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Congressional Snack Trading Helps Cut Across Party Lines

Congressional Snack Trading Helps Cut Across Party Lines


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Fritos, Skittles, and Little Debbie snack cakes are the unspoken currency of Capitol Hill

Congressmen reach across the aisle… for snacks.

There’s a secretive and well-protected black market happening right inside our nation’s capital, and what gets traded has the power to cut across state and party lines, reports Politico.

This black market, used to help government aides “make friends, forge informal alliances and, ultimately, help keep Capitol Hill functioning” is a “covert snack economy” that helps Capitol Hill staffers get what they’re looking for: a bag of Skittles in exchange for a bag of Fritos, for example.

Food and beverage companies, as well as farm cooperatives, donate snacks to Capitol Hill, though some offices reportedly do keep specific snacks on hand at all times. Receiving snacks is permitted under ethics guidelines and although staffers “aren’t supposed to directly ask suppliers for their snacks to be replenished, they tend to not run out for long.”

Senator Rand Paul reportedly keeps his office stocked with Pop-Tarts and Nutri-Grain bars, while Kirsten Gillibrand has the Chobani yogurt, which makes good currency for heath-conscious staffers.

“I hesitatingly slink into a New York office and awkwardly make small talk until I ask if I can take a yogurt,” an aide from another delegation told Politco.

Amongst junior staffers, Politico reports the existence of “an elaborate barter system” where Pepsi is traded for M&Ms and Coke is exchanged for Craisins. What’s more, the most politically savvy snackers have compiled something akin to a “Capitol Hill snack bible.”

It’s a good strategy to be well-stocked “at 4 p.m., when you need that sugar buzz,” said a spokesman for Senator John Boozman.

For the latest food and drink updates, visit our Food News page.

Karen Lo is an associate editor at The Daily Meal. Follow her on Twitter @appleplexy.


How American Politics Went Insane

It happened gradually—and until the U.S. figures out how to treat the problem, it will only get worse.

It’s 2020, four years from now. The campaign is under way to succeed the president, who is retiring after a single wretched term. Voters are angrier than ever—at politicians, at compromisers, at the establishment. Congress and the White House seem incapable of working together on anything, even when their interests align. With lawmaking at a standstill, the president’s use of executive orders and regulatory discretion has reached a level that Congress views as dictatorial—not that Congress can do anything about it, except file lawsuits that the divided Supreme Court, its three vacancies unfilled, has been unable to resolve.

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On Capitol Hill, Speaker Paul Ryan resigned after proving unable to pass a budget, or much else. The House burned through two more speakers and one “acting” speaker, a job invented following four speakerless months. The Senate, meanwhile, is tied in knots by wannabe presidents and aspiring talk-show hosts, who use the chamber as a social-media platform to build their brands by obstructing—well, everything. The Defense Department is among hundreds of agencies that have not been reauthorized, the government has shut down three times, and, yes, it finally happened: The United States briefly defaulted on the national debt, precipitating a market collapse and an economic downturn. No one wanted that outcome, but no one was able to prevent it.

As the presidential primaries unfold, Kanye West is leading a fractured field of Democrats. The Republican front-runner is Phil Robertson, of Duck Dynasty fame. Elected governor of Louisiana only a few months ago, he is promising to defy the Washington establishment by never trimming his beard. Party elders have given up all pretense of being more than spectators, and most of the candidates have given up all pretense of party loyalty. On the debate stages, and everywhere else, anything goes.

I could continue, but you get the gist. Yes, the political future I’ve described is unreal. But it is also a linear extrapolation of several trends on vivid display right now. Astonishingly, the 2016 Republican presidential race has been dominated by a candidate who is not, in any meaningful sense, a Republican. According to registration records, since 1987 Donald Trump has been a Republican, then an independent, then a Democrat, then a Republican, then “I do not wish to enroll in a party,” then a Republican he has donated to both parties he has shown loyalty to and affinity for neither. The second-place candidate, Republican Senator Ted Cruz, built his brand by tearing down his party’s: slurring the Senate Republican leader, railing against the Republican establishment, and closing the government as a career move.

Former presidential hopeful Jeb Bush called Donald Trump “a chaos candidate.” Unfortunately for Bush, Trump’s supporters didn’t mind. They liked that about him. (Charles Rex Arbogast / AP)

The Republicans’ noisy breakdown has been echoed eerily, albeit less loudly, on the Democratic side, where, after the early primaries, one of the two remaining contestants for the nomination was not, in any meaningful sense, a Democrat. Senator Bernie Sanders was an independent who switched to nominal Democratic affiliation on the day he filed for the New Hampshire primary, only three months before that election. He surged into second place by winning independents while losing Democrats. If it had been up to Democrats to choose their party’s nominee, Sanders’s bid would have collapsed after Super Tuesday. In their various ways, Trump, Cruz, and Sanders are demonstrating a new principle: The political parties no longer have either intelligible boundaries or enforceable norms, and, as a result, renegade political behavior pays.

Political disintegration plagues Congress, too. House Republicans barely managed to elect a speaker last year. Congress did agree in the fall on a budget framework intended to keep the government open through the election—a signal accomplishment, by today’s low standards—but by April, hard-line conservatives had revoked the deal, thereby humiliating the new speaker and potentially causing another shutdown crisis this fall. As of this writing, it’s not clear whether the hard-liners will push to the brink, but the bigger point is this: If they do, there is not much that party leaders can do about it.

And here is the still bigger point: The very term party leaders has become an anachronism. Although Capitol Hill and the campaign trail are miles apart, the breakdown in order in both places reflects the underlying reality that there no longer is any such thing as a party leader. There are only individual actors, pursuing their own political interests and ideological missions willy-nilly, like excited gas molecules in an overheated balloon.

No wonder Paul Ryan, taking the gavel as the new (and reluctant) House speaker in October, complained that the American people “look at Washington, and all they see is chaos. What a relief to them it would be if we finally got our act together.” No one seemed inclined to disagree. Nor was there much argument two months later when Jeb Bush, his presidential campaign sinking, used the c-word in a different but equally apt context. Donald Trump, he said, is “a chaos candidate, and he’d be a chaos president.” Unfortunately for Bush, Trump’s supporters didn’t mind. They liked that about him.

In their different ways, Donald Trump and Bernie Sanders have demonstrated that the major political parties no longer have intelligible boundaries or enforceable norms. (Charlie Neibergall / AP)

Trump, however, didn’t cause the chaos. The chaos caused Trump. What we are seeing is not a temporary spasm of chaos but a chaos syndrome.

Chaos syndrome is a chronic decline in the political system’s capacity for self-organization. It begins with the weakening of the institutions and brokers—political parties, career politicians, and congressional leaders and committees—that have historically held politicians accountable to one another and prevented everyone in the system from pursuing naked self-interest all the time. As these intermediaries’ influence fades, politicians, activists, and voters all become more individualistic and unaccountable. The system atomizes. Chaos becomes the new normal—both in campaigns and in the government itself.

Our intricate, informal system of political intermediation, which took many decades to build, did not commit suicide or die of old age we reformed it to death. For decades, well-meaning political reformers have attacked intermediaries as corrupt, undemocratic, unnecessary, or (usually) all of the above. Americans have been busy demonizing and disempowering political professionals and parties, which is like spending decades abusing and attacking your own immune system. Eventually, you will get sick.

The disorder has other causes, too: developments such as ideological polarization, the rise of social media, and the radicalization of the Republican base. But chaos syndrome compounds the effects of those developments, by impeding the task of organizing to counteract them. Insurgencies in presidential races and on Capitol Hill are nothing new, and they are not necessarily bad, as long as the governing process can accommodate them. Years before the Senate had to cope with Ted Cruz, it had to cope with Jesse Helms. The difference is that Cruz shut down the government, which Helms could not have done had he even imagined trying.

Like many disorders, chaos syndrome is self-reinforcing. It causes governmental dysfunction, which fuels public anger, which incites political disruption, which causes yet more governmental dysfunction. Reversing the spiral will require understanding it. Consider, then, the etiology of a political disease: the immune system that defended the body politic for two centuries the gradual dismantling of that immune system the emergence of pathogens capable of exploiting the new vulnerability the symptoms of the disorder and, finally, its prognosis and treatment.

Immunity

Why the political class is a good thing

The Founders knew all too well about chaos. It was the condition that brought them together in 1787 under the Articles of Confederation. The central government had too few powers and powers of the wrong kinds, so they gave it more powers, and also multiple power centers. The core idea of the Constitution was to restrain ambition and excess by forcing competing powers and factions to bargain and compromise.

The Framers worried about demagogic excess and populist caprice, so they created buffers and gatekeepers between voters and the government. Only one chamber, the House of Representatives, would be directly elected. A radical who wanted to get into the Senate would need to get past the state legislature, which selected senators a usurper who wanted to seize the presidency would need to get past the Electoral College, a convocation of elders who chose the president and so on.

They were visionaries, those men in Philadelphia, but they could not foresee everything, and they made a serious omission. Unlike the British parliamentary system, the Constitution makes no provision for holding politicians accountable to one another. A rogue member of Congress can’t be “fired” by his party leaders, as a member of Parliament can a renegade president cannot be evicted in a vote of no confidence, as a British prime minister can. By and large, American politicians are independent operators, and they became even more independent when later reforms, in the 19th and early 20th centuries, neutered the Electoral College and established direct election to the Senate.

Senate Majority Leader Mitch McConnell proved unable to rein in Ted Cruz. (Tom Williams / CQ Roll Call / Getty)

The Constitution makes no mention of many of the essential political structures that we take for granted, such as political parties and congressional committees. If the Constitution were all we had, politicians would be incapable of getting organized to accomplish even routine tasks. Every day, for every bill or compromise, they would have to start from scratch, rounding up hundreds of individual politicians and answering to thousands of squabbling constituencies and millions of voters. By itself, the Constitution is a recipe for chaos.

So Americans developed a second, unwritten constitution. Beginning in the 1790s, politicians sorted themselves into parties. In the 1830s, under Andrew Jackson and Martin Van Buren, the parties established patronage machines and grass-roots bases. The machines and parties used rewards and the occasional punishment to encourage politicians to work together. Meanwhile, Congress developed its seniority and committee systems, rewarding reliability and establishing cooperative routines. Parties, leaders, machines, and congressional hierarchies built densely woven incentive structures that bound politicians into coherent teams. Personal alliances, financial contributions, promotions and prestige, political perks, pork-barrel spending, endorsements, and sometimes a trip to the woodshed or the wilderness: All of those incentives and others, including some of dubious respectability, came into play. If the Constitution was the system’s DNA, the parties and machines and political brokers were its RNA, translating the Founders’ bare-bones framework into dynamic organizations and thus converting conflict into action.

The informal constitution’s intermediaries have many names and faces: state and national party committees, county party chairs, congressional subcommittees, leadership pac s, convention delegates, bundlers, and countless more. For purposes of this essay, I’ll call them all middlemen, because all of them mediated between disorganized swarms of politicians and disorganized swarms of voters, thereby performing the indispensable task that the great political scientist James Q. Wilson called “assembling power in the formal government.”

The middlemen could be undemocratic, high-handed, devious, secretive. But they had one great virtue: They brought order from chaos. They encouraged coordination, interdependency, and mutual accountability. They discouraged solipsistic and antisocial political behavior. A loyal, time-serving member of Congress could expect easy renomination, financial help, promotion through the ranks of committees and leadership jobs, and a new airport or research center for his district. A turncoat or troublemaker, by contrast, could expect to encounter ostracism, marginalization, and difficulties with fund-raising. The system was hierarchical, but it was not authoritarian. Even the lowliest precinct walker or officeholder had a role and a voice and could expect a reward for loyalty even the highest party boss had to cater to multiple constituencies and fend off periodic challengers.

House Speaker Paul Ryan has already faced a rebellion. The reality is that there no longer is any such thing as a “party leader.” (Cliff Owen / AP)

Parties, machines, and hacks may not have been pretty, but at their best they did their job so well that the country forgot why it needed them. Politics seemed almost to organize itself, but only because the middlemen recruited and nurtured political talent, vetted candidates for competence and loyalty, gathered and dispensed money, built bases of donors and supporters, forged coalitions, bought off antagonists, mediated disputes, brokered compromises, and greased the skids to turn those compromises into law. Though sometimes arrogant, middlemen were not generally elitist. They excelled at organizing and representing unsophisticated voters, as Tammany Hall famously did for the working-class Irish of New York, to the horror of many Progressives who viewed the Irish working class as unfit to govern or even to vote.

The old machines were inclusive only by the standards of their day, of course. They were bad on race—but then, so were Progressives such as Woodrow Wilson. The more intrinsic hazard with middlemen and machines is the ever-present potential for corruption, which is a real problem. On the other hand, overreacting to the threat of corruption by stamping out influence-peddling (as distinct from bribery and extortion) is just as harmful. Political contributions, for example, look unseemly, but they play a vital role as political bonding agents. When a party raised a soft-money donation from a millionaire and used it to support a candidate’s campaign (a common practice until the 2002 McCain-Feingold law banned it in federal elections), the exchange of favors tied a knot of mutual accountability that linked candidate, party, and donor together and forced each to think about the interests of the others. Such transactions may not have comported with the Platonic ideal of democracy, but in the real world they did much to stabilize the system and discourage selfish behavior.

Middlemen have a characteristic that is essential in politics: They stick around. Because careerists and hacks make their living off the system, they have a stake in assembling durable coalitions, in retaining power over time, and in keeping the government in functioning order. Slash-and-burn protests and quixotic ideological crusades are luxuries they can’t afford. Insurgents and renegades have a role, which is to jolt the system with new energy and ideas but professionals also have a role, which is to safely absorb the energy that insurgents unleash. Think of them as analogous to antibodies and white blood cells, establishing and patrolling the barriers between the body politic and would-be hijackers on the outside. As with biology, so with politics: When the immune system works, it is largely invisible. Only when it breaks down do we become aware of its importance.

Vulnerability

How the war on middlemen left America defenseless

Beginning early in the 20th century, and continuing right up to the present, reformers and the public turned against every aspect of insider politics: professional politicians, closed-door negotiations, personal favors, party bosses, financial ties, all of it. Progressives accused middlemen of subverting the public interest populists accused them of obstructing the people’s will conservatives accused them of protecting and expanding big government.

To some extent, the reformers were right. They had good intentions and valid complaints. Back in the 1970s, as a teenager in the post-Watergate era, I was on their side. Why allow politicians ever to meet behind closed doors? Sunshine is the best disinfectant! Why allow private money to buy favors and distort policy making? Ban it and use Treasury funds to finance elections! It was easy, in those days, to see that there was dirty water in the tub. What was not so evident was the reason the water was dirty, which was the baby. So we started reforming.

We reformed the nominating process. The use of primary elections instead of conventions, caucuses, and other insider-dominated processes dates to the era of Theodore Roosevelt, but primary elections and party influence coexisted through the 1960s especially in congressional and state races, party leaders had many ways to influence nominations and vet candidates. According to Jon Meacham, in his biography of George H. W. Bush, here is how Bush’s father, Prescott Bush, got started in politics: “Samuel F. Pryor, a top Pan Am executive and a mover in Connecticut politics, called Prescott to ask whether Bush might like to run for Congress. ‘If you would,’ Pryor said, ‘I think we can assure you that you’ll be the nominee.’ ” Today, party insiders can still jawbone a little bit, but, as the 2016 presidential race has made all too clear, there is startlingly little they can do to influence the nominating process.

Primary races now tend to be dominated by highly motivated extremists and interest groups, with the perverse result of leaving moderates and broader, less well-organized constituencies underrepresented. According to the Pew Research Center, in the first 12 presidential-primary contests of 2016, only 17 percent of eligible voters participated in Republican primaries, and only 12 percent in Democratic primaries. In other words, Donald Trump seized the lead in the primary process by winning a mere plurality of a mere fraction of the electorate. In off-year congressional primaries, when turnout is even lower, it’s even easier for the tail to wag the dog. In the 2010 Delaware Senate race, Christine “I am not a witch” O’Donnell secured the Republican nomination by winning just a sixth of the state’s registered Republicans, thereby handing a competitive seat to the Democrats. Surveying congressional primaries for a 2014 Brookings Institution report, the journalists Jill Lawrence and Walter Shapiro observed: “The universe of those who actually cast primary ballots is small and hyper-partisan, and rewards candidates who hew to ideological orthodoxy.” By contrast, party hacks tend to shop for candidates who exert broad appeal in a general election and who will sustain and build the party’s brand, so they generally lean toward relative moderates and team players.

Moreover, recent research by the political scientists Jamie L. Carson and Jason M. Roberts finds that party leaders of yore did a better job of encouraging qualified mainstream candidates to challenge incumbents. “In congressional districts across the country, party leaders were able to carefully select candidates who would contribute to the collective good of the ticket,” Carson and Roberts write in their 2013 book, Ambition, Competition, and Electoral Reform: The Politics of Congressional Elections Across Time. “This led to a plentiful supply of quality candidates willing to enter races, since the potential costs of running and losing were largely underwritten by the party organization.” The switch to direct primaries, in which contenders generally self-recruit and succeed or fail on their own account, has produced more oddball and extreme challengers and thereby made general elections less competitive. “A series of reforms that were intended to create more open and less ‘insider’ dominated elections actually produced more entrenched politicians,” Carson and Roberts write. The paradoxical result is that members of Congress today are simultaneously less responsive to mainstream interests and harder to dislodge.

Was the switch to direct public nomination a net benefit or drawback? The answer to that question is subjective. But one effect is not in doubt: Institutionalists have less power than ever before to protect loyalists who play well with other politicians, or who take a tough congressional vote for the team, or who dare to cross single-issue voters and interests and they have little capacity to fend off insurgents who owe nothing to anybody. Walled safely inside their gerrymandered districts, incumbents are insulated from general-election challenges that might pull them toward the political center, but they are perpetually vulnerable to primary challenges from extremists who pull them toward the fringes. Everyone worries about being the next Eric Cantor, the Republican House majority leader who, in a shocking upset, lost to an unknown Tea Partier in his 2014 primary. Legislators are scared of voting for anything that might increase the odds of a primary challenge, which is one reason it is so hard to raise the debt limit or pass a budget.

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In March, when Republican Senator Jerry Moran of Kansas told a Rotary Club meeting that he thought President Obama’s Supreme Court nominee deserved a Senate hearing, the Tea Party Patriots immediately responded with what has become activists’ go-to threat: “It’s this kind of outrageous behavior that leads Tea Party Patriots Citizens Fund activists and supporters to think seriously about encouraging Dr. Milton Wolf”—a physician and Tea Party activist—“to run against Sen. Moran in the August GOP primary.” (Moran hastened to issue a statement saying that he would oppose Obama’s nominee regardless.) Purist issue groups often have the whip hand now, and unlike the elected bosses of yore, they are accountable only to themselves and are able merely to prevent legislative action, not to organize it.

We reformed political money. Starting in the 1970s, large-dollar donations to candidates and parties were subject to a tightening web of regulations. The idea was to reduce corruption (or its appearance) and curtail the power of special interests—certainly laudable goals. Campaign-finance rules did stop some egregious transactions, but at a cost: Instead of eliminating money from politics (which is impossible), the rules diverted much of it to private channels. Whereas the parties themselves were once largely responsible for raising and spending political money, in their place has arisen a burgeoning ecology of deep-pocketed donors, super pac s, 501(c)(4)s, and so-called 527 groups that now spend hundreds of millions of dollars each cycle. The result has been the creation of an array of private political machines across the country: for instance, the Koch brothers’ Americans for Prosperity and Karl Rove’s American Crossroads on the right, and Tom Steyer’s NextGen Climate on the left.

Private groups are much harder to regulate, less transparent, and less accountable than are the parties and candidates, who do, at the end of the day, have to face the voters. Because they thrive on purism, protest, and parochialism, the outside groups are driving politics toward polarization, extremism, and short-term gain. “You may win or lose, but at least you have been intellectually consistent—your principles haven’t been defeated,” an official with Americans for Prosperity told The Economist in October 2014. The parties, despite being called to judgment by voters for their performance, face all kinds of constraints and regulations that the private groups don’t, tilting the playing field against them. “The internal conversation we’ve been having is ‘How do we keep state parties alive?’ ” the director of a mountain-state Democratic Party organization told me and Raymond J. La Raja recently for a Brookings Institution report. Republicans told us the same story. “We believe we are fighting for our lives in the current legal and judicial framework, and the super pac s and (c)(4)s really present a direct threat to the state parties’ existence,” a southern state’s Republican Party director said.

The state parties also told us they can’t begin to match the advertising money flowing from outside groups and candidates. Weakened by regulations and resource constraints, they have been reduced to spectators, while candidates and groups form circular firing squads and alienate voters. At the national level, the situation is even more chaotic—and ripe for exploitation by a savvy demagogue who can make himself heard above the din, as Donald Trump has so shrewdly proved.

We reformed Congress. For a long time, seniority ruled on Capitol Hill. To exercise power, you had to wait for years, and chairs ran their committees like fiefs. It was an arrangement that hardly seemed either meritocratic or democratic. Starting with a rebellion by the liberal post-Watergate class in the ’70s, and then accelerating with the rise of Newt Gingrich and his conservative revolutionaries in the ’90s, the seniority and committee systems came under attack and withered. Power on the Hill has flowed both up to a few top leaders and down to individual members. Unfortunately, the reformers overlooked something important: Seniority and committee spots rewarded teamwork and loyalty, they ensured that people at the top were experienced, and they harnessed hundreds of middle-ranking members of Congress to the tasks of legislating. Compounding the problem, Gingrich’s Republican revolutionaries, eager to prove their anti-Washington bona fides, cut committee staffs by a third, further diminishing Congress’s institutional horsepower.

Congress’s attempts to replace hierarchies and middlemen with top-down diktat and ad hoc working groups have mostly failed. More than perhaps ever before, Congress today is a collection of individual entrepreneurs and pressure groups. In the House, disintermediation has shifted the balance of power toward a small but cohesive minority of conservative Freedom Caucus members who think nothing of wielding their power against their own leaders. Last year, as House Republicans struggled to agree on a new speaker, the conservatives did not blush at demanding “the right to oppose their leaders and vote down legislation without repercussions,” as Time magazine reported. In the Senate, Ted Cruz made himself a leading presidential contender by engaging in debt-limit brinkmanship and deriding the party’s leadership, going so far as to call Majority Leader Mitch McConnell a liar on the Senate floor. “The rhetoric—and confrontational stance—are classic Cruz,” wrote Burgess Everett in Politico last October: “Stake out a position to the right of where his leaders will end up, criticize them for ignoring him and conservative grass-roots voters, then use the ensuing internecine fight to stoke his presidential bid.” No wonder his colleagues detest him. But Cruz was doing what makes sense in an age of maximal political individualism, and we can safely bet that his success will inspire imitation.

We reformed closed-door negotiations. As recently as the early 1970s, congressional committees could easily retreat behind closed doors and members could vote on many bills anonymously, with only the final tallies reported. Federal advisory committees, too, could meet off the record. Understandably, in the wake of Watergate, those practices came to be viewed as suspect. Today, federal law, congressional rules, and public expectations have placed almost all formal deliberations and many informal ones in full public view. One result is greater transparency, which is good. But another result is that finding space for delicate negotiations and candid deliberations can be difficult. Smoke-filled rooms, whatever their disadvantages, were good for brokering complex compromises in which nothing was settled until everything was settled once gone, they turned out to be difficult to replace. In public, interest groups and grandstanding politicians can tear apart a compromise before it is halfway settled.

Despite promising to televise negotiations over health-care reform, President Obama went behind closed doors with interest groups to put the package together no sane person would have negotiated in full public view. In 2013, Congress succeeded in approving a modest bipartisan budget deal in large measure because the House and Senate Budget Committee chairs were empowered to “figure it out themselves, very, very privately,” as one Democratic aide told Jill Lawrence for a 2015 Brookings report. TV cameras, recorded votes, and public markups do increase transparency, but they come at the cost of complicating candid conversations. “The idea that Washington would work better if there were TV cameras monitoring every conversation gets it exactly wrong,” the Democratic former Senate majority leader Tom Daschle wrote in 2014, in his foreword to the book City of Rivals. “The lack of opportunities for honest dialogue and creative give-and-take lies at the root of today’s dysfunction.”

We reformed pork. For most of American history, a principal goal of any member of Congress was to bring home bacon for his district. Pork-barrel spending never really cost very much, and it helped glue Congress together by giving members a kind of currency to trade: You support my pork, and I’ll support yours. Also, because pork was dispensed by powerful appropriations committees with input from senior congressional leaders, it provided a handy way for the leadership to buy votes and reward loyalists. Starting in the ’70s, however, and then snowballing in the ’90s, the regular appropriations process broke down, a casualty of reforms that weakened appropriators’ power, of “sunshine laws” that reduced their autonomy, and of polarization that complicated negotiations. Conservatives and liberals alike attacked pork-barreling as corrupt, culminating in early 2011, when a strange-bedfellows coalition of Tea Partiers and progressives banned earmarking, the practice of dropping goodies into bills as a way to attract votes—including, ironically, votes for politically painful spending reductions.

