The End of Economic Freedom (Part V)

Let’s evaluate a few examples of how the rational basis test works against workers and businesses. In Williamson v. Lee Optical (1955), the Court upheld an Oklahoma law prohibiting Lee Optical from providing a lawful business option to the public (doing what Lens Crafters does today). The Court said the law does not have to make sense to have some rational basis. Licensing is a key impediment to new opportunities for workers. Licensing was held Constitutional in Dent v. West Virginia in 1889 as a means to protect the public welfare from incompetent workers and businesses. In Yick Wo v. Hopkins (1886) the Court held that licensing rules in the California laundry business were unconstitutional because they targeted mostly Chinese Americans and immigrants (even though the licensing regulation had a purpose to protect the public from fires). In New State Ice Company v. Liebmann (1932), the Court correctly held that an Oklahoma law limiting those in the Ice business was unconstitutional. Louis Brandies dissent in this case has gotten much attention because his opinion fosters federalism by saying States should be allowed to experiment with laws without judicial interference. Brandies opinion, moreover, concludes that States should be allowed to find what laws work and which do not. This may be true, but as Justice Sutherland noted in his majority opinion: States cannot experiment with Liberty and the fundamental rights of citizens. But since the New State Ice Company ruling, licensing laws have gotten out of hand. Consider a Louisiana licensing law for florists? How does this protect the public health and safety of citizens? The Louisiana courts held it prevents people from scratching their fingers on wires that hold floral arrangement together. Yes, the Courts merely invented some rational (or irrational) reason to uphold the law. Taxi licensing laws work to exclude others from entering the business by making it cost and training prohibitive. The same can be said about fields such as cosmetology. When the Tenth Circuit ruled in Powers v. Harris that the government can regulate businesses by providing economic benefit to one business at the expense of another, even without a public interest to promote safety or health. In Powers, the Oklahoma government regulated coffin sellers and the court held that those retailers selling coffins over the internet without following licensing and training regulations where in violation of the law. This case is in conflict with the outcome in a similar case in Tennessee (Craigmile). Hence, it may be up to the Supreme Court to rule on which is correct (I am not holding my breath).

When licensing is not sufficient to limit business opportunities and protect preferential businesses then there are methods such as zoning laws. In one California case a person who sold furniture in the city limits was closed down because the zoning laws only provide for the sale of furniture in downtown (protecting the downtown monopoly). In other words, government could “limit competition, raise costs to consumers, and prevent job creation” to protect a monopoly. The Motor Vehicle Franchise Act in Illinois allows government bureaucrats to reject any new franchise car stores from competing with established local car stores. A study of this law showed that customers payed nearly 10% more in states with these types of protective laws. Zoning laws are not much different than environmental regulations that put farmers and companies out of business. Consider the example where the government shut off the water supply to California farmers so the state could protect a fish. In other words, the rights of fish are more important than the rights of farmers and their families. In fact, the government has protected a small wetland from the right of a landowner to build a home or business. I find it odd that liberals will protect dirt, but they will not protect a human being or even a fetus.

The Agriculture Adjustment Act (AAA) was passed by Congress during the New Deal and is still used today to regulate most farming items. It was first found Constitutional when the Court held in Wickard v. Filburn (1941) that Congress could regulate how much wheat a farmer could grow on its land (including how much can be grown to feed their families and livestock). In fact, to drive the cost of farm products up, the government still regulates how much a farmer can grow. Remember, this was during the Great Depression and people were starving. A more modern example of egregious AAA power is the raisin market. Today, the government confiscates up to half of all raisin crops to distribute them as they see fit (to schools for instance). When farmers filed suit saying the AAA violates the Fifth Amendment’s Takings Clause (government cannot take private property without just compensation), the Court held this thievery did not constitute a taking. For a big business raisin farmer, the effects of AAA regulations are much less extreme than on a small raisin farmer. Hence, AAA regulations stifle competition, protect big business farmers, drive up costs for Americans, and stifle innovation and job growth.

Lochner v. New York (1905) is regarded by both the Left and Right as one of the worse decisions in Supreme Court history. Why? Because the Court elevated the fundamental “freedom of contract” right not found in the Constitution. The Court said New York could not place work hour limits on bakery workers because both employer and employee have a freedom of contract over the right to earn a living to support their families. Both the Right and Left are hypocrites because they routinely elevate fundamental rights not found in the Constitution: Privacy, Right to Bodily Integrity, Procreation, Gay Marriage, Sex, Right for Parents to make Decisions in their children’s upbringing, and so on. Besides, freedom of contract and the right to earn a living have always been considered basic rights or privileges and immunities outlined in Corfield v. Coryell and implicit in the Fourteenth Amendment. This country needs more, not less, decisions that protect not just economic rights but all rights. Finally, the Ninth Amendment says that rights not included in the Constitution should not be disregarded or disparaged. Lochner was overruled in West Coast Hotel v. Parrish in 1937 and economic freedom has not seen the light of day since.

The unfortunate nature of Supreme Court precedent is that there are no longer any economic rights such as the freedom of contract or the freedom to pursue a lawful occupation without government interference. Because of this, companies (large or small) and individuals pursuing economic freedom do so under the guise of other Constitutional protections. For example, in Metropolitan Life Insurance v. Ward (1984) the Court held that an insurance tax on out of state insurance policies to protect in state companies was unconstitutional because it violated the equal protection clause of the Fourteenth Amendment. States have upheld statutes that make it illegal for stores that sell “sex toys”. In these cases, stores do not argue economic freedom, but instead they failed to successfully argue the right to privacy found in Griswold v. Connecticut. Using Griswold precedent, the Court in Lawrence v. Texas found the right to sexual freedom between two consenting adults in private. Still, most states and courts will deny people the right to “sex tools” over moral concerns even though those instruments will be used in private.