Promoting the General Welfare

c h a p t e r f o u r

Promoting the

General Welfare

One of the purposes of the Constitution, stated in the Preamble, is to “pro-

mote the General Welfare.” Promoting the general welfare has two dimen-

sions. One concerns the duty of government to provide for the basic needs

of the citizenry. In general, our Constitution has not been interpreted to

encompass positive rights to social or economic provision,

although there are

good arguments that the Constitution is properly read (at least by the politi-

cal branches if not by the courts) to secure the material conditions necessary

for full citizenship and equal opportunity.

The other dimension concerns

the scope of government authority to respond to the nation’s needs. In this

chapter, we examine the development of our constitutional understandings in

this latter dimension.

Today, Americans do not think twice about the authority of government

to respond to economic needs. Social Security, Medicare, collective bargain-

ing and minimum wage laws, disaster assistance, regulation of the ﬁnancial

markets, and robust initiatives to stabilize the economy comprise large parts

of the work we expect our federal and state governments to do. Reasonable

people may disagree about the speciﬁc policies needed to deal with vari-

ous economic conditions, with regulation of the marketplace, and with the

economy as a whole. But there is no question that developing, enacting, and

implementing such policies are an important and legitimate part of what gov-

ernment does.

It was not always so. Until 1937, two lines of judicial doctrine often pre-

vented government from responding to pressing economic problems. First,

66 Kee p ing Fa i th w ith t he C o nsti tuti o n

the Supreme Court interpreted the principle of federalism to limit Congress’s

power to regulate the economy, reserving much of that sphere for state gov-

ernments. The principle of federalism is implicit in Article I’s enumeration

of limited federal powers, and it is made explicit in the Tenth Amendment’s

reservation to the states of powers not delegated to the federal government.

However, the Constitution does not state the principle with the precision

necessary to resolve particular disputes over the scope of federal power. Con-

sider, for example, Congress’s power to regulate interstate commerce.

Before

1937, the Supreme Court often applied the federalism principle by adhering

to the eighteenth-century understanding of the term “commerce.” As Justice

Thomas has explained, “[a]t the time the original Constitution was ratiﬁed,

‘commerce’ consisted of selling, buying, and bartering, as well as transporting

for these purposes. . . . [T]he term ‘commerce’ was used in contradistinc-

tion to productive activities such as manufacturing and agriculture.”

Ap-

plying this deﬁnition, the Court repeatedly struck down federal regulation

of manufacturing, mining, agriculture, and other “local” activities on the

ground that they occurred “prior to” commerce and affected commerce only

“indirectly.”

Under this reading of the Commerce Clause, the federal government could

not enact laws to address labor inequities or to establish minimum wages or

maximum hours in vast parts of the American economy. Moreover, the Court

took a similarly narrow view of the Taxing and Spending Clause, disabling

Congress from imposing taxes on businesses in part to implement regulatory

policy unless some other enumerated power authorized the objectives Con-

gress sought to achieve.

This limitation cast serious doubt on the validity of

the 1935 Social Security Act for workers in manufacturing, mining, and other

activities occurring “prior to” interstate commerce. The National Labor Re-

lations Act, which established procedures for collective bargaining, was also

constitutionally suspect before 1937.

The second doctrinal roadblock to enacting social and economic policy

was the Supreme Court’s interpretation of the Due Process Clause in Lochner

v. New York.

Just as narrow construction of the commerce and spending pow-

ers limited Congress’s ability to regulate the economy, so too did the Court’s

construction of Fourteenth Amendment “liberty” to encompass “freedom of

contract” disable state governments from enacting various labor laws, price

regulations, maximum hours and minimum wage laws, and other economic

Pro m otin g th e Gen era l We lfare 67

regulations.

On this view, the state had to leave workers free to accept any

terms of employment they were offered, even if it meant, as a practical matter,

that workers had to accept unfavorable terms dictated by their employers or

else remain unemployed.

The Court’s federalism and contractual freedom jurisprudence was not a

marginal development. It signiﬁcantly affected the power of government to

meet society’s needs. As the nation became more industrialized and as the

national economy became more integrated, the impact of the Court’s doc-

trines on government’s ability to respond to economic conditions became

more pronounced in the everyday life of the nation. In turn, both state and

federal governments came to conclude that a market economy was vulnerable

to serious distortions and inequities if left largely unregulated.