Congress has not passed all its annual appropriations bills in 20 years, and more than $300 billion a year in federal spending goes out the door without proper authorization. Routine business such as passing a farm bill or a surface-transportation bill now takes years instead of weeks or months to complete. Today two-thirds of federal-program spending (excluding interest on the national debt) runs on formula-driven autopilot. This automatic spending by so-called entitlement programs eludes the discipline of being regularly voted on, dwarfs old-fashioned pork in magnitude, and is so hard to restrain that it’s often called the “third rail” of politics. The political cost has also been high: Congressional leaders lost one of their last remaining tools to induce followership and team play. “Trying to be a leader where you have no sticks and very few carrots is dang near impossible,” the Republican former Senate Majority Leader Trent Lott told CNN in 2013, shortly after renegade Republicans pointlessly shut down the government. “Members don’t get anything from you and leaders don’t give anything. They don’t feel like you can reward them or punish them.”

Donald Trump had no political debts or party loyalty. And he had no compunctions—which made him the perfect vector for anti-establishment sentiment. (John Bazemore / AP)

Like campaign contributions and smoke-filled rooms, pork is a tool of democratic governance, not a violation of it. It can be used for corrupt purposes but also, very often, for vital ones. As the political scientist Diana Evans wrote in a 2004 book, Greasing the Wheels: Using Pork Barrel Projects to Build Majority Coalitions in Congress, “The irony is this: pork barreling, despite its much maligned status, gets things done.” In 1964, to cite one famous example, Lyndon Johnson could not have passed his landmark civil-rights bill without support from House Republican leader Charles Halleck of Indiana, who named his price: a nasa research grant for his district, which LBJ was glad to provide. Just last year, Republican Senator John McCain, the chairman of the Senate Armed Services Committee, was asked how his committee managed to pass bipartisan authorization bills year after year, even as the rest of Congress ground to a legislative standstill. In part, McCain explained, it was because “there’s a lot in there for members of the committees.”

Party-dominated nominating processes, soft money, congressional seniority, closed-door negotiations, pork-barrel spending—put each practice under a microscope in isolation, and it seems an unsavory way of doing political business. But sweep them all away, and one finds that business is not getting done at all. The political reforms of the past 40 or so years have pushed toward disintermediation—by favoring amateurs and outsiders over professionals and insiders by privileging populism and self-expression over mediation and mutual restraint by stripping middlemen of tools they need to organize the political system. All of the reforms promote an individualistic, atomized model of politics in which there are candidates and there are voters, but there is nothing in between. Other, larger trends, to be sure, have also contributed to political disorganization, but the war on middlemen has amplified and accelerated them.

Pathogens

Donald Trump and other viruses

By the beginning of this decade, the political system’s organic defenses against outsiders and insurgents were visibly crumbling. All that was needed was for the right virus to come along and exploit the opening. As it happened, two came along.

In 2009, on the heels of President Obama’s election and the economic-bailout packages, angry fiscal conservatives launched the Tea Party insurgency and watched, somewhat to their own astonishment, as it swept the country. Tea Partiers shared some of the policy predilections of loyal Republican partisans, but their mind-set was angrily anti-establishment. In a 2013 Pew Research poll, more than 70 percent of them disapproved of Republican leaders in Congress. In a 2010 Pew poll, they had rejected compromise by similar margins. They thought nothing of mounting primary challenges against Republican incumbents, and they made a special point of targeting Republicans who compromised with Democrats or even with Republican leaders. In Congress, the Republican House leadership soon found itself facing a GOP caucus whose members were too worried about “getting primaried” to vote for the compromises necessary to govern—or even to keep the government open. Threats from the Tea Party and other purist factions often outweigh any blandishments or protection that leaders can offer.

So far the Democrats have been mostly spared the anti-compromise insurrection, but their defenses are not much stronger. Molly Ball recently reported for The Atlantic’s Web site on the Working Families Party, whose purpose is “to make Democratic politicians more accountable to their liberal base through the asymmetric warfare party primaries enable, much as the conservative movement has done to Republicans.” Because African Americans and union members still mostly behave like party loyalists, and because the Democratic base does not want to see President Obama fail, the Tea Party trick hasn’t yet worked on the left. But the Democrats are vulnerable structurally, and the anti-compromise virus is out there.

A second virus was initially identified in 2002, by the University of Nebraska at Lincoln political scientists John R. Hibbing and Elizabeth Theiss-Morse, in their book Stealth Democracy: Americans’ Beliefs About How Government Should Work. It’s a shocking book, one whose implications other scholars were understandably reluctant to engage with. The rise of Donald Trump and Bernie Sanders, however, makes confronting its thesis unavoidable.

Using polls and focus groups, Hibbing and Theiss-Morse found that between 25 and 40 percent of Americans (depending on how one measures) have a severely distorted view of how government and politics are supposed to work. I think of these people as “politiphobes,” because they see the contentious give-and-take of politics as unnecessary and distasteful. Specifically, they believe that obvious, commonsense solutions to the country’s problems are out there for the plucking. The reason these obvious solutions are not enacted is that politicians are corrupt, or self-interested, or addicted to unnecessary partisan feuding. Not surprisingly, politiphobes think the obvious, commonsense solutions are the sorts of solutions that they themselves prefer. But the more important point is that they do not acknowledge that meaningful policy disagreement even exists. From that premise, they conclude that all the arguing and partisanship and horse-trading that go on in American politics are entirely unnecessary. Politicians could easily solve all our problems if they would only set aside their craven personal agendas.

If politicians won’t do the job, then who will? Politiphobes, according to Hibbing and Theiss-Morse, believe policy should be made not by messy political conflict and negotiations but by ensid s: empathetic, non-self-interested decision makers. These are leaders who will step forward, cast aside cowardly politicians and venal special interests, and implement long-overdue solutions. ensid s can be politicians, technocrats, or autocrats—whatever works. Whether the process is democratic is not particularly important.

Chances are that politiphobes have been out there since long before Hibbing and Theiss-Morse identified them in 2002. Unlike the Tea Party or the Working Families Party, they aren’t particularly ideological: They have popped up left, right, and center. Ross Perot’s independent presidential candidacies of 1992 and 1996 appealed to the idea that any sensible businessman could knock heads together and fix Washington. In 2008, Barack Obama pandered to a center-left version of the same fantasy, promising to magically transcend partisan politics and implement the best solutions from both parties.

No previous outbreak, however, compares with the latest one, which draws unprecedented virulence from two developments. One is a steep rise in antipolitical sentiment, especially on the right. According to polling by Pew, from 2007 to early 2016 the percentage of Americans saying they would be less likely to vote for a presidential candidate who had been an elected official in Washington for many years than for an outsider candidate more than doubled, from 15 percent to 31 percent. Republican opinion has shifted more sharply still: The percentage of Republicans preferring “new ideas and a different approach” over “experience and a proven record” almost doubled in just the six months from March to September of 2015.

The other development, of course, was Donald Trump, the perfect vector to concentrate politiphobic sentiment, intensify it, and inject it into presidential politics. He had too much money and free media to be spent out of the race. He had no political record to defend. He had no political debts or party loyalty. He had no compunctions. There was nothing to restrain him from sounding every note of the politiphobic fantasy with perfect pitch.

Democrats have not been immune, either. Like Trump, Bernie Sanders appealed to the antipolitical idea that the mere act of voting for him would prompt a “revolution” that would somehow clear up such knotty problems as health-care coverage, financial reform, and money in politics. Like Trump, he was a self-sufficient outsider without customary political debts or party loyalty. Like Trump, he neither acknowledged nor cared—because his supporters neither acknowledged nor cared—that his plans for governing were delusional.

Trump, Sanders, and Ted Cruz have in common that they are political sociopaths—meaning not that they are crazy, but that they don’t care what other politicians think about their behavior and they don’t need to care. That three of the four final presidential contenders in 2016 were political sociopaths is a sign of how far chaos syndrome has gone. The old, mediated system selected such people out. The new, disintermediated system seems to be selecting them in.

Symptoms

The disorder that exacerbates all other disorders

There is nothing new about political insurgencies in the United States—nor anything inherently wrong with them. Just the opposite, in fact: Insurgencies have brought fresh ideas and renewed participation to the political system since at least the time of Andrew Jackson.

There is also nothing new about insiders losing control of the presidential nominating process. In 1964 and 1972, to the dismay of party regulars, nominations went to unelectable candidates—Barry Goldwater for the Republicans in 1964 and George McGovern for the Democrats in 1972—who thrilled the parties’ activist bases and went on to predictably epic defeats. So it’s tempting to say, “Democracy is messy. Insurgents have fair gripes. Incumbents should be challenged. Who are you, Mr. Establishment, to say the system is broken merely because you don’t like the people it is pushing forward?”

The problem is not, however, that disruptions happen. The problem is that chaos syndrome wreaks havoc on the system’s ability to absorb and channel disruptions. Trying to quash political disruptions would probably only create more of them. The trick is to be able to govern through them.

Leave aside the fact that Goldwater and McGovern, although ideologues, were estimable figures within their parties. (McGovern actually co-chaired a Democratic Party commission that rewrote the nominating rules after 1968, opening the way for his own campaign.) Neither of them, either as senator or candidate, wanted to or did disrupt the ordinary workings of government.

Jason Grumet, the president of the Bipartisan Policy Center and the author of City of Rivals, likes to point out that within three weeks of Bill Clinton’s impeachment by the House of Representatives, the president was signing new laws again. “While they were impeaching him they were negotiating, they were talking, they were having committee hearings,” Grumet said in a recent speech. “And so we have to ask ourselves, what is it that not long ago allowed our government to metabolize the aggression that is inherent in any pluralistic society and still get things done?”

I have been covering Washington since the early 1980s, and I’ve seen a lot of gridlock. Sometimes I’ve been grateful for gridlock, which is an appropriate outcome when there is no working majority for a particular policy. For me, however, 2011 brought a wake-up call. The system was failing even when there was a working majority. That year, President Obama and Republican House Speaker John Boehner, in intense personal negotiations, tried to clinch a budget agreement that touched both parties’ sacred cows, curtailing growth in the major entitlement programs such as Medicare, Medicaid, and Social Security by hundreds of billions of dollars and increasing revenues by $800 billion or more over 10 years, as well as reducing defense and nondefense discretionary spending by more than $1 trillion. Though it was less grand than previous budgetary “grand bargains,” the package represented the kind of bipartisan accommodation that constitutes the federal government’s best and perhaps only path to long-term fiscal stability.

Former House Speaker John Boehner explained to Jay Leno before he resigned: “You learn that a leader without followers is simply a man taking a walk.” (Steve Helber / AP)

People still debate why the package fell apart, and there is blame enough to go around. My own reading at the time, however, concurred with Matt Bai’s postmortem in The New York Times: Democratic leaders could have found the rank-and-file support they needed to pass the bargain, but Boehner could not get the deal past conservatives in his own caucus. “What’s undeniable, despite all the furious efforts to peddle a different story,” Bai wrote, “is that Obama managed to persuade his closest allies to sign off on what he wanted them to do, and Boehner didn’t, or couldn’t.” We’ll never know, but I believe that the kind of budget compromise Boehner and Obama tried to shake hands on, had it reached a vote, would have passed with solid majorities in both chambers and been signed into law. The problem was not polarization it was disorganization. A latent majority could not muster and assert itself.

As soon became apparent, Boehner’s 2011 debacle was not a glitch but part of an emerging pattern. Two years later, the House’s conservative faction shut down the government with the connivance of Ted Cruz, the very last thing most Republicans wanted to happen. When Boehner was asked by Jay Leno why he had permitted what the speaker himself called a “very predictable disaster,” he replied, rather poignantly: “When I looked up, I saw my colleagues going this way. You learn that a leader without followers is simply a man taking a walk.”

Boehner was right. Washington doesn’t have a crisis of leadership it has a crisis of followership. One can argue about particulars, and Congress does better on some occasions than on others. Overall, though, minority factions and veto groups are becoming ever more dominant on Capitol Hill as leaders watch their organizational capacity dribble away. Helpless to do much more than beg for support, and hostage to his own party’s far right, an exhausted Boehner finally gave up and quit last year. Almost immediately, his heir apparent, Majority Leader Kevin McCarthy, was shot to pieces too. No wonder Paul Ryan, in his first act as speaker, remonstrated with his own colleagues against chaos.

Nevertheless, by spring the new speaker was bogged down. “Almost six months into the job, Ryan and his top lieutenants face questions about whether the Wisconsin Republican’s tenure atop the House is any more effective than his predecessor,” Politico’s Web site reported in April. The House Republican Conference, an unnamed Republican told Politico, is “unwhippable and unleadable. Ryan is as talented as you can be: There’s nobody better. But even he can’t do anything. Who could?”

Of course, Congress’s incompetence makes the electorate even more disgusted, which leads to even greater political volatility. In a Republican presidential debate in March, Ohio Governor John Kasich described the cycle this way: The people, he said, “want change, and they keep putting outsiders in to bring about the change. Then the change doesn’t come … because we’re putting people in that don’t understand compromise.” Disruption in politics and dysfunction in government reinforce each other. Chaos becomes the new normal.

Being a disorder of the immune system, chaos syndrome magnifies other problems, turning political head colds into pneumonia. Take polarization. Over the past few decades, the public has become sharply divided across partisan and ideological lines. Chaos syndrome compounds the problem, because even when Republicans and Democrats do find something to work together on, the threat of an extremist primary challenge funded by a flood of outside money makes them think twice—or not at all. Opportunities to make bipartisan legislative advances slip away.

Or take the new technologies that are revolutionizing the media. Today, a figure like Trump can reach millions through Twitter without needing to pass network‑TV gatekeepers or spend a dime. A figure like Sanders can use the Internet to reach millions of donors without recourse to traditional fund-raising sources. Outside groups, friendly and unfriendly alike, can drown out political candidates in their own races. (As a frustrated Cruz told a supporter about outside groups ostensibly backing his presidential campaign, “I’m left to just hope that what they say bears some resemblance to what I actually believe.”) Disruptive media technologies are nothing new in American politics they have arisen periodically since the early 19th century, as the historian Jill Lepore noted in a February article in The New Yorker. What is new is the system’s difficulty in coping with them. Disintermediating technologies bring fresh voices into the fray, but they also bring atomization and cacophony. To organize coherent plays amid swarms of attack ads, middlemen need to be able to coordinate the fund-raising and messaging of candidates and parties and activists—which is what they are increasingly hard-pressed to do.

Assembling power to govern a sprawling, diverse, and increasingly divided democracy is inevitably hard. Chaos syndrome makes it all the harder. For Democrats, the disorder is merely chronic for the Republican Party, it is acute. Finding no precedent for what he called Trump’s hijacking of an entire political party, Jon Meacham went so far as to tell Joe Scarborough in The Washington Post that George W. Bush might prove to be the last Republican president.

Nearly everyone panned party regulars for not stopping Trump much earlier, but no one explained just how the party regulars were supposed to have done that. Stopping an insurgency requires organizing a coalition against it, but an incapacity to organize is the whole problem. The reality is that the levers and buttons parties and political professionals might once have pulled and pushed had long since been disconnected.

Prognosis and Treatment

Chaos syndrome as a psychiatric disorder

I don’t have a quick solution to the current mess, but I do think it would be easy, in principle, to start moving in a better direction. Although returning parties and middlemen to anything like their 19th-century glory is not conceivable—or, in today’s America, even desirable—strengthening parties and middlemen is very doable. Restrictions inhibiting the parties from coordinating with their own candidates serve to encourage political wildcatting, so repeal them. Limits on donations to the parties drive money to unaccountable outsiders, so lift them. Restoring the earmarks that help grease legislative success requires nothing more than a change in congressional rules. And there are all kinds of ways the parties could move insiders back to the center of the nomination process. If they wanted to, they could require would-be candidates to get petition signatures from elected officials and county party chairs, or they could send unbound delegates to their conventions (as several state parties are doing this year), or they could enhance the role of middlemen in a host of other ways.

Building party machines and political networks is what career politicians naturally do, if they’re allowed to do it. So let them. I’m not talking about rigging the system to exclude challengers or prevent insurgencies. I’m talking about de-rigging the system to reduce its pervasive bias against middlemen. Then they can do their job, thereby making the world safe for challengers and insurgencies.

Unfortunately, although the mechanics of de-rigging are fairly straightforward, the politics of it are hard. The public is wedded to an anti-establishment narrative. The political-reform community is invested in direct participation, transparency, fund-raising limits on parties, and other elements of the anti-intermediation worldview. The establishment, to the extent that there still is such a thing, is demoralized and shattered, barely able to muster an argument for its own existence.

But there are optimistic signs, too. Liberals in the campaign-finance-reform community are showing new interest in strengthening the parties. Academics and commentators are getting a good look at politics without effective organizers and cohesive organizations, and they are terrified. On Capitol Hill, conservatives and liberals alike are on board with restoring regular order in Congress. In Washington, insiders have had some success at reorganizing and pushing back. No Senate Republican was defeated by a primary challenger in 2014, in part because then–Senate Minority Leader Mitch McConnell, a machine politician par excellence, created a network of business allies to counterpunch against the Tea Party.

The biggest obstacle, I think, is the general public’s reflexive, unreasoning hostility to politicians and the process of politics. Neurotic hatred of the political class is the country’s last universally acceptable form of bigotry. Because that problem is mental, not mechanical, it really is hard to remedy.


What’s in the bill

Brady’s partner on the bill, the Democratic House Ways and Means Chairman Richard Neal (D., Mass.), has also voiced support for the provision. He noted in a recent Yahoo Finance Present interview that “people are living longer, they're going to work longer.”

The argument for an age restriction – which is noted in an official summary of the bill – is “to ensure that individuals spend their retirement savings during their lifetime and not use their retirement plans for estate planning purposes to transfer wealth to beneficiaries.”

The bill, as currently written, would change the rule for any required distributions in 2021 and beyond. The legislation would also exempt retirees from minimum distributions for the rest of their life if they have less than $100,000 in all of their retirement plans at age 75. (As it stands now, when you reach age 72, you're required to withdraw a certain amount of money from your retirement accounts each year and pay taxes on that amount.)

The coronavirus stimulus bill passed in March allowed retirees to skip their minimum distributions this year if they desired, but that provision expires at the end of 2020.


Congressional Snack Trading Helps Cut Across Party Lines - Recipes

The Congressional Pig Book is CAGW's annual compilation of the pork-barrel projects in the federal budget. A "pork" project is a line-item in an appropriations bill that designates tax dollars for a specific purpose in circumvention of established budgetary procedures. To qualify as pork, a project must meet one of seven criteria that were developed in 1991 by CAGW and the Congressional Porkbusters Coalition.

Introduction

The United States is facing an imminent fiscal reckoning.

The current national debt of $28.2 trillion is going to grow at a record pace over the next decade. A January 2021 Congressional Budget Office (CBO) report forecast a $2.3 trillion deficit in fiscal year (FY) 2021 and an increase in national debt held by the public to $35.3 trillion by FY 2031, which would be a record 107 percent of the gross domestic product. And that was before President Biden signed into law the $1.9 trillion American Rescue Plan Act and then proposed a $2.25 trillion infrastructure plan and $4 trillion tax increase. On top of the multi-trillion expenditures, the House and Senate Appropriations Committees have agreed to end the earmark moratorium, and the Transportation Committees appear likely to follow their lead.

It is in this climate that Citizens Against Government Waste (CAGW) releases the 2021 Congressional Pig Book, which demonstrates that legislators continue to pack the 12 spending bills that fund the federal government with pork.

For the fourth year in a row, members of Congress have set a record for the cost of earmarks during the supposed earmark moratorium. This year’s Congressional Pig Book exposes 285 earmarks, an increase of 4 percent from the 274 in FY 2020, at a cost of $16.8 billion, an increase of 5.7 percent from the $15.9 billion in earmarks in FY 2020. The cost of the FY 2021 earmarks is 1.8 percent higher than the $16.5 billion in FY 2010, the last year prior to the moratorium. Since FY 1991, CAGW has identified 111,702 earmarks costing $392.5 billion.

While the increase in the cost of earmarks from FY 2021 is significant, it pales in comparison to the growth since FY 2017. The $16.8 billion in FY 2021 is an increase of 147.1 percent from the $6.8 billion in FY 2017. The number of earmarks has also risen sharply. The 285 earmarks in FY 2021 are a 74.8 percent increase from the 163 in FY 2017.

The primary cause of this upsurge in earmarks is the two consecutive budget deals that revoked spending restraints imposed by the 2011 Budget Control Act (BCA). The Bipartisan Budget Act of 2018, signed into law on February 9, 2018, paved the way for a 13.4 percent increase in spending in FYs 2018 and 2019. The subsequent Bipartisan Budget Act of 2019 covering FYs 2020 and 2021, which became law on August 2, 2019, lifted spending caps by $320 billion. The budget deals covering the past four years have resulted in the cost and number of earmarks increasing by far more than the overall jump in spending.

While the BCA was successful in limiting spending, it was anathema to the members of the House and Senate Appropriations Committees. It coincided with the imposition of the earmark moratorium, which was first applied in FY 2012.

Nonetheless, CAGW exposed earmarks in the appropriations bills every year since the moratorium. The number and cost for the first six years were much lower than they had been prior to the moratorium. On average, there were 109 earmarks costing $3.7 billion annually between FYs 2012 and 2017. But, like everything else in Congress, the restraint only lasted for a short period of time. Over the past four years, legislators added an average of 268 earmarks costing $15.7 billion.

This explosion of earmarks has apparently not been sufficient for members of Congress. House Appropriations Committee Chair Rosa DeLauro (D-Conn.) and Senate Appropriations Committee Chairman Patrick Leahy (D-Vt.) have agreed to restore earmarks for FY 2022, for which CAGW named them both March 2021 Porkers of the Month. On March 17, 2021, the House Republican Conference agreed to go along with this plan by a vote of 102-84, while Senate Republicans, who became the first group of members of Congress to agree to a permanent ban on earmarks on May 23, 2019, by a vote of 28-12, have yet to undo their policy.

The new earmarks, despite a futile attempt to cover them up by designating them as “Community Project Funding,” will be similar to the old earmarks that were included in the appropriations bills passed by Congress during fiscal years 2008-2010, which required that the names of the members who received earmarks be listed in each bill. According to Chair DeLauro, each member may request up to 10 community projects requests must be posted in an online searchable website a list of projects funded must be published when the subcommittee or committee is marking up a bill for-profit entities are not eligible, and members must certify that they, their spouse, and their family have no financial interest in the project. But there is no prohibition on making a campaign contribution in exchange for an earmark.

There must be “evidence of community support that were compelling factors” in deciding which projects to request. This limitation is prima face absurd, since it includes every expenditure from building a weapons system to programs and projects funded by hundreds of agencies and programs that include community, development, economic, or similar words in their title. It also describes the normal system of requesting money from competitive grant programs. The projects that would be requested as earmarks were by their very nature not funded because the agencies rejected them based on statutory criteria established by Congress.

As noted in a September 7, 2007 Department of Transportation Office of Inspector General (DOT OIG) report, 7,724, or 99 percent of the 7,760 projects for FY 2006 reviewed by the OIG worth $8 billion at three DOT agencies either failed to be “subject to the agencies’ normal review and planning process or bypassed the states’ normal planning and programming processes.” At the Federal Aviation Administration, nine of the 10 earmarked air traffic control tower replacement projects were low priority, and their funding caused a three-year delay in planning for higher priority projects. There were 16 projects out of 65 at the Federal Highway Administration that failed to meet the statutory requirements of the Interstate Maintenance Discretionary Program. Reviewing up to 4,350 earmark requests for FY 2022 by appropriations committee staff will not only bypass the local review and approval process it will also usurp the authority Congress provided to federal agencies and their experienced employees, who are charged with deciding how to spend the 99 percent of discretionary spending that is not going to be earmarked.

The members of Congress who agreed to restore earmarks are willfully ignoring or have forgotten why this corrupt, inequitable, and costly practice was first subject to the moratorium. The movement gained traction due to the tireless work of members of Congress such as then-Rep. Jeff Flake (R-Ariz.) and the late Sen. John McCain (R-Ariz.) high-profile boondoggles like the Bridge to Nowhere and a decade of scandals that resulted in jail terms for Reps. Randy “Duke” Cunningham (R-Calif.) and Bob Ney (R-Ohio) and lobbyist Jack Abramoff.

Earmarks provide the most benefit to those with spots on prime congressional committees. In the 111th Congress, when the names of members of Congress who obtained earmarks were included in the appropriations bills, the 81 House and Senate appropriators, making up only 15 percent of Congress, were responsible for 51 percent of the earmarks and 61 percent of the money. Under the new requirements for earmarks, which allow for up to 10 requests per members but, “only a handful may actually be funded,” this disproportionate display of power by the appropriators will undoubtedly continue. They will once again engage in the legalized bribery that causes members to vote for excessively expensive spending bills that cost tens or hundreds of billions of dollars in exchange for a few earmarks worth a few million or sometimes just thousands of dollars.

As the late Sen. John McCain (R-Ariz.) explained regarding those making the case for a return to earmarks, “The problem with all their arguments is: the more powerful you are, the more likely it is you get the earmark in. Therefore, it is a corrupt system.”

Another argument centers on the Article I tax and spending power given to Congress. As Sen. Mike Lee (R-Utah) and then-Rep. Jeb Hensarling (R-Texas), co-leaders of the Article I Project, wrote in 2017 in regard to earmarks, “Congress needs to assert its power of the purse, but not in this manner.” As practiced in the past, Lee and Hensarling continued, “earmarking was not the innocuous exercise of Congress’ constitutional spending power it was the tool lobbyists and leadership used to compel members to vote for bills that their constituents – and sometimes their conscience –opposed.” Bringing back earmarks, they wrote, “would make our job harder, make Congress weaker and make federal power more centralized, less accountable and more corrupt.”

