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The Supreme Court’s role in economic policy, explained

There’s more to the judiciary than the culture wars.

SCOTUS Justice Ruth Bader Ginsburg
Flowers and notes are left outside of the Supreme Court to mourn the death of Supreme Court Justice Ruth Bader Ginsburg in Washington, DC, on September 21, 2020.
Yasin Ozturk/Anadolu Agency via Getty Images

The Supreme Court is best known for its role in adjudicating social issues, both its triumphs as an institution, like its decision in Brown v. Board of Education, and its most shameful moments, such as Dred Scott v. Sandford and the rulings that struck down the civil rights legislation of the 1870s. Of course there’s Roe v. Wade, whose authors saw it as a ruling in the tradition of the former and whose critics see it as a ruling in the tradition of the latter.

But in the American system, essentially every law and regulatory undertaking is subject to litigation and second-guessing by the courts. That means Supreme Court appointments have vast and wide-ranging authority over economic issues — authority that is often ignored by politicians and the media, but not by people with money at stake.

The US Chamber of Commerce, for example, did not enthusiastically back Brett Kavanaugh’s nomination because they liked his thinking on abortion, but because they like his hostility toward regulatory agencies. And while progressives often appreciated that Kavanaugh’s predecessor Anthony Kennedy sided with liberals like Ruth Bader Ginsburg on some abortion and LGBTQ rights cases, it’s telling that Kennedy himself — like Sandra Day O’Connor before him — strategically timed his retirement to be replaced by a Republican president and a GOP Senate.

The more socially moderate Republican justices understood what too few do: There’s much more to the Supreme Court than the culture wars.

Mystery meat federalism

The Gilded Age Supreme Court regularly struck down all manner of economic regulations under a nebulous “freedom of contract” theory, which held that even the most minimal efforts to secure workplace safety were constitutionally dubious. But after clashes with President Franklin Roosevelt during the New Deal era, the courts shifted to a new paradigm whereby Congress’s power “to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes,” was understood to be a broad grant of authority to enact economic regulation.

That began to change with United States v. Lopez (1995), which featured a defendant challenging the Gun-Free School Zones Act. This was, interestingly, not a Second Amendment case that attempted to argue that prohibiting guns near schools violated an individual’s rights to keep and bear arms. Rather, a 5-4 Supreme Court majority invalidated the law on federalism grounds — saying that Congress lacked the authority to regulate the matter because the impact of gun violence on interstate commerce was allegedly too tangential.

This turned out not to be a huge deal on the specific question because Congress was able to come back later and rewrite the law with a specific stipulation that it only related to guns that were shipped across states.

It was, however, a shot across the bow that the Supreme Court was no longer going to allow the people’s elected representatives to decide for themselves what steps were and were not useful exercises of congressional authority to regulate the national economy.

The decision left a serious question as to how far the Court planned to take that new doctrine. Clarence Thomas, in an influential concurrence, wrote that the dissenters were basically correct that the Gun-Free Schools Act was not really different from any number of older laws regulating wages, working conditions, and product safety that the courts had deemed acceptable. He said they should revisit the entire New Deal era of jurisprudence and try to restrict Congress to exclusively regulating the actual act of shipping things across state lines.

In practice, conservative judges have mostly not done that, choosing instead to only strike down new laws. For example, most conservatives on the bench adhered to the new idea that the Affordable Care Act constituted an impermissible form of regulatory activity. And though the bulk of the law was spared by John Robert’s judiciousness, he did cost millions of people health insurance by inventing a new doctrine (that Congress could not threaten to take away previously provided matching funds to create an incentive for states to accept new matching funds) to block aspects of Medicaid expansion.

What makes Ginsburg’s departure from the bench alarming in this regard is that post-Lopez, essentially all new progressive legislation has been a crapshoot. There’s inevitably a lawsuit to strike down anything, but on any given issue, a Roberts or (more rarely) Gorsuch or Kavanaugh might defect. With a sixth conservative justice, it would be that much easier to stop any new law that you like, since you only need to get five of them. There are many conservative legal theorists — including Thomas on the bench and Georgetown professor Randy Barnett in the scholarly world — who believe that essentially all modern economic regulation is unconstitutional. There are plenty of smart conservative lawyers to write up a brief arguing that any new law should be struck down. As for using old laws to address new problems, well, there’s a fix for that, too.

The rise and fall of deference

When Ronald Reagan became president in 1981, he governed with the background of what had been 50 years of pretty steady expansion of the federal role in the economy. Some of this he got changed through legislation (indeed, some of it had been repealed during Jimmy Carter’s presidency), but he wanted to achieve much of it simply through relaxation of federal enforcement effort.

During that period, conservative jurists developed and largely celebrated a doctrine called Chevron deference. “Chevron is a rule that tips the scales in favor of a particular result when a statute is unclear,” Yale Law’s Abbe Gluck wrote. “In Chevron’s case, the scales are tipped toward the agency’s preferred interpretation.”

In the ’80s, the upshot of deference was that the Reagan administration could relax 1970s-era environmental regulations. But by the 2010s the valence had switched. The big question was whether a progressive administration could use powerful, broadly worded statutes like the Clean Air Act to address big modern problems in a flexible way. The result is a regulator that not only helped clean up the air at the time of its creation, but over time has been able to mandate the use of new, superior technologies that did not exist when the law was passed.

