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November 04, 2003

Why Lochner Matters

Having engaged in what could seem a historical debate on the Lochner and associated decisions from the early part of last century, one might ask why it matters. Surely, the courts aren't about to revive the "freedom of contract" doctrine that struck down minimum wage laws and other social legislation?

The Takings Clause: Probably not-- although with folks like Janice Brown being nominated, who knows? But the rightwing has already been pushing forward an alternative strategy to attack economic regulation under the rubric of the 5th Amendment's "takings clause", the provision most people think of as eminent domain. This is the idea that government must pay a fair price when they take land for public uses and derives from this provision in the 5th Amendment:

[no person shall] be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
But the rightwing goal is to argue that even where people keep their land, if any land use regulation cuts down on their profit margins, they should be compensated. Any environmental regulation-- the government would have to pay. Any zoning rule-- the government would have to pay.

There are three key Supreme Court cases that moved this doctrine forward, the Nollan, Dolan, and Lucas decisions. Here is a list of key "takings" legal decisions. These decisions involved various zoning and land regulations that the Court found interfered with owners use of their land property.

Expanding to Regulatory Takings: But the rightwing doesn't want to stop at regulations of physical property. If they can extend the concept to financial property, essentially the whole regulatory state would crash-- and that is the goal.

Here is how one analyst of the "regulatory takings" school describes the sweeping goals of the movement:

The regulatory takings movement appears to have its origins in the libertarian school of legal thought associated with the University of Chicago and epitomized by professor Richard Epstein. Epstein's 1985 book, Takings: Private Property and the Power of Eminent Domain, provided the impetus for a regulatory takings legal and legislative strategy. It is useful to examine Epstein's writings, for although proponents of regulatory takings legislation invariably argue that the scope of such laws would be finite, Epstein openly asserts that his position on regulatory takings "invalidates much of the twentieth century legislation," including the National Labor Relations Act, minimum wage laws, civil rights legislation, virtually all government entitlement programs, and quite possibly Social Security. In fact, Epstein proposes to challenge the entire New Deal as "inconsistent with the principles of limited government and with the constitutional provisions designed to secure that end."

For instance, Epstein argues that minimum wage laws are "undoubted partial takings, with all the earmarks of class legislation, which requires their complete constitutional invalidation." Under regulatory takings doctrine, employers forced to pay a statutory minimum wage higher than wages set by free market forces suffer from a government takings of their property. "Collective bargaining," Epstein asserts, "is yet another system in which well-defined markets are displaced by complex common pool devices whose overall wealth effects are in all likelihood negative and whose disproportionate impact, especially on established firms, is enormous."

Here Epstein's argument raises the obvious question: for whom are the wealth effects of collective bargaining negative? It also provides the answer: the owners of "established firms."

The Eastern Enterprises Decision: There have not yet been five Supreme Court votes for a regulatory takings decision, yet, but they came close in a little commented upon case, Eastern Enterprises v. Apfel.

That decision struck down a Congressional law mandating that mining companies share the costs of health care for mining retirees where the original companies had often been bought out or gone under. O'Connor, writing for the Court, for the first time declared a Congressional regulation an illegal takings by arguing that the law "interferes with the claimant's reasonable investment-backed expectations."

Lochner Reborn: If every regulation that interferes with an "expectation" of profit gets struck down, the Supreme Court could reassert a standard of judicial activism that would strike down a wide swath of regulations currently restraining corporate power and cripple any redistribution of resources to those less well-off.

So Lochner is hardly a historical curiosity. It won't return under the same name and doctrine, but conservative jurists are gunning to return the substance of judicial activism that will strike down all progressive economic legislation in the name of "property rights." They are far closer than most people recognize, which is why the fight over the Janice Browns being nominated for the courts is so crucial.

BTW Eric Muller in this debate argues disingenuously that the "constitutional structure that allowed the New Deal and the Great Society is still essentially entirely in place"; this is only partially true, and the argument here is over opposing judges like Janice Brown who want to take the next steps to fully dismantle the post-New Deal judicial restraint by judges in regard to economic regulation.

Posted by Nathan at November 4, 2003 07:51 AM