Those sentiments echo President James Monroe’s May 4, 1822 Special Message to Congress regarding its authority to spend money on internal improvements across the country: “It is, however, my opinion that the power should be confined to great national works only, since if it were unlimited it would be liable to abuse and might be productive of evil.”

Some members of Congress remain resolute against the return of earmarks. On March 1, 2021, Sen. Steve Daines (R-Mont.), with nine of his Republican colleagues, introduced S. 501, which would permanently ban earmarks. On March 17, 2021, Rep. Chip Roy (R-Texas) released an open letter to House Speaker Nancy Pelosi (D-Calif.), signed by 26 of his Republican colleagues, pledging that they would “not request earmarks, or the preferred euphemism of the day, ‘Community Project Funding.’”

The FY 2021 earmarks were again contained in omnibus packages containing thousands of pages, which present their own challenges to determine how money is being spent. Voting on blocks of spending bills bundled together with minimal time for review is a strong indicator of a poorly functioning legislative process.

In FY 2021, as in each of the years following the establishment of the moratorium, there were fewer earmarks than in the peak years, but far more money was spent on average for each earmark and no detailed description was provided. For instance, legislators added 19 earmarks costing $1,107,177,000 for the Army Corps of Engineers in the FY 2021 Energy and Water Development and Related Agencies Appropriations Act. These earmarks correspond to 482 earmarks costing $541,653,000 in FY 2010.

In other words, the average dollar amount for the Corps of Engineers earmarks in FY 2021 was $58.3 million, while in FY 2010 the average was $1.1 million. The “Congressionally Directed Spending” section at the end of the FY 2010 bill contained the names of the members of Congress requesting each project and its location, as required by the transparency rules at the time. In stark contrast, the $1.1 billion in FY 2021 earmarks, which is more than twice as much as the $541.6 million in FY 2010, contained no such data and simply created a pool of money to be distributed later without any specific information about the eventual recipients. The new criteria for earmarks will at least lead to more transparency, a positive development in otherwise bad news for taxpayers.

Members of Congress will argue that their standards differ from the earmark criteria used in the Pig Book, and that the appropriations bills are earmark-free according to their definition. However, the difference in the definition of earmarks between CAGW and Congress has existed since the first Pig Book in 1991.

The pork-free claim can also be challenged based on the inclusion of projects that have appeared in past appropriations bills as earmarks. In addition to meeting CAGW’s long-standing seven-point criteria, to qualify for the 2021 Pig Book, a project must have appeared in prior years as an earmark. The total number and cost of earmarks are, therefore, quite conservative.

The question for those in Congress who deny the existence of earmarks in the appropriations bills is: Why were these projects previously considered earmarks, but not this year?

The 29th installment of CAGW’s exposé of pork-barrel spending includes $1.7 billion for 17 unrequested F-35 Joint Strike Fighter (JSF) aircraft, which has been plagued with cost overruns, delays, and poor performance a record $25 million for Save America’s Treasures grants (56.3 percent greater than the $16 million in FY 2020), which in the past have funded the restoration and operation of local museums, opera houses, and theaters a record $19.7 million for the East-West Center, added by Senate Appropriations Committee member Brian Schatz (D-Hawaii), even though there was no budget request and, $663,000 to help eliminate the brown tree snake.

The projects in the 2021 Congressional Pig Book Summary symbolize the most blatant examples of pork. As in previous years, all items in the Congressional Pig Book meet at least one of CAGW’s seven criteria, but most satisfy at least two:

  • Requested by only one chamber of Congress
  • Not specifically authorized
  • Not competitively awarded
  • Not requested by the President
  • Greatly exceeds the President’s budget request or the previous year’s funding
  • Not the subject of congressional hearings or,
  • Serves only a local or special interest.

I. Agriculture

Members of Congress have long used the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act to feed at the trough, and their appetite grew in FY 2021. The number of earmarks increased by 27.3 percent, from 11 in FY 2020 to 14 in FY 2021, and the cost went up by 18.7 percent, from $81.7 million in FY 2020 to $97 million in FY 2021.

$10,000,000 for High Energy Cost Grants (HECGs) within the Rural Utilities Service (RUS). The RUS grew out of the Department of Agriculture’s Rural Electrification Administration (REA), established in 1936. The REA’s mission was to promote electrification to farmers and residents in communities where the cost of providing electricity was considered to be too expensive for local utilities. By 1981, 98.7 percent electrification and 95 percent telephone service coverage were achieved. Rather than declaring victory and shutting down the REA, the agency was transformed into the RUS, and expanded into other areas.

Created by Congress in November 2000, HECGs are intended to assist communities whose energy costs exceed 275 percent of the national average by funding the construction, installation, and repair of energy distribution facilities.

HECGs may sound like a bright idea, but they duplicate the RUS Electric Loans program, which is intended to achieve the same objective. Former President Obama’s FY 2013 version of Cuts, Consolidations, and Savings proposed the elimination of HECGs, noting that low-interest electric loans are available through the RUS to residents of the areas served by HECGs, which include Alaska, Hawaii, several communities in certain other states, and U.S. territories.

Since FY 2002, members of Congress have added 11 earmarks for HECGs totaling $163.5 million.

$9,000,000 for the Appalachian Regional Commission (ARC) and the Delta Regional Authority (DRA). The DRA also received an earmark costing $27.5 million in the Energy and Water Development and Related Agencies Appropriations Act.

Both the ARC and DRA have been targeted by numerous cost-cutting plans. All four versions of former President Trump’s Major Savings and Reforms between FYs 2018 and 2021 proposed eliminating funding for the DRA, which would save $27 million according to the FY 2021 report. Each of the Republican Study Committee’s (RSC) budgets from FYs 2017 through 2020 called for the termination of regional commissions. Former President Obama’s FY 2017 version of Cuts, Consolidations, and Savings proposed a $3 million annual cut for the DRA.

The ARC was created by Congress in 1965 to “bring the 13 Appalachian states into the mainstream of the American economy,” and covers all of West Virginia along with portions of Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia. The ARC duplicates dozens of federal, state, and local programs.

Established in 2000, the DRA is intended to provide economic development assistance to support the creation of jobs and improve local conditions for the 10 million people who reside in 252 counties and parishes throughout the Mississippi Delta states of Alabama, Arkansas, Illinois, Kentucky, Louisiana, Mississippi, Missouri, and Tennessee.

The ARC has received 14 earmarks costing $413.8 million since FY 1995, and the DRA has received 18 earmarks costing $177.9 million since FY 2003.

II. Commerce, Justice, and Science

The nine earmarks in the FY 2021 Commerce, Justice, Science, and Related Agencies Appropriations Act (CJS) represent a 12.5 percent increase over the eight contained in FY 2020. The $1.5 billion in earmarks in FY 2021 represents a 6.3 percent decrease from the $1.6 billion in FY 2020. However, the $1.5 billion in FY 2021 is an increase of 92.3 percent from the $780 million in FY 2019, and a staggering 2,400 percent more than the $60 million earmarked in FY 2016.

$675,176,000 for operations, research, and facilities at the National Oceanic and Atmospheric Administration (NOAA), a 4.3 percent decrease from the $705,556,000 earmarked in FY 2020. The second largest ever earmark for NOAA, the amount provided in FY 2021 represents 45 percent of the $1.5 billion in pork contained in the CJS bill.

Since FY 2001, members of Congress have added 135 earmarks for NOAA, costing $1.8 billion. In other words, the FY 2021 earmark accounts for 37.5 percent of the total amount of funding that legislators have earmarked for NOAA over the past 21 years.

$65,000,000 for the Pacific Coastal Salmon Recovery Fund (PCSRF), the same amount earmarked in the past three years, and tied for the largest earmark ever for this purpose. The PCSRF was established by Congress in FY 2000 to “reverse the declines of Pacific salmon and steelhead, supporting conservation efforts in California, Oregon, Washington, Idaho, and Alaska.”

Each version of former President Trump’s Major Savings and Reforms recommended eliminating funding for the PCSRF. According to the FY 2021 report, elimination of the fund would allow the National Oceanic and Atmospheric Administration (NOAA) “to better target remaining resources to core missions and services.” The budget also noted that programs like the PCSRF favor state, local, and/or industry interests, and are “not optimally targeted, in many instances favoring certain species and geographic areas over others,” and do not direct funds to programs that have “the greatest need or potential benefit.”

The RSC’s FY 2020 budget also proposed eliminating funding for the PCSRF, stating that it was one of several grant programs that “do not provide significant support to the core mission” of NOAA.

Senate Appropriations Committee member Patty Murray (D-Wash.) has routinely pressed for increased funding for the PCSRF. A December 22, 2020 press release from Sen. Murray stated that she successfully secured funding for the program in the FY 2021 CJS bill.

Since FY 2000, members of Congress have added 24 earmarks costing taxpayers $409.5 million for the PCSRF. From FYs 2008 through 2010, the three years in which members of Congress were required to identify their earmark requests, Sen. Murray added 575 earmarks costing taxpayers $779.5 million.

III. Defense

The Department of Defense (DOD) has received the most earmarks at the highest cost to taxpayers in each year since FY 1994, and that trend continued in FY 2021. The number of earmarks in the bill increased by 11.4 percent, from 132 in FY 2020 to 147 in FY 2021, while the cost went up by 10.7 percent, from $7.5 billion in FY 2020 to $8.3 billion in FY 2021. The amount contained in the DOD appropriations bill constitutes 49.4 percent of the $16.8 billion in earmarks in all 12 appropriations bills for FY 2021.

$1,833,160,000 for 40 earmarks for health and disease research under the Defense Health Program (DHP), which is a 13.5 percent increase in cost from the 36 earmarks worth $1,615,600,000 in FY 2020, and the most ever earmarked for the program.

A March 14, 2012 Washington Post article stated that then-DOD Comptroller Robert Hale proposed decreasing the Pentagon health budget in part by eliminating “one-time congressional adds,” which he said totaled $603.6 million in FY 2012 for the Congressionally Directed Medical Research Program.

The late Sen. Tom Coburn’s (R-Okla.) November 2012 “The Department of Everything” report pointed out that the DOD disease earmarks mean that “fewer resources are available for DOD to address those specific health challenges facing members of the armed forces for which no other agencies are focused.” According to the report, in 2010 the Pentagon withheld more than $45 million for overhead related to earmarks, which means those funds were unavailable for national security needs or medical research specifically affecting those serving in the military.

On June 17, 2015, then-Senate Armed Services Committee Chairman John McCain (R-Ariz.) suggested that funding for medical research should only be included in the DOD bill if the secretary of defense determined it was directly related to the military. He said that “over the past two decades, lawmakers have appropriated nearly $7.3 billion for medical research that was ‘totally unrelated’ to the military.” In a response that explains why legislators continue to believe that they have the knowledge, privilege, and right to earmark billions of dollars for the DHP, Senate appropriator Dick Durbin (D-Ill.) claimed that none of the secretaries of defense that he had known, despite being “talented individuals,” were qualified to decide whether any of this research is related to the military.

Since FY 1996, members of Congress have added 812 earmarks for the DHP, costing taxpayers $16.8 billion.

$1,657,000,000 for three earmarks for the F-35 JSF, the fourth-most ever earmarked for the program and a reduction of 21.1 percent from the $2.1 billion earmarked in FY 2020. The bulk of the FY 2021 earmarks fund the acquisition of 17 aircraft beyond the amount requested by the DOD, including 12 for the Air Force and five for the Navy. The money earmarked for the F-35 represents 9.9 percent of the $16.8 billion in earmarks across all the spending bills in FY 2021.

The very embodiment of the DOD’s broken acquisition system, the JSF program has been under continuous development since the contract was awarded in 2001 and has faced innumerable delays and cost overruns. Total acquisition costs now exceed $428 billion, nearly double the initial estimate of $233 billion. The total costs for the F-35 are estimated to reach $1.727 trillion over the lifetime of the program. Of this total, $1.266 trillion will be needed for operations and support.

The JSF has attracted more bad reviews than the worst Broadway performance. On January 14, 2021, then-Acting DOD Secretary Christopher Miller labeled the JSF a “piece of [expletive].” Then, on March 5, 2021, House Armed Services Committee (HASC) Chairman Adam Smith (D-Wash.) called the program a “rathole,” and asked whether it was time to stop spending that such a high amount for “such a low capability?”

The JSF has been plagued by a staggering array of persistent issues, many of which were highlighted in the FY 2019 DOD Operational Test and Evaluation Annual Report, which revealed 873 unresolved deficiencies including 13 Category 1 items, involving the most serious flaws that could endanger crew and aircraft. While this is an overall reduction from the 917 unresolved deficiencies and 15 Category 1 items found in September 2018, the report stated that “although the program is working to fix deficiencies, new discoveries are still being made, resulting in only a minor decrease in the overall number of deficiencies.”

On September 11, 2020, Bloomberg News reported on a June 17, 2020 internal DOD review of the JSF program labeled “For Official Use Only.” The report estimated that $88 billion for research and development, procurement, and operations and maintenance will be needed over the next five fiscal years, $10 billon more than the officially announced $78 billion for these purposes.

The report highlighted uncertainty regarding final program costs, as the JSF has only logged about 2 percent of the total flight hours it will accrue over its lifecycle. In addition, the DOD’s goal to reduce the F-35’s cost per hour of flight by $10,000 to $25,000 over the next five years “is likely to prove unachievable” because of “a lack of defined actions” to cut costs.

As usual when it comes to the JSF, the motives of members of Congress are shortsighted and parochial. In a March 17, 2020 letter to the chairs and ranking members of the HASC and Defense Appropriations Subcommittee, the Congressional JSF Caucus encouraged a 24 percent increase in the number of JSFs to be purchased and inexplicably suggested this would “further reduce overall program costs.” They said the JSF “bolsters our domestic economy by supporting more than 1,800 suppliers and more than 254,000 direct and indirect jobs across the country.”

The wide distribution of F-35 supply lines across the country is no accident. According to a map showing the local economic impact of the JSF on Lockheed Martin’s website, the only states that do not have at least one supplier for the aircraft are Hawaii and North Dakota. This gives all but two representatives and four senators more than enough incentive to not only keep greasing the wheels, but also to support adding 32 earmarks for the JSF program, costing $10.6 billion, since FY 2001.

$171,000,000 for 20 earmarks funding a variety of industrial base analysis and sustainment support measures. Beyond specifying the broad areas in which the money will be spent, like automated textile manufacturing, there is no further information regarding the location or purpose of the funding.

While members of Congress will typically create dubious justifications for earmarking funding for programs in their districts, perhaps claiming DOD officials mistakenly failed to request funding, this effort is more transparent. Some anonymous member of Congress deemed it necessary to supply funding for unneeded work simply to support local industries.

Finite national security spending should never be utilized for a jobs program.

$120,000,000 for two earmarks for the National Guard Counter-Drug Program, a 41.2 percent increase from the $85 million provided in FY 2020 and tied for the third-most ever.

Formerly earmarked to individual states and congressional districts, the program, which allows for the use of military personnel in domestic drug enforcement operations, is now funded in one bundle as a workaround to the earmark moratorium.

The Drug Enforcement Administration, with a budget of $2.3 billion, is already responsible for these activities. Since FY 2001, there have been 76 earmarks costing taxpayers $1.1 billion for the National Guard Counter-Drug Program. Members of Congress who have inserted earmarks for this program in the past include Senate Minority Leader Mitch McConnell (R-Ky.), House Appropriations Committee member Harold Rogers (R-Ky.), former Senate Majority Leader Harry Reid (D-Nev.), and the late Sens. Daniel Inouye (D-Hawaii) and Ted Stevens (R-Alaska).

$41,167,000 for the Starbase Youth Program, which teaches science, technology, engineering, and math (STEM) to at-risk youth in multiple locations at or near military bases around the country. The amount supplied in FY 2021 is a 17.6 percent increase from the $35 million earmarked in FY 2020, and the largest ever earmark for Starbase.

Since FY 2001, members of Congress have added 13 earmarks costing taxpayers $230.1 million for Starbase, including an earmark worth $1.9 million in FY 2010 by Sen. Amy Klobuchar (D-Minn.) and then-Rep. Keith Ellison (D-Minn.).

An April 2018 GAO annual report on program duplication, overlap, and fragmentation found that $2.9 billion was spent in FY 2016 across 13 agencies for 163 STEM programs. Former President Obama proposed the consolidation or elimination of 31 STEM programs in FY 2015, and a further 20 STEM programs in FY 2016. Former President Trump’s FY 2021 Major Savings and Reforms recommended eliminating the National Aeronautics and Space Administration’s Office of STEM Engagement, saving $120 million.

IV. Energy and Water

Legislators once again flooded the Energy and Water Development and Related Agencies Appropriations Act with pork. While members of Congress added 47 earmarks in FY 2021, the same amount as FY 2020, the $3.7 billion earmarked in FY 2021 represents an 8.8 percent increase from the $3.4 billion in FY 2020.

$1,107,177,000 for 19 earmarks for the Army Corps of Engineers, a 2.3 percent increase in cost from the $1,082,791,000 in FY 2020. Former President Trump’s FY 2018 Major Savings and Reforms recommended reducing the Corps of Engineers’ budget by $976 million. The FY 2021 version of Major Savings and Reforms proposed reforming Army Corps of Engineers Inland Waterways Trust Fund financing by establishing an annual fee paid by commercial navigation users, saving $180 million annually. The report also recommended divesting the federal government of the Washington Aqueduct, which services Washington, D.C., and several Virginia suburbs, saving $118 million over five years.

Legislators have long treated the Army Corps of Engineers as a prime repository of pork, and it is among the most heavily earmarked areas of the federal budget. Since FY 1996, members of Congress have added 6,992 earmarks for the Corps, costing taxpayers $16.9 billion.

$41,325,000 for two earmarks to combat underwater pests, including $25 million for the aquatic plant control program, the largest amount ever earmarked for this program.

Since FY 1994, there have been 27 earmarks worth a total of $119.1 million for aquatic plant control projects, meaning the amount provided in FY 2021 represents 21 percent of the total over the past 28 years. Legislators who have requested earmarks for the aquatic plant control program include Senate Majority Leader Chuck Schumer (D-N.Y.), who requested three, and one each by Senate Appropriations Committee Chairman Patrick Leahy (D-Vt.) and then-Sen. Jeff Sessions (R-Ala.).

Legislators also included $16,325,000 for aquatic nuisance control research, 6.5 percent more than the $15,325,000 earmarked in FY 2020, and the largest ever earmark for this purpose. Since FY 1992, members of Congress have added 10 earmarks for aquatic nuisance research, costing $40.1 million.

$11,400,000 for fish passage and fish screens, the same amount earmarked in FY 2020, and tied for the largest amount ever provided for this purpose.

Since FY 2000, members of Congress have added 21 earmarks costing $74.3 million for fish passage and fish screens. Past legislators responsible for adding earmarks for this purpose include Sen. Ben Cardin (D-Md.), then-Sen. Barbara Mikulski (D-Md.), House Majority Leader Steny Hoyer (D-Md.), and then-Reps. Norm Dicks (D-Wash.) and Wally Herger (R-Calif.).

V. Financial Services

Legislators again loaded up the Financial Services and General Government Appropriations Act with earmarks. The number of earmarks increased by 16.7 percent, from six in FY 2020 to seven in FY 2021. The cost of the projects increased by 7.4 percent, from $529.5 million in FY 2020 to $568.6 million in FY 2021.

$290,000,000 for the High Intensity Drug Trafficking Areas program (HIDTA) at the Office of National Drug Control Policy (ONDCP), a 1.8 percent increase from the $285 million added in FY 2020, and the largest earmark ever for the HIDTA.

Originally intended for Southern border states, members of Congress have used earmarks to expand HIDTA to other parts of the country. Since FY 1997, there have been 33 HIDTA earmarks costing taxpayers $902.4 million, meaning the FY 2021 earmark represents 32.1 percent of all HIDTA earmarks over the past 25 years. Of the previous earmarks, 16 were directed to programs in 10 states, only two of which, Arizona and New Mexico, are on the Southern border. The other eight states that received HIDTA earmarks were Alabama, Hawaii, Iowa, Louisiana, Missouri, New Jersey, Tennessee, and Wisconsin.

Former President Obama’s FY 2017 version of Cuts, Consolidations, and Savings recommended trimming the HIDTA program by $54 million, or 21.6 percent, from the $250 million spent in FY 2016.

$115,750,000 for other federal drug control programs at ONDCP, the most ever, and a 5.6 percent increase from the $109.5 million earmarked in FY 2020. There is no indication as to which specific ONDCP programs will be funded. Since FY 1996, members of Congress have added 22 earmarks for the ONDCP, costing $659.4 million. The FY 2021 earmark amounts to 17.6 percent of the total added for the ONDCP.

Members of Congress who have provided earmarks for the ONDCP include Senate Financial Services and General Government Appropriations Subcommittee member Dick Durbin (D-Ill.), House Appropriations Committee member Harold Rogers (R-Ky.), and Rep. Rick Larsen (D-Wash.).

President Richard Nixon kicked off the War on Drugs on June 18, 1971, declaring drug abuse to be “public enemy number one.” Since then, the U.S. has spent more than $1 trillion on drug interdiction policies, with little to show for it. In fact, the problem has grown exponentially, especially with the rise of opioids. In the 12-month period ending in May 2020, 81,000 Americans died of drug overdoses, the most ever during such a period.

Then-ONDCP Director Richard Kerlikowske acknowledged the failure of the War on Drugs in May 2010, stating, “In the grand scheme, it has not been successful. … Forty years later, the concern about drugs and drug problems is, if anything, magnified, intensified.”

In addition to interdiction, ONDCP has been responsible for ad campaigns, including the Reagan administration’s “Just Say No” campaign and the Bush administration’s National Youth Anti-Drug Media Campaign targeting teenage marijuana use. The Trump administration launched its own advertising campaign on June 7, 2018, warning against the dangers of opioids.

Such ad campaigns are doomed to failure. A December 2008 assessment found that the ONDCP’s anti-marijuana campaign may have had the opposite effect, stating, “more ad exposure predicted less intention to avoid marijuana use … and weaker antidrug social norms.” A March 2015 report on 19 studies examining anti-drug media campaigns found that, while four campaigns provided some benefits, eight did not affect drug use or intended drug use, and two had the opposite result.

Spending more than $1 trillion, including yet another earmark, along with ineffective ad campaigns, is not the way to win the war on drugs.

$104,400,000 for entrepreneurial development programs (EDP) within the Small Business Administration (SBA), a 29.9 percent increase from the $80.4 million earmarked in FY 2020, and the largest ever earmark for the SBA.

Once heavily earmarked by members of Congress, the SBA received its first earmark in seven years in FY 2018, when legislators supplied $54,650,000, which means there has been a 91 percent increase in SBA earmarks over three years.

In FY 2010, members of Congress added 259 earmarks costing $58.9 million, including local business development centers, chambers of commerce, and business incubation centers. Each of those earmarks included the name of the recipient, its location, and the member of Congress responsible. In contrast, the FY 2021 earmark, which is 77.2 percent greater than FY 2010, contains no identifying information and no indication as to where the funding will be directed. As has been noted previously, the lack of transparency regarding this earmark is troubling, given that former members of Congress received prison sentences relating to misuse of earmarks.

Former President Trump’s FY 2021 Major Savings and Reforms recommended reducing funding for the EDP, saving $93 million.

The RSC’s FY 2020 budget went further, recommending that the EDP be eliminated altogether, saving $2.8 billion over 10 years.

Since FY 1995, members of Congress have added 679 earmarks for the SBA, costing $582.1 million.

VI. Homeland Security

The cost and number of earmarks surged in the FY 2021 Department of Homeland Security (DHS) Appropriations Act. Earmarks increased by 66.7 percent, from 6 in FY 2020 to 10 in FY 2021, while their cost ballooned by 51.7 percent, from $316.1 million in FY 2020 to $479.6 million in FY 2021.

$101,000,000 for the National Domestic Preparedness Consortium (NDPC), the same amount earmarked in FYs 2018, 2019, and 2020, and tied for the second largest ever earmark.

Former President Trump’s FY 2021 Major Savings and Reforms recommended eliminating funding for the NDPC because it is duplicative of other programs and belongs in the purview of state and local governments. The report also noted the NDPC is “duplicative of FEMA’s Emergency Management Institute and Center for Domestic Preparedness.”

Since FY 2005, the NDPC has received 11 earmarks worth $884.6 million, including a $10.1 million earmark in FY 2010 by then-Sens. Jeff Bingaman (D-N.M.) and Tom Udall (D-N.M.).

$63,642,000 for the Port Security Grant Program (PSGP), the same amount provided in FYs 2019 and 2020. A June 2014 GAO report found that, despite distributing nearly $2.9 billion in funding to the PSGP since 2002, the Federal Emergency Management Agency “stated that it is unable – due to resource constraints – to annually measure reduced vulnerability attributed to enhanced PSGP-funded security measures.”

Former President Trump’s FY 2021 Major Savings and Reforms recommended reducing funding for the PSGP as part of a larger package of budget eliminations and reductions in DHS state and local grants and training., saving $535 million. Members of Congress have provided 10 earmarks totaling $1 billion for the PSGP since FY 2005.

VII. Interior

The number of earmarks FY 2021 Department of the Interior, Environment, and Related Agencies Appropriations Act decreased by 23.8 percent, from 21 in FY 2020 to 16 in FY 2021. Earmarks in FY 2021 cost $294.6 million, a 37.8 percent decrease from the $473.6 million FY 2020.

