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FORUM: RESPONSE
Judicial Review and the Power of the Purse
Michele Landis Dauber
| Howard Gillman is unconvinced by my argument that New Deal lawyers turned to the history of federal disaster relief in support of key spending measures, such as the Social Security Act. Likewise, he is unpersuaded by Justice Stone's suggestion to Frances Perkins that she could "do anything under the taxing power." I understand why Stone's comment grates on Gillman's modern ear; it grated on mine too. What is Stone talking about, and how could his comment be squared with our understanding of the pre-New Deal period as one of sharp limits to federal power imposed by the courts? Gillman's conviction that, in this era, the Supreme Court exercised substantial veto power over federal spending leads him to some critical misreadings of key cases and misstatements of fact. I appreciate the opportunity to respond to his comments and, in particular, to include some details regarding Supreme Court developments for which there was no space in the article itself. |
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Gillman's criticisms center on two issues. First, he claims that, prior to the New Deal, the Supreme Court exercised judicial review over congressional spending decisions under the General Welfare Clause. Gillman cites two cases, United States v. Butler, and the Child Labor Tax Case, in which he asserts that the Court struck down federal statutes on this basis. Thus, Justice Stone's suggestion was, in Gillman's view, wishful thinking. Second, Gillman argues that the history of congressional appropriations for disaster relief was not cited, not relied upon, and ultimately not relevant to New Deal-era debates over the constitutionality of federal spending programs. Both of these claims are belied by the evidence. |
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Judicial Review of Congressional Spending | |
| I turn first to the question of the extent of judicial review of Congress's spending power. Essentially, Gillman argues that there was no "serious precedent for the claim that the judiciary would have a very small role in reviewing congressional spending decisions" until at least the "switch in time," when it upheld unemployment compensation and old age benefits in Steward Machine Co. v. Davis and Helvering v. Davis. However, the reality is very nearly the opposite: beginning with Realty Company, decided in 1896, the Supreme Court on several occasions before 1937 indicated that Congressional spending was, for all practical purposes, unreviewable. In fact, the Court has never invalidated a congressional appropriation because it exceeded the scope of the General Welfare Clause. |
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Realty Company is a nearly perfect test of the power of the idea that Congressional spending decisions deserved extreme deference. The case presented a prime opportunity for the Court to strike down class-based legislation, to which the Court had a well-defined aversion during this period, according to Gillman himself.1 The case was brought by sugar producers (in the parlance of the time, the "Sugar Men") seeking payment of nearly $5.3 million in bounties—cash gifts to sugar interests—legislated by Congress in connection with the reduction of the tariff on imported sugar, but withheld by the Treasury because of doubts about the constitutionality of the various acts mandating the payments. |
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Despite the obvious class nature of the bounties, the Court unanimously refused the government's invitation to hold that these payments were outside the scope of Congress's authority under the General Welfare Clause.2 Instead, as Gillman notes, the Court stated that the question of whether Congress had completely unreviewable authority to spend as it saw fit could be "postponed until it arises." But the Court did so in the course of defining a basis for congressional spending that was, for all practical purposes, the same thing. The Court found that Congress could pay a debt grounded in "general principles of right and justice—when, in other words it is based upon considerations of a moral or merely honorary nature ... although the debt could obtain no recognition in a court of law." And how to determine whether such "debts" exist? In the Court's view, "[t]heir recognition depends solely upon congress, and whether it will recognize claims thus founded must be left to the discretion of that body," a discretion that "can rarely, if ever, be the subject of review by the judicial branch of the government." |
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Given the expansive nature of the Court's opinion in Realty Company, it should be no surprise that Gillman's claims that it was "not cited later by the Supreme Court as authority for any sweeping statement about the unlimited or unreviewable scope of Congress's spending power" and that it "play[ed] no discernible role in any of the New Deal-era debates about the legitimacy of innovative spending plans" are simply false.3 In fact, Realty Company was repeatedly cited for just such sweeping propositions, despite Gillman's claim about the narrowness of its significance. |
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Legal defenders of the New Deal saw Realty Company as a key resource in their argument for judicial deference to Congress's spending power and repeatedly cited it in their briefs to the Court. Realty Company was cited numerous times on this point in the government's brief in U.S. v. Butler, a legal tour de force by Assistant Solicitor General Alger Hiss, most relevantly for the principle that "Congressional application of the term 'general welfare' cannot be ... subject to judicial review." According to the government's brief, if courts could not scrutinize congressional appropriations for moral or honorary "debt," "a term so familiar to our courts," then surely more exotic notions like the "general welfare" were beyond the competence of any court to decide. Realty Co. was similarly cited in the government's briefs in key New Deal cases, including Steward Machine Co. v. Davis and Helvering v. Davis. |
