of equality before the law for black Americans twenty years before the civil rights movement began in earnest in the United States.
In an address to Brown University in 1939 Roberts said "unreasoning hatred constituted the only menace to the foundations of this Country's government. Race, color and political hatreds," he said, "have no place in a government of reason, which ours should be.”
Yet, it is a failure of guardianship of another aspect of the Constitution though that Justice Roberts stands indicted by history for.  In two decisions Justice Roberts did not write an opinion for, he left one of the greatest marks in Constitutional history.

New Ideas Over the Old Principle
The traditional lassie faire US economy, of course, was the primary obstacle to the many, many economic reforms that the Progressive Movement had been pushing for forty years already by the time of the 1929 Wall Street Crash.  However, the established understanding of the Due Process Clause within the Fourteenth Amendment gave unhindered capitalism in the United States the highest protection in law that exists, effectively checkmating the economic longings of forced-collectivism nearly in full.
Though FDR in his first presidential campaign spoke of a “new deal” that would ”bring happy days again”, no promises were made to initiate federal jobs programs or to create national worker pensions or to establish agricultural and industrial quotas.  Such a sudden, startling empowerment of the federal government was nowhere on the radar screen in 1932 when FDR was elected 57% to 40% over Hoover.
Once the FDR “New Deal” went well beyond funding crisis relief and the stabilization of the banks, the opposing sides in the most consequential constitutional showdown ever lined up.  But the fight was a lost one already in the FDR Democratic Congress with a 2/3rds majority.

FDR’s law writers for Congress had a wholly different way of looking at the Constitution, one that had never before been so stretched in its possible application.  It was the Commerce Clause in the main text of the Constitution they said empowered the Congress to “regulate interstate commerce” in literally any way it wished to.  And these law writers defined “intrastate commerce”, the part of the economy that federal interference was disallowed in by the Clause, as being little more than an oddity, no barrier to sweeping national legislation steering the economy in the grandest of experiments.

Yet, no real constitutional argument was made by FDR though reconciling the inapposite policy of the 14th Amendment and the citizen’s “right to contract”.  In a precursor of today’s world, one set of laws passed today would successfully contradict older laws, even the Constitution itself.

So, the likely “New Deal” breaker laid with the United State Supreme Court and its obligation to enforce the 14th Amendment over any law passed by Congress that infringed the “right to contract”.  The Court in Lochner was already on the record deciding these matters in an equally sweeping way.

Pot-Boiling Courthouse Politics
The main supporter in the corner of the “right to contract” was the United States Judiciary trained in limited constitutional government, including the Lochner decision.  Though the titans of industry and banking certainly opposed the New Deal, their influence in society had been diluted by the Depression and by FDR.  Tellingly on this, the New Deal raised the upper income tax bracket till it rose up to 94% during WWII.

Though FDR would eventually nominate eight members of the US Supreme Court, his first nomination was not made until 1937.  The constitutional drama over the scope of the Commerce Clause powers was decided by a Court of justices appointed by previous Presidents.

The US Supreme Court by 1935 had developed a clearly defined divide over the vitality of the “right to contract” and the importance of the Commerce Clause.  The Court had three liberal Justices who backed an omnipotent Congress guided by the democratic will of the people.  The Court also had four Justices, known as the Four Horsemen, whose rock-ribbed constitutional conservatism was so identical they often traveled together to and from the Court in a four-horse carriage.

In the middle of the sharp divide stood Justice Roberts and swashbuckling Chief Justice Charles Evan Hughes.  Roberts regarded Hughes as a towering intellect, even though Roberts tended to side with the Four-Horsemen more often than not, unlike Hughes.

Roberts’ alliance with the Four Horsemen reached a zenith in 1935 with the reversal of New Deal legislation.

Justice Roberts wrote the majority opinion in the 6-3 Butler decision joined by Chief Justice Hughes.  The AAA quota law was not a tax whatever the drafters called it.  The coercion of farmers in their business choices violated the “right to contract” within the 14th Amendment and, therefore, violated the 10th Amendment as well.