$25,000,000 for the Save America’s Treasures (SAT) grants program, a 56.3 percent increase from the $16 million earmarked in FY 2020, and the largest ever earmark for the program. Intended to help preserve historic locations across the country, members of Congress have added 269 SAT earmarks costing taxpayers $122.5 million since FY 2006.

Between FYs 2008 and 2010, when transparency rules required each earmark to contain the name of the legislator who requested it and the recipient’s name, city, and state, members of Congress went whole hog for SAT earmarks. In FY 2008, 78 members of Congress added 70 earmarks costing $13.6 million. In FY 2009, 58 members of Congress added 55 earmarks costing $10 million. And in FY 2010, 72 members of Congress added 52 earmarks costing $10.2 million.

During those three years, there were 21 earmarks for theaters costing $4.5 million 10 earmarks for museums costing $2.4 million and seven earmarks for opera houses costing $1.5 million. One of those earmarks, worth $150,000, was obtained by House Appropriations Committee Chair Rosa DeLauro (D-Conn.) in FY 2010 for the Sterling Opera House in Derby, Connecticut $110,000 of that amount had to be returned to the federal government after it was improperly used by the city.

SAT earmarks contributed to the downfall of former House Appropriations Committee member Alan Mollohan (D-W.Va.). In FY 2010, he added $150,000 for restoration of the Cottrill Opera House through the Vandalia Heritage Foundation, which was operated by a former aide, Laura Kurtz Kuhn. This was one of several earmarks that led to Rep. Mollohan being accused of potential ethics violations, a key issue in his primary election loss in May 2010.

While the earmarks in FYs 2008 through 2010 were transparent, there is no indication where the FY 2020 earmark is going. As a result, taxpayers will be unaware should a member of Congress direct the SAT money in FY 2020 to a friend, former staffer, or anyone else.

Former President Obama called for the elimination of SAT in the FY 2011 version of Cuts, Consolidations, and Savings, to allow the NPS to “focus resources on managing national parks and other activities that most closely align with its core mission,” since the grants have “not demonstrated how they contribute to nationwide historic preservation goals.”

On top of these problems with the SAT program, many facilities could have simply charged more money or found other ways to match the amount of the earmarks. A prime example is the $147,660 earmarked by Rep. Peter King (R-N.Y.) in FY 2008 for the plush de Seversky Center Mansion in Old Westbury, New York, which “is an elegant wedding venue … on Long Island’s historic Gold Coast.” WeddingWire.com cites a cost of approximately $42,000 for a ceremony and reception for 150 guests. In other words, four weddings would be more than enough to replace the earmark.

Another such facility is the Roberson Center in Binghamton, New York, located in the district of then-House appropriator Maurice Hinchey (D-N.Y.), which received a $100,000 earmark in FY 2006. The center raised $50,000 for its 12th annual Wine and Food Fest in 2017, and charges $215 per week for summer camp, which means just 23 more attendees per week for the 10 weeks of camp would equal the remaining $50,000 of the earmark.

$23,491,000 for the Heritage Partnership Program (HPP), which supports the 49 National Heritage Areas (NHAs) created by Congress. The FY 2021 earmark is the largest ever for the HPP, and 8.8 percent higher than the $21.6 million earmarked in FY 2020. Operated through the National Park Service (NPS), the HPP has received 54 earmarks costing $141.5 million since FY 2001, including funding for projects like park improvements, sports complexes, health centers, water quality monitoring, bike paths, sustainable agriculture, and agricultural tourism.

Each of former President Obama’s budgets from FYs 2011 through 2017 slashed funding for NHAs. The FY 2017 version of Cuts, Consolidations, and Savings recommended trimming the budget by 55 percent, from $20 million to $9 million. The last three of former President Trump’s Major Savings and Reforms proposed eliminating the HPP entirely, saving $22 million. The 2021 report noted there is no “systematic process for designating Heritage Partnership Areas or determining their effectiveness,” and that funding for the HPP diverted resources from core NPS responsibilities.

Unfortunately, members of Congress have continuously ignored these proposed budget reductions, earmarking funding for the HPP in eight of the last 10 years.

$5,000,000 for the National Capital Arts and Cultural Affairs (NCACA) grant program, the same as FY 2020, and tied for the largest earmark ever for the program.

The NCACA provides funding for large arts and cultural institutions in Washington, D.C. The Kennedy Center for the Performing Arts received $650,000 in FY 2020, a 44.2 percent increase from the $450,730.26 awarded in FY 2019. The Kennedy Center also received $25 million in the Coronavirus Aid, Relief, and Economic Security Act, signed into law by then-President Trump on March 27, 2020.

The NCACA is similar to cultural affairs organizations that exist in many U.S. cities and at the state and regional level, and is no more deserving of funding than any other such entity. Since FY 2005, members of Congress have added six earmarks for the NCACA, costing taxpayers $18.1 million.

$663,000 for a brown tree snake eradication program. The snakes are native to northern Australia and Indonesia, but have caused damage to the ecosystem of Guam, where they were likely introduced by the U.S. military following World War II.

In Senate floor comments on July 22, 2004, Sen. John McCain (R-Ariz.) said of a $1 million earmark that found its way into the FY 2005 DOD appropriations bill, “Once again, the brown tree snake has slithered its way into our defense appropriation bill. I’m sure the snakes are a serious problem, but a defense appropriations act is not the appropriate vehicle to address this issue.”

Since FY 1993, there have been 19 earmarks costing $19 million to fight brown tree snakes. Members of Congress who have inserted earmarks for this program in the past include then-Reps. Neil Abercrombie (D-Hawaii) and Mazie Hirono (D-Hawaii), then-Del. Madeleine Bordallo (D-Guam), and the late Sens. Daniel Akaka (D-Hawaii) and Daniel Inouye (D-Hawaii).

VIII. Labor, Health and Human Services, and Education (Labor/HHS)

The number of earmarks in the FY 2021 Labor, Health and Human Services, and Education Appropriations Act (Labor/HHS) declined by 14.8 percent, from 27 in FY 2020 to 23 in FY 2021. The cost of these projects was reduced by 7.7 percent, from $1.3 billion in FY 2020 to $1.2 billion in FY 2021.

Despite the decline from FY 2020, it is worth noting the extent to which the cost of earmarks in the Labor/HHS bill have exploded over the past four fiscal years. The $1.2 billion provided in FY 2021 represents a 2,035.2 percent increase from the $56.2 million in FY 2017.

$55,609,000 for Rural Hospital Flexibility Grants (Flex), a 3.7 percent increase from the $53.6 million earmarked in FYs 2019 and 2020, and the second largest ever earmark for the program.

Flex grants were created to “improve access to hospitals and other health services for families that live in rural communities.” The last six Obama administration budgets recommended slashing funding for the Flex program, including by $16 million in FYs 2016 and 2017.

Since FY 2006, Flex grants have received 10 earmarks totaling $351.2 million.

IX. State and Foreign Operations

The number of earmarks in the FY 2021 State and Foreign Operations Appropriations Act decreased by 12.5 percent, from eight in FY 2020 to seven in FY 2021. Their cost went in the opposite direction, increasing by 1.4 percent, from $550 million in FY 2020 to $557.7 million in FY 2021.

$232,725,000 for the National Endowment for Democracy (NED), the same amount earmarked in FY 2020, and tied for the largest earmark ever for the NED. The FY 2021 earmark represents 41.7 percent of the total cost of earmarks contained in the State and Foreign Operations bill.

Since FY 1997, members of Congress have added 11 earmarks costing $923.8 million for the NED, a private, nonprofit foundation that aims to help grow and strengthen democratic institutions around the world. The FY 2021 earmark represents 25.2 percent of the total amount of money earmarked for the NED.

$28,170,000 for international fisheries commissions (IFCs), a 0.4 percent decrease from the $28,270,000 earmarked in FY 2020, and the second largest earmark ever for the IFCs. Made up of various marine conservation organizations and commissions, IFCs have received 11 earmarks totaling $104.4 million since FY 1997. Legislators added 27 percent of this total in FY 2021 alone.

Congress should let taxpayers off the hook and tell the IFCs to go fish for money elsewhere.

$20,000,000 for the Asia Foundation, which is “committed to improving lives across a dynamic and developing Asia.” The earmark is the largest ever for the foundation and represents a 5.3 percent increase from the $19 million provided in FY 2020. Since FY 1997, members of Congress have directed 15 earmarks totaling $137.6 million to the Asia Foundation.

The foundation has a $106.1 million annual budget, meaning the earmark represents 18.9 percent of its income. The organization had 715 donors in 2019, comprised of 89 corporations, foundations, and organizations, 30 government and multilateral agencies, and 596 individuals. It should rely solely on these private sources of income, each of which could contribute another $27,972 instead of asking taxpayers to help fund the foundation.

A February 26, 2018 article by Brett Schaefer of The Heritage Foundation argued for the elimination of funding for the Asia Foundation and the East-West Center, claiming that the organizations “receive appropriated federal funding to support their activities, but do not operate under direct Executive Branch oversight. These organizations should be required to compete for federal funding like other nongovernmental organizations.”

All four versions of former President Trump’s Major Savings and Reforms between FYs 2018 and 2021 proposed eliminating funding for the Asia Foundation. The RSC’s budgets from FYs 2017 through 2020 also recommended zeroing out funding.

$19,700,000 for the East-West Center in Hawaii, an 18 percent increase from the $16.7 million earmarked in FYs 2018 through 2020, and the largest earmark ever for the center.

Big earmarks are the new norm for the East-West Center. From FYs 2014 through 2017, legislators added $5.9 million annually the FY 2021 amount is a 233.9 percent increase above this level.

Intended to promote better relations with Pacific and Asian nations, the center was established by Congress in 1960 with no congressional hearings and over the State Department’s opposition. For years, the State Department tried to eliminate the center by not requesting funding in the department’s annual budget requests.

After Sen. Daniel Inouye (D-Hawaii) passed away in 2013, Senate Appropriations Committee member Brian Schatz (D-Hawaii) took over as the center’s champion. In a December 22, 2020 press release, Sen. Schatz claimed credit for securing the $19.7 million in funding. The FY 2021 earmark represents 68.2 percent of the center’s $28.9 million budget for FY 2018.

The East-West Center is similar to the North-South Center, which stopped receiving federal funding in 2001. An April 3, 2009 Congressional Research Service report stated, “Congress has not funded the North-South Center since FY 2001, noting that it should be funded by the private sector.” Following that logic, the East-West Center should be fully funded by the private sector as well. Since FY 1997, the East-West Center has received 18 earmarks totaling $197.2 million.

The FYs 2018 through 2020 versions of former President Trump’s Major Savings and Reforms and t he RSC’s budgets from FYs 2017 through 2020 proposed eliminating funding for the East-West Center.

X. Transportation, Housing, and Urban Development (THUD)

The number of earmarks in the FY 2021 Transportation, Housing, and Urban Development and Related Agencies Appropriations Act decreased by 37.5 percent, from eight in FY 2020 to five in FY 2021. The cost of earmarks declined by 67.3 percent, from $168.3 million in FY 2020 to $55.1 million in FY 2021.

$52,049,000 for four earmarks for the Airport and Airways Trust Fund (AATF), through which the Federal Aviation Administration finances airport infrastructure improvements. The FY 2021 earmarks represent a 63.3 percent decrease from the $142 million in FY 2020. Since FY 2005, members of Congress have added 19 earmarks for the AATF costing $335.9 million, which means the FY 2021 funding level represents 15.5 percent of this total.

According to a November 21, 2016 Cato Institute report, the AATF has the indirect effect of preventing competition among airlines. Because the AATF allows funding only for maintenance and improvements, airports are limited in the number of gates they can build. As a result, airport managers ration gate access through long-term contracts with established companies, creating a barrier to entry for potential competitors.

A 2016 Airport Council International report found that market-based reforms in European airports have led to “significant volumes of investment in necessary infrastructure, higher service quality levels, and a commercial acumen which allows airport operators to diversify revenue streams and minimize the costs that users have to pay.” Because privatized European airports are not forced to compete with inefficient government-subsidized airport ownership, healthy competition thrives, and consumers pay lower prices. The U.S. should adopt this model.

$3,000,000 for the Maritime Guaranteed Loan program (Title XI), the same amount provided in FYs 2019 and 2020. In 2001, then-OMB Director Mitch Daniels labeled Title XI an “unwarranted corporate subsidy.” An August 8, 2011 Bloomberg Businessweek article noted that the program was suspended in 1987 following 129 loan defaults between FYs 1985 and 1987. The Bush administration ceased issuing loans in 2005, but Congress consistently resuscitated the program. In one high-profile failure, two ferries meant for Hawaii sat docked in Norfolk, Virginia, after the operating company defaulted on a $138 million loan in 2009. The Navy bought the ferries for $35 million in 2012.

A December 7, 2010 Department of Transportation DOT OIG report found that between February 1998 and April 2002, nine borrowers defaulted on approximately $490 million in loans. Between August 2008 and January 2010, six additional borrowers defaulted on $305 million. Loan information was not maintained properly and, therefore, “there is no assurance that information … need[ed] to effectively oversee the $2.3 billion Title XI program is readily accessible.” In August 2011, the late Sen. John McCain (R-Ariz.) called the program “an egregious example of pork-barrel spending.” The same can be said for this earmark.

Title XI did not receive a budget request, meaning all of the funding was provided through the earmark. Since FY 2006, legislators have added seven earmarks totaling $49.8 million for the program.

This booklet was written by Sean Kennedy, director of research and policy. It was edited by Thomas A. Schatz, president.


Which party will hold the keys to states’ legislative and congressional maps?

While the race for the White House is sorted out across tight midwestern battlegrounds, Republicans can already claim an important victory further down the ballot. The GOP held state House and Senate chambers across Texas, North Carolina, Florida, Ohio, Kansas, and many other key states. This ensures a dramatic edge when it comes to redrawing new state legislative and congressional maps next year, following the completion of the census count.

This year, Democrats had hoped to avenge the GOP’s 2010 Redmap strategy, which drove Republicans that year to control swing-state legislatures in Pennsylvania, Michigan, Ohio, Wisconsin, North Carolina and Florida, and majorities they have not relinquished since. That also allowed Republicans to draw, on their own, nearly five times as many congressional districts nationwide as Democrats.

Tuesday’s election offered both parties the last chance to gain influence over maps that will define the state of play for the next decade. States have different rules on this: almost three-quarters of all states, however, give their legislatures the prominent role. That heightens the stakes of state legislative races in years ending in zero. On Tuesday, in the two states with the most at stake – Texas and North Carolina – Democrats fell far short, despite millions of dollars invested by the national party and outside organizations.

In Texas, Democrats needed to gain nine seats in the state House to affect redistricting. They may not net any. Republicans picked up several open seats, and GOP incumbents held on in almost all the battleground districts enveloping the cities of Dallas, Fort Worth and Houston. In House district 134, which includes part of Houston, Democrat Ann Johnson ousted GOP incumbent Sarah Davis. But otherwise, the party ran far behind expectations.

The consequences could linger until 2031, if not longer. Texas Republicans may look to redraw state maps next year based on the “citizen voting-age population” or CVAP, and depart from the longtime standard of counting the total population. A 2015 study by Thomas Hofeller, the late GOP redistricting maestro, found that such a switch “would be advantageous to Republicans and non-Hispanic whites,” and create a relative population decline in Democratic strongholds in south Texas and in otherwise fast-growing parts of Dallas and Houston.

How will the Guardian report US election results?

Though most people will probably be watching the results of the race for the White House, more than 7,000 elections took place across the US on 3 November.

In the age of disinformation, it is more important than ever that media outlets report election results as clearly and transparently as possible.

The Guardian will be using data collected and analysed by the Associated Press (AP) as the source for when we will call election results for the presidency, Senate, House races and others. AP has a team of thousands of specialists and correspondents across America, who have trusted relationships with local officials. This will guide their data-led assessment of when it's time to call a race.

There are a number of other highly reputable election "decision desks" in US media. They may call races earlier than AP. While the Guardian will report this is happening, we will rely on AP's data to make our own final call.

Should any candidate declare victory prematurely, we will report this claim, but make clear that it is not valid. The only measure of victory is a complete count of all outstanding ballots.

In North Carolina, meanwhile, even a new, fairer state legislative map – albeit one that still slightly favored Republicans – couldn’t help Democrats break the GOP’s 10-year hold on both the House and Senate. Democrats netted one Senate seat – they needed five – and lost ground in the state House. Republicans will not only have a free hand to draw maps next year, but they also appear to have gained seats on the state supreme court – which will adjudicate any dispute over these maps – and cut the Democratic majority there to 4-3. (Democrats did make gains on both the Ohio and Michigan state supreme courts, both of which could be asked to weigh in on the constitutionality of maps later this decade.)

As a result, Republicans will have a free hand in drawing new districts across both states, providing the GOP with a renewed decade-long edge and also paving the way for conservative legislation on voting rights, health care, reproductive rights, education funding and much more. Any new voting restrictions, meanwhile, could assist Republicans in maintaining electoral college dominance in these states, as well.

Democrats in Kansas had hoped to simply break GOP supermajorities and sustain a Democratic governor’s veto power over a GOP gerrymander that could devour the state’s one blue congressional seat. But they appear to have been unable to muster either a one-seat gain in the House or the three seats necessary in the Senate.

Wisconsin Democrats, however, did successfully preserve the veto of Democratic governor Tony Evers, ensuring that the party will have some say over maps that have provided Republicans with decade-long majorities even when Democratic candidates won hundreds of thousands more statewide votes. Wisconsin was one of the most gerrymandered states in the country after the Republican takeover in 2010.

Democrats flipped the Oregon secretary of state’s office as well, which plays a determinative role in redistricting should Republicans deny Democrats a quorum to pass a map. The party also denied Republicans in Nebraska’s ostensibly nonpartisan unicameral chamber a supermajority that would allow them to gerrymander the second congressional district in Omaha, which carries an electoral college vote.

There was mixed news for gerrymandering reformers in two states where fair maps were on the ballot statewide. In Virginia, voters overwhelmingly approved a redistricting commission that will consist equally of lawmakers and citizens to draw lines next year. But in Missouri, by a narrow margin of 51% to 49%, voters repealed a 2018 initiative that would have placed maps under the control of a neutral state demographer. That will leave Republicans in full control of the process.

After 2010, Pennsylvania has elected a Democratic governor, and Michigan has adopted an independent commission, suggesting less partisan maps next year. But by holding Texas, North Carolina, Florida and Ohio, Republicans appear likely to draw at least four times as many congressional seats by themselves.

That advantage, in turn, will endure long after whoever won Tuesday’s presidential election has left the scene.


Patriot Act: three controversial provisions that Congress voted to keep

Congress had included sunset provisions in the USA Patriot Act to ensure that lawmakers revisited these measures. On Thursday, they extended three provisions for four years.

Congress passed and President Obama signed legislation reauthorizing the USA Patriot Act just hours before three controversial provisions were due to expire.

But in a rare meeting of minds, many liberals and some tea party activists opposed the bill on the grounds that it gives the government too much power and does not protect civil liberties. The Senate passed the bill on Thursday 72 to 23, after working through objections by Sen. Rand Paul (R) of Kentucky.

The vote also cut across party lines in the House, where the measure passed on Thursday 250 to 153, with 31 Republicans and 122 Democrats voting in opposition.

Speaker John Boehner (R) of Ohio called the bill “a critical tool” to protect the American people. Democratic leader Nancy Pelosi of California, meanwhile, said that Congress had failed “to preserve Americans’ privacy” and missed an opportunity to reform “documented abuses” in the law.

On the Senate side, majority leader Harry Reid (D) of Nevada blasted Senator Paul for putting the nation’s security at risk by delaying the bill.

Few laws have so consistently been associated with haste and fear as the USA Patriot Act, which first passed the Congress as ground zero still smoldered after the 9/11 attacks. At the time, the Bush administration warned that new terrorist attacks could take place within days – and that if Congress did not grant government significant new powers of surveillance, lawmakers would be accountable for the attacks. The USA Patriot Act passed the Senate on Oct. 24, 2001, with just one dissenting vote, and later cleared the House by a vote of 357 to 66.

But Congress also included sunset provisions to ensure that lawmakers revisited these measures, outside such a climate of crisis. Over time, nearly all these sunset provisions have been made a permanent part of the law.

Here are three provisions that Congress took up this week and extended for four years:

Roving wiretaps. This provision gives intelligence officials authority to conduct surveillance on terrorist suspects regardless of how many communication devices they use (such as cellphones or the Internet). Approval for the surveillance must be obtained from a federal court. Law-enforcement agencies have been able to use wiretaps for criminal investigations since 1986.

Business records. Another provision allows access to business records in cases involving terrorism, foreign intelligence, or espionage, with approval of a federal judge.

Lone wolf. In 2004, Congress amended the Foreign Intelligence Surveillance Act to authorize intelligence gathering on individuals not affiliated with any known terrorist organization, with a sunset date to correspond with the Patriot Act provisions. The provision, which is thus technically not part of the Patriot Act, is explicit in saying it does not to apply to US citizens.

On Wednesday, Director of National Intelligence James Clapper wrote to congressional leaders warning that any lapse in the provisions of the law carried national security risks, especially following the killing of Osama bin Laden.

“The information obtained at the Osama Bin Laden compound must be quickly analyzed for any indications and warning of terrorist plots and attack plans,” he wrote. “As part of this effort we are using all our collection authorities to investigate and prevent terrorist attacks.”

But privacy groups say that Congress has never done a thorough investigation of how the law actually works, especially its impact on individual privacy rights.

“Despite having months to debate and legislate on this crucial issue, Congress has once again chosen to rubberstamp the Patriot Act and its overreaching provisions,” said Laura Murphy, director of the Washington legislative office of the American Civil Liberties Union, in a statement. “Since its passage nearly a decade ago, the Patriot Act has been used improperly again and again by law enforcement to invade Americans’ privacy and violate their constitutional rights.”

As for Paul, he had held out for an amendment that would have limited access to gun records under the Patriot Act. “There is no reason we should allow a government to look at our gun records and to troll through all of them,” the senator said on the floor Wednesday. “If a government thinks someone is a terrorist, name that person, name the place, and show probable cause.”

In a surprise move, the National Rifle Association declined to take a position on the amendment, which was blocked on a procedural vote, 85 to 10.


Raising the U.S. minimum wage would both help and hurt

Activists appeal for a $15 minimum wage in Washington, DC, 25 February 2021. (AP Photo/J. Scott Applewhite)

A proposal by U.S. President Joseph Biden to more than double the federal minimum wage to $15 an hour by 2025 — the first increase in more than a decade — would boost the pay checks of millions of workers, lifting many out of poverty.

But it would also throw more than a million people out of work, cause prices to rise, dampen overall economic output, increase the federal budget deficit and hit many small businesses hard, according to the Congressional Budget Office.

As with so much legislation in Washington, support for the proposal splits along party lines. Democrats are pushing to raise the current minimum of $7.25 an hour — “a starvation wage,” according to Senator Bernie Sanders — while Republicans are balking at such a large increase for fear of punishing businesses, especially small firms.

“No person in America can make it on $8, $10 or $12 an hour,” Sanders said recently. “In the United States of America, a job must lift workers out of poverty, not keep them in it. We must raise the minimum wage to a living wage — at least $15 an hour.”

Saying a $15 minimum wage would destroy 1.4 million jobs, Republican U.S. Senators Mitt Romney and Tom Cotton have proposed lifting the floor to a more modest $10 an hour.

“Our legislation would raise the floor for workers without costing jobs and increase the federal minimum wage to $10, automatically raising it every two years to match the rate of inflation,” Romney said.

Many U.S. states have a higher minimum wage.

First established under President Franklin Roosevelt, the federal minimum wage sets a floor — or minimum amount — that employees are entitled to be paid by the hour.

As of January 2020, 29 of the 50 U.S. states had set a minimum wage that was higher than the federal floor, and most workers earned more than the current federal minimum of $7.25 an hour.

Still, if the federal minimum were raised, it would put general upward pressure on many wages, affecting far greater numbers of workers than just those receiving the minimum.

Because the federal minimum wage has not been adjusted since 2009 while the cost of living has risen, a full-time federal minimum wage worker today effectively earns 18% less than what their counterpart earned at the time of the last increase, according to the Economic Policy Institute (EPI), a think tank that is considered close to the U.S. labor movement.

The Raise the Wage Act of 2021, which is before Congress, would phase in increases until the minimum wage reached $15 in 2025. According to EPI, it would raise the earnings of 32 million workers, or 21% of the U.S. workforce, because those currently receiving just above the new minimum wage would receive a raise as pay scales were adjusted upwards.

By 2025, nearly one million people would be lifted out of poverty, but there would be 1.4 million workers out of a job, according to the non-partisan Congressional Budget Office (CBO).

The legislation would increase the federal budget deficit by $54 billion over the next decade, slightly reduce inflation-adjusted economic growth and increase the prices of some goods, such as food prepared in restaurants, according to the CBO.

EPI estimated that raising the minimum wage would lift far more people out of poverty — 3.7 million Americans, including 1.3 million children.

Many restaurants say they would suffer.

Biden has said that small business owners, many of whom employ hourly wage earners, have legitimate concerns, but that the U.S. economy would grow in the long run if the federal minimum wage were raised.

“I think there’s equally, if not more, evidence it would grow the economy in the long run and medium-run, benefit small businesses as well as large businesses,” Biden said in February.