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New Deal lawyers continued to rely on Realty Co. for a simple reason: it proved to be a powerful precedent. For example, the Court's unanimous opinion in Cincinnati Soap Co. v. United States4 in May 1937, authored by Justice George Sutherland (one of the conservative "four horsemen" and author of the despised 1923 opinion in Adkins v. Children's Hospital striking down the women's minimum wage law), cites Realty Company for the principle that congressional appropriations for "high moral obligations" are virtually always "a matter of policy and discretion not open to judicial review" (at 317). Justice Sutherland's opinion explicitly relied upon the history of disaster relief for "earthquakes, fires, and other events," saying that "legislation of this character has been so long continued and its validity so long unquestioned that ... a legislative practice such as we have here ... marked by the movement of a steady stream for a century and a half of time goes a long way in the direction of proving the presence of unassailable ground for the constitutionality of the practice" (at 315). |
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Three weeks later, the Supreme Court upheld federal old age pensions in Helvering v. Davis, relying on Realty Company and Cincinnati Soap for the proposition that Congress has a "wide range of discretion" to spend in the general welfare, "unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment."5 By this point, any distinctions among "debt," "high moral obligation" and "general welfare" had been submerged and Realty Company now stood, with Cincinnati Soap, for the simple proposition that Congress could spend as it saw fit so long as its determinations were not utterly arbitrary. 6 |
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It is worth noting here, given Gillman's insistence on the importance of finding "any conservative justice who might have been expected to oppose the New Deal [who] nevertheless voted in favor of spending programs because he was convinced that the tradition of disaster relief was legitimate" that Justice Sutherland, the author of Cincinnati Soap, voted with the majority in Helvering rather than join the dissent by his fellow-horsemen McReynolds and Butler. |
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But what of Butler? In Gillman's view, Butler demonstrates that Stone was simply wrong: shortly after his clandestine tea with Perkins, the Court struck down the AAA as outside Congress's authority under the General Welfare Clause. Here, Gillman misreads Butler. The government had indeed rested its case for the AAA on the capacious and generally unreviewable power of Congress to appropriate for the general welfare. However, the majority discussed the issue just long enough to reject the processors' claim that Congress could spend only for enumerated powers rather than in the general welfare, a field over which Congress had "a wide range of discretion." The Court then explicitly sidestepped the question of whether spending in aid of agriculture was within the general welfare, despite the fact that the opinion terms this issue the "great and controlling question in the case." Instead, the Court resorted to a tortured argument that the Act was an improper attempt to regulate agriculture, a subject reserved to the states according to the 10th Amendment. Rather than undertake the first-ever judicial review of Congress's exercise of the spending power, the Court turned to another basis for invalidating the law. That the Court chose the alternative route is evidence for the power of the Realty Company precedent, and in fact Butler was subsequently cited, in the New Deal cases discussed above, for the proposition that Congress was entitled to nearly unlimited deference in spending under the General Welfare Clause.7 |
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This is still the law. The plain fact is that the Supreme Court has never—before, during, or after the New Deal—struck down a federal law because Congress had exceeded its constitutional authority to spend. Instead, the Court has repeatedly restated Realty Co.'s principle of deference to Congress on the question of the general welfare. As Chief Justice Rehnquist noted in South Dakota v. Dole, "the level of deference to the congressional decision is such that the Court has ... recently questioned whether 'general welfare' is a judicially enforceable restriction at all."8 |
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Disaster Relief in the New Deal | |
| Gillman believes that I overstate the importance of federal disaster relief by calling it a "key legal underpinning" for the expansion of the welfare state during the New Deal. I am less committed to the precise wording (one person's "key" could be another's "somewhat important") than I am to showing how disaster relief was deployed as a precedent in New Deal legal and political contests. As I have detailed at greater length elsewhere and in my forthcoming book,9 New Deal lawyers, politicians, and other advocates frequently invoked the history of disaster relief to argue that the Depression was itself a disaster that deserved, even mandated, federal relief. |
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To give just one example from the political arena, Roosevelt's relief captain Harry Hopkins argued in a radio speech in early 1937 that "we should consider Government spending in the light of this country's history, to see whether or not it is something new and revolutionary and frightful, or whether it is entirely traditional and has been going on for a long time." As examples of "traditional" spending, Hopkins mentioned "direct subsidies" to the sugar industry, and then said
