The Upside-Down Constitution

  • Title:

    The Upside-Down Constitution
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    9.2 x 6.1 x 0.6 inches
  • 528 Paperback pages
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As you can see, The Upside-Down Constitution is a very long book. It's also a somewhat complex book. Its topic is the constitutional structure and, in particular, its federal structure. Federalism, of course, figures prominently in current controversies, from ObamaCare to immigration policy. But the book doesn't address those raging debates in any detail. Instead, it wanders far from the ground of our day-to-day constitutional debate and even from familiar landmark cases. On one side, the book engages grand constitutional theory and political economy-the Calculus of Consent, and that sort of thing. On the other side, it tracks the history of legal doctrines on corporations, railroad bonds, public debt, state taxation, and federal jurisdiction. (There's very little in here about God, guns, and gays.) Nor will your patience be rewarded with a compelling political or litigation program to repair our tattered constitutional fabric: I have no such program. It's obvious why you should buy the book: I want the royalties. But why you should you read it?

The reason, I think, is that there is something very wrong with the way we've come to think about federalism and the Constitution. By "we," I mean not only the faculty of Yale Law School but also originalists-and, more broadly, the public debate. Let me give you three examples to illustrate our federalism confusions.

First example: conservatives like to think that more federalism-decentralization, "devolution"-means smaller, more accountable and responsible government. But try telling that to business people who produce stuff and want to sell it in interstate commerce: to them, "federalism" means overzealous state attorneys general, hellhole jurisdictions, and regulation by fifty fiefdoms. Less federalism, for them, would be better. So who is right? And, did the Founders really give us a "federalism" that creates a permanent conflict between production values and limited government-or have we made a mistake somewhere along the way?

Second example: for as long as I can remember, conservatives have agitated against "unfunded mandates." Washington, they say, lures the states into "cooperative" fiscal programs but then fails to fund them, and this destroys the federal balance. But then, look at the states' briefs on ObamaCare's Medicaid expansion: their argument is that Medicaid is so generously funded-under ObamaCare, at 100 cents on the dollar-that the states can't say "no." So now it's the funded "mandate" that destroys the federalism balance. Which is it to be?

My third example isn't really an example but the confusion itself. We are constantly told that we must protect or restore federalism's constitutional "balance." My question especially to originalists is, where do you get this?  Lots of federal constitutions have an equilibrating rule; ours very conspicuously and deliberately doesn't. And note how senseless the "federalism as balance" talk is. Let's stipulate that the feds have destroyed the balance by regulating a ton of stuff that belongs to the states: could we make it up to the states and restore the balance by delegating, say, the power to declare war to states? That's not as crazy as it may sound. It's how the EU works. And even here, we've already given state attorneys general the power to tax and regulate the commerce of the United States on a national basis; so what's one more power among friends? If ultimately it is crazy, that's because our constitutional federalism designed as a balance. It's designed as a structure that allocates powers and establishes decision rules, and that's a very different institutional model. The Constitution has nothing to say about how much federalism there has to be-how centralized or decentralized the system must be (provided it remains federal in a very minimal sense). However, the Constitution, rightly understood, has a lot to say about the kind of federalism we are supposed to have. Our problem is that we no longer have that federalism; in fact, the constitutional structure has been turned upside-down. This book tries to explain how that happened and to excavate the Constitution's right-side-up structure. In my remaining few minutes, I'll give you the 30,000-foot overflight version.

I start where everyone starts-with the Federalist; and I start where Publius starts. Some form of federalism is a foregone conclusion; the question, in a constitutional moment of "reflection and choice," is how to organize it, and to what ends. The best answer is to organize and understand federalism in continuity with the rest of the constitutional program: make democratic politics possible, and guard against its dangers. Curb the danger of government monopoly; provide protection against the violence and abuse of faction; and enhance political stability and guard against what Madison called a "mutable government."

The federalism that answers to those demands is what political economists call competitive federalism. You try to limit the central government to the provision of genuinely national goods (such as defense) and, with respect to all else, let states govern themselves and compete for productive citizens and their talents and assets. If one state government exploits its citizens, they can move elsewhere. Mobility will constrain government, perhaps more effectively than voting. "Exit" complements "voice."

