The Evolution of the Commerce Clause (Part II)

In 1935 the case between Panama Refining Company v. Ryan the Court ruled that certain provisions of the National Industrial Recovery Act (NIRA) were unconstitutional. The Court found that the NIRA breached the use of the commerce clause because it provided the president with large amounts of unchecked power to dictate economic trade without any standards or criteria. The 1938 case involving the United States v. Carolene Products Company the Court began to set standards for applying the commerce clause (the Famous Footnote 4 case). While the Court used very low standards for economic issues, the Court applied higher standards for other laws affecting other areas of “commerce”. One standard was whether or not the law attempted to distort the political process and another standard was whether or not the law discriminates against a smaller minority groups (i.e. the power of majority groups over smaller groups). Carolene Products lost this case because their healthier products were falsely deemed unhealthier than other milk products. Hence, the dairy lobby won this case using false information and denied Carolene products the right to interstate commerce. The Supreme Court was making up rules (and using false data) to protect earlier New Deal decisions using substantive due process and the commerce clause. After all, siding with Carolene Products would set possible precedent to overrule FDR’s agenda. Carolene Products would be vindicated decades later.

The 1937 case Steward Machine Company v. Davis the Court upheld the unemployment compensation provision of the 1935 Social Security Act. In Steward, the Court showed it had a broad interpretation of Federal government powers over the states. Both the Social Security Act and the unemployment provision were coercive just as was every entitlement act to follow in American history. For instance, if states opted out of entitlement laws, then they would never recoup the Federal tax monies paid by its constituents. Justice Cardozo wrote “the petitioner confuses motive with coercion” since “The states are at liberty, upon obtaining the consent of Congress, to make agreements with one another”. That may be true, but the federal government never takes advice from anyone, it only dictates terms. There is a fine line between motive and coercion and that is precisely why laws should be constructed carefully. The Court also ruled that the Social Security Act were necessary and proper to promote the general welfare of the nation to fight the Great Depression. In his dissent, Justice McReynolds wrote “I cannot find any authority in the Constitution for making the federal government the great almoner of public charity throughout the United States”. Justice Sutherland correctly predicted that “encroachments upon other functions, will follow”. He also added “Imposing a tax that could be avoided only by contributing to a state unemployment compensation fund was effectively coercing each state to make law creating such a fund.” Steward marked the beginning of New Deal programs that were found constitutional by using the spending clause to promote the general welfare of the nation. The precedent for this decision was set in the 1935 case United States v. Butler. Although the decision invalidated many provisions of FDR’s 1933 Agriculture Adjustment Act, for some reason the Court felt compelled to provide an expansive interpretation of the spending clause as it pertains to the promotion of the general welfare of the nation. In fact, the Court suggested that Congress had powers not enumerated in the Constitution when using the spending clause. Also in 1937 the Court upheld the National Labor Relations Act (NLRA) of 1935 in National Labor Relations Board v. Jones and Loughlin Steel Company. After the steel company fired 10 employees for trying to unionize, they filed suit under the NLRA. For the first time in the FDR era the Court used the commerce clause to uphold economic regulations. This case as well as West Coast Hotel v. Parrish turned the tide for the New Deal program. Justices were now approving everything FDR passed instead of finding his laws unconstitutional and an encroachment of power. By 1938, FDR passed a new Agriculture Adjustment Act (AAA) and the Court in Wickard v. Filburn decided that a farmer could not grow more than what was allotted by the AAA because it would violate the commerce clause. Filburn was using the excess crops he grew to feed his farm animals and family, yet the Court decided that even this act violated the interstate commerce clause. So, it was legal for the government (under the AAA) to dictate how many acres of crops a farmer could grow; how much tonnage of crops could be harvested for sale; and how much of the crops can be used to feed your family and farm animals. If this does not violate the Tenth Amendment, then nothing will ever violate the amendment. In a similar case to Steward, in South Dakota v. Dole the Court held that Congress could withhold federal highway money if states did not raise the drinking age to 21. Liberals call the South Dakota ruling incentive, but conservative call it what it rightly is: coercion. Many individuals have been convicted of blackmail using similar types of “incentive” requests in exchange for money. Steward was a big shift in the Court who just two years earlier invalidated FDR’s National Industrial Recovery Act (NIRA) of 1933 in Schechter Poultry Company v. United States. This was a unanimous decision where the Court ruled that NIRA and FDR could not use the commerce clause for wage fixing, maximum work hours, and the right for unions to organize. The Court found NIRA violated the Tenth Amendment. The Court quickly changed its mind on economic regulations with West Coast Hotel Company v. Parrish in 1935. After Parrish the commerce clause began to grow in size and scope such as in cases like National Labor Relations Board v. Jones and Laughlin Steel Corporation in 1937. By 1995, the Court finally tried to reign in the limits of the commerce clause in cases such as United States v. Lopez and in Bond v. United States in 2014. In summary, FDR legislation went from unconstitutional to constitutional using broad interpretations of the commerce clause and the spending clause along with some coercive politics.