TheAgitator.com
In Which I (Finally) Embrace the Commerce Clause
Thursday, June 24th, 2004Given that in the past I have objected to the invocation of the Commerce Clause for such slam-dunk initiatives as squelching annoying telemarketers and ending prison rape, I’d like to point out two items in the news of late where I think its use is warranted.
As we’ve discussed before, an originalist reading of the Commerce Clause calls for its use as a way of Congress to promote a sort of free trade between the states. So Congress could prevent the state of Louisiana, for example, from passing a state tax on shrimp coming in from states other than Louisiana. It was intended to be a tool Congress could use to promote commerce between the states, not to inibit it. It has unfortunately been interpreted to give Congress broad powers to tax, restrict, regulate or prohibit anything that in any way affects commerce in more than one state — which is to say just about everything.
But the first example where the Supreme Court ought to invoke the Commerce Clause is in the Internet wine case it’s now considering. Some states — most notably New York — have enacted restrictive laws requiring out-of-state vintners to go through a wholesaler before being permitted to sell wine in-state. These laws protect in-state wineries, unjustly benefit wholesalers, and hurt consumers by limiting selection and artificially hiking prices on non-native wine. They also kill Internet sales.
Predictably, the good folks at the Institute for Justice are fighting the good fight on this one. For more, check out the Free the Grapes website.
The second case where we ought to bring in the Commerce Clause is to justify a bill by Rep. John Shadegg that would allow you to buy health insurance from any insurer in the country — and be subject to the laws of the state where that insurer is located. Many states now prohibit residents from buying insurance out of state, or require out-of-state insurers to insure state residents according to the laws of the state where the customer resides. These laws clearly discriminate against out of state comeptitors.
Freeing consumers to purchase health insurance from anywhere in the country would force the states to compete to keep insurers (and their tax dollars) incorporated within their borders. It would in effect create 50 competing markets for health insurance — all to the benefit of consumers. It would mean that, for example, your employer could choose to buy its group plan from a state that allows health insurers to write premiums that factor in risk, just as auto and life insurers do.
Given that both of these proposals address state laws that restrict commerce from out of state competitors, and that both would increase economic activity rather than inhibit it, I think we’ve found two rare cases where Congress could justifiably take action under the Commerce Clause.
While I agree with Radley’s end goal (and his antipathy toward the Commerce Clause), his analysis earns a gentleman’s C at best.
The Commerce Clause, unfortunately, says what it says — namely that Congress may “regulate Commerce … among the several States” — PERIOD! If it’s interstate commerce, Congress can regulate it — PERIOD (subject only to other Constitutional limitations — more on this below!). There’s simply no “discrimination against out-of-state commerce” in the equation (unfortunately).
I think our noble host may be confusing the Commerce Clause with Article IV, Section 2, Clause 1, Privileges and Immunities, which addresses how a State may treat in-state and out-of-state people and activities differently.
Also, please re-read (we all read the entire Constitution at least once a year, don’t we?) Section 2 of the Twenty-First Amendment. Alcohol is NOT the battlefield upon which to fight this (very good) fight.
And another thing, since when are libertarians “original intent” legal theorists? I think most libertarian causes (if not this particular one) are far more easily supported by “plain language” analysis than by “original intent” … but’s that a whole other thread…
As an Arizonan, I guess I should be proud of Shadegg … I like the sound of that.
“Freeing consumers to purchase health insurance from anywhere in the country would force the states to compete to keep insurers (and their tax dollars) incorporated within their borders. It would in effect create 50 competing markets for health insurance — all to the benefit of consumers.”
I’d have to disagree with that.
Far more likely, it’d work like credit cards. Card issuers flock to states which have modified their usury laws to raise the maximum interest rates that can be charged to customers.
That definitely isn’t to the benefit of consumers. (It seems short-sighted for the bank, as well, seeing as how jacking up rates must surely push people toward filing for bankruptcy. Thus the banks’ interest in bankruptcy ‘reform’, so they cut their risk incurred by making bad loans, while maximizing income from debtors.)
States may create an environment that makes it possible for insurance companies to offer low rates, but they will also pass laws making it easy for insurers to make life hell for their customers. The insurers will do that at the first opportunity.