To offset the impact of an increase in hourly wages on the bottom line, a small business can cut expenses, including the number of employees on payroll, and increase prices. But that can be difficult to do.

“Our evidence suggests that some small businesses, industries and areas may face frictions in absorbing the increased cost of labor due to an increase in the federal minimum wage,” according to the National Bureau of Economic Research, a non-profit research organization . “As a result, they experience financial stress or may even default in extreme cases.”

Pat Fontaine, executive director of the Mississippi Hospitality & Restaurant Association, said an increase in the federal minimum wage to $15 an hour “would be a devastating impact on restaurants.”

The average profit margin for a restaurant not serving alcohol in Mississippi is between 4% and 5%, according to Fontaine.

“For a restaurant to be able to maintain that margin and factor in the increased wages, it has no alternative but to pass the costs around to the customer and their menu prices,” he said, predicting many Mississippians would elect not to dine out.

‘People struggling financially are horrible employees.’

But Mitchell Moore, owner of Campbell’s Bakery in Jackson, Mississippi, offered a different take on the issue.

“At Campbell’s Bakery, we already understand the minimum wage is too low, so for several years most of our crew make well above the minimum wage,” he said, noting that the average hourly wage is currently closer to $12-$13.

If the minimum wage were increased incrementally, his business would be better able to manage the change, Moore said.

“Raising everyone’s pay across the board all at once would hurt the cash flow of the business. We would need to adjust pricing and recipes most likely,” he said. “If, however, we were given the time to implement, those struggles could be minimized.”

Moore put his finger on an intangible aspect of the debate — the work environment.

“These extremely low-paying jobs do not allow the worker to feel anything towards the employer,” Moore said. “Raising the minimum wage allows workers in even entry-level positions to feel more pride in their work, a greater sense of happiness at work, and puts them in a better position financially. People who are struggling financially are horrible employees.”


Contents

Before and after the CFMA, federal banking regulators imposed capital and other requirements on banks that entered into OTC derivatives. [4] The U.S. Securities and Exchange Commission (SEC) and CFTC had limited "risk assessment" authority over OTC derivatives dealers affiliated with securities or commodities brokers and also jointly administered a voluntary program under which the largest securities and commodities firms reported additional information about derivative activities, management controls, risk and capital management, and counterparty exposure policies that were similar to, but more limited than, the requirements for banks. [5] Banks and securities firms were the dominant dealers in the market, with commercial bank dealers holding by far the largest share. [6] To the extent insurance company affiliates acted as dealers of OTC derivatives rather than as counterparties to transactions with banks or security firm affiliates, they had no such federal "safety and soundness" regulation of those activities and typically conducted the activities through London-based affiliates. [7]

The CFMA continued an existing 1992 preemption of state laws enacted in the Futures Trading Practices Act of 1992 which prevented the law from treating eligible OTC derivatives transactions as gambling or otherwise illegal. [8] It also extended that preemption to security-based derivatives that had previously been excluded from the CEA and its preemption of state law. [9]

The CFMA, as enacted by President Clinton, went beyond the recommendations of a Presidential Working Group on Financial Markets (PWG) report titled "Over-the Counter Derivatives and the Commodity Exchange Act" (the "PWG Report"). [10]

President's Working Group on Financial Markets, November 1999:

Although hailed by the PWG on the day of congressional passage as "important legislation" to allow "the United States to maintain its competitive position in the over-the-counter derivative markets", by 2001 the collapse of Enron brought public attention to the CFMA's treatment of energy derivatives in the "Enron Loophole." Following the Federal Reserve's emergency loans to "rescue" American International Group (AIG) in September, 2008, the CFMA has received even more widespread criticism for its treatment of credit default swaps and other OTC derivatives. [a]

In 2008 the "Close the Enron Loophole Act" was enacted into law to regulate more extensively "energy trading facilities." [13] [b] On August 11, 2009, the Treasury Department sent Congress draft legislation to implement its proposal to amend the CFMA and other laws to provide "comprehensive regulation of all over-the counter derivatives." This proposal was revised in the House and, in that revised form, passed by the House on December 11, 2009, as part of H.R. 4173 (Dodd–Frank Wall Street Reform and Consumer Protection Act). Separate, but similar, proposed legislation was introduced in the Senate and still awaiting Senate action at the time of the House action. [c]

OTC derivatives regulation before the CFMA Edit

Exchange trading requirement Edit

The PWG Report was directed at ending controversy over how swaps and other OTC derivatives related to the CEA. A derivative is a financial contract or instrument that "derives" its value from the price or other characteristic of an underlying "thing" (or "commodity"). A farmer might enter into a "derivative contract" under which the farmer would sell from next summer's harvest a specified number of bushels of wheat at a specified price per bushel. If this contract were executed on a commodity exchange, it would be a "futures contract." [d]

Before 1974, the CEA only applied to agricultural commodities. "Future delivery" contracts in agricultural commodities listed in the CEA were required to be traded on regulated exchanges such as the Chicago Board of Trade. [14]

The Commodity Futures Trading Commission Act of 1974 created the CFTC as the new regulator of commodity exchanges. It also expanded the scope of the CEA to cover the previously listed agricultural products and "all other goods and articles, except onions, and all services, rights, and interests in which contracts for future delivery are presently or in the future dealt in." Existing non-exchange traded financial "commodity" derivatives markets (mostly "interbank" markets) in foreign currencies, government securities, and other specified instruments were excluded from the CEA through the "Treasury Amendment", to the extent transactions in such markets remained off a "board of trade." The expanded CEA, however, did not generally exclude financial derivatives. [14] [15]

After the 1974 law change, the CEA continued to require that all "future delivery" contracts in commodities covered by the law be executed on a regulated exchange. This meant any "future delivery" contract entered into by parties off a regulated exchange would be illegal and unenforceable. The term "future delivery" was not defined in the CEA. Its meaning evolved through CFTC actions and court rulings. [16]

Not all derivative contracts are "future delivery" contracts. The CEA always excluded "forward delivery" contracts under which, for example, a farmer might set today the price at which the farmer would deliver to a grain elevator or other buyer a certain number of bushels of wheat to be harvested next summer. By the early 1980s a market in interest rate and currency "swaps" had emerged in which banks and their customers would typically agree to exchange interest or currency amounts based on one party paying a fixed interest rate amount (or an amount in a specified currency) and the other paying a floating interest rate amount (or an amount in a different currency). These transactions were similar to "forward delivery" contracts under which "commercial users" of a commodity contracted for future deliveries of that commodity at an agreed upon price. [17]

Based on the similarities between swaps and "forward delivery" contracts, the swap market grew rapidly in the United States during the 1980s. Nevertheless, as a 2006 Congressional Research Service report explained in describing the status of OTC derivatives in the 1980s: "if a court had ruled that a swap was in fact an illegal, off-exchange futures contract, trillions of dollars in outstanding swaps could have been invalidated. This might have caused chaos in financial markets, as swaps users would suddenly be exposed to the risks they had used derivatives to avoid." [18]

"Legal certainty" through regulatory exemptions Edit

To eliminate this risk, the CFTC and the Congress acted to give "legal certainty" to swaps and, more generally, to the OTC derivatives market activities of "sophisticated parties."

First, the CFTC issued "policy statements" and "statutory interpretations" that swaps, "hybrid instruments" (i.e., securities or deposits with a derivative component), and certain "forward transactions" were not covered by the CEA. The CFTC issued the forward transactions "statutory interpretation" in response to a court ruling that a "Brent" (i.e., North Sea) oil "forward delivery" contract was, in fact, a "future delivery" contract, which could cause it to be illegal and unenforceable under the CEA. This, along with a court ruling in the United Kingdom that swaps entered into by a local UK government unit were illegal, elevated concerns with "legal certainty." [19]

Second, in response to this concern about "legal certainty", Congress (through the Futures Trading Practices Act of 1992 (FTPA)) gave the CFTC authority to exempt transactions from the exchange trading requirement and other provisions of the CEA. The CFTC used that authority (as Congress contemplated or "instructed") to exempt the same three categories of transactions for which it had previously issued policy statements or statutory interpretations. The FTPA also provided that such CFTC exemptions preempted any state law that would otherwise make such transactions illegal as gambling or otherwise. To preserve the 1982 Shad-Johnson Accord, [20] which prohibited futures on "non-exempt securities", the FTPA prohibited the CFTC from granting an exemption from that prohibition. This would later lead to concerns about the "legal certainty" of swaps and other OTC derivatives related to "securities." [21]

Similar to the existing statutory exclusion for "forward delivery" contracts, the 1989 "policy statement" on swaps had required that swaps covered by the "policy statement" be privately negotiated transactions between sophisticated parties covering (or "hedging") risks arising from their business (including investment and financing) activities. The new "swaps exemption" dropped the "hedging" requirement. It continued to require the swap be entered into by "sophisticated parties" (i.e., "eligible swap participants") in private transactions. [22]

Although OTC derivatives were subject to criticism in the 1990s and bills were introduced in Congress to regulate aspects of the market, the 1993 exemptions remained in place. Bank regulators issued guidelines and requirements for bank OTC derivatives activities that responded to many of the concerns raised by Congress, the General Accounting Office (GAO), and others. Securities firms agreed with the Securities and Exchange Commission (SEC) and CFTC to establish a Derivatives Policy Group through which six large securities firms conducting the great majority of securities firm OTC derivatives activities reported to the CFTC and SEC about their activities and adopted voluntary principles similar to those applicable to banks. Insurance companies, which represented a much smaller part of the market, remained outside any federal oversight of their OTC derivatives activities. [23]

CFTC/SEC dispute Edit

Dispute Edit

In 1997 and 1998 a conflict developed between the CFTC and the SEC over an SEC proposal to ease its broker-dealer regulations for securities firm affiliates that engaged in OTC derivatives activities. The SEC had long been frustrated that those activities were conducted outside the regulated broker-dealer affiliates of securities firms, often outside the United States in London or elsewhere. To bring the activities into broker-dealer supervision, the SEC proposed relaxed net capital and other rules (known as "Broker-Dealer Lite") for OTC derivatives dealers. The CFTC objected that some activities that would be authorized by this proposal were not permitted under the CEA. The CFTC also issued a "concept release" requesting comments on whether the OTC derivatives market was properly regulated under the existing CEA exemptions and on whether market developments required regulatory changes. [25]

The CFTC's actions were widely viewed as a response to the SEC's Broker-Dealer Lite proposal and, at least by Professor John C. Coffee, as perhaps an attempt to force the SEC to withdraw the proposal. The CFTC expressed dismay over the Broker-Dealer Lite proposal and the manner in which it was issued, but also noted it was 18 months into a "comprehensive regulatory reform effort." The same day the CFTC issued its "concept release" Treasury Secretary Robert Rubin, Federal Reserve Board Chair Alan Greenspan, and SEC Chair Arthur Levitt (who, along with CFTC Chair Brooksley Born, were the members of the PWG) issued a letter asking Congress to prevent the CFTC from changing its existing treatment of OTC derivatives. They argued that, by calling into question whether swaps and other OTC derivatives were "futures", the CFTC was calling into question the legality of security related OTC derivatives for which the CFTC could not grant exemptions (as described in Section 1.1.2 above) and, more broadly, undermining an "implicit agreement" not to raise the question of the CEA's coverage of swaps and other established OTC derivatives. [26]

In the ensuing Congressional hearings, the three members of the PWG dissenting from the CFTC's "unilateral" actions argued the CFTC was not the proper body, and the CEA was not the proper statute, to regulate OTC derivatives activities. Banks and securities firms dominated the OTC derivatives market. Their regulators needed to be involved in any regulation of the market. Bank regulators and the SEC already monitored and regulated bank and broker-dealer OTC Derivatives activities. The dissenting PWG members explained that any effort to regulate those activities through the CEA would only lead to the activities moving outside the United States. In the 1980s banks had used offshore branches to book transactions potentially covered by the CEA. Securities firms were still using London and other foreign offices to book at least securities related derivatives transactions. Any change in regulation of OTC derivatives should only occur after a full study of the issue by the entire PWG. [27]

CFTC Chair Brooksley Born replied that the CFTC had exclusive authority over "futures" under the CEA and could not allow the other PWG members to dictate the CFTC's authority under that statute. She pointed out the "concept release" did not propose, nor presuppose the need for, any change in the regulatory treatment of OTC derivatives. She noted, however, that changes in the OTC derivatives market had made that market more similar to futures markets. [28]

Congress passed a law preventing the CFTC from changing its treatment of OTC derivatives through March 1999. CFTC Chair Born lost control of the issue at the CFTC when three of her four fellow Commissioners announced they supported the legislation and would temporarily not vote to take any action concerning OTC derivatives. CFTC Chair Born resigned effective June 1999. Her successor, William Rainer, was CFTC Chair when the PWG Report was issued in November 1999. [29]

Other background events Edit

While the dispute between the SEC and CFTC over OTC derivatives jurisdiction was at the core of pre-2008 narrations of the events leading to the CFMA, two other noteworthy background events occurred. First, in early 1997 CFTC Chairperson Born testified forcefully to Congress against a Senate bill that would have authorized futures exchanges to establish "professional markets" exempt from many regulatory requirements in a manner similar to the "regulatory relief" ultimately provided for an "exempt board of trade" under the CFMA. In her testimony to the Senate Agriculture Committee and in several subsequent speeches during the first half of 1997, Chairperson Born argued OTC derivatives did not create the same "concentration of financial risk" as exchange traded futures and did not perform the "unique price discovery" function of exchange traded contracts. She argued these differences justified different regulatory treatment. [30]

Chairperson Born's 1997 testimony on the difference between exchange and OTC markets was consistent with her first speech as CFTC Chair, on October 24, 1996, in which she stated her belief that regulation of the OTC derivatives market should be limited to fraud and manipulation. While her 1997 testimony opposed the Senate bill's provision to codify in law the existing CFTC regulatory exemptions for OTC derivatives, she also stated the CFTC was "watching" the OTC derivatives market with the PWG and had no plans to modify the existing CFTC exemptions for that market. [31]

The futures exchanges argued they needed permission to operate "professional markets" free of "regulatory burdens" in order to compete with foreign exchanges and the OTC derivatives market that catered to the same professionals. 1997 news reports attributed the failure of the "professional markets" legislation to disagreements concerning equity derivatives between the Chicago Board of Trade and the OTC derivatives dealers, on the one side, and the Chicago Mercantile Exchange and others futures exchanges, on the other. [32]

Second, after the 1998 CFTC "concept release" controversy arose, Long-Term Capital Management (LTCM) became headline news with the near collapse of a hedge fund it managed. The near collapse was widely attributed to OTC derivatives transactions. At an October 1, 1998, hearing before the House Banking Committee, Chairperson Born received compliments from some members of the Committee for having raised important issues in the May "concept release." The hearing, however, focused on issues with regulatory oversight of the banks and security firms that had given the LTCM fund high leverage through both loans and OTC derivative transactions. [33]

The 1999 GAO Report that analyzed the LTCM experience criticized federal regulators for not coordinating their oversight of LTCM's activities with banks and securities firms. The Report also recommended "consideration of" legislation to grant the SEC and CFTC consolidated supervision authority for securities and commodities firms in order to supervise the OTC derivatives activities of those consolidated entities in a manner similar to the Federal Reserve's authority over bank holding companies. The GAO Report did not consider, and did not recommend, CFTC regulation of OTC derivatives. [34]

An effect of the LTCM experience was that the conference committee report adopting the six-month moratorium on CFTC action affecting OTC derivative regulation included a statement that "the conferees strongly urge" the PWG to study OTC derivatives transactions of hedge funds and others. Although Chairperson Born had explained at the October 1, 1998, House Banking Committee hearing that the CFTC's supervisory authority over the LTCM fund as a "commodity pool operator" was limited to monitoring its exchange trading activities, the CFTC's possession of financial statements for the fund received negative news coverage in November 1998 based on the fact the CFTC was the only federal regulator to receive such reports directly from LTCM and had not shared the information with other members of the PWG. [35] When the LTCM matter was investigated at a December 16, 1998, Senate Agriculture Committee hearing, the three CFTC Commissioners that had supported the Congressional moratorium, as described in Section 1.2.1 above, reiterated their support and their position that the entire PWG should study the OTC derivatives market and the issues raised in the CFTC's "concept release." [36]

The President's Working Group Report Edit

The PWG Report recommended: (1) the codification into the CEA, as an "exclusion", of existing regulatory exemptions for OTC financial derivatives, revised to permit electronic trading between "eligible swaps participants" (acting as "principals") and to even allow standardized (i.e. "fungible") contracts subject to "regulated" clearing (2) continuation of the existing CFTC authority to exempt other non-agricultural commodities (such as energy products) from provisions of the CEA (3) continuation of existing exemptions for "hybrid instruments" expanded to cover the Shad-Johnson Accord (thereby exempting from the CEA any hybrid that could be viewed as a future on a "non-exempt security"), and a prohibition on the CFTC changing the exemption without the agreement of the other members of the PWG (4) continuation of the preemption of state laws that might otherwise make any "excluded" or "exempted" transactions illegal as gambling or otherwise (5) as previously recommended by the PWG in its report on hedge funds, the expansion of SEC and CFTC "risk assessment" oversight of affiliates of securities firms and commodity firms engaged in OTC derivatives activities to ensure they did not endanger affiliated broker-dealers or futures commission merchants (6) encouraging the CFTC to grant broad "deregulation" of existing exchange trading to reflect differences in (A) the susceptibility of commodities to price manipulation and (B) the "sophistication" and financial strength of the parties permitted to trade on the exchange and (7) permission for single stock and narrow index stock futures on terms to be agreed between the CFTC and SEC. [37]

In 1998 the CFTC had disagreed with the other members of the PWG about the scope and purposes of the CEA. Whereas the CFTC saw broad purposes in protecting "fair access" to markets, "financial integrity", "price discovery and transparency", "fitness standards," and protection of "market participants from fraud and other abuses," other members of the PWG (particularly the Federal Reserve through Alan Greenspan) found the more limited purposes of (1) preventing price manipulation and (2) protecting retail investors. [38]

The PWG Report ended that disagreement by analyzing only four issues in deciding not to apply the CEA to OTC derivatives. By finding (1) the sophisticated parties participating in the OTC derivatives markets did not require CEA protections, (2) the activities of most OTC derivatives dealers were already subject to direct or indirect federal oversight, (3) manipulation of financial markets through financial OTC derivatives had not occurred and was highly unlikely, and (4) the OTC derivatives market performed no significant "price discovery" function, the PWG concluded "there is no compelling evidence of problems involving bilateral swap agreements that would warrant regulation under the CEA." By essentially adopting the views of the other members of the PWG concerning the scope and application of the CEA, the CFTC permitted a "remarkable" agreement "on a redrawing of the regulatory lines." [39]

Rather than treat the "convergence' of OTC derivatives and futures markets as a basis for CFTC regulation of OTC derivatives, the PWG Report acknowledged and encouraged the growth in similarities between the OTC derivatives market and the regulated exchange traded futures market. Standardized terms and centralized clearing were to be encouraged, not prohibited. Price information could be broadly disseminated through "electronic trading facilities." The PWG hoped these features would (1) increase "transparency" and liquidity in the OTC derivatives market by increasing the circulation of information about market pricing and (2) reduce "systemic risk" by reducing credit exposures between parties to OTC derivatives transactions. [40]

The PWG Report also emphasized the desire to "maintain U.S. leadership in these rapidly developing markets" by discouraging the movement of such transactions "offshore." In the 1998 Congressional hearings concerning the CFTC "concept release" Representative James A. Leach (R-IA) had tied the controversy to "systemic risk" by arguing the movement of transactions to jurisdictions outside the United States would replace U.S. regulation with laxer foreign supervision. [41]

It can be argued that the PWG Report recommendations and the CFMA as enacted did not change the "regulation" of OTC derivatives because there was no existing regulation under the CEA or securities laws. The change to the CEA, however, would be the elimination of existing criteria for distinguishing OTC derivatives from "futures." [42]

CFMA implementation Edit

Title I of the CFMA adopted recommendations of the PWG Report by broadly excluding from the CEA transactions in financial derivatives (i.e. "excluded commodities") between "eligible contract participants." The definition of "eligible contract participant" covered the same types of "sophisticated" parties as the existing "swaps exemption" in its definition of "eligible swap participants", but was broader, particularly by adding permission for individuals with assets of $5 million rather than $10 million, if the transaction related to managing asset or liability "risk." The PWG had recommended "considering" an increase in this threshold to $25 million, not a reduction for actual hedging. [43]

Such "eligible contract participants" could enter into transactions on or off "electronic trading facilities" without being subject to any of the regulatory oversight applicable to futures. The only exception was that the transactions would be subject to the rules for the new "Derivative Clearing Organizations" authorized by the CFMA, if the transaction used such a clearing facility. The CFMA did not require that standardized transaction use a clearing facility. It only authorized their existence, subject to regulatory oversight. The PWG Report had recommended permitting "standardized" contracts, so long as they were subject to regulated clearing. [44]

Title I's biggest departure from the PWG Report recommendations was in extending most of the same exclusions to non-financial commodities that were not agricultural. These "exempt commodities" were, in practice, mostly energy and metal commodities. As discussed below in Section 4, these transactions were subject to the "anti-fraud" and "anti-manipulation" provisions of the CEA in some, but not all, circumstances. The PWG Report had recommended that exemptions for such transactions remain in the control of the CFTC, although it had recommended the continuation of those regulatory exemptions. [45]

Title I also resolved the issue of "hybrid instruments" by defining when such an instrument would be considered a "security" subject to security laws and excluded from the CEA even though it had a "commodity component." Equivalent treatment of bank products was provided in Title IV. [46]

Title I retained the CEA's existing preemption of state gambling and other laws that could render a CFTC exempted transaction illegal. It made that preemption applicable to all exempted or excluded transactions. [47]

Title I also created a new system under which three different types of exchanges could be established based on the types of commodities and participants on such exchanges. [48]

Title II of the CFMA repealed the 1982 Shad-Johnson Accord that had prohibited single stock and narrow stock index futures and replaced that with a joint CFTC and SEC regulated "security futures" system. [49]

Title III established a framework for SEC regulation of "security-based swaps." The PWG Report had not addressed this issue. [50]

Title IV established a framework for CFTC regulation of "bank products." This included coverage of deposit based "hybrid instruments", but went further. The PWG Report had not dealt with these issues beyond how Title IV overlapped with Title I. [51]

The CFMA did not provide the CFTC or SEC the broader "risk assessment" authority over affiliates of futures commission merchants or broker-dealers that the PWG Report had recommended. [52]

H.R. 4541 and S.2697 Edit

H.R. 4541 was introduced in the House of Representatives on May 25, 2000, as the Commodities Futures Modernization Act of 2000. Three separate House Committees held hearings on the bill. Each Committee reported out a different amended version of H.R. 4541 by September 6, 2000. [53] [54]

Another Commodity Futures Modernization Act of 2000 was introduced in the Senate on June 8, 2000, as S. 2697. A joint hearing of the Senate Agriculture and Banking Committees was held to consider that bill. The Senate Agriculture Committee reported out an amended version of S. 2697 on August 25, 2000. [55]

During the House and Senate committee hearings on these bills, Committee Chairs and Ranking Members described a tight legislative schedule for the bills because of the election year's short Congressional schedule. Sponsors had delayed introduction of the bills as they vainly awaited agreement between the CFTC and SEC on how to regulate the single stock futures contemplated by the PWG Report. That issue dominated the hearings. [56]

On September 14, 2000, the SEC and CFTC announced they had agreed on a joint regulation approach for "security futures." Senior Treasury Department officials hailed the "historic agreement" as eliminating "the major obstacles to forming a consensus bill." [57] At the same time, Senator Phil Gramm (R-TX), the Chair of the Senate Banking Committee, was quoted as insisting that any bill brought to the Senate Floor would need to be expanded to include prohibitions on SEC regulation of the swaps market. [58]

Democratic members of Congress later described a period in late September through early October during which they were excluded from negotiations over reconciling the three committee versions of H.R. 4541, followed by involvement in reaching an acceptable compromise that left some Republicans unhappy with the final version of the bill and some Democrats upset over the "process", particularly the involvement of Sen. Gramm and House Republican leadership in the negotiations. [59] Despite indications no agreement would be reached, on October 19, 2000, the White House announced its "strong support" for the version of H.R. 4541 scheduled to reach the House Floor that day. [60] The House approved H.R. 4541 in a 377-4 vote. [61]

As so passed by the House, H.R. 4541 contained, in Title I, the language concerning OTC derivatives that became the source for Title I of the CFMA and, in Title II, the language regulating "security futures" that became the source for Title II of the CFMA. Titles III and IV would be added when the CFMA was enacted into law two months later. [62]

From H.R. 4541 to the CFMA Edit

After the House passed H.R. 4541, press reports indicated Sen. Gramm was blocking Senate action based on his continued insistence that the bill be expanded to prevent the SEC from regulating swaps, and the desire to broaden the protections against CFTC regulation for "bank products." [63] Nevertheless, with Congress adjourned for the 2000 elections, but scheduled to return for a "lame duck" session, Treasury Secretary Summers "urged" Congress to move forward with legislation on OTC derivatives based on the "extraordinary bipartisan consensus this year on these very complex issues.". [64]