One of those conditions was the increasing concentration of corporate

power through trusts and monopolies. In 1890, Congress passed the Sher-

man Antitrust Act, which prohibits contracts or combinations in restraint

of trade.

When the federal government sued the American Sugar Reﬁning

Company for “acquir[ing] nearly complete control of the manufacture of re-

ﬁned sugar within the United States,” the Supreme Court held that Congress

had no power to regulate contracts governing activities that supposedly pre-

cede commerce, such as sugar production, even though the evident purpose

of the production monopoly was to control the price of sugar in the national

marketplace.

The sweatshop conditions facing wage laborers who migrated from rural

areas into the cities exposed the vulnerabilities of an unprotected workforce.

When Congress responded by prohibiting the interstate shipment of goods

produced by child labor, the Supreme Court invalidated the law again on the

ground that manufacturing occurred prior to interstate commerce and thus

the working conditions associated with manufacturing were outside of Con-

gress’s control.

Such matters were left to individual states, the Court said,

because the Commerce Clause gave Congress no authority to set a national

baseline of fair competition among states with respect to child labor, mini-

mum wages, or maximum hours.

And yet, when states attempted to establish minimum wages or maxi-

mum hours pursuant to their authority to regulate local employment condi-

tions, they encountered judicial resistance based on the doctrine of freedom of

contract.

Although the decisions were not uniformly anti-regulation,

the

68 Kee p ing Fa i th w ith t he C o nsti tuti o n

freedom of contract doctrine prevailed for more than three decades after Loch-

ner and prohibited many government efforts to ensure equitable terms and

conditions of employment. Striking down a New York minimum wage law

for women in 1936, the Court continued to state the doctrine in broad terms:

The right to make contracts about one’s affairs is a part of the liberty

protected by the due process clause. Within this liberty are provi-

sions of contracts between employer and employee ﬁxing the wages

to be paid. In making contracts of employment, generally speak-

ing, the parties have equal right to obtain from each other the best

terms they can by private bargaining. Legislative abridgement of that

freedom can only be justiﬁed by the existence of exceptional cir-

cumstances. Freedom of contract is the general rule and restraint the

exception.

In these and other ways, the Supreme Court articulated a restrictive view

of federal and state authority that blocked measures to reduce some of the

inequities, hardships, and economically harmful conditions that accompanied

the industrialization and urbanization of the economy. While these doctrinal

roadblocks were consequential even before 1929, they deepened the genu-

ine crisis facing the nation after the economy fell into the grip of the Great

Depression. When President Roosevelt took ofﬁce in 1933, he voiced the

American people’s widely shared belief that “the economy would almost cer-

tainly remain debilitated without substantial government intervention” and

that “government had an afﬁrmative obligation to do whatever was necessary

to restore a healthy economy.”

In the ﬁrst hundred days of his administration, President Roosevelt pro-

posed and Congress enacted ambitious programs to stabilize the supply side

of the economy. The cornerstones of his early efforts were the National In-

dustrial Recovery Act (NIRA) and the Agricultural Adjustment Act (AAA),

each intended to prevent destructive competition, to establish equitable wag-

es, and to maintain stable supplies and proﬁtability. In 1935, the Supreme

Court struck down the core provisions of the NIRA and, in the next year,

invalidated the AAA.

In the latter decision, United States v. Butler, the Court

ruled that despite the apparently broad authority of the federal government

to tax and spend for the “general welfare,”

the tax-and-subsidy provisions of

the AAA were beyond the powers of Congress. “Coming on top of the 1935

opinions, the Butler verdict appeared to indicate a determination by the Court

Pro m otin g th e Gen era l We lfare 69

to wipe out all of the New Deal.”

With these decisions as well as others that

invalidated the federal railroad workers’ pension law

and provisions of the

Bituminous Coal Conservation Act,

the Supreme Court thwarted the fo-

cused response of the President and Congress to the most pressing economic

crisis the country had ever faced.

