Lecture 8: The Commerce Clause And Other Power-Expanding Mechanisms

Inherent in the notion of government is the power to regulate human conduct. Under the compact theory of government, the people themselves determine the limits and extents of their government’s authority to so regulate. In our federal form of government, a key constitutional question is which level of government has the authority to regulate a given sphere of activity – the central government or the states? Chief Justice John Marshall observed:

“In our complex system, presenting the rare and difficult scheme of one general government, whose action extends over the whole, but which possesses only certain enumerated powers, and of numerous state governments, which retain and exercise all powers not delegated to the Union, contests respecting power must arise.”[1]

In the last lecture, we discussed how the U. S. Supreme Court assumed greatly-expanded powers to control the states through its “interpretation” of the 14th Amendment’s due process clause. It is probably universally conceded that the prime function of the judiciary is to interpret and apply the law to the facts and controversies brought before it. But at some point it becomes ridiculous to say that they are merely “interpreting” the Constitution when in fact, they are changing or amending it by judicial fiat. They did that regarding the 14th Amendment and they also did it concerning the commerce clause of Article 1, Section 8 which is the main focus of this lecture.

The Court’s interpretations of the powers delegated to the federal government under the commerce clause are a classic example of the “slippery slope” analogy. Imagine yourself on the crest of a slick and steep rock formation. If you were to take one step forward, your fate would be sealed because you couldn’t stop until you slid, tumbled, or rolled all the way to the bottom – there could be no intermediate stopping point – either you are at the top or you are on your way to the bottom with no long term options in between.

In my analogy, the starting point at the top of the hill represents our original situation where the states had a lot of authority to determine what went on within their respective state borders. The ending point at the bottom of the hill represents our current state of affairs where the states have very little authority to determine what goes on within their borders and the federal government controls virtually every aspect of regulatory power.

Review From Past Lectures

In the first lecture we discussed the various barriers to interstate and international commerce that were created by the various states to secure for themselves special advantages at the expense of the other states. The national government under the Articles of Confederation was powerless to control these things. The resulting problems were so extreme that John Marshall observed:

“The power over commerce...was one of the primary objects for which the people of America adopted their government, and must have been contemplated in forming it.”[2]

It is very clear – based upon their recent experience with excessive centralized authority in King George and Parliament, the strength of the Anti-federalist sentiment, and the refutations of those sentiments in the Federalist Papers – that people were afraid of making too strong of a central government here in America. They wanted to give it enough power to perform its legitimate national functions but otherwise, wanted to hem it in very tightly to preserve the local control the people earned through the Revolution and loved very deeply.

Remember the common theme of the anti-federalists when they argued against adoption? Their common argument was that we were on the verge of making too powerful a central government that would eventually gobble up states’ rights. Every part of the proposed constitution that could possibly be used to transform the federal government into an unlimited political authority was strenuously attacked by the anti-federalists. Hamilton, Madison, and Jay responded to those concerns in the Federalist Papers. When Madison considered the commerce clause in Federalist #45, he said: “The regulation of Commerce it is true, is a new power, but that seems to be an addition which few oppose and from which no apprehensions are entertained.” In short, nobody saw that as a potential avenue for rabid federal expansion of power, so Madison ignored it and went on to discuss other matters. Little did the Anti-federalists suspect that the commerce clause would latter serve as the springboard to unlimited federal authority.

Gibbons v. Ogden

In the 1824 case of Gibbons v. Ogden,[3]Ogden had been given a monopoly by the State of New York to run steamboats between New York and New Jersey. Gibbons had been given a license to run steamboats between those two states by the federal Congress. The question in the case was whether Congress had constitutionally delegated authority to issue such a license under the commerce clause. The Court held that it did.

In defining “commerce” the Court said:

“Commerce, undoubtedly, is traffic, but it is something more; it is intercourse. It describes the commercial intercourse between nations, and parts of nations....

***

“It is not intended to say that these words comprehend that commerce which is completely internal, which is carried on between man and man in a state, or between different parts of the same state, and which does not extend to or affect other states....

“Comprehensive as the word ‘among’ is, it may very properly be restricted to that commerce which concerns more states than one. The phrase is not one which would probably have been selected to indicate the completely interior traffic of a state, because it is not an apt phrase for that purpose; and the enumeration of the particular classes of commerce to which the power was to be extended [i.e. commerce in one state involving another state, an Indian tribe, or a foreign nation], would not have been made had the intention been to extend the power to every description [of commerce.] The enumeration presupposes something not enumerated; and that something, if we regard the language or the subject of the sentence, must be the exclusively internal commerce of a state....The completely internal commerce of a state, then, may be considered as reserved for the state itself.”[4]

So the Court recognized that Congress did not have the authority to regulate all types of commerce – otherwise, the Constitution would have used no modifiers to describe the word “commerce.”