When Congress returned into session for two days in mid-November, the sponsor of H.R. 4541, Representative Thomas Ewing (R-IL), described Senator Gramm as the "one man" blocking Senate passage of H.R. 4541. [65] Senator Richard G. Lugar (R-IN), the sponsor of S. 2697, was reported to be considering forcing H.R. 4541 to the Senate Floor against Senator Gramm's objections. [66]

After Congress returned into session on December 4, 2000, there were reports Senator Gramm and the Treasury Department were exchanging proposed language to deal with the issues raised by Sen. Gramm, followed by a report those negotiations had reached an impasse. [67] On December 14, however, the Treasury Department announced agreement had been reached the night before and urged Congress to enact into law the agreed upon language. [68]

The "compromise language" was introduced in the House on December 14, 2000, as H.R. 5660. [69] The same language was introduced in the Senate on December 15, 2000 as S. 3283. [70] The Senate and House conference that was called to reconcile differences in H.R. 4577 appropriations adopted the "compromise language" by incorporating H.R. 5660 (the "CFMA") into H.R. 4577, which was titled "Consolidated Appropriations Act for FY 2001". [71] The House passed the Conference Report and, therefore, H.R. 4577 in a vote of 292-60. [72] Over "objection" by Senators James Inhofe (R-OK) and Paul Wellstone (D-MN), the Senate passed the Conference Report, and therefore H.R. 4577, by "unanimous consent." [73] The Chairs and Ranking members of each of the five Congressional Committees that considered H.R. 4541 or S. 2697 supported, or entered into the Congressional Record statements in support of, the CFMA. The PWG issued letters expressing the unanimous support of each of its four members for the CFMA. [74] H.R. 4577, including H.R. 5660, was signed into law, as CFMA, on December 21, 2000. [75]

Credit default swaps Edit

With the 2008 emergence of widespread concerns about credit default swaps, the CFMA's treatment of those instruments has become controversial. Title I of the CFMA broadly excludes from the CEA financial derivatives, including specifically any index or measure tied to a "credit risk or measure." In 2000, Title I's exclusion of financial derivatives from the CEA was not controversial in Congress. Instead, it was widely hailed for bringing "legal certainty" to this "important market" permitting "the United States to retain its leadership in the financial markets", as recommended by the PWG Report. [76]

Insurance law issue Edit

The CFMA's treatment of credit default swaps has received the most attention for two issues. First, former New York Insurance Superintendent Eric Dinallo has argued credit default swaps should have been regulated as insurance and that the CFMA removed a valuable legal tool by preempting state "bucket shop" and gaming laws that could have been used to attack credit default swaps as illegal. In 1992, the FTPA had preempted those state laws for financial derivatives covered by the CFTC's "swaps exemption." As described in Section 1.1.2 above, however, a "gap" in the CFTC's powers prohibited it from exempting futures on "non-exempt securities." This "loophole" (which was intended to preserve the Shad-Johnson Accord's prohibition on single stock futures) meant that, before the CFMA, the CEA's preemption of state gaming and "bucket shop" laws would not have protected a credit default swap on a "non-exempt security" (i.e. an equity security or a "non-exempt" debt obligation that qualified as a "security"). As before 1992, the application of such state laws to a credit default swap (or any other swap) would depend upon a court finding the swap was a gambling, "bucket shop", or otherwise illegal transaction. As described in Section 1.2.1 above, legal uncertainty for security-based swaps was an important issue in the events that led to the PWG Report. The PWG Report recommended eliminating that uncertainty by excluding credit default swaps and all security-based swaps from the CEA and by adding to the "hybrid instrument" exemption an exclusion from the Shad-Johnson Accord. [77]

Former Superintendent Dinallo has written that the CFMA was enacted in part to avoid having OTC derivatives transactions move offshore. He has not, however, addressed whether that could have been avoided if the CFMA had not been enacted. AIG (the insurance company addressed by Mr. Dinallo's commentary) located its controversial derivatives dealer (AIG Financial Products) in London and conducted its "regulatory CDS" transactions through a French bank (Banque AIG) because of the bank regulatory capital provision that banks (not AAA rated parties) received a reduced credit risk "weighting" for their obligations, including CDS, owed to other banks. General Re, the other insurance company with a very active derivatives dealer affiliate, similarly established that dealer in London. [78]

Securities law issue Edit

Second, Title II of the CFMA treated credit default swaps tied to "securities" as "security-related swaps" for which the SEC was granted limited authority to enforce "insider trading", fraud, and anti-manipulation provisions of the securities laws. Before the CFMA, it was generally agreed most swaps were not securities, but the SEC had always maintained that swaps tied to securities were securities, particularly when such swaps could reproduce the attributes of owning the underlying security. In granting the SEC authority over "security-related swaps", the CFMA specifically prohibited applying any "prophylactic" anti-fraud or anti-manipulation measures. The SEC has complained this has prevented it from collecting information, and requiring disclosures, regarding credit default positions of investors. The SEC has argued this handicaps its ability to monitor possible manipulations of security markets through credit default swaps. [79]

Centralized clearing Edit

The SEC, the PWG, and others have also expressed concern about the "systemic risk" created by a lack of centralized clearing of credit default swaps. Although (as noted in Section 2 above) the CFMA created the possibility of centralized clearing by removing the pre-CFMA requirements that OTC derivatives not be subject to centralized clearing, the CFMA did not require such clearing, even for "standardized" transactions. [80]

"Enron Loophole" Edit

Section 2(h) "loophole" Edit

The first provision of the CFMA to receive widespread popular attention was the "Enron Loophole". [81] In most accounts, this "loophole" was the CEA's new section 2(h). Section 2(h) created two exemptions from the CEA for "exempt commodities" such as oil and other "energy" products. [82]

First, any transaction in exempt commodities not executed on a "trading facility" between "eligible contract participants" (acting as principals) was exempted from most CEA provisions (other than fraud and anti-manipulation provisions). This exemption in Section 2(h)(1) of the CEA covered the "bilateral swaps market" for exempt "trading facilities." [83]

Second, any transaction in exempt commodities executed on an "electronic trading facility" between "eligible commercial entities" (acting as principals) was also exempted from most CEA provisions (other than those dealing with fraud and manipulation). The "trading facility", however, was required to file with the CFTC certain information and certifications and to provide trading and other information to the CFTC upon any "special call." This exemption in Section 2(h)(2) of the CEA covered the "commercial entities" for exempt "electronic trading facilities." [84]

While the language of Section 2(h) was in H.R. 4541 as passed by the House, the portion of Section 2(h) dealing with the exempt commercial market had been deleted from S. 2697 when the Senate Agriculture Committee reported out an amended version of that bill. H.R. 4541 served as the basis for Titles I and II of the CFMA. The Senate Agriculture Committee's removal of the Section 2(h) language from S. 2697, however, served as the basis for later Senate concern over the origins of Section 2(h). [85]

In 2008 Congress enacted into law over President Bush's veto an Omnibus Farm Bill that contained the "Close the Enron Loophole Act." This added to CEA Section 2(h)(2) a new definition of "electronic trading facility" and imposed on such facilities requirements applicable to fully regulated exchanges (i.e. "designated contract markets") such as the NYMEX. The legislation did not change Section 2(h)(1) exemption for the "bilateral swaps market" in exempt commodities. [86]

Section 2(g) "loophole" Edit

Section 2(g) of the CEA is also sometimes called the "Enron Loophole". It is a broader exclusion from the CEA than the Section 2(h)(1) exemption for the "bilateral swaps market" in exempt commodities. It excludes from even the fraud and manipulation provisions of the CEA any "individually negotiated" transaction in a non-agricultural commodity between "eligible contract participants" not executed on a "trading facility." Thus, the exclusion from provisions of the CEA for "eligible contract participants" is broader than the Section 2(h)(1) exemption for "bilateral swaps" of energy commodities. The criteria for this exclusion, however, are narrower in requiring "individual negotiation." [87]

This exclusion was not contained in either H.R. 4541 or S. 2697 as introduced in Congress. The House Banking and Financial Services Committee added this provision to the amended H.R. 4541 it reported to the House. That language was included in H.R. 4541 as passed by the House. Its final version was modified to conform to the Gramm-Leach-Bliley Act definition of "swap agreement." That definition requires that the swap be "individually negotiated." H.R. 4541 had required that each "material economic term" be individually negotiated. [88]

2002 Senate hearings indicated CEA Section 2(h)(2) was not the"Enron Loophole" used by EnronOnline. That facility was not required to qualify as an "electronic trading facility" under Section 2(h)(2) of the CEA because Enron Online was only used to enter into transactions with Enron affiliates. There were not "multiple participants" on both the buy and sell sides of the trades. Whether such Enron-only trades were covered by the Section 2(h)(1) "bilateral swaps market" exemption for energy products or the broader Section 2(g) exclusion for swaps generally depended whether there was "individual negotiation." [89]

Bill Clinton Edit

In June 2013, film producer Charles Ferguson interviewed Bill Clinton who said he and Larry Summers couldn't change Alan Greenspan's mind and Congress then passed the Act with a veto-proof supermajority. Ferguson revealed that this was inaccurate and, he said, a lie, while commenting that he thought Clinton was "a really good actor". In fact, Ferguson wrote, the Clinton Administration and Larry Summers lobbied for the Act and joined Robert Rubin in both privately and publicly attacking advocates of regulation. [90]

On August 11, 2009, the Treasury Department sent to Congress proposed legislation titled the "Over-the-Counter Derivatives Markets Act of 2009." The Treasury Department stated that under this proposed legislation "the OTC derivative markets will be comprehensively regulated for the first time." [91]

To accomplish this "comprehensive regulation", the proposed legislation would repeal many of the provisions of the CFMA, including all of the exclusions and exemptions that have been identified as the "Enron Loophole". While the proposed legislation would generally retain the "legal certainty" provisions of the CFMA, it would establish new requirements for parties dealing in non-"standardized" OTC derivatives and would require that "standardized" OTC derivatives be traded through a regulated trading facility and cleared through regulated central clearing. The proposed legislation would also repeal the CFMA's limits on SEC authority over "security-based swaps." [92]


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The Commerce Clause as a Source of National Police Power

The Court has several times expressly noted that Congress’s exercise of power under the Commerce Clause is akin to the police power exercised by the states.888 It should follow, therefore, that Congress may achieve results unrelated to purely commercial aspects of commerce, and this result in fact has often been accomplished. Paralleling and contributing to this movement is the virtual disappearance of the distinction between interstate and intrastate commerce.

Is There an Intrastate Barrier to Congress’s Commerce Power?.

Not only has there been legislative advancement and ju- dicial acquiescence in Commerce Clause jurisprudence, but the melding of the Nation into one economic union has been more than a little responsible for the reach of Congress’s power. “The volume of interstate commerce and the range of commonly accepted objects of government regulation have . . . expanded considerably in the last 200 years, and the regulatory authority of Congress has expanded along with them. As interstate commerce has become ubiquitous, activities once considered purely local have come to have effects on the national economy, and have accordingly come within the scope of Congress’s commerce power.”889

Congress’s commerce power has been characterized as having three, or sometimes four, interrelated principles of decision, some old, some of recent vintage. The Court in 1995 described “three broad categories of activity that Congress may regulate under its commerce power. First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress’s commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e., those activities that substantially affect interstate commerce.”890

An example of the first category, regulating to protect the channels and instrumentalities of interstate commerce, is Pierce County v. Guillen,891 in which the Court upheld a prohibition on the use in state or federal court proceedings of highway data required to be collected by states on the basis that “Congress could reasonably believe that adopting a measure eliminating an unforeseen side effect of the information-gathering requirement . . . would result in more diligent efforts [by states] to collect the relevant information.”

Under the second category, which attaches to instrumentalities

892 and persons crossing of state lines, Congress has validly legislated to protect interstate travelers from harm, to prevent such travelers from being deterred in the exercise of interstate traveling, and to prevent them from being burdened. Many of the 1964 public accommodations law applications have been premised on the point that larger establishments do serve interstate travelers and that even small stores, restaurants, and the like may serve interstate travelers, and, therefore, it is permissible to regulate them to prevent or deter racial discrimination.893

Commerce regulation under this second category is not limited to persons who cross state lines but can also extend to an object that will or has crossed state lines, and the regulation of a purely intrastate activity may be premised on the presence of such object. Thus, the public accommodations law reached small establishments that served food and other items that had been purchased from interstate channels.894 Congress has validly penalized convicted felons, who had no other connection to interstate commerce, for possession or receipt of firearms, which had been previously transported in interstate commerce independently of any activity by the two felons.895

This reach is not of recent origin. In United States v. Sullivan,896 the Court sustained a conviction of misbranding under the Federal Food, Drug and Cosmetic Act. Sullivan, a Columbus, Georgia druggist, had bought a properly labeled 1000-tablet bottle of sulfathiazole from an Atlanta wholesaler. The bottle had been shipped to the Atlanta wholesaler by a Chicago supplier six months earlier. Three months after Sullivan received the bottle, he made two retail sales of 12 tablets each, placing the tablets in boxes not labeled in strict accordance with the law. Upholding the conviction, the Court concluded that there was no question of “the constitutional power of Congress under the Commerce Clause to regulate the branding of articles that have completed an interstate shipment and are being held for future sales in purely local or intrastate commerce.”897

Under the third category, Congress’s power reaches not only transactions or actions that occasion the crossing of state or national boundaries but extends as well to activities that, though local, “affect” commerce this power derives from the Commerce Clause enhanced by the Necessary and Proper Clause. The seminal case, of course, is Wickard v. Filburn,898 sustaining federal regulation of a crop of wheat grown on a farm and intended solely for home consumption. The premise was that if it were never marketed, it supplied a need otherwise to be satisfied only in the market, and that if prices rose it might be induced onto the market. “Even activity that is purely intrastate in character may be regulated by Congress, where the activity, combined with like conduct by others similarly situated, affects commerce among the States or with foreign nations.”899 Coverage under federal labor and wage-and-hour laws after the 1930s showed the reality of this doctrine.900

In upholding federal regulation of strip mining, the Court demonstrated the breadth of the “affects” standard. One case dealt with statutory provisions designed to preserve “prime farmland.” The trial court had determined that the amount of such land disturbed annually amounted to 0.006% of the total prime farmland acreage in the Nation and, thus, that the impact on commerce was “infinitesimal” or “trivial.” Disagreeing, the Court said: “A court may invalidate legislation enacted under the Commerce Clause only if it is clear that there is no rational basis for a congressional finding that the regulated activity affects interstate commerce, or that there is no reasonable connection between the regulatory means selected and the asserted ends.”901 Moreover, “[t]he pertinent inquiry therefore is not how much commerce is involved but whether Congress could rationally conclude that the regulated activity affects interstate commerce.”902

In a companion case, the Court reiterated that “[t]he denomination of an activity as a ‘local’ or ‘intrastate’ activity does not resolve the question whether Congress may regulate it under the Commerce Clause. As previously noted, the commerce power ‘extends to those activities intrastate which so affect interstate commerce, or the exertion of the power of Congress over it, as to make regulation of them appropriate means to the attainment of a legitimate end, the effective execution of the granted power to regulate interstate commerce.’ ”903 Judicial review is narrow. Congress’s determination of an “effect” must be deferred to if it is rational, and Congress must have acted reasonably in choosing the means.904

Fourth, a still more potent engine of regulation has been the expansion of the class-of-activities standard, which began in the “affecting” cases. In Perez v. United States,905 the Court sustained the application of a federal “loan-sharking” law to a local culprit. The Court held that, although individual loan-sharking activities might be intrastate in nature, still it was within Congress’s power to determine that the activity was within a class the activities of which did affect interstate commerce, thus affording Congress the opportunity to regulate the entire class. Although the Perez Court and the congressional findings emphasized that loan-sharking was generally part of organized crime operating on a national scale and that loan-sharking was commonly used to finance organized crime’s national operations, subsequent cases do not depend upon a defensible assumption of relatedness in the class.

Thus, the Court applied the federal arson statute to the attempted “torching” of a defendant’s two-unit apartment building. The Court merely pointed to the fact that the rental of real estate “unquestionably” affects interstate commerce and that “the local rental of an apartment unit is merely an element of a much broader commercial market in real estate.”906 The apparent test of whether aggregation of local activity can be said to affect commerce was made clear next in an antitrust context.907

In a case allowing the continuation of an antitrust suit challenging a hospital’s exclusion of a surgeon from practice in the hospital, the Court observed that in order to establish the required jurisdictional nexus with commerce, the appropriate focus is not on the actual effects of the conspiracy but instead is on the possible consequences for the affected market if the conspiracy is successful. The required nexus in this case was sufficient because competitive significance is to be measured by a general evaluation of the impact of the restraint on other participants and potential participants in the market from which the surgeon was being excluded.908

Requirement that Regulation be Economic.

In United States v. Lopez909 the Court, for the first time in almost sixty years,910 invalidated a federal law as exceeding Congress’s authority under the Commerce Clause. The statute made it a federal offense to possess a firearm within 1,000 feet of a school.911 The Court reviewed the doctrinal development of the Commerce Clause, especially the effects and aggregation tests, and reaffirmed that it is the Court’s responsibility to decide whether a rational basis exists for concluding that a regulated activity sufficiently affects interstate commerce when a law is challenged.912 As noted previously, the Court evaluation started with a consideration of whether the legislation fell within the three broad categories of activity that Congress may regulate or protect under its commerce power: (1) use of the channels of interstate commerce, (2) the use of instrumentalities of interstate commerce, or (3) activities that substantially affect interstate commerce.913

Clearly, the Court said, the criminalized activity did not implicate the first two categories.914 As for the third, the Court found an insufficient connection. First, a wide variety of regulations of “intrastate economic activity” has been sustained where an activity substantially affects interstate commerce. But the statute being challenged, the Court continued, was a criminal law that had nothing to do with “commerce” or with “any sort of economic enterprise.” Therefore, it could not be sustained under precedents “upholding regulations of activities that arise out of or are connected with a commercial transaction, which viewed in the aggregate, substantially affects interstate commerce.”915 The provision did not contain a “jurisdictional element which would ensure, through case-by-case inquiry, that the firearm possession in question affects interstate commerce.”916 The existence of such a section, the Court implied, would have saved the constitutionality of the provision by requiring a showing of some connection to commerce in each particular case.

Finally, the Court rejected the arguments of the government and of the dissent that there existed a sufficient connection between the offense and interstate commerce.917 At base, the Court’s concern was that accepting the attenuated connection arguments presented would result in the evisceration of federalism. “Under the theories that the government presents . . . it is difficult to perceive any limitation on federal power, even in areas such as criminal law enforcement or education where States historically have been sovereign. Thus, if we were to accept the Government’s arguments, we are hard pressed to posit any activity by an individual that Congress is without power to regulate.”918

Whether Lopez bespoke a Court determination to police more closely Congress’s exercise of its commerce power, so that it would be a noteworthy case,919 or whether it was rather a “warning shot” across the bow of Congress, urging more restraint in the exercise of power or more care in the drafting of laws, was not immediately clear. The Court’s decision five years later in United States v. Morrison,920 however, suggests that stricter scrutiny of Congress’s commerce power exercises is the chosen path, at least for legislation that falls outside the area of economic regulation.921 The Court will no longer defer, via rational basis review, to every congressional finding of substantial effects on interstate commerce, but instead will examine the nature of the asserted nexus to commerce, and will also consider whether a holding of constitutionality is consistent with its view of the commerce power as being a limited power that cannot be allowed to displace all exercise of state police powers.

In Morrison the Court applied Lopez principles to invalidate a provision of the Violence Against Women Act (VAWA) that created a federal cause of action for victims of gender-motivated violence. Gender-motivated crimes of violence “are not, in any sense of the phrase, economic activity,”922 the Court explained, and there was allegedly no precedent for upholding commerce-power regulation of intrastate activity that was not economic in nature. The provision, like the invalidated provision of the Gun-Free School Zones Act, contained no jurisdictional element tying the regulated violence to interstate commerce. Unlike the Gun-Free School Zones Act, the VAWA did contain “numerous” congressional findings about the serious effects of gender-motivated crimes,923 but the Court rejected reliance on these findings. “The existence of congressional findings is not sufficient, by itself, to sustain the constitutionality of Commerce Clause legislation. . . . [The issue of constitutionality] is ultimately a judicial rather than a legislative question, and can be settled finally only by this Court.”924

The problem with the VAWA findings was that they “relied heavily” on the reasoning rejected in Lopez—the “but-for causal chain from the initial occurrence of crime . . . to every attenuated effect upon interstate commerce.” As the Court had explained in Lopez, acceptance of this reasoning would eliminate the distinction between what is truly national and what is truly local, and would allow Congress to regulate virtually any activity, and basically any crime.925 Accordingly, the Court “reject[ed] the argument that Congress may regulate noneconomic, violent criminal conduct based solely on that conduct’s aggregate effect on interstate commerce.” Resurrecting the dual federalism dichotomy, the Court could find “no better example of the police power, which the Founders denied the National Government and reposed in the States, than the suppression of violent crime and vindication of its victims.”926

Yet, the ultimate impact of these cases on Congress’s power over commerce may be limited. In Gonzales v. Raich,927 the Court reaffirmed an expansive application of Wickard v. Filburn, and signaled that its jurisprudence is unlikely to threaten the enforcement of broad regulatory schemes based on the Commerce Clause. In Raich, the Court considered whether the cultivation, distribution, or possession of marijuana for personal medical purposes pursuant to the California Compassionate Use Act of 1996 could be prosecuted under the federal Controlled Substances Act (CSA).928 The respondents argued that this class of activities should be considered as separate and distinct from the drug-trafficking that was the focus of the CSA, and that regulation of this limited non-commercial use of marijuana should be evaluated separately.

In Raich, the Court declined the invitation to apply Lopez and Morrison to select applications of a statute, holding that the Court would defer to Congress if there was a rational basis to believe that regulation of home-consumed marijuana would affect the market for marijuana generally. The Court found that there was a “rational basis” to believe that diversion of medicinal marijuana into the illegal market would depress the price on the latter market.929 The Court also had little trouble finding that, even in application to medicinal marijuana, the CSA was an economic regulation. Noting that the definition of “economics” includes “the production, distribution, and consumption of commodities,”930 the Court found that prohibiting the intrastate possession or manufacture of an article of commerce is a rational and commonly used means of regulating commerce in that product.931

The Court’s decision also contained an intertwined but potentially separate argument that Congress had ample authority under the Necessary and Proper Clause to regulate the intrastate manufacture and possession of controlled substances, because failure to regulate these activities would undercut the ability of the government to enforce the CSA generally.932 The Court quoted language from Lopez that appears to authorize the regulation of such activities on the basis that they are an essential part of a regulatory scheme.933 Justice Scalia, in concurrence, suggested that this latter category of activities could be regulated under the Necessary and Proper Clause regardless of whether the activity in question was economic or whether it substantially affected interstate commerce.934

Activity Versus Inactivity.

In National Federation of Independent Business (NFIB) v. Sebelius,935 the Court held that Congress did not have the authority under the Commerce Clause to impose a requirement compelling certain individuals to maintain a minimum level of health insurance (although, as discussed previously, the Court found such power to exist under the taxing power). Under this “individual mandate,” failure to purchase health insurance may subject a person to a monetary penalty, administered through the tax code.936 By requiring that individuals purchase health insurance, the mandate prevents cost-shifting by those who would otherwise go without it. In addition, the mandate forces healthy individuals into the insurance risk pool, thus allowing insurers to subsidize the costs of covering the unhealthy individuals they are now required to accept.

Chief Justice Roberts, in a controlling opinion,937 suggested that Congress’s authority to regulate interstate commerce presupposes the existence of a commercial activity to regulate. Further, his opinion noted that the commerce power had been uniformly described in previous cases as involving the regulation of an “activity.”938 The individual mandate, on the other hand, compels an individual to become active in commerce on the theory that the individual’s inactivity affects interstate commerce. Justice Roberts suggested that regulation of individuals because they are doing nothing would result in an unprecedented expansion of congressional authority with few discernable limitations. While recognizing that most people are likely to seek health care at some point in their lives, Justice Roberts noted that there was no precedent for the argument that individuals who might engage in a commercial activity in the future could, on that basis, be regulated today.939 The Chief Justice similarly rejected the argument that the Necessary and Proper Clause could provide this additional authority. Rather than serving as a “incidental” adjunct to the Commerce Clause, reliance on the Necessary and Proper Clause in this instance would, according to the Chief Justice, create a substantial expansion of federal authority to regulate persons not otherwise subject to such regulation.940

Civil Rights.