Yet, the three liberal dissenters in Butler were oddly joined by Chief Justice Hughes the next year in granting review of another case examining a minimum-wage law, this one for female workers only.  Morehead v. New York ex rel. Tipaldo, 298 U.S. 587 (1936)  Chief Justice Hughes had joined in the majority opinion in Butler.

It was odd because the general issue in the new case was very little different than the question posed in Butler just the year before, a law applying a direct restriction on commerce.  Also, a minimum-wage law had been struck down by the High Court under the “right to contract” in 1923 citing Lochner.

Tipaldo ended as a 5-4 decision with a majority opinion written by Four Horseman Justice Pierce Butler. Chief Justice Hughes wrote a separate dissenting opinion from the three liberal Justices who dissented together.  The Chief Justice did mention at the close of his separate dissent that the three liberal Justices favored his view of the law as well, though they would go much further than he does.

In his Tipaldo dissent, in apparent contradiction of two recent precedents, Chief Justice Hughes found critical differences between this New York minimum-wage law and the one in the District of Columbia that had been struck down in 1923.  He insisted that removing the wage elevation to a private board with official power after a time of public shaming was not effectively the same thing as simply prescribing a minimum-wage. 
Hughes went so far as to hold that the States have more authority in protecting the wages of women than the wages of men.  Women could not take care of themselves as well as men do, so the dead hand of the State was especially needed by women.

Chief Justice Hughes did not join the other dissenters in Tipaldo in their stance in favor of vast, new governmental powers in the States, and implicitly including the same increased powers in Congress under the Commerce Clause.

On this thin reed, Chief Justice Hughes nonetheless crossed the constitutional Rubicon with his dissenting vote pretending that a clear constitutional mandate can be so easily finessed away.  One of the two key barriers to the New Deal in the US Supreme Court had fallen it seemed.

Justice Roberts did not write an opinion in the Tipaldo case.  He sided with the majority striking down the New York law as being in violation of the “right to contract” citing the Butler decision he did write.

It was the next year, believe it or not, when the now expanded liberal coalition of four Justices brought the issue of the minimum-wage before the Court for a third time in 14-years trying to reverse the two prior recent decisions on the issue.  If one thing can be said of Progressives’ methods, persistence to the point of distraction is one of them.  To these four Justices the Constitution was not only alive, it became as pliable as a human hand is.

But the new law of the State of Washington, for women and children only, directly prescribed a minimum-wage in the just the way the Chief Justice had just said in Tipaldo was still unconstitutional.

So, why did Hughes vote to review the very minimum-wage formulation he had just written about as still being unconstitutional?  Judges are supposed to be the most respectful of all when it comes to past precedents, one would think especially so for one’s own opinion from a year earlier.  To switch his view of the Constitution again so quickly should have been problematic for Hughes, not what a judge is ever supposed to do.

What happened between the Tipaldo decision and the West Coast Hotel case was the national election of 1936.  Now with the New Deal in full view in its forced-collectivist glory, American voters re-elected FDR by a margin of 61% to 37% routing Republican Alf Landon by more than he had Hoover four years earlier.

Well, if the Constitution in June, 1936 said a minimum-wage law like Washington State’s is unconstitutional, by March, 1937, it turned out, the Constitution did allow for the Washington law as written.  West Coast Hotel v. Parris, 300 U.S. 379 (1937)

The opinion of the liberal coalition was written by its newest member, Chief Justice Hughes.  It was so thoroughgoing in its view of the primacy of the State’s Police Powers and of the lesser “right to contract”, only one opinion was needed this time.  Lacking all shame, Hughes did not begin to explain his constitutional hair-splitting in Tipaldo just ten months earlier and instead joined in the Progressive fun completely in his own hand.

So, with the Justices of the Court identical, nothing should have changed.