The basic structural features of this federalism conform to Madison's "compound republic." The central government's powers are "federal"-that is, enumerated and limited; otherwise, there'd be nothing for states to compete over. But this is not the only condition, nor even the most important. A second condition  is what Madison called the "national operation" of the federal government's powers: it must tax and regulate citizens directly, not through the states. Otherwise, state and federal politicians will "cooperate"-usually, for the purpose of obscuring political responsibility for the costs and ill results. (I'll come back to this.) A third condition is a federal government with sufficient authority and incentives to enforce competitive conditions among states-open borders, coupled with prohibitions against "extraterritorial" state action (that is, state attempts to tax and regulate other states' citizens).

The Upside-Down Constitution maps this conceptual framework onto the Constitution- limited and enumerated powers, the Supremacy Clause, the open-economy protections of the Privileges and Immunities Clause and of Article I, Section 10. And it tracks the trajectory of judicial doctrines under those clauses over the nineteenth century. I'm hoping that the discussion will help to correct two widespread and fateful misunderstandings.

First, it's a horrid mistake to think that competitive federalism necessarily means a small central government and very limited national powers. It may have that result. But if you have to fight a big war or establish institutions to guarantee the full faith and credit of the United States, the national government won't be so small. Moreover, if states routinely violate the competitive order, you have to have a way to bring them into line. You need a Supremacy Clause with teeth: see Martin v. Hunter's Lessee. You need an expansive dormant Commerce Clause: see Gibbons v. Ogden. You need a federal common law to ensure the integrity of credit and commercial paper throughout the United States: see Swift v. Tyson. The landmark cases suggest the theme: competitive federalism requires a confident Supreme Court, with jurists who comprehend that the Constitution makes the commerce of the United States their business.

Second, it's an even worse mistake to think that states "as states"-that is, political elites and their hangers-on-will defend competitive, constitutional federalism unless the federal government corrupts or overwhelms them. Usually, they'll do the opposite. Think about it: competitive federalism disciplines state governments. If states over-tax or over-regulate, the victims move, and that's the last thing the politicians want. Thus, what states want is an unlimited national government that stands ready to mow down competition in any dimension. However, a federal government that is sufficiently powerful to protect your surplus is also sufficiently powerful to wipe it out, and you'll want to guard against that eventuality. For example, you'll want a federal tax monopoly coupled with a guarantee that the money will flow back to you. You'll want a federal power to blanket the sky with minimum regulatory standards-provided you get to play a role in administering the regulatory scheme and, moreover, retain power to regulate on top of the federal scheme. And, you'll want a power to tax and regulate people in other states. Unlike your own citizens, those people can't vote you out of office, and they can't run away.

Lo, there you have the New Deal Constitution and its upside-down federalism. Enumerated powers become limitless. (No state ever resisted that development. All the famous New Deal cases were brought by private, marginal producers, like the Schechter brothers. The states sided with the feds.) The feds get into the business of collecting taxes from citizens and sending the money to the states' political elites, and there's no constitutional defense. Federal preemption-that is, the doctrine that governs when and to what extent federal law trumps state law-treats the Supremacy Clause as suspect, to make sure that after the expansion of federal authority, the states get to regulate on top of it. And states are liberated to exploit the commerce of the United States fifty times over. That's the point of the disappearance of the Contract Clause, the Full Faith and Credit Clause, and the Compact Clause. Above all, it's the point of Erie Railroad-a case that's foundational for the New Deal Constitution and to my mind one of the Supreme Court's biggest unforced errors ever. Let me emphasize two unorthodox conclusions from the book's extensive discussion.

First: contrary to federalism folklore and especially conservative folklore, the New Deal Constitution was not a centralizing revolution. Its point and effect was to expand the power of government at all levels. Our constitutional doctrines reflect that. So, increasingly, does our federalism on the ground. State and local taxes as a percentage of GDP are now at 15 percent, three times the ratio in 1950. States collect an ever-larger share of their revenues from the federal government. And while no business enterprise or lawyer worried about state regulators or AGs in 1960 or so, they do worry now. Never in American history have states exerted so much power over the commerce of the United States, or claimed a greater share of national production. The standard story of progressive centralization is simply a crock.