It had been generally established some time ago that Congress had power under the Commerce Clause to prohibit racial discrimination in the use of the channels of commerce.941 The power under the clause to forbid discrimination within the states was firmly and unanimously sustained by the Court when Congress in 1964 enacted a comprehensive measure outlawing discrimination because of race or color in access to public accommodations with a requisite connection to interstate commerce.942 Hotels and motels were declared covered—that is, declared to “affect commerce”—if they provided lodging to transient guests restaurants, cafeterias, and the like, were covered only if they served or offered to serve interstate travelers or if a substantial portion of the food which they served had moved in commerce.943 The Court sustained the Act as applied to a downtown Atlanta motel that did serve interstate travelers,944 to an out-of-the-way restaurant in Birmingham that catered to a local clientele but that had spent 46 percent of its previous year’s out-go on meat from a local supplier who had procured it from out-of-state,945 and to a rural amusement area operating a snack bar and other facilities, which advertised in a manner likely to attract an interstate clientele and that served food a substantial portion of which came from outside the state.946

Writing for the Court in Heart of Atlanta Motel and McClung, Justice Clark denied that Congress was disabled from regulating the operations of motels or restaurants because those operations may be, or may appear to be, “local” in character. “[T]he power of Congress to promote interstate commerce also includes the power to regulate the local incidents thereof, including local activities in both the States of origin and destination, which might have a substantial and harmful effect upon that commerce.”947

But, it was objected, Congress is regulating on the basis of moral judgments and not to facilitate commercial intercourse. “That Congress [may legislate] . . . against moral wrongs . . . rendered its enactments no less valid. In framing Title II of this Act Congress was also dealing with what it considered a moral problem. But that fact does not detract from the overwhelming evidence of the disruptive effect that racial discrimination has had on commercial intercourse. It was this burden which empowered Congress to enact appropriate legislation, and, given this basis for the exercise of its power, Congress was not restricted by the fact that the particular obstruction to interstate commerce with which it was dealing was also deemed a moral and social wrong.”948 The evidence did, in fact, noted the Justice, support Congress’s conclusion that racial discrimination impeded interstate travel by more than 20 million black citizens, which was an impairment Congress could legislate to remove.949

The Commerce Clause basis for civil rights legislation prohibiting private discrimination was important because of the understanding that Congress’s power to act under the Fourteenth and Fifteenth Amendments was limited to official discrimination.950 The Court’s subsequent determination that Congress is not necessarily so limited in its power reduces greatly the importance of the Commerce Clause in this area.951

Criminal Law.

Federal criminal jurisdiction based on the com- merce power, and frequently combined with the postal power, has historically been an auxiliary criminal jurisdiction. That is, Congress has made federal crimes of acts that constitute state crimes on the basis of some contact, however tangential, with a matter subject to congressional regulation even though the federal interest in the acts may be minimal.952 Examples of this type of federal criminal statute abound, including the Mann Act designed to outlaw interstate white slavery,953 the Dyer Act punishing interstate transportation of stolen automobiles,954 and the Lindbergh Law punishing interstate transportation of kidnapped persons.955 But, just as in other areas, Congress has passed beyond a proscription of the use of interstate facilities in the commission of a crime, it has in the criminal law area expanded the scope of its jurisdiction. Typical of this expansion is a statute making it a federal offense to “in any way or degree obstruct . . . delay . . . or affect . . . commerce . . . by robbery or extortion . . . .”956 Nonetheless, “Congress cannot punish felonies generally” and may enact only those criminal laws that are connected to one of its constitutionally enumerated powers, such as the commerce power.957 As a consequence, “most federal offenses include . . . a jurisdictional” element that ties the underlying offense to one of Congress’s constitutional powers.958

The most far-reaching measure the Court has sustained is the “loan-sharking” prohibition of the Consumer Credit Protection Act.959 The title affirmatively finds that extortionate credit transactions affect interstate commerce because loan sharks are in a class largely controlled by organized crime with a substantially adverse effect on interstate commerce. Upholding the statute, the Court found that though individual loan-sharking activities may be intrastate in nature, still it is within Congress’s power to determine that it was within a class the activities of which did affect interstate commerce, thus affording Congress power to regulate the entire class.960