Except one thing did change.  In West Coast Hotel Justice Roberts switched his vote from the Four Horsemen and joined the now majority opinion finding the New Deal type law constitutional this time.  He did not offer any words about his complete change of stance, just like his colleague Chief Justice Hughes.
Later in 1937, FDR proposed the “court packing scheme” to his Congress asking that the membership of the US Supreme Court be increased to thirteen from nine.  The plan failed to pass Congress.
It took only a short time for the Commerce Clause to work the same magic for Congress that the police powers accomplished for the State of Washington in West Coast Hotel.  Wickard v. Filburn  After West Coast Hotel, the war on poverty, the war on drugs, the $1tr stimulus act, and the departments of HHS, Labor, Energy and Education never had a problem with the constitutional right to contract.
Before too long after West Coast Hotel the “right to contract” was no longer even cited any more as having vitality of any form.  It has been become clear since West Coast Hotel that even the adoption of outright communism by Congress, or even by the States, would still be constitutional, though it may have to be called a 100% tax instead.

Justice Roberts only comment that was reported publicly concerning his switched vote in 1937 was “it may have had something to do with the breakfast I had that morning.”
At the end of his career Owen Roberts decided to burn all of his judicial papers thereby forever blurring his vote in West Coast Hotel. It was not uncommon to burn one’s papers at the time
That did not change the widely held view that, in this instance anyway, there was something to be hidden.
Rumor has it that Chief Justice Hughes hugged Justice Roberts for the first time when told of Roberts’ decision to switch his vote in West Coast Hotel.

The Verdict of History

One thing that can be said about the West Coast Hotel affair is that it was a set of circumstances that Justice Roberts did not bring about on his own in any way.  His so brash colleague was clearly the moving force.  None of the seedy politics infecting the High Court in the 1930’s was attributable to Justice Roberts, until that vote in West Coast Hotel betraying the Four Horsemen and the constitutional right to contract.

Another undeniable point is that it was indeed Justice Roberts, by quirk of history, who stood in the monumental position in 1937 forced to choose between the glory of the past and the tidal wave of a different world that had come to America with the Great Depression. 
Justice Roberts chose what he had come to believe represented the modern future.  His method certainly should have been frank though, rather than wholly hidden, at least over the passage of time.

It is further fair to say that had Justice Roberts stood his ground firmly with the Four Horsemen there is an excellent chance the New Deal and FDR would still succeed, but in another way later.

Maybe FDR’s court-packing plan would have succeeded but for the result in West Coast Hotel. But maybe not.  Maybe the US economy would have recovered under the doctrine of the “right to contract” before a new Progressive attack could be effectively launched on this liberty.

Free market advocates can take solace from the likelihood that a good person like Owen Roberts, and even his four liberal companions in West Coast Hotel, would be thoroughly appalled by the gargantuan, often contradictory US federal government of today, assuming they had the chance to see where all of this New Dealism ended up taking the nation to.

It certainly seems the Four Horsemen of the 1930’s were right after all.  The grand experiment of the time has proven a failure compared to what the nation already had.

It is ironic that a man like Owen Roberts, so thoroughly out of the 19th Century US tradition, would somehow become the deciding vote on changing everything that he had come to understand when it came to the lawful powers of government.

But, in the end, it is not surprising really.  Because as fellow Justice Felix Frankfurter said about Roberts “[He is] a forthright, democratic, perhaps even somewhat innocently trusting, generous, humane creature.”

Roberts decided in 1937 the country belonged to the voters mostly, even beyond certain limits the Constitution has supported, when the command of the people is quite clear.  Roberts would not become a member of the tiny group who stalled history and the overwhelming will of the people.  His connection to the nation would not allow for it.  His act was one of love for the nation, unlike the traitor Benedict Arnold.

In the process though, Justice Roberts sacrificed the American Republic ultimately, all in favor of democracy.  In the wake of the all-powerful Congress over decades, even democracy itself has now been consumed by the Goliath that had been wrought.

So, raise a toast for the constitutional right to contract.  Place aside its ignoble demise for now.

The doctrine served the nation in liberty so well for so long.

Mr. Merrill, a practicing attorney, served in the Navy Judge Advocate General’s Corps and as a Navy Reserve Intelligence Officer.

Mr. Merrill is the editor of the Alaska Freedom News, formerly the Hampton Roads Freedom News

© 2015 Copyright  Stephen Merrill - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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