There is no question that Congress had the authority to regulate commerce on the waters between New York and New Jersey, for problems of that sort exactly matched the problems experienced under the Articles of Confederation and were sought to be remedied by the commerce clause.

In commenting on the state inspection powers, the Court explained why those were not powers held by the federal government. It said:

“[T]he [state] inspection laws are said to be regulations of commerce, and are certainly recognized in the constitution, as being passed in the exercise of a power remaining with the states.

“That inspection laws may have a remote and considerable influence on commerce, will not be denied; but that a power to regulate commerce is the source from which the right to pass them is derived, cannot be admitted. The object of inspection laws, is to improve the quality of articles produced by the labour of a country; to fit them for exportation; or, it may be, for domestic use. They act upon the subject before it becomes an article of foreign commerce, or of commerce among the States, and prepare it for that purpose. They form a portion of that immense mass of legislation, which embraces every thing within the territory of a State, not surrendered to the general government: all which can be most advantageously exercised by the States themselves. Inspection laws, quarantine laws, health laws of every description, as well as laws for regulating the internal commerce of a State, and those which respect turnpike roads, ferries, &c., are component parts of this mass. (emphasis added)

“No direct general power over these objects is granted to Congress; and, consequently, they remain subject to State legislation. If the legislative power of the Union can reach them, it must be for national purposes; it must be where the power is expressly given for a special purpose, or is clearly incidental to some power which is expressly given.”[5]

In the last chapter we introduced the idea of “police powers” – the reserved, open-ended power of the states to regulate public “safety, health, morals, and general welfare.”[6] The federal government was not given such open-ended police powers. Rather it was confined to its limited delegated powers and the Court here was recognizing that fact. But whatever happened to that “immense mass of legislation, which embraces every thing within the territory of a State, [which was] not surrenderedto the general government?” As we will soon see, the Supreme Court will later acquiesce to Congress’ usurpation of those open-ended powers “interpreting” the commerce clause contrary to what the framers and adopters originally intended.

Notice too my emphasis of the word “before” in the foregoing quotation. The Court recognized that just because something was ultimately destined to be transported across state lines was not enough, in and of itself, to bring it within Congress’ regulatory authority under the commerce clause. This concept naturally led later Courts to make a distinction between production/manufacturing processes (which were deemed to be local in nature and thus outside the scope of Congress’ regulatory authority under the commerce clause), and the interstatetransportation/commerce of the resulting products (which is within Congress’ authority.)[7]

Hammer v. Dagenhart

In Hammer v. Dagenhart (1918), the Court said:

“Over interstate transportation, or its incidents, the regulatory power of Congress is ample, but the production of articles, intended for interstate commerce, is a matter of local regulation. * * * If it were otherwise, all manufacture intended for interstate shipment would be brought under federal control to the practical exclusion of the authority of the states, a result certainly not contemplated by the framers of the Constitution when they vested in Congress the authority to regulate commerce among the States.”[8] (emphasis added)

That case had to do with the Federal Child Labor Act of 1916 which totally barred from shipment in interstate commerce, products from factories which employed child labor. It is very interesting what Congress was trying to do there. Consistent with the idea that the federal government was only delegated limited authority, apparently Congress anticipated the Supreme Court would not allow it to pass a direct law in the nature of general police powers. So it tried to accomplish the same thing indirectly by stopping all interstate commerce of goods produced under circumstances they deemed to be unjust. Consistent with what courts do so often today, the Court exalted substance over mere form and held the Act to be unconstitutional. Said the court:

“A statute must be judged by its natural and reasonable effect.* * * The control by Congress over interstate commerce cannot authorize the exercise of authority not entrusted to it by the Constitution.* * *

“...The purposes intended must be attained consistently with constitutional limitations and not by an invasion of the powers of the states. This court has no more important function than that which devolves upon it the obligation to preserve inviolate the constitutional limitations upon the exercise of authority federal and state to the end that each may continue to discharge, harmoniously with the other, the duties entrusted to it by the Constitution.

