The Supreme Court’s decisions in “Dobbs v. Jackson Women’s Health” and “New York State Rifle & Pistol Association v. Bruen” demonstrate that, for the first time since its emasculation in 1937, the U.S. Supreme Court is capable of holding firm in protection of basic Constitutional rights. The media have obsessed over the possibility of further possible decisions restoring previous norms in social issues, which I think unlikely (will a Supreme Court Justice with a mixed marriage vote to outlaw them?) Much more interesting is the possibility of some reversals of the more outrageous economic decisions of the last 87 years, thus restoring the Constitution’s guarantees of property rights.
The Supreme Court ceased to be a reliable defender of property rights after the election of Franklin Roosevelt in 1932. The Court at that time had four staunch defenders of those rights, in Justices Butler, Sutherland, McReynolds and Van Devanter, known to liberals as the “Four Horsemen,” a relatively staunch albeit over-political Chief Justice Hughes and a generally helpful moderate Justice Owen Roberts. Nevertheless, even though the Court generally upheld property rights, much to the fury of the Roosevelt administration, in February 1935 it struck a major blow at them through the Gold Clause cases. Then in 1937 Roosevelt’s attempt to pack the Supreme Court, while rebuffed, caused a timely retirement of Justice Van Devanter and a rapid remaking of the Court to be a reliably liberal even leftist institution. The sound property-rights jurisdiction of the “Lochner Era” was over.
For the next five decades, until 1986, the Supreme Court had a solid leftist majority, almost unanimity for a few years, with the 7-2 majority in 1973 on the extreme judicial-supremacy Roe v. Wade abortion decision being typical (only the newest Justice, Rehnquist and one Kennedy appointee, Justice White, dissented). After 1986, it appeared that the Rehnquist Court would have a solid conservative majority, but centrist justices such as O’Connor and Kennedy, Bush family errors such as Souter and to a large extent Roberts, and general wimpiness about upsetting the mainstream media meant that only a few decisions went in the conservative direction.
President Trump, bless him, appears to have changed that. The two decisions last week appear to indicate that the Court now has a solid conservative bloc, as it has not had since 1937, so that decisions even in economic matters might be made in a conservative direction, upholding the property rights that the makers of the Constitution held sacrosanct, and making Americans secure against the depredations of leftist ideologues, especially in the areas of environmental law and other government regulation. It is thus worth considering which bad leftist decisions a reinvigorated Supreme Court might usefully reverse.
The first, relatively recent case the Court could go after is Kelo v. New London, decided 5-4 in 2005, reversing which would meet with almost universal approval apart from local government bureaucrats and the odd real estate developer. Although decided so recently, only two of the current Court were involved: Justice Breyer, who has just retired and was part of the majority and Justice Thomas, who was part of the dissenting minority.
Kelo v. New London allowed the City of New London to seize Susette Kelo’s house for a private sector redevelopment. Compulsory purchase of this kind is allowed for Federal, state and city needs, limited by the “takings” clause of the Fifth Amendment and the “due process” clause of the Fourteenth Amendment. However, allowing a “taking” for a private sector redevelopment, as the Supreme Court permitted, grossly violated Ms. Kelo’s property rights. The decision allows large corporations with political connections (or on payment of appropriate bribes, given the murk of local politics in some U.S. jurisdictions) to seize the property of those without such connections. The provision that compensation may be paid does not eliminate the violation of property rights, since the compensation is generally determined by a tribunal effectively controlled by the local government. Reversing this decision would be a major blow for property rights and economic freedom, and it would not even be that difficult.
That was the easy one. The heavier lift, that would do even more good to U.S. economic life, would be to restore the jurisdiction of Lochner v. New York, a 1905 case. That case decreed that the state of New York did not have the right to impose maximum working hours legislation on an adult baker, an occupation in which there was no particular safety reason why working hours should be limited. The majority derived the rationale for this ruling from the baker’s freedom of contract under the Due Process Clause of the 14th Amendment. The decision was overruled in stages by the New Deal Supreme Court, mostly in two cases, West Coast Hotel v. Parrish (1937) and U.S. v. Carolene Products (1938), since when there has been little or no restriction on idiotic state and Federal regulations.