On June 2, 1936, the day after the Court invalidated New York’s mini-

mum wage law for women, President Roosevelt said: “It seems to be fairly

clear, as a result of this decision and former decisions, using this question of

minimum wage as an example, that the ‘no-man’s-land’ where no Govern-

ment—State or Federal—can function is being more clearly deﬁned. A State

cannot do it, and the Federal Government cannot do it.”

The impasse with

the Court deeply frustrated President Roosevelt and his supporters. They

could not believe that the Constitution forbade government from improving

the working and living conditions of millions of Americans mired in poverty

and hopelessness, or from regulating the marketplace to stabilize important

industries and to stimulate growth. Constitutional authorities inside and out-

side of Roosevelt’s administration debated whether the problem lay with the

Constitution itself or with the current composition of the Court. In the end,

President Roosevelt saw the prospect of amending the Constitution as remote

if not impossible

and decided to pursue the course he thought most feasible

to reform the Court’s misguided doctrines.

On February 5, 1937, the President proposed the Judiciary Reorganiza-

tion Act of 1937. It contained a provision to add one judge or Justice to any

federal court on which a judge or Justice over the age of seventy and one half

was sitting. The impact on the Supreme Court would have been dramatic

and immediate: the bill would have enabled Roosevelt to appoint six new

Justices. Despite widespread dissatisfaction with the Court, the court-packing

plan met ﬁerce and widespread resistance even among members of Roosevelt’s

party in Congress.

But before its validity could be tested legally or politically, the Supreme

Court handed down a remarkable series of decisions dismantling the jurispru-

dence that had stymied federal and state legislative action. On March 29, 1937,

the Court rejected a freedom-of-contract challenge to a minimum wage law

from the state of Washington that was in all material respects identical to

the New York law struck down a year earlier.

Two weeks later, the Court

interpreted the Commerce Clause to sustain federal protections for labor

70 Ke epin g Faith with the Cons t itut ion

organizing provided in the National Labor Relations Act,

and six weeks

after that, it construed the Spending Clause to uphold the unemployment

compensation provisions of the Social Security Act.

In each of these 5-4

decisions, Justice Roberts abandoned the pre-1937 jurisprudence that he had

previously endorsed, providing the so-called “switch in time” that saved the

nine-person composition of the Court. The court-packing plan was never

enacted, as congressional support for the bill dwindled. In the ensuing years,

several departures from the Court enabled President Roosevelt to solidify,

through new appointments, the change in direction that the 1937 decisions

had signaled. Ultimately, the Court repudiated all signiﬁcant aspects of its

earlier doctrine blocking federal and state initiatives to promote equity, fair

competition, and stability in the market economy.

The legitimacy of the speciﬁc sequence of events by which the doctrinal

transformation occurred has been much debated by constitutional scholars,

with one leading theorist arguing that the 1937 change was an unorthodox

but valid amendment of the Constitution outside of the Article V process.

Through all of the scholarly debate, the Court’s changed understanding of

the scope of federal and state power to oversee the economy has endured with

the support of a broad national consensus. Today, as the nation faces its most

severe economic crisis perhaps since the Great Depression, that understanding

informs proposals for aggressive government action to stimulate growth and

to cushion the free market’s effects on individuals and corporate entities. Far

from requiring a formal amendment to the Constitution, the legitimacy of

such government action rests comfortably on a proper reading of the Consti-

tution as written—that is, as a declaration of general principles “intended to

endure for ages to come, and consequently, to be adapted to the various crises

of human affairs”

and not as a set of narrow legalisms that “would cripple the

government, and render it unequal to the object for which it is declared to be

instituted.”

In short, the constitutional history of the New Deal reveals the

inadequacy of the Court’s pre-1937 interpretive methodology rather than any

shortcoming of the Constitution itself.

The error of the Court’s jurisprudence on the scope of federal power lay

in its adherence to formal conceptions of “commerce” that failed to corre-

spond to the economic reality of the challenges Congress tried to address. The

contrived distinctions between activities that “precede” or “succeed” com-

merce, or between activities with “direct” or “indirect” effects on commerce,

Pro m otin g th e Gen era l We lfare 71

disabled Congress from responding to problems, such as anticompetitive prac-

tices and unfair labor standards, with clearly national dimensions. Whatever

resonance such distinctions might have had in a smaller nation comprised of

distinct local economies, they bore little relationship to the functional reali-

ties of the integrated national economy emerging from the forces of indus-

trialization and urbanization, the rise of large corporations, and advances in

transportation and communication.