Customers would have little defense, since people have almost zero leverage, at least in the case of medical coverage.
In theory, yes, states could create a regulatory environment that lowers costs for insurance companies, and the companies could pass those costs on to the customers.
In reality, based on observations of real-world behavior of such companies, I think they’ll pocket the savings and consumers will take it in the ass. Hard.
Oh, BTW. I’m really just commenting on the “all to the benefit of consumers” part.
As with any legislation, especially legislation which stands to make people very rich, it can have very nasty effects which don’t bear much resemblance to the glories and miracles that were promised.
Another of several reasons (aside, you know, the “reading the plain language” one) I don’t go along with Radley’s narrow reading (mine’s also narrow, but not AS narrow) of the commerce clause is that, at least arguably, the things he sees as within the proper scope of its power grant are actually redundant: between the “dormant” commerce clause and the 14th amendment, the kinds of commercial discrimination he describes are unconstitutional without any congressional action whatever. I could site a whole slew of Supreme Court cases striking down capricious restrictions on out of state shrimping boats and whatnot… Anyway, the upshot is, it’s contrary to any reasonable interpretive strategy to read a clause phrased as a power grant as granting the power only to affirm the illegality of state laws already prohibited by the constitution. (Indeed, one of the best arguments for not reading the CC as including manufacture, advanced in a seminal paper by Richard Epstein, relies on precisely this principle)
Here’s a little history on alcohol direct shipping:
Many states tried in vain to restrict the distribution of alcohol in the latter part of the 19th century. They came up against a Supreme Court that repeatedly held that the dormant commerce clause restricted the power of states to prohibit various forms of alcohol distribution. The states would then lobby congress to pass various laws aimed at mitigating the effect of the dormant commerce clause on state alcohol legislation. Each time a new federal law would be passed, alcohol distributors would find a loophole through which they could distribute alcohol with the imprimatur of the dormant commerce clause.
In Rhodes v. Iowa (1898), the Supreme Court struck down an Iowa law that attempted to prohibit mail order shipments of alcohol. As a result, Congress passed the Webb-Kenyon Act, which prohibited the importation of alcohol into a state in violation of such state’s law. The language of the Webb-Kenyon Act eventually became, after the failure of prohibition, the model for Section 2 of the 21st Amendment to the Constitution, which prohibits the “transportation or importation into any State … for delivery or use therein of intoxicating liquors, in violation of the laws thereof….”
The plain language of the 21st Amendment clearly grants the States the latitude to pass laws restricting the importation of alcohol. The Supreme Court held as much in its original interpretation of the matter in State Board of Equalization v. Young’s Market Co. (1936), in which Justice Brandeis, writing for the majority, scoffed at the notion that the States were limited in their authority to regulate the importation and distribution of alcohol.
The Institute for Justice is taking the position that a judicially-created constitutional doctrine, the dormant commerce clause, trumps an express constitutional provision that was enacted with the aim of mitigating the effect of that very same judicially-created constitutional doctrine. This is a curious position to say the least.
The commerce clause isn’t only about interstate trade, but also international trade. A proper use for it on that level would be for congress to regulate the difference in prices of prescription drugs. Pass a law stating that US drug companies can’t sell drugs to other countries for less than they sell them at home. Then we won’t have issues like reimporting them from Canada anbd probably wouldn’t need the recent $550 billion per year prescription drug benefit package.
The Commerce Clause, while short, is one of the most powerful federal powers in the Constitution. Maybe THE most powerful. It has been used to justify everything from striking down interstate trade tariffs to forcing a 55mph speed limit on the entire country. And the Supreme Court has rarely circumscribed Congressional authority in this area. Even the most remote and imaginary connection to “commerce” enables the US Congress to invade our lives in pretty much any manner they chose.
Bruce writes: “It has been used to justify … forcing a 55mph speed limit on the entire country.”
Wrong.
That comes via the Spending Clause, through which Congress bribes the States with federal highway money if and only if they adopt certain standards. See also, “Click It or Ticket” and the brouhaha (sp?) over requiring colleges to allow ROTC recruiters on their campuses.
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