Second: once you view federalism through this prism, it becomes easier to appreciate the ideological connotations of "federalism as balance." The notion was invented, quite literally, by Felix Frankfurter, whose point was to liberate all government institutions from constitutional shackles. The thrust of his program wasn't more or less federalism. It was the migration from a constitutional, competitive federalism that disciplined government at all levels to a federalism-"cooperative" federalism, he called it-that empowers government at all levels and that serves as an engine for the growth of government. Every time you say "balance," that's the program you sign on to. The only way out is to recognize that it's the kind of federalism, not the degree of centralization, that matters.

Suppose this is all true: what follows? For the most part, The Upside-Down Constitution is about explanation, not prescription. But I make no bones about my conviction that a reversion to a more constitutional, competitive federalism would be a good thing. What would that take?

There's a conservative streak that says, it's all about ideas and values. The Progressives wrecked the Constitution, and their modern-day heirs want to complete the project of turning us into Europe. What we have to do is to return to Aristotle, or John Locke, or our Judaeo-Christian heritage, or whatever else might embody our "values." Maybe, but I can't think like that. What I'm trying to do is to think like a political economist (including the greatest of them all, Alexander Hamilton). What that inquiry tells me is that our constitutional inversion, at least so far as federalism is concerned, isn't just an ideas thing. Barring very unusual conditions, competitive federalism is inherently unstable. The junior governments will use their agency in federal institutions to lock themselves into federally sponsored tax and regulatory cartels. Those arrangements are self-reinforcing. If you want to know what they look like at their climax, Obamacare and Dodd-Frank are good places to start. If you want to see cartel federalism in an advanced state of decay and fiscal ruin, Argentina makes a fine case study. The question is whether our federalism's pathological tendencies have any limits. I can think of two.

One, our fragmented regulatory system have begun to drag on the economy. This matters because in a global economy, the rule of law acts as a factor endowment. It's the only comparative and competitive advantage on which we can hope to rely, and that recognition may prompt a realization, in Congress and on the Court, that there's a real cost to "balancing" federal meddling with state exploitation.

Two, our federalism's tax cartels have reached their limits. State and local governments can no longer rely on ever-increasing federal transfers, because the feds are broke. We'll have to renegotiate our federalism; the question is how and on what terms.

Here's where ideas come in after all, and the central idea is how we think about the Constitution and the Supreme Court. It's striking that the text of the Constitution provided very little resistance to federalism's inversion. The conservative mantra is that the New Deal trashed the Constitution by trashing the text-for example, by expanding "commerce" beyond all recognition. Shockingly, I believe that Wickard v. Filburn was rightly decided. But even if that's wrong, you can change-and the Court did change-the Constitution's political economy and architecture by not enforcing  pro-competitive norms (such as the Contract Clause, the Full Faith and Credit Clause, and the Compact Clause); or by manipulating infra-constitutional rules of decision, see Erie Railroad. And if the bare-bones text offered little defense for the right kind of federalism at its demise, it's hard to see how it can impel its reconstruction.

 For this reason, The Upside-Down Constitution ends in a plea to re-think originalism, or rather to broaden it. You can't get federalism right unless you get the structure right; and you can't get the structure right without some political, normative theory of what the Constitution is supposed to do. At the same time, you need a very elaborate set of abstract-concrete norms that make a deliberately minimalist Constitution work over the long haul, under vastly changed conditions and with an eye on what John Marshall called "the varying crises of human affairs." Textual analysis can't possibly do all the work. You need workable, common-law-like doctrines.

Them's fighting words to originalists. Once you engage political theory, they say, there'll be more than one (Mike Greve's, and Bruce Ackerman's), and the judges will go ape. And once you allow common law-like doctrine, the text will disappear and again, judges will make it all up. I recognize the force of these apprehensions. But I think it's now time to go beyond them. If the Founders had anticipated a modern-day originalism, they would never have written a minimalist Constitution or entrusted so much power to the Court. If John Marshall had subscribed to that jurisprudence, there would not be a United States of America. And if you think that legal positivism and interpretive Calvinism will protect the Constitution, think again: the Constitution will get further and further away from you-not only, or even primarily, because your opponents will put their spin on the document, but mostly because you are refusing to do the work that the Constitution so obviously demands.

The Upside-Down Constitution tries to show why the work is worth doing, and why I will not cede this constitutional ground.

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