In Federal Courts “property is at the mercy of pillagers”

Should the federal court system defer to state and federal legislatures in the realm of economic legislation and regulations? After all, why not let democratically-elected legislatures propose, debate, and pass or not pass legislation regulating worker, food, building, and product safety standards?

Legislatures can research proposed safety regulations just as debaters research their affirmative cases. Other legislators, like negative teams in debate, can research and present arguments against badly-crafted or unjust legislation. And if laws passed turn out to be misguided, legislatures can later reform or abolish them.

That’s the theory anyway, of having legislatures pass new legislation each session. Unfortunately though, legislators attract campaign donations more often for shepherding the affirmatives lobbyists hand them, and rarely gain much by taking up the negative side against special-interest legislation.

Consider the Milk Regulatory Equity Act of 2005.

A bill to ensure regulatory equity between and among all dairy farmers and handlers for sales of packaged fluid milk in federally regulated milk marketing areas and into certain non-federally regulated milk marketing areas from federally regulated areas, and for other purposes.

Damon Root gives the background story in Overruled: The Long War for Control of the Supreme Court. 

Sarah Farms, an Arizona company owned and operated by Hein and Ellen Hettinga, began selling milk in California at prices lower than those fixed regionally by a New Deal law. Root quotes a Washington Post article on what happened next:

a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga’s initiative. For three years the milk lobby spent millions of dollars on lobbying and campaign contributions, and made deals with lawmakers… (“Dairy Industry Crushed Innovator who Bested Price-Control System” Washington Post, December 10, 2006)

Root described the result of this lopsided legislative process:

The final result of that lobbying was the Milk Regulation Equity Act of 2005, which among other things, imposed minimum milk pricing on all producer-handlers operating out of Arizona that distribute at least 3,000,000 pounds of fluid milk per month. Not coincidentally, Sarah Farms was the only producer-handler in the entire state that fit that description. (Overruled, p. 134)

So, in summary, a family diary producer and handler delivers milk to California customers at lower prices, and in response the established dairy industry spends millions for new legislation targeting that single price-cutting firm.

Critics of special interest legislation might reasonably wish the federal courts to invalidate such politicized intervention in the economy.

The Hettinga’s sued in federal court, arguing their firm had been targeted and Constitutional protections violated. Root describes the response of Judge Janice Rogers Brown of the U.S. Court of Appeals, to the Milk Regulatory Equity Act of 2005:

When Judge Brown finally reviewed the government’s justifications, however, she rejected them as pure fantasy, likening the 2005 law to forced collectivization and describing it as a naked wealth transfer that came at the expense of both the Hettingas and the milk-drinking public.

However, given Supreme Court precedent for the “rational-basis” test, Judge Brown deferred to the legislature and let the law stand. Root reports Brown’s complaint about the decision:

The practical effect of rational basis review of economic regulation…is the absence of any check on the group interests that all too often control the democratic process. It allows the legislature free rein to subjugate the common good and individual liberty to the electoral calculus of politicians, the whims of majorities, or the self-interest of faction. (Overruled, p. 135)

Supreme Court precedent for interventionist economic legislation, no matter how unjust or absurd, has been set by decisions since the New Deal era, so Judge Brown had to go along, noting: “Rational basis review means property is at the mercy of the pillagers.”

The KeepMilkPricesLow website also presents the story of special interests and “your legislature at work:”

Congress has decided to raise the cost of milk by driving Hein Hettinga out of business. Hettinga, an independent dairyman, has been targeted and punished for trying to keep the price of milk low. 

In 2006, Congress punished Hettinga by a special-interest bill passed at the behest of the largest companies in the dairy industry. Without a hearing in either House, Congress eliminated Hettinga’s independent status, forcing him to share his revenues with his direct competitors.  The result is that milk prices remain artificially high, consumers suffer, and an independent dairy farmer is at risk of losing his family business.

Will the Supreme Court someday intervene to free Arizona milk producer handlers? Well, they can hope to someday gain the economic freedom now enjoyed by Fresno raisin growers, who thanks to a recent Supreme Court decision, no longer have a portion of their raisins seized by the state. The July 28, 2015 Los Angeles Times story here: “Supreme Court sides with Fresno farmer in raisin dispute.”  NPR story here.

Again, ideally, state and federal legislatures would stop passing regulations favoring special interest groups who lobby and donate in exchange for legislation protecting their businesses. But advocates for reform argue legislatures will be legislatures if not held to limited Constitutional powers. The federal court system should provide that protection for individuals, firms, and the general public from arbitrary legislation and regulation.