And as for the spending of Federal money to relieve the distress of individuals, there are more than 100 acts or resolutions of Congress dating back to 1803, which provide special subsidies or concessions to help groups of citizens recover from disaster or other circumstances beyond their own control. These policies were not mere official generosity. They were intended to promote the general welfare in accordance with the Constitution.10
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This use of disaster relief as a precedent for federal spending began even before the New Deal. It was mentioned in similar speeches by Senator Robert M. La Follette, Jr. and others in Congress during the winter of 1930. This effort was, I have argued, continuous with earlier efforts, many of which I mention in my article, to bolster spending proposals by analogizing them to disaster relief. |
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Of course, as Gillman points out, the history of those efforts to call on disaster relief in Congress to support innovative spending measures was not uniformly successful. Why then would New Deal lawyers repeatedly list congressional appropriations for disaster relief in their legal defense of New Deal spending programs? The most likely reason is that in the judicial context these precedents by and large worked, as when Justice Sutherland explicitly credited the government lawyers with educating the Court on the history of disaster relief as a precedent for federal spending in Cincinnati Soap. Alger Hiss and his team of lawyers in Butler were likely led to include the list of disaster relief appropriations through reading the Supreme Court's opinion in Realty Company, in which the Court cited the list as it appeared in Joseph Choate's brief for the Sugar Men. The disaster precedents reappeared in other New Deal cases, including those cited above, because they had helped in Butler and in Realty Company to support the proposition that Congress's long practice of enacting class legislation in support of disaster relief was constitutional, and hence that Congress could legitimately spend for purposes not included in its enumerated powers. The lawyers also looked to disaster relief as a kind of hedge in case the Court decided to exercise judicial review over spending: to the extent that a new spending measure could be analogized to the 150-year tradition of disaster relief, it could be brought within the constitutional scope of the general welfare.11 |
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Gillman's difficulty with disaster relief as a precedent for the New Deal welfare state is rooted, it appears, in his more general understanding of the New Deal as a revolutionary break with the past, a "complete reconfiguration of structures of governance." He therefore asserts that lawyers defending the New Deal moved freely between citations of useful precedents and arguments for the "irrelevance of precedents in light of dramatic changes in the social and economic life of the country." But arguing that the New Deal was wholly innovative was a luxury not available to the lawyers defending the Social Security Act in the Supreme Court, where the most damning description would have been "unprecedented." We need not settle the question of the essential continuity or discontinuity of the New Deal in order to see that, for its legal defenders, the ability to demonstrate continuity with constitutionally permissible practices was prized above all else. Disaster relief provided one such potential safe haven, to such an extent that I think it reasonable to term it a "key" legal underpinning for the New Deal welfare state. |
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Notes
1. In The Constitution Besieged, Gillman argues that during the Lochner era, the Court was motivated by hostility to "class" legislation that "promoted only the narrow interests of particular groups or classes rather than the general welfare." In his view, the prior political commitments of justices led them to "strike down legislation that (from their perspective) was designed to advance the special or partial interests of particular groups or classes." See Howard Gillman, The Constitution Besieged: The Rise and Demise of Lochner Era Police Powers Jurisprudence (Durham: Duke University Press, 1993), 7 and 10.
2. That the Court refused to declare the bounties as unconstitutional class legislation favoring the sugar men is even more surprising because the Court had to reverse a lower court that had struck down the bounty on this precise basis. United States ex. Rel. the Miles Planting and Mfg. Co. v. Carlisle, 5 App. D.C. 138 (C.A.D.C. 1895). The government likely shared this surprise, as it clearly expected to prevail. After all, it had boldly refused to carry out a statute that had been passed by Congress and signed by the president.
3. Even the Westlaw headnotes for Realty Company summarize the opinion as holding that Congressional appropriations "can rarely, if ever, be the subject of review by the judicial branch."
4. 301 U.S. 308 (1937).
5. Helvering v. Davis, 301 U.S. 619, at 640–41. The strength of the precedent was not limited to cases of federal power. Two months earlier, the Alabama Supreme Court had relied on Realty Co. in upholding the state's unemployment compensation scheme as an appropriate use of the state's police power. That "some individuals may receive more immediate benefits than others" was not fatal to the plan because under Realty Co. such payments were permissible if part of a general plan serving a public purpose or discharging a public duty. Beeland Wholesale Co. v Kaufman, 174 So. 516, 524 (Ala. 1937).