In applying eighteenth-century deﬁni-

tions of commerce to the twentieth-century economy, the Court’s concep-

tion of federalism failed to account for the more interdependent nation that

the United States had become. As Justice Souter has observed, “ ‘[t]he ﬁrst call

of a theory of law is that it should ﬁt the facts,’ ” and “[t]he facts that cannot

be ignored today are the facts of integrated national commerce and a politi-

cal relationship between States and Nation much affected by their respective

treasuries and constitutional modiﬁcations adopted by the people.”

The les-

son of the New Deal is thus similar to the lesson of Brown: constitutional in-

terpretation that is untethered to social context and unresponsive to the lived

experience of the American people cannot keep faith with a charter of gov-

ernment designed to endure and meet the challenges facing each generation,

and will not long command legitimacy.

The Lochner doctrine was also grounded in an implausible account of eco-

nomic and social realities. Whatever the merits of construing “liberty” in the

Due Process Clause to encompass a right of contractual freedom, the Court’s

recurring portrait of state regulation as unwarranted interference with sup-

posedly voluntary and consensual relationships between employers and em-

ployees or between businesses and consumers

often ignored the conditions

of hardship, privation, and unequal bargaining power in the face of ascendant

corporatism that made true freedom of contract illusory. Moreover, the doc-

trine of contractual freedom failed to recognize that market ordering under

the common law is itself a social and legal construct rather than a natural

baseline from which to evaluate the validity of government action.

Once the

Court recognized that traditional market mechanisms were “state-created,

hardly neutral, and without prepolitical status,” government regulation of

market exchange could no longer be deemed suspect on the ground that it

disturbed the purportedly “natural” outcome of private choices.

After 1937, the Court generally applied minimal scrutiny under the Four-

teenth Amendment to “regulatory legislation affecting ordinary commercial

72 Ke e ping Fa ith with the Cons t itut ion

transactions” and reserved “more searching judicial inquiry” for legislation

that may reﬂect “prejudice against discrete and insular minorities.”

And

with respect to congressional power, the Court, appropriately pressed by the

nation’s needs and experiences, found a new equilibrium that adapted the

principle of federalism to accommodate national authority to facilitate a pro-

ductive and fair economy. As the Court eventually explained, “the Framers

chose to rely on a federal system in which special restraints on federal power

over the States inhered principally in the workings of the National Govern-

ment itself, rather than in discrete limitations on the objects of federal author-

ity. State sovereign interests, then, are more properly protected by procedural

safeguards inherent in the structure of the federal system than by judicially

created limitations on federal power.”

In recent years, the Court has signaled new interest in policing the bound-

aries of Congress’s commerce power, perhaps “portend[ing] a return to the

untenable jurisprudence from which the Court extricated itself [over] 60 years

ago.”

The Court has declared certain subjects off-limits to federal regula-

tion by attempting to draw a line between “economic” and “non-economic”

activity

—a line that “looks much like the old distinction between what

directly affects commerce and what touches it only indirectly” in its incoher-

ence and inefﬁcacy in advancing federalism values.

Rejecting the distinc-

tion between direct and indirect effects many decades ago, Justice Cardozo

wisely observed that “a great principle of constitutional law is not susceptible

of comprehensive statement in an adjective.”

That admonition remains as

pertinent today as it was then in pointing the way toward faithful interpreta-

tion of constitutional text and principle.

In sum, the constitutional foundations of the government’s ability to re-

spond to the nation’s economic needs rest on an interpretation of the Con-

stitution that adapts its words and principles to the actual experiences and

changing conditions facing the American people. Neither original under-

standings nor static, formal categories provide an adequate account of what

we take for granted today as the legitimate scope of government power and

responsibility to promote the general welfare. The adaptation of the Consti-

tution’s text and principles to authorize government to address contempo-

rary economic challenges provides another illustration of what we mean by

constitutional ﬁdelity.