Today we have justices like Kavanaugh writing that the existence of independent regulatory agencies is a “threat to individual liberty,” whom his ally Ken Starr praises for his “pro-democracy, let-the-people-govern-themselves vision [that] has been evident in his incisive questioning of the modern-day judicial emphasis on courthouse deference to administrative agencies.”

Conservative jurists, in other words, are preparing to sharply limit regulators’ ability to promulgate new rules, arguing that each new change in policy should be achieved through the passage of a new law.

That sounds nice, but it’s completely out of touch with how the American political system actually functions.

Vetoing our way to oligarchy

In her fiery dissent in Ledbetter v. Goodyear Tire & Rubber Co. Inc (2007), Ginsburg implored Congress to take up Lilly Ledbetter’s cause and amend Title VII of the Civil Rights Act of 1964 to clarify that the clock on the statute of limitations for pay discrimination starts ticking on the date of the last discriminatory paycheck, not the first. Two years later, Congress did what she asked and passed the Lilly Ledbetter Fair Pay Act of 2009.

In a theoretical sense, this is how a national legislature and its Supreme Court could relate. If a court decision construes a statute in some excessively narrow way, the legislature passes a new law. If the Court decides a regulatory agency has overstepped its statutory bounds in the effort to address a new problem, the legislature passes a new law. If the Court finds that tax cuts accidentally repeal an unrelated expansion of the welfare state (yes, this is what conservative lawyers are currently arguing about Obamacare), then the legislature can plug the flaw.

It’s a nice vision, in my opinion, and also a vision of a world in which the courts play a smaller role in the political process. It is not the way American politics works. When Alfred Stepan and Juan Linz surveyed the United States and 22 other peer nations to see how many electorally generated veto points each country had, they found the US to be a huge outlier. More than half their sample had just one elected body that could block policy change — a parliamentary majority. Seven had two veto players. France often had one, sometimes two, but since then has tweaked its rules to ensure that it’s always one. Switzerland and Australia had three. And the United States had four.

Which is just to say it’s really, really hard to change the law in America. In their magisterial work Lobbying and Policy Change: Who Wins, Who Loses, and Why, Frank Baumgartner and his co-authors find something superficially encouraging — it’s not the case that the side with more money backing it normally wins in Congress. The reason, however, is less encouraging. It simply turns out that there are so many veto points in the US political system that the status quo almost always wins. What the increasingly active conservative courts do, under the guise of aw-shucks balls and strikes refereeing, is essentially introduce yet another veto player into the system. What Linz and Stepan found is that “high numbers of electoral veto players are highly correlated with inequality” because they make it difficult to assemble a majoritarian check on the fortunes of the wealthy. The introduction of an increasingly aggressive judicial veto player further exacerbates the problem. Or, as the Federalist Society’s donors no doubt see it, provides part of the solution.

A test for conservative populism

This is primarily a problem for liberals, though from the liberal point of view, the solution is also clear: Have fewer conservative justices on the bench and more liberal ones.

A perhaps more interesting issue faces conservative populists like Sen. Josh Hawley (R-MO) who have made some big noise about separating themselves from the pack of free market ideologues, while in practice mostly being party-line votes for Senate Majority Leader Mitch McConnell’s priorities. His tool of choice is antitrust policy, where he’s called for crackdowns on everyone from Google to the big four meatpacking conglomerates.

The thing about antitrust policy that professionals who work in the field always emphasize to me is that “you’ve got to win the cases.”

Activists often like to complain that the Obama administration or the Trump administration is doing this or that wrong and the next president should be tougher in this or that way. But the antitrust statutes are classic examples of big, broad laws that leave a ton of power in the hands of the courts to decide what they mean. The regulators can be more or less aggressive in what cases they bring, but it’s the courts that decide what happens.

As Hawley himself told The Verge’s Makena Kelly last year, “we need to have a discussion, though, about what antitrust looks like when applied to the tech world. Our antitrust laws and our antitrust doctrine in the courts are not really developed to talk about this. So we’ll have that discussion in the courts.”

And as it happens, Hawley has staked out a bold and somewhat unusual stance on the Supreme Court vacancy — but it’s a stance on abortion, arguing that Trump’s next judge should explicitly promise to overturn Roe v. Wade.

I’m cynical about these things and tend to assume that Republicans like Hawley know perfectly well that the judges they vote to confirm won’t let them do the things they pretend to want to do in terms of antitrust and other regulation. That’s why, even as Hawley actively seeks a reputation as an innovative thinker on competition policy, he’s only interested in using his leverage to emphasize his orthodoxy on abortion. And to many people on both sides of the aisle, that’s fundamentally what these court battles are about.

But the business community and the Supreme Court bar and the conservative legal movement are all well aware that there is a huge economic and regulatory element. Their strategy is to put in place a judicial roadblock to democratic governance of the economy. And while I wouldn’t expect much, it will be interesting to see if any of the conservatives making noise about a shift from hard-right economics have anything to say about it.

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