6. The difficulty of distinguishing between a "debt" arising from a "moral obligation" and "general welfare" was frequently noted from the very beginning of the litigation over the Roosevelt administration's programs. For example, a district court relied upon Realty Co. for its conclusion that building municipal power plants was within the general welfare. The court concluded that the distinction between "debt" and "general welfare" was incoherent because "the only constitutional power to pay such a debt as the promise to give a bounty to sugar producers and manufacturers is in clause 1 of section 8, and the Court said that there was the source of the power.... By what sort of reasoning can it be argued that the same language which authorizes Congress to appropriate money to pay a debt not incurred in the discharge of any power elsewhere vested in Congress does not also authorize some object essential to the general welfare not within the scope of any power elsewhere vested in Congress." Missouri Utilities Co. v. City of California, 8 F. Supp. 454 (W.D. Mo. 1934). The government's brief in Butler made the same point. Brief for the United States, at 179, United States v. Butler, 297 U.S. 1 (1936) (No. 401).
7. The Child Labor Tax Case offers even less support for Gillman's argument. There, the Court never even reached the question of the scope of Congress's power to tax for the general welfare, concluding quickly that the tax on businesses employing child labor was not a tax but was a penalty designed to regulate a matter reserved to the states. Another case discussed by Gillman, Frothingham v. Mellon, did raise the subject of the scope of the General Welfare Clause, but as in Butler the Court declined to exercise judicial review, disposing of the case on the basis of standing. In any event, Gillman's suggestion that Frothingham somehow provides the only "serious precedent for the claim that the judiciary would have a very small role to play in reviewing congressional spending decisions" is belied by the fact that the Court did not similarly dispose of Butler, Helvering, and Steward Machine on the basis of standing, despite the fact that the government raised it. See, e.g., Brief for the United States, at 40–45, Helvering v. Davis, 301 U.S. 619 (1937) (No. 910); Brief for the United States, at 122–35, United States v. Butler, 297 U.S. 1 (1936) (No. 401). Hiss was less sanguine than Gillman about the efficacy of Frothingham, as he devoted the bulk of his brief to deference and the scope of the General Welfare Clause.
8. Likewise, the Ninth Circuit noted in upholding the conditional expenditure of federal highway funds contingent on the states adopting a uniform speed limit, courts have almost uniformly shied away from meddling in the congressional power of the purse. Nevada v. Skinner, 884 F.2d 445 (9th Cir. 1989).
9. The book, also titled The Sympathetic State, will treat the use of the disaster precedent in the legal and political defense of the New Deal in close detail. See also works cited in Michele Landis Dauber, "The Sympathetic State," Law and History Review 23 (2005): 391, n. 12.
10. Radio Address, 1937, Harry L. Hopkins Papers, box 12, Speeches and Articles, Franklin and Eleanor Roosevelt Library, Hyde Park NY.
11. The disaster precedent actually extended out of the federal spending context into the interpretation of the state police power. For example, the Supreme Court held in Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398 (1934) that Minnesota's Mortgage Moratorium Law did not unconstitutionally interfere with contractual obligations because "if state power exists to give temporary relief from the enforcement of contracts in the presence of disasters due to physical causes such as fire, flood, or earthquake, that power cannot be said to be nonexistent when the urgent public need demanding such relief is produced by other and economic causes" (439–40). The Alabama Supreme Court explicitly relied on disaster relief and Blaisdell in holding that the state's unemployment compensation statute was within the state's police power to enact because the suffering caused by large scale economic difficulties, like that caused by "fire, flood, or earthquakes" was "a proper subject of governmental action in the interest of the general welfare." Beeland Wholesale Co. v. Kaufman, 174 So. 516, 524–25 (Ala. 1937). Gillman finds fault with the fact that I chose not to discuss Public Pensions by Susan Sterett. Sterett's book, while quite good in some respects, is flawed for its failure to distinguish between federal and state spending doctrines and practices, as well as its incorrect theory of the legal defense of the Social Security Act. Sterett asserts that the New Deal spending programs were justified as payment for "service" by workers to the state, however, as Beeland shows, this is inaccurate. Instead, Beeland, which was the most important test case of state unemployment compensation statutes, relied for its conclusion that unemployment relief was a valid public purpose on the fact that "starvation, or the tendency to it, due to economic depression, is as alarming and dangerous to the state and its people as that condition due to flood, drouth, or earthquake." Beeland Wholesale Co. v. Kaufman, 525.
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