“...Thus the act in a two-fold sense is repugnant to the Constitution. It not only transcends the authority delegated to Congress over commerce but also exerts a power as to a purely local matter to which the federal authority does not extend. The far reaching result of upholding the act cannot be more plainly indicated than by pointing out that if Congress can thus regulate matters entrusted to local authority by prohibition of the movement of commodities in interstate commerce, all freedom of commerce will be at an end, and the power of the states over local matters may be eliminated, and thus our system of government be practically destroyed.”[9]

This however was a very close case – just a five to four majority opinion. Justice Oliver Wendell Holmes wrote the four-person dissenting opinion. While he admitted that Congress could not directly regulate child labor, he thought it could do so indirectly in the way Congress tried. In other words, he would exalt form over substance in favor of expanding federal authority in the nature of general police powers so long as Congress performed just the right fancy footwork. Said he:

“[Congress] may carry out its views of public policy whatever indirect effect they may have upon the activities of the States.”[10]

But what would be the logical extension of that proposition? What if Congress passed a law banning all interstate and international commerce with a particular state until it passed a state constitutional amendment disbanding the entire state government and transferring all of its prior powers over to the national Congress? Is there any question how the framers would have viewed such a proposed application of the commerce clause?

The majority opinion best comports with the original intents of the framers. There were prior cases where the Court held federal regulation to be constitutional under the commerce clause when it came to interstate lotteries[11], the Pure Food and Drug Act[12] banning the interstate transportation of impure foods and drugs, and the White Slave Traffic Act[13] banning the interstate transportation of women for the purpose of prostitution.

The majority distinguished these cases by saying: “In each of these instances the use of interstate transportation was necessary to the accomplishment of harmful results.” In other words, the goods made with child labor did not cause any harm in the states into which they were transported in contrast with the foregoing examples. Whatever harm occurred, happened solely within the state of manufacture making it a state, rather than a federal, regulatory issue and the majority refused to allow the federal government to take indirect regulatory control over such matters through the commerce clause.

Despite the strong dissenting opinion in Hammer v Dagenhart, the majority rule held for almost twenty more years. The Court continued making distinctions between direct and indirect effects on interstate commerce and between production (considered local in nature and outside the federal commerce authority) and interstate commerce (considered national in nature thus falling within federal authority.) What changed things radically was the advent of the Great Depression.

The Great Depression, Franklin Delano Roosevelt and the New Deal

Hamilton observed:

"Nothing is more common than for a free people, in times of heat and violence, to gratify momentary passions, by letting into the government, principles and precedents which afterwards prove fatal to themselves."[14]

The Great Depression was such a time. There was massive unemployment, an economy stuck in reverse, bank closings, foreclosures, etc. There was great suffering among the people. They cried out to be saved and Franklin D. Roosevelt said that he could deliver them through the power of the federal government. Once elected President, he recommended a lot of federal legislation to respond to the crisis and Congress, by and large, complied. The only problem, from his perspective, was that the Supreme Court found constitutional problems with that legislation.

Consistent with the Hammer v. Dagenhart rationale, in Schechter Poultry Corp. v. U.S.[15](1935), the Court held as unconstitutional the National Industrial Recovery Act seeking to establish codes of fair competition covering wages, hours, employment practices, working conditions, and methods of competition.

In the 1936 case of Carter v. Carter Coal Co.[16], the Court likewise struck down the Bitumenous Coal Conservation Act which sought to stabilize the coal industry through regulations on prices, methods of competition, and labor relations; etc.

In that case, the Court emphasized that we must remember “fundamental principles....The ruling and firmly established principle is that the powers which the general government may exercise are only those specifically enumerated in the Constitution, and such implied powers as are necessary and proper to carry into effect the enumerated powers.”[17]

The General Welfare Clause

Concerning the General Welfare clause of Article 1, Section 8, the Carter Court went on to say:

“Thus, it may be said that to a constitutional end many ways are open; but to an end not within the terms of the Constitution, all ways are closed.

“The proposition, often advanced as often discredited, that the power of the federal government inherently extends to purposes affecting the Nation as a whole with which the states severally cannot deal or cannot adequately deal, and the related notion that Congress, entirely apart from those powers delegated by the Constitution, may enact laws to promote the general welfare, have never been accepted but always definitely rejected by this court. * * * In the Framers Convention, the proposal to confer a general power akin to that just discussed was included in Mr. Randolph’s resolutions, the sixth of which, among other things, declared that the National Legislature ought to enjoy the legislative rights vested in Congress by the Confederation, and ‘moreover to legislate in all cases to which the separate States are incompetent, or in which the harmony of the United States may be interrupted by the exercise of individual Legislation.’ The convention, however, declined to confer upon Congress power in such general terms; instead of which it carefully limited the powers which it thought wise to entrust to Congress by specifying them, thereby denying all others not granted expressly or by necessary implication. It made no grant of authority to Congress to legislate substantively for the general welfare * * * and no such authority exists, save as the general welfare may be promoted by the exercise of powers which are granted.”[18]