Justice Oliver Wendell Holmes stated in his dissent to Lochner that “The Fourteenth Amendment does not enact Mr. Herbert Spencer’s ‘Social Statics,’” a popular libertarian tract of the time. However, in another case Holmes opined that “Three Generations of Imbeciles is Enough!” Liberals happily quote Holmes’ former obiter dicta against Lochner, but shudder in horror at the latter. Personally, I would suggest that Holmes was very clearly fallible, and that his Lochner dissent was wrong. My late revered acquaintance Judge Robert H. Bork objected to Lochner, on the grounds that it violated the “original intent” of the Constitution; I never summoned up the intellectual courage to debate the subject with him. I merely rejoiced later when I found out that the admirable Judge Janice Rodgers Brown agreed with me on the subject.
Property rights in the United States have always been bedeviled by the Founding Fathers allowing the young and foolish Thomas Jefferson to draft the Declaration of Independence. Good Whigs of the Founding Fathers’ generation (which includes a large majority of the Fathers themselves – few were Tories and only Jefferson was a Radical) believed profoundly in the rights of private property and of free contract. John Locke, their intellectual mentor, summed up the purpose of the state as preservation of “Life, Liberty and Property,” which Jefferson botched in the Declaration by substituting airy French rubbish about the pursuit of happiness. Thus, there can be no question that the drafters of the Constitution (of which Jefferson, being in France, was not one) regarded freedom of contract as a fundamental principle and would have profoundly agreed with Lochner. For originalist as well as economic reasons, it must be restored.
The third reversal that is urgently needed is of the 1935 Gold Clause Cases. During the 1920s, many bond underwriters and investors saw how Britain had been forced off the Gold Standard during World War I and was having difficulty maintaining its return to it after 1925, and how the relatively new Federal Reserve was holding interest rates artificially low during the 1920s boom. That raised the risk that the U.S. would be subject to a further burst of inflation, as in 1917-19, and might be forced off the Gold Standard (as in fact happened in 1933). Accordingly, they sought to protect themselves against inept or left-wing government policy by issuing and buying bonds with a “Gold Clause” by which the bonds would be repaid at their gold value if the U.S. altered the dollar parity against gold. These clauses were common in other countries; for example my late wife’s Bulgarian great-grandfather sold a parcel of land to Tsar Boris III in 1934 for 1 million gold leva, thereby ensuring that the purchase would be carried out in 1914 monetary values, not the devalued paper-money leva of the mid-1930s.
The Supreme Court in 1935 outlawed the gold clauses, on the grounds that the government’s control of money was a plenary power – no constitutional justification was given for this view. The minority, led by Justice McReynolds, pointed out that in at least one of the cases, the contract was between two private parties, so none of the government’s damn business, but alas in vain.
The Gold Clause judgment urgently needs reversal, if only because of the lunatic and inconsistent policies of the Federal Reserve, a body wholly absent from the Constitution. Since the government cannot be trusted to regulate money properly, private parties must have the right to link contracts to gold – or silver, Bitcoin or any other unit of value they choose. Only with such a right can savers be protected from the Fed’s wildly inflationary and GOSPLAN-like policies, maintaining interest rates at wholly artificial levels, and seeking ways in which cash can be outlawed so they can expropriate savers even further. If gold clauses between private parties are legal and enforceable, the Fed will be kept honest, or at least moderately so, an outcome the Founding Fathers would have ardently wished – the Continental Congress’ adventures with paper money being an ongoing scandal when they wrote the Constitution, corrected only by Alexander Hamilton as Treasury Secretary repaying debts at full par value.
There are doubtless many other Supreme Court decisions in the economic area that need reversing, but those three are the most egregious. Now that the Supreme Court has found the courage of its convictions, it needs to re-establish the soundness and probity of the U.S. economy.
(The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.)