Footnotes

663 E. PRENTICE & J. EGAN, THE COMMERCE CLAUSE OF THE FEDERAL CONSTITUTION 664 OED: “com– together, with, + merx, merci- merchandise, ware.” 665 22 U.S. (9 Wheat.) 1 (1824). 666 Act of February 18, 1793, 1 Stat. 305, entitled “An Act for enrolling and licensing ships or vessels to be employed in the coasting trade and fisheries, and for regulating the same.” 667 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189 (1824). 668 22 U.S. at 190–94. 669 22 U.S. at 193. 670 As we will see, however, in many later formulations the crossing of state lines is no longer the sine qua non wholly intrastate transactions with substantial effects on interstate commerce may suffice. 671 E.g., United States v. Simpson, 252 U.S. 465 (1920) Caminetti v. United States, 242 U.S. 470 (1917). 672 “Not only, then, may transactions be commerce though non-commercial they may be commerce though illegal and sporadic, and though they do not utilize common carriers or concern the flow of anything more tangible than electrons and information.” United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533, 549–50 (1944). 673 Kidd v. Pearson, 128 U.S. 1 (1888) Oliver Iron Co. v. Lord, 262 U.S. 172 (1923) United States v. E. C. Knight Co., 156 U.S. 1 (1895) see also Carter v. Carter Coal Co., 298 U.S. 238 (1936). 674 Paul v. Virginia, 75 U.S. (8 Wall.) 168 (1869) see also the cases to this effect cited in United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533, 543–545, 567–568, 578 (1944). 675 Federal Baseball League v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922). When called on to reconsider its decision, the Court declined, noting that Congress had not seen fit to bring the business under the antitrust laws by legislation having prospective effect and that the business had developed under the understanding that it was not subject to these laws, a reversal of which would have retroactive effect. Toolson v. New York Yankees, 346 U.S. 356 (1953). In Flood v. Kuhn, 407 U.S. 258 (1972), the Court recognized these decisions as aberrations, but it thought the doctrine entitled to the benefits of stare decisis, as Congress was free to change it at any time. The same considerations not being present, the Court has held that businesses conducted on a multistate basis, but built around local exhibitions, are in commerce and subject to, inter alia, the antitrust laws, in the instance of professional football, Radovich v. National Football League, 352 U.S. 445 (1957), professional boxing, United States v. International Boxing Club, 348 U.S. 236 (1955), and legitimate theatrical productions. United States v. Shubert, 348 U.S. 222 (1955). 676 Blumenstock Bros. v. Curtis Pub. Co., 252 U.S. 436 (1920). 677 Williams v. Fears, 179 U.S. 270 (1900). See also Diamond Glue Co. v. United States Glue Co., 187 U.S. 611 (1903) Browning v. City of Waycross, 233 U.S. 16 (1914) General Railway Signal Co. v. Virginia, 246 U.S. 500 (1918). But see York Manufacturing Co. v. Colley, 247 U.S. 21 (1918). 678 Associated Press v. United States, 326 U.S. 1 (1945). 679 American Medical Ass’n v. United States, 317 U.S. 519 (1943). Cf. United States v. Oregon Medical Society, 343 U.S. 326 (1952). 680 United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533 (1944). 681 “It has been truly said, that commerce, as the word is used in the constitution, is a unit, every part of which is indicated by the term.” Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 194 (1824). See also id. at 195–196. 682 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937). 683 Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381 (1940). See also Hodel v. Virginia Surface Mining & Recl. Ass’n, 452 U.S. 264, 275–283 (1981) Mulford v. Smith, 307 U.S. 38 (1939) (agricultural production). 684 Swift & Co. v. United States, 196 U.S. 375 (1905) Stafford v. Wallace, 258 U.S. 495 (1922) Chicago Board of Trade v. Olsen, 262 U.S. 1 (1923). 685 22 U.S. (9 Wheat.) 1, 194, 195 (1824). 686 New York v. Miln, 36 U.S. (11 Pet.) 102 (1837) License Cases, 46 U.S. (5 How.) 504 (1847) Passenger Cases, 48 U.S. (7 How.) 283 (1849) Patterson v. Kentucky, 97 U.S. 501 (1879) Trade-Mark Cases, 100 U.S. 82 (1879) Kidd v. Pearson, 128 U.S. 1 (1888) Illinois Central R.R. v. McKendree, 203 U.S. 514 (1906) Keller v. United States, 213 U.S. 138 (1909) Hammer v. Dagenhart, 247 U.S. 251 (1918) Oliver Iron Co. v. Lord, 262 U.S. 172 (1923). 687 Swift & Co. v. United States, 196 U.S. 375 (1905) Stafford v. Wallace, 258 U.S. 495 (1922) Chicago Board of Trade v. Olsen, 262 U.S. 1 (1923). 688 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937). 689 NLRB v. Fainblatt, 306 U.S. 601 (1939) Kirschbaum v. Walling, 316 U.S. 517 (1942) United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942) Wickard v. Filburn, 317 U.S. 111 (1942) NLRB v. Reliance Fuel Oil Co., 371 U.S. 224 (1963) Katzenbach v. McClung, 379 U.S. 294 (1964) Maryland v. Wirtz, 392 U.S. 183 (1968) McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232, 241–243 (1980) Hodel v. Virginia Surface Mining & Reclamation Ass’n, 452 U.S. 264 (1981). 690 United States v. Darby, 312 U.S. 100 (1941) Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) Maryland v. Wirtz, 392 U.S. 183 (1968) Perez v. United States, 402 U.S. 146 (1971) Russell v. United States, 471 U.S. 858 (1985) Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991). 691 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 196 (1824). Commerce “among the several States” does not comprise commerce of the District of Columbia nor of the territories of the United States. Congress’s power over their commerce is an incident of its general power over them. Stoutenburgh v. Hennick, 129 U.S. 141 (1889) Atlantic Cleaners & Dyers v. United States, 286 U.S. 427 (1932) In re Bryant, 4 Fed. Cas. 514 (No. 2067) (D. Oreg. 1865). Transportation between two points in the same state, when a part of the route is a loop outside the state, is interstate commerce. Hanley v. Kansas City Southern Ry. Co., 187 U.S. 617 (1903) Western Union Tel. Co. v. Speight, 254 U.S. 17 (1920). But such a deviation cannot be solely for the purpose of evading a tax or regulation in order to be exempt from the state’s reach. Greyhound Lines v. Mealey, 334 U.S. 653, 660 (1948) Eichholz v. Public Service Comm’n, 306 U.S. 268, 274 (1939). Red cap services performed at a transfer point within the state of departure but in conjunction with an interstate trip are reachable. New York, N.H. & H. R.R. v. Nothnagle, 346 U.S. 128 (1953). 692 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 196–197 (1824). 693 Brooks v. United States, 267 U.S. 432, 436–37 (1925). 694 United States v. Darby, 312 U.S. 100, 114 (1941). 695 E.g., Caminetti v. United States, 242 U.S. 470 (1917) (transportation of female across state line for noncommercial sexual purposes) Cleveland v. United States, 329 U.S. 14 (1946) (transportation of plural wives across state lines by Mormons) United States v. Simpson, 252 U.S. 465 (1920) (transportation of five quarts of whiskey across state line for personal consumption). 696 Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) Katzenbach v. McClung, 379 U.S. 294 (1964) Daniel v. Paul, 395 U.S. 298 (1969). 697 E.g., Reid v. Colorado, 187 U.S. 137 (1902) (transportation of diseased livestock across state line) Perez v. United States, 402 U.S. 146 (1971) (prohibition of all loansharking). 698 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 195 (1824). 699 E.g., Houston & Texas Ry. v. United States, 234 U.S. 342 (1914) (necessary for ICC to regulate rates of an intrastate train in order to effectuate its rate setting for a competing interstate train) Wisconsin R.R. Comm’n v. Chicago, B. & Q. R.R., 257 U.S. 563 (1922) (same) Southern Ry. v. United States, 222 U.S. 20 (1911) (upholding requirement of same safety equipment on intrastate as interstate trains). See also Wickard v. Filburn, 317 U.S. 111 (1942) United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942) Gonzales v. Raich, 545 U.S. 1 (2005). 700 See, e.g., United States v. Darby, 312 U.S. 100, 115–16 (1941). 701 E.g., United States v. E. C. Knight Co., 156 U.S. 1 (1895) Hammer v. Dagenhart, 247 U.S. 251 (1918). Of course, there existed much of this time a parallel doctrine under which federal power was not so limited. E.g., Houston & Texas Ry. v. United States (The Shreveport Rate Case), 234 U.S. 342 (1914). 702 E.g., California v. United States, 320 U.S. 577 (1944) California v. Taylor, 353 U.S. 553 (1957). 703 For example, federal regulation of the wages and hours of certain state and local governmental employees has alternatively been upheld and invalidated. See Maryland v. Wirtz, 392 U.S. 183 (1968), overruled in National League of Cities v. Usery, 426 U.S. 833 (1976), overruled in Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985). 704 New York v. United States, 505 U.S. 144 (1992) Printz v. United States, 521 U.S. 898 (1997). For elaboration, see the discussions under the Supremacy Clause and under the Tenth Amendment. 705 250 U.S. 199 (1919). 706 250 U.S. at 203. 707 E.g., Hoke v. United States, 227 U.S. 308 (1913) (transportation of women for purposes of prostitution) Gooch v. United States, 297 U.S. 124 (1936) (kidnaping) Brooks v. United States, 267 U.S. 432 (1925) (stolen autos). For example, in Scarborough v. United States, 431 U.S. 563 (1977), the Court upheld a conviction for possession of a firearm by a felon upon a mere showing that the gun had sometime previously traveled in interstate commerce, and Barrett v. United States, 423 U.S. 212 (1976), upheld a conviction for receipt of a firearm on the same showing. The Court does require Congress in these cases to speak plainly in order to reach such activity, inasmuch as historic state police powers are involved. United States v. Bass, 404 U.S. 336 (1971). 708 Lottery Case (Champion v. Ames), 188 U.S. 321, 373 (1903). 709 Brolan v. United States, 236 U.S. 216, 222 (1915). The most recent dicta to this effect appears in Japan Line v. County of Los Angeles, 441 U.S. 434, 448–51 (1979), a “dormant” commerce clause case involving state taxation with an impact on foreign commerce. In context, the distinction seems unexceptionable, but the language extends beyond context. 710 License Cases, 46 U.S. (5 How.) 504, 578 (1847). 711 Pittsburg & Southern Coal Co. v. Bates, 156 U.S. 577, 587 (1895). 712 United States v. Carolene Products Co., 304 U.S. 144, 147–148 (1938). 713 22 U.S. (9 Wheat.) 1, 217, 221 (1824). 714 96 U.S. 1 (1878). See also Western Union Telegraph Co. v. Texas, 105 U.S. 460 (1882). 715 96 U.S. at 9. “Commerce embraces appliances necessarily employed in carrying on transportation by land and water.” Railroad Co. v. Fuller, 84 U.S. (17 Wall.) 560, 568 (1873). 716 Act of March 28, 1927, 45 Stat. 373, superseded by the Communications Act of 1934, 48 Stat. 1064, 47 U.S.C. §§ 151 et seq. 717 “No question is presented as to the power of the Congress, in its regulation of interstate commerce, to regulate radio communication.” Chief Justice Hughes speaking for the Court in Federal Radio Comm’n v. Nelson Bros. Bond & Mortgage Co., 289 U.S. 266, 279 (1933). See also Fisher’s Blend Station v. Tax Comm’n, 297 U.S. 650, 654–55 (1936). 718 54 U.S. (13 How.) 518 (1852). 719 Ch. 111, § 6, 10 Stat 112 (1852). 720 Pennsylvania v. Wheeling & Belmont Bridge Co., 59 U.S. (18 How.) 421, 430 (1856). “It is Congress, and not the Judicial Department, to which the Constitution has given the power to regulate commerce with foreign nations and among the several States. The courts can never take the initiative on this subject.” Transportation Co. v. Parkersburg, 107 U.S. 691, 701 (1883). See also Prudential Ins. Co. v. Benjamin, 328 U.S. 408 (1946) Robertson v. California, 328 U.S. 440 (1946). 721 But see In re Debs, 158 U.S. 564 (1895), in which the Court held that in the absence of legislative authorization the Executive had power to seek and federal courts to grant injunctive relief to remove obstructions to interstate commerce and the free flow of the mail. 722 70 U.S. (3 Wall.) 713 (1866). 723 70 U.S. at 724–25. 724 Union Bridge Co. v. United States, 204 U.S. 364 (1907). See also Monongahela Bridge Co. v. United States, 216 U.S. 177 (1910) Wisconsin v. Illinois, 278 U.S. 367 (1929). The United States may seek injunctive or declaratory relief requiring the removal of obstructions to commerce by those negligently responsible for them or it may itself remove the obstructions and proceed against the responsible party for costs. United States v. Republic Steel Corp., 362 U.S. 482 (1960) Wyandotte Transportation Co. v. United States, 389 U.S. 191 (1967). Congress’s power in this area is newly demonstrated by legislation aimed at pollution and environmental degradation. In confirming the title of the states to certain waters under the Submerged Lands Act, 67 Stat. 29 (1953), 43 U.S.C. §§ 1301 et seq., Congress was careful to retain authority over the waters for purposes of commerce, navigation, and the like. United States v. Rands, 389 U.S. 121, 127 (1967). 725 Gibson v. United States, 166 U.S. 269 (1897). See also Bridge Co. v. United States, 105 U.S. 470 (1882) United States v. Rio Grande Irrigation Co., 174 U.S. 690 (1899) United States v. Chandler-Dunbar Co., 229 U.S. 53 (1913) Seattle v. Oregon & W.R.R., 255 U.S. 56, 63 (1921) Economy Light Co. v. United States, 256 U.S. 113 (1921) United States v. River Rouge Co., 269 U.S. 411, 419 (1926) Ford & Son v. Little Falls Co., 280 U.S. 369 (1930) United States v. Commodore Park, Inc., 324 U.S. 386 (1945) United States v. Twin City Power Co., 350 U.S. 222 (1956) United States v. Rands, 389 U.S. 121 (1967). 726 United States v. Cress, 243 U.S. 316 (1917). 727 United States v. Chicago, M., St. P. & P. R.R., 312 U.S. 592, 597 (1941) United States v. Willow River Power Co., 324 U.S. 499 (1945). 728 United States v. Rio Grande Irrigation Co., 174 U.S. 690 (1899). 729 77 U.S. (10 Wall.) 557 (1871). 730 77 U.S. at 565. 731 77 U.S. at 566. “The regulation of commerce implies as much control, as far-reaching power, over an artificial as over a natural highway.” Justice Brewer for the Court in Monongahela Navigation Co. v. United States, 148 U.S. 312, 342 (1893). 732 Congress had the right to confer upon the Interstate Commerce Commission the power to regulate interstate ferry rates, N.Y. Central R.R. v. Hudson County, 227 U.S. 248 (1913), and to authorize the Commission to govern the towing of vessels between points in the same state but partly through waters of an adjoining state. Cornell Steamboat Co. v. United States, 321 U.S. 634 (1944). Congress’s power over navigation extends to persons furnishing wharfage, dock, warehouse, and other terminal facilities to a common carrier by water. Hence an order of the United States Maritime Commission banning certain allegedly “unreasonable practices” by terminals in the Port of San Francisco, and prescribing schedules of maximum free time periods and of minimum charges was constitutional. California v. United States, 320 U.S. 577 (1944). The same power also comprises regulation of the registry enrollment, license, and nationality of ships and vessels, the method of recording bills of sale and mortgages thereon, the rights and duties of seamen, the limitations of the responsibility of shipowners for the negligence and misconduct of their captains and crews, and many other things of a character truly maritime. See The Lottawanna, 88 U.S. (21 Wall.) 558, 577 (1875) Providence & N.Y. S.S. Co. v. Hill Mfg. Co., 109 U.S. 578, 589 (1883) The Hamilton, 207 U.S. 398 (1907) O’Donnell v. Great Lakes Dredge & Dock Co., 318 U.S. 36 (1943). 733 Pollard v. Hagan, 44 U.S. (3 How.) 212 (1845) Shively v. Bowlby, 152 U.S. 1 (1894). 734 Green Bay & Miss. Canal Co. v. Patten Paper Co., 172 U.S. 58, 80 (1898). 735 229 U.S. 53 (1913). 736 229 U.S. at 73, citing Kaukauna Water Power Co. v. Green Bay & Miss. Canal Co., 142 U.S. 254 (1891). 737 283 U.S. 423 (1931). 738 311 U.S. 377 (1940). 739 283 U.S. at 455–56. See also United States v. Twin City Power Co., 350 U.S. 222, 224 (1956). 740 311 U.S. at 407, 409–10. 741 311 U.S. at 426. 742 Oklahoma v. Atkinson Co., 313 U.S. 508, 523–33 (1941). 743 Ashwander v. TVA, 297 U.S. 288 (1936). 744 Cf. Indiana v. United States, 148 U.S. 148 (1893). 745 12 Stat. 489 (1862) 13 Stat. 356 (1864) 14 Stat. 79 (1866). 746 The result then as well as now might have followed from Congress’s power of spending, independently of the Commerce Clause, as well as from its war and postal powers, which were also invoked by the Court in this connection. 747 Thomson v. Pacific R.R., 76 U.S. (9 Wall.) 579 (1870) California v. Pacific R.R. Co. (Pacific Ry. Cases), 127 U.S. 1 (1888) Cherokee Nation v. Southern Kansas Ry., 135 U.S. 641 (1890) Luxton v. North River Bridge Co., 153 U.S. 525 (1894). 748 14 Stat. 66 (1866). 749 14 Stat. 221 (1866). 750 17 Stat. 353 (1873). 751 Munn v. Illinois, 94 U.S. 113 (1877) Chicago B. & Q. R. Co. v. Iowa, 94 U.S. 155 (1877) Peik v. Chicago & N.W. Ry., 94 U.S. 164 (1877) Pickard v. Pullman Southern Car Co., 117 U.S. 34 (1886). 752 Wabash, St. L. & P. Ry. Co. v. Illinois, 118 U.S. 557 (1886). A variety of state regulations have been struck down on the burdening-of-commerce rationale. E.g., Southern Pacific Co. v. Arizona ex rel. Sullivan, 325 U.S. 761 (1945) (train length) Napier v. Atlantic Coast Line R.R., 272 U.S. 605 (1926) (locomotive accessories) Pennsylvania R.R. v. Public Service Comm’n, 250 U.S. 566 (1919). But the Court has largely exempted regulations with a safety purpose, even a questionable one. Brotherhood of Firemen v. Chicago, R.I. & P. R.R., 393 U.S. 129 (1968). 753 24 Stat. 379 (1887). 754 154 U.S. 447, 470 (1894). 755 ICC v. Alabama Midland Ry., 168 U.S. 144 (1897) Cincinnati, N.O. & Texas Pacific Ry. v. ICC, 162 U.S. 184 (1896). 756 34 Stat. 584. 757 36 Stat. 539. 758 These regulatory powers are now vested, of course, in the Federal Communications Commission. 759 49 Stat. 543 (1935). 760 41 Stat. 474. 761 54 Stat. 898, U.S.C. §§ 1 et seq. The two acts were “intended . . . to provide a completely integrated interstate regulatory system over motor, railroad, and water carriers.” United States v. Pennsylvania R.R., 323 U.S. 612, 618–19 (1945). The ICC’s powers include authority to determine the reasonableness of a joint through international rate covering transportation in the United States and abroad and to order the domestic carriers to pay reparations in the amount by which the rate is unreasonable. Canada Packers v. Atchison, T. & S. F. Ry., 385 U.S. 182 (1966), and cases cited. 762 Disputes between the ICC and other government agencies over mergers have occupied a good deal of the Court’s time. Cf. United States v. ICC, 396 U.S. 491 (1970). See also County of Marin v. United States, 356 U.S. 412 (1958) McLean Trucking Co. v. United States, 321 U.S. 67 (1944) Penn-Central Merger & N & W Inclusion Cases, 389 U.S. 486 (1968). 763 Among the various provisions of the Interstate Commerce Act which have been upheld are: a section penalizing shippers for obtaining transportation at less than published rates, Armour Packing Co. v. United States, 209 U.S. 56 (1908) a section construed as prohibiting the hauling of commodities in which the carrier had at the time of haul a proprietary interest, United States v. Delaware & Hudson Co., 213 U.S. 366 (1909) a section abrogating life passes, Louisville & Nashville R.R. v. Mottley, 219 U.S. 467 (1911) a section authorizing the ICC to regulate the entire bookkeeping system of interstate carriers, including intrastate accounts, ICC v. Goodrich Transit Co., 224 U.S. 194 (1912) a clause affecting the charging of rates different for long and short hauls. Intermountain Rate Cases, 234 U.S. 476 (1914). 764 Houston & Texas Ry. v. United States, 234 U.S. 342, 351–352 (1914). See also, American Express Co. v. Caldwell, 244 U.S. 617 (1917) Pacific Tel. & Tel. Co. v. Tax Comm’n, 297 U.S. 403 (1936) Weiss v. United States, 308 U.S. 321 (1939) Bethlehem Steel Co. v. State Board, 330 U.S. 767 (1947) United States v. Walsh, 331 U.S. 432 (1947). 765 Wisconsin R.R. Comm’n v. Chicago, B. & Q. R. Co., 257 U.S. 563 (1922). Cf. Colorado v. United States, 271 U.S. 153 (1926), upholding an ICC order directing abandonment of an intrastate branch of an interstate railroad. But see North Carolina v. United States, 325 U.S. 507 (1945), setting aside an ICC disallowance of intrastate rates set by a state commission as unsupported by the evidence and findings. 766 27 Stat. 531, 45 U.S.C. §§ 1–7. 767 32 Stat. 943, 45 U.S.C. §§ 8–10. 768 Southern Ry. v. United States, 222 U.S. 20 (1911). See also Texas & Pacific Ry. v. Rigsby, 241 U.S. 33 (1916) United States v. California, 297 U.S. 175 (1936) United States v. Seaboard Air Line R.R., 361 U.S. 78 (1959). 769 34 Stat. 1415, 45 U.S.C. §§ 61–64. 770 Baltimore & Ohio R.R. v. ICC, 221 U.S. 612 (1911). 771 34 Stat. 232, held unconstitutional in part in the Employers’ Liability Cases, 207 U.S. 463 (1908). 772 35 Stat. 65, 45 U.S.C. §§ 51–60. 773 The Second Employers’ Liability Cases, 223 U.S. 1 (1912). For a longer period, a Court majority reviewed a surprising large number of FELA cases, almost uniformly expanding the scope of recovery under the statute. Cf. Rogers v. Missouri Pacific R.R., 352 U.S. 500 (1957). This practice was criticized both within and without the Court, cf. Ferguson v. Moore-McCormack Lines, 352 U.S. 521, 524 (1957) (Justice Frankfurter dissenting) Hart, Foreword: The Time Chart of the Justices, 73 HARV. L. REV . 84, 96–98 (1959), and has been discontinued. 774 See discussion under Railroad Retirement Act and National Labor Relations Act, infra. 775 The Pipe Line Cases, 234 U.S. 548 (1914). See also State Comm’n v. Wichita Gas Co., 290 U.S. 561 (1934) Eureka Pipe Line Co. v. Hallanan, 257 U.S. 265 (1921) United Fuel Gas Co. v. Hallanan, 257 U.S. 277 (1921) Pennsylvania v. West Virginia, 262 U.S. 553 (1923) Missouri ex rel. Barrett v. Kansas Gas Co., 265 U.S. 298 (1924). 776 Public Utilities Comm’n v. Attleboro Co., 273 U.S. 83 (1927). See also Utah Power & Light Co. v. Pfost, 286 U.S. 165 (1932) Pennsylvania Power Co. v. FPC, 343 U.S. 414 (1952). 777 49 Stat. 863, 16 U.S.C. §§ 791a–825u. 778 52 Stat. 821, 15 U.S.C. §§ 717–717w. 779 FPC v. Natural Gas Pipeline Co., 315 U.S. 575 (1942). 780 315 U.S. at 582. Sales to distributors by a wholesaler of natural gas delivered to it from out-of-state sources are subject to FPC jurisdiction. Colorado-Wyoming Co. v. FPC, 324 U.S. 626 (1945). See also Illinois Gas Co. v. Public Service Co., 314 U.S. 498 (1942) FPC v. East Ohio Gas Co., 338 U.S. 464 (1950). In Phillips Petroleum Co. v. Wisconsin, 347 U.S. 672 (1954), the Court ruled that an independent company engaged in one state in production, gathering, and processing of natural gas, which it thereafter sells in the same state to pipelines that transport and sell the gas in other states is subject to FPC jurisdiction. See also California v. Lo-Vaca Gathering Co., 379 U.S. 366 (1965). 781 48 Stat. 1064, 47 U.S.C. §§ 151 et seq. Cf. United States v. Southwestern Cable Co., 392 U.S. 157 (1968), on the regulation of community antenna television systems (CATV). 782 52 Stat. 973, as amended. The CAB has now been abolished and its functions are exercised by the Federal Aviation Administration, 49 U.S.C. § 106, as part of the Department of Transportation. 783 26 Stat. 209 (1890) 15 U.S.C. §§ 1–7. 784 156 U.S. 1 (1895). 785 156 U.S. at 13. 786 156 U.S. at 13–16. 787 156 U.S. at 17. The doctrine of the case boiled down to the proposition that commerce was transportation only, a doctrine Justice Harlan undertook to refute in his notable dissenting opinion. “Interstate commerce does not, therefore, consist in transportation simply. It includes the purchase and sale of articles that are intended to be transported from one State to another—every species of commercial intercourse among the States and with foreign nations.” 156 U.S. at 22. “Any combination, therefore, that disturbs or unreasonably obstructs freedom in buying and selling articles manufactured to be sold to persons in other States or to be carried to other States—a freedom that cannot exist if the right to buy and sell is fettered by unlawful restraints that crush out competition—affects, not incidentally, but directly, the people of all the States and the remedy for such an evil is found only in the exercise of powers confided to a government which, this court has said, was the government of all, exercising powers delegated by all, representing all, acting for all. McCulloch v. Maryland, 4 Wheat. 316, 405.” 156 U.S. at 33. 788 175 U.S. 211 (1899). 789 196 U.S. 375 (1905). The Sherman Act was applied to break up combinations of interstate carriers in United States v. Trans-Missouri Freight Ass’n, 166 U.S. 290 (1897) United States v. Joint-Traffic Ass’n, 171 U.S. 505 (1898) and Northern Securities Co. v. United States, 193 U.S. 197 (1904). In Mandeville Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 229–39 (1948), Justice Rutledge, for the Court, critically reviewed the jurisprudence of the limitations on the Act and the deconstruction of the judicial constraints. In recent years, the Court’s decisions have permitted the reach of the Sherman Act to expand along with the expanding notions of congressional power. Gulf Oil Corp. v. Copp Paving Co., 419 U.S. 186 (1974) Hospital Building Co. v. Rex Hospital Trustees, 425 U.S. 738 (1976) McLain v. Real Estate Bd. of New Orleans, 444 U.S. 232 (1980) Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991). The Court, however, does insist that plaintiffs alleging that an intrastate activity violates the Act prove the relationship to interstate commerce set forth in the Act. Gulf Oil Corp, 419 U.S. at 194–99. 790 Swift & Co. v. United States, 196 U.S. 375, 396 (1905). 791 196 U.S. at 398–99. 792 196 U.S. at 399–401. 793 196 U.S. at 400. 794 Loewe v. Lawlor (The Danbury Hatters Case), 208 U.S. 274 (1908) Duplex Printing Press Co. v. Deering, 254 U.S. 443 (1921) Coronado Co. v. United Mine Workers, 268 U.S. 295 (1925) United States v. Bruins, 272 U.S. 549 (1926) Bedford Co. v. Stone Cutters Ass’n, 274 U.S. 37 (1927) Local 167 v. United States, 291 U.S. 293 (1934) Allen Bradley Co. v. Union, 325 U.S. 797 (1945) United States v. Employing Plasterers Ass’n, 347 U.S. 186 (1954) United States v. Green, 350 U.S. 415 (1956) Callanan v. United States, 364 U.S. 587 (1961). 795 42 Stat. 159, 7 U.S.C. §§ 171–183, 191–195, 201–203. 796 42 Stat. 998 (1922), 7 U.S.C. §§ 1–9, 10a–17. 797 258 U.S. 495 (1922). 798 258 U.S. at 514. 799 258 U.S. at 515–16. See also Lemke v. Farmers Grain Co., 258 U.S. 50 (1922) Minnesota v. Blasius, 290 U.S. 1 (1933). 800 262 U.S. 1 (1923). 801 262 U.S. at 35. 802 262 U.S. at 40. 803 262 U.S. at 37, quoting Stafford v. Wallace, 258 U.S. 495, 521 (1922). 804 48 Stat. 881, 15 U.S.C. §§ 77b et seq. 805 49 Stat. 803, 15 U.S.C. §§ 79–79z–6. 806 Electric Bond Co. v. SEC, 303 U.S. 419 (1938) North American Co. v. SEC, 327 U.S. 686 (1946) American Power & Light Co. v. SEC, 329 U.S. 90 (1946). 807 Appalachian Coals, Inc. v. United States, 288 U.S. 344, 372 (1933). 808 48 Stat. 195. 809 295 U.S. 495 (1935). 810 295 U.S. at 548. See also id. at 546. 811 In United States v. Sullivan, 332 U.S. 689 (1948), the Court interpreted the Federal Food, Drug, and Cosmetic Act of 1938 as applying to the sale by a retailer of drugs purchased from his wholesaler within the State nine months after their interstate shipment had been completed. The Court, speaking by Justice Black, cited United States v. Walsh, 331 U.S. 432 (1947) Wickard v. Filburn, 317 U.S. 111 (1942) United States v. Wrightwood Dairy Co., 315 U.S. 110 (1942) United States v. Darby, 312 U.S. 100 (1941). Justice Frankfurter dissented on the basis of FTC v. Bunte Bros., 312 U.S. 349 (1941). It is apparent that the Schechter case has been thoroughly repudiated so far as the distinction between “direct” and “indirect” effects is concerned. Cf. Perez v. United States, 402 U.S. 146 (1971). See also McDermott v. Wisconsin, 228 U.S. 115 (1913), which preceded Schechter by more than two decades. The NIRA, however, was found to have several other constitutional infirmities besides its disregard, as illustrated by the Live Poultry Code, of the “fundamental” distinction between “direct” and “indirect” effects, namely, the delegation of standard-less legislative power, the absence of any administrative procedural safeguards, the absence of judicial review, and the dominant role played by private groups in the general scheme of regulation. 812 48 Stat. 31. 813 United States v. Butler, 297 U.S. 1, 63–64, 68 (1936). 814 49 Stat. 991. 815 Carter v. Carter Coal Co., 298 U.S. 238 (1936). 816 298 U.S. at 308–09. 817 48 Stat. 1283. 818 295 U.S. 330 (1935). 819 295 U.S. at 374. 820 295 U.S. at 379, 384. 821 326 U.S. 446 (1946). Indeed, in a case decided in June 1948, Justice Rutledge, speaking for a majority of the Court, listed the Alton case as one “foredoomed to reversal,” though the formal reversal has never taken place. See Mandeville Island Farms v. American Crystal Sugar Co., 334 U.S. 219, 230 (1948). Cf. Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 19 (1976). 822 301 U.S. 1 (1937). A major political event had intervened between this decision and those described in the preceding pages. President Roosevelt, angered at the Court’s invalidation of much of his depression program, proposed a “reorganization” of the Court by which he would have been enabled to name one new Justice for each Justice on the Court who was more than 70 years old, in the name of “judicial efficiency.” The plan was defeated in the Senate, in part, perhaps, because in such cases as Jones & Laughlin a Court majority began to demonstrate sufficient “judicial efficiency.” See Leuchtenberg, The Origins of Franklin D. Roosevelt’s ‘Court-Packing’ Plan, 1966 S UP. CT. REV . 347 (P. Kurland ed.) Mason, Harlan Fiske Stone and FDR’s Court Plan, 61 Y ALE L. J. 791 (1952) 2 M. PUSEY, CHARLES EVANS HUGHES 759–765 (1951). 823 49 Stat. 449, as amended, 29 U.S.C. §§ 151 et seq. 824 The NLRA was enacted against the backdrop of depression, although obviously it went far beyond being a mere antidepression measure, and Congress could find precedent in railway labor legislation. In 1898, Congress passed the Erdman Act, 30 Stat. 424, which attempted to influence the unionization of railroad workers and facilitate negotiations with employers through mediation. The statute fell largely into disuse because the railroads refused to mediate. Additionally, in Adair v. United States, 208 U.S. 161 (1908), the Court struck down a section of the law outlawing “yellow-dog contracts,” by which employers exacted promises of workers to quit or not to join unions as a condition of employment. The Court held the section not to be a regulation of commerce, there being no connection between an employee’s membership in a union and the carrying on of interstate commerce. Cf. Coppage v. Kansas, 236 U.S. 1 (1915). In Wilson v. New, 243 U.S. 332 (1917), the Court did uphold a congressional settlement of a threatened rail strike through the enactment of an eight-hour day and a time-and-a-half for overtime for all interstate railway employees. The national emergency confronting the Nation was cited by the Court, but with the implication that the power existed in more normal times, suggesting that Congress’s powers were not as limited as some judicial decisions had indicated. Congress’s enactment of the Railway Labor Act in 1926, 44 Stat. 577, as amended, 45 U.S.C. §§ 151 et seq., was sustained by a Court decision admitting the connection between interstate commerce and union membership as a substantial one. Texas & N.L.R. Co. v. Brotherhood of Railway Clerks, 281 U.S. 548 (1930). A subsequent decision sustained the application of the Act to “back shop” employees of an interstate carrier who engaged in making heavy repairs on locomotives and cars withdrawn from service for long periods, the Court finding that the activities of these employees were related to interstate commerce. Virginian Ry. v. System Federation No. 40, 300 U.S. 515 (1937). 825 NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 38, 41–42 (1937). 826 NLRB v. Fruehauf Trailer Co., 301 U.S. 49 (1937) NLRB v. Friedman-Harry Marks Clothing Co., 301 U.S. 58 (1937). 827 NLRB v. Fainblatt, 306 U.S. 601, 606 (1939). 828 Howell Chevrolet Co. v. NLRB, 346 U.S. 482 (1953). 829 Journeymen Plumbers’ Union v. County of Door, 359 U.S. 354 (1959). 830 NLRB v. Reliance Fuel Oil Co., 371 U.S. 224 (1963). 831 371 U.S. at 226. See also Guss v. Utah Labor Bd., 353 U.S. 1, 3 (1957) NLRB v. Fainblatt, 306 U.S. 601, 607 (1939). 832 NLRB v. Reliance Fuel Oil Co., 371 U.S. 224, 225 n.2 (1963) Liner v. Jafco, 375 U.S. 301, 303 n.2 (1964). 833 52 Stat. 1060, as amended, 63 Stat. 910 (1949). The 1949 amendment substituted the phrase “in any process or occupation directly essential to the production thereof in any State” for the original phrase “in any process or occupation necessary to the production thereof in any State.” In Mitchell v. H.B. Zachry Co., 362 U.S. 310, 317 (1960), the Court noted that the change “manifests the view of Congress that on occasion courts . . . had found activities to be covered, which . . . [Congress now] deemed too remote from commerce or too incidental to it.” The 1961 amendments to the Act, 75 Stat. 65, departed from previous practices of extending coverage to employees individually connected to interstate commerce to cover all employees of any “enterprise” engaged in commerce or production of commerce thus, there was an expansion of employees covered but not, of course, of employers, 29 U.S.C. §§ 201 et seq. See 29 U.S.C. §§ 203(r), 203(s), 206(a), 207(a). 834 United States v. Darby, 312 U.S. 100, 115 (1941). 835 312 U.S. at 113, 114, 118. 836 312 U.S. at 123–24. 837 E.g., Kirschbaum v. Walling, 316 U.S. 517 (1942) (operating and maintenance employees of building, part of which was rented to business producing goods for interstate commerce) Walton v. Southern Package Corp., 320 U.S. 540 (1944) (night watchman in a plant the substantial portion of the production of which was shipped in interstate commerce) Armour & Co. v. Wantock, 323 U.S. 126 (1944) (employees on stand-by auxiliary fire-fighting service of an employer engaged in interstate commerce) Borden Co. v. Borella, 325 U.S. 679 (1945) (maintenance employees in building housing company’s central offices where management was located though the production of interstate commerce was elsewhere) Martino v. Michigan Window Cleaning Co., 327 U.S. 173 (1946) (employees of a window-cleaning company the principal business of which was performed on windows of industrial plants producing goods for interstate commerce) Mitchell v. Lublin, McGaughy & Associates, 358 U.S. 207 (1959) (nonprofessional employees of architectural firm working on plans for construction of air bases, bus terminals, and radio facilities). 838 Cf. Mitchell v. H.B. Zachry Co., 362 U.S. 310, 316–318 (1960). 839 75 Stat. 65. 840 80 Stat. 830. 841 29 U.S.C. §§ 203(r), 203(s). 842 392 U.S. 183 (1968). 843 Another aspect of this case was overruled in National League of Cities v. Usery, 426 U.S. 833 (1976), which itself was overruled in Garcia v. San Antonio Metropolitan Transit Auth., 469 U.S. 528 (1985). 844 50 Stat. 246, 7 U.S.C. §§ 601 et seq. 845 315 U.S. 110 (1942). The Court had previously upheld other legislation that regulated agricultural production through limitations on sales in or affecting interstate commerce. Currin v. Wallace, 306 U.S. 1 (1939) Mulford v. Smith, 307 U.S. 38 (1939). 846 315 U.S. at 118–19. 847 317 U.S. 111 (1942). 848 52 Stat. 31, 7 U.S.C. §§ 612c, 1281–1282 et seq. 849 317 U.S. at 128–29. 850 317 U.S. at 120, 123–24. In United States v. Rock Royal Co-operative, Inc., 307 U.S. 533 (1939), the Court sustained an order under the Agricultural Marketing Agreement Act of 1937, 50 Stat. 246, regulating the price of milk in certain instances. Justice Reed wrote for the majority of the Court: “The challenge is to the regulation ‘of the price to be paid upon the sale by a dairy farmer who delivers his milk to some country plant.’ It is urged that the sale, a local transaction, is fully completed before any interstate commerce begins and that the attempt to fix the price or other elements of that incident violates the Tenth Amendment. But where commodities are bought for use beyond state lines, the sale is a part of interstate commerce. We have likewise held that where sales for interstate transportation were commingled with intrastate transactions, the existence of the local activity did not interfere with the federal power to regulate inspection of the whole. Activities conducted within state lines do not by this fact alone escape the sweep of the Commerce Clause. Interstate commerce may be dependent upon them. Power to establish quotas for interstate marketing gives power to name quotas for that which is to be left within the state of production. Where local and foreign milk alike are drawn into a general plan for protecting the interstate commerce in the commodity from the interferences, burdens and obstructions, arising from excessive surplus and the social and sanitary evils of low values, the power of the Congress extends also to the local sales.” Id. at 568–69. 851 United States v. The William, 28 Fed. Cas. 614, 620–623 (No. 16,700) (D. Mass. 1808). See also Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 191 (1824) United States v. Marigold, 50 U.S. (9 How.) 560 (1850). 852 289 U.S. 48 (1933). 853 289 U.S. at 57, 58. 854 Ch. 270, § 28, 5 Stat. 566. 855 9 Stat. 237 (1848). 856 24 Stat. 409. 857 35 Stat. 614 38 Stat. 275. 858 29 Stat. 605. 859 192 U.S. 470 (1904). 860 223 U.S. 166 (1912) cf. United States v. California, 332 U.S. 19 (1947). 861 239 U.S. 325 (1915). 862 239 U.S. at 329. 863 236 U.S. 216 (1915). 864 Groves v. Slaughter, 40 U.S. (15 Pet.) 449, 488–89 (1841). 865 312 U.S. 100 (1941). 866 The judicial history of the argument may be examined in the majority and dissenting opinions in Hammer v. Dagenhart, 247 U.S. 251 (1918), a five-to-four decision, in which the majority held Congress not to be empowered to ban from the channels of interstate commerce goods made with child labor, since Congress’s power was to prescribe the rule by which commerce was to be carried on and not to prohibit it, except with regard to those things the character of which—diseased cattle, lottery tickets—was inherently evil. With the majority opinion, compare Justice Stone’s unanimous opinion in United States v. Darby, 312 U.S. 100, 112–24 (1941), overruling Hammer v. Dagenhart. See also Corwin, The Power of Congress to Prohibit Commerce, 3 S ELECTED ESSAYS ON CONSTITUTIONAL LAW 103 (1938). 867 23 Stat. 31. 868 32 Stat. 791. 869 33 Stat. 1264. 870 33 Stat. 1269. 871 37 Stat. 315. 872 39 Stat. 1165. 873 Illinois Central R.R. v. McKendree, 203 U.S. 514 (1906). See also United States v. DeWitt, 76 U.S. (9 Wall.) 41 (1870). 874 Lottery Case (Champion v. Ames), 188 U.S. 321 (1903). 875 28 Stat. 963. 876 143 U.S. 110 (1892). 877 22 U.S. (9 Wheat.) 1, 227 (1824). 878 114 U.S. 622, 630 (1885). 879 Hoke v. United States, 227 U.S. 308, 322 (1913). 880 United States v. Hill, 248 U.S. 420, 425 (1919). 881 267 U.S. 432 (1925). 882 41 Stat. 324 (1919), 18 U.S.C., §§ 2311–2313. 883 267 U.S. at 436–39. See also Kentucky Whip & Collar Co. v. Ill. Cent. R.R., 299 U.S. 334 (1937). 884 29 U.S.C. §§ 201–219. 885 United States v. Darby, 312 U.S. 100 (1941). 886 247 U.S. 251 (1918). 887 312 U.S. at 116–17. 888 E.g., Brooks v. United States, 267 U.S. 432, 436–437 (1925) United States v. Darby, 312 U.S. 100, 114 (1941). See Cushman, The National Police Power Under the Commerce Clause, 3 S ELECTED ESSAYS ON CONSTITUTIONAL LAW 62 (1938). 889 New York v. United States, 505 U.S. 144, 158 (1992). 890 United States v. Lopez, 514 U.S. 549, 558–59 (1995) (citations omitted). 891 537 U.S. 129, 147 (2003). 892 Examples of laws addressing instrumentalities of commerce include prohibitions on the destruction of an aircraft, 18 U.S.C. § 32, or on theft from interstate shipments. Accord Perez v. United States, 402 U.S. 146, 150 (1971). 893 Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) Katzenbach v. McClung, 379 U.S. 294 (1964) Daniel v. Paul, 395 U.S. 298 (1969). 894 Katzenbach v. McClung, 379 U.S. 294, 298, 300–02 (1964) Daniel v. Paul, 395 U.S. 298, 305 (1969). 895 Scarborough v. United States, 431 U.S. 563 (1977) Barrett v. United States, 423 U.S. 212 (1976). However, because such laws reach far into the traditional police powers of the states, the Court insists Congress clearly speak to its intent to cover such local activities. United States v. Bass, 404 U.S. 336 (1971). See also Rewis v. United States, 401 U.S. 808 (1971) United States v. Enmons, 410 U.S. 396 (1973). A similar tenet of construction has appeared in the Court’s recent treatment of federal prosecutions of state officers for official corruption under criminal laws of general applicability. E.g., McDonnell v. United States, 579 U.S. ___, No. 15–474, slip op. at 24 (2016) (narrowly interpreting the term “official act” to avoid a construction of the Hobbs Act and federal honest-services fraud statute that would “raise[] significant federalism concerns” by intruding on a state’s “prerogative to regulate the permissible scope of interactions between state officials and their constituents.”) McCormick v. United States, 500 U.S. 257 (1991) McNally v. United States, 483 U.S. 350 (1987). Congress has overturned the latter case. 102 Stat. 4508, § 7603, 18 U.S.C. § 1346. 896 332 U.S. 689 (1948). 897 332 U.S. at 698–99. 898 317 U.S. 111 (1942). 899 Fry v. United States, 421 U.S. 542, 547 (1975). 900 See Maryland v. Wirtz, 392 U.S. 183, 188–93 (1968). 901 Hodel v. Indiana, 452 U.S. 314, 323–24 (1981). 902 452 U.S. at 324. 903 Hodel v. Virginia Surface Mining & Recl. Ass’n, 452 U.S. 264 (1981) (quoting United States v. Wrightwood Dairy Co., 315 U.S. 110, 119 (1942)). 904 452 U.S. at 276, 277. The scope of review is restated in Preseault v. ICC, 494 U.S. 1, 17 (1990). Then-Justice Rehnquist, concurring in the two Hodel cases, objected that the Court was making it appear that no constitutional limits existed under the Commerce Clause, whereas in fact it was necessary that a regulated activity must have a substantial effect on interstate commerce, not just some effect. He thought it a close case that the statutory provisions here met those tests. 452 U.S. at 307–13. 905 402 U.S. 146 (1971). 906 Russell v. United States, 471 U.S. 858, 862 (1985). In a later case the Court avoided the constitutional issue by holding the statute inapplicable to the arson of an owner-occupied private residence. 907 Summit Health, Ltd. v. Pinhas, 500 U.S. 322 (1991). See also Jones v. United States, 529 U.S. 848 (2000) (an owner-occupied building is not “used” in interstate commerce within the meaning of the federal arson statute). 908 500 U.S. at 330–32. The decision was 5-to-4, with the dissenters of the view that, although Congress could reach the activity, it had not done so. 909 514 U.S. 549 (1995). The Court was divided 5-to-4, with Chief Justice Rehnquist writing the opinion of the Court, joined by Justices O’Connor, Scalia, Kennedy, and Thomas, with dissents by Justices Stevens, Souter, Breyer, and Ginsburg. 910 Carter v. Carter Coal Co., 298 U.S. 238 (1936) (striking down regulation of mining industry as outside of Commerce Clause). 911 18 U.S.C. § 922(q)(1)(A). Congress subsequently amended the section to make the offense jurisdictionally to turn on possession of “a firearm that has moved in or that otherwise affects interstate or foreign commerce.” Pub. L. 104–208, 110 Stat. 3009–370. 912 514 U.S. at 556–57, 559. 913 514 U.S. at 558–59. For an example of regulation of persons or things in interstate commerce, see Reno v. London, 528 U.S. 141 (2000) (information about motor vehicles and owners, regulated pursuant to the Driver’s Privacy Protection Act, and sold by states and others, is an article of commerce) 914 514 U.S. at 559. 915 514 U.S. at 559–61. 916 514 U.S. at 561. 917 514 U.S. at 563–68. 918 514 U.S. at 564. 919 “Not every epochal case has come in epochal trappings.” 514 U.S. at 615 (Justice Souter dissenting) (wondering whether the case is only a misapplication of established standards or is a veering in a new direction). 920 529 U.S. 598 (2000). Once again, the Justices were split 5–4, with Chief Justice Rehnquist’s opinion of the Court being joined by Justices O’Connor, Scalia, Kennedy, and Thomas, and with Justices Souter, Stevens, Ginsburg, and Breyer dissenting. 921 For an expansive interpretation in the area of economic regulation, decided during the same Term as Lopez, see Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995). Lopez did not “purport to announce a new rule governing Congress’s Commerce Clause power over concededly economic activity.” Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 58 (2003). 922 529 U.S. at 613. 923 Dissenting Justice Souter pointed to a “mountain of data” assembled by Congress to show the effects of domestic violence on interstate commerce. 529 U.S. at 628–30. The Court has evidenced a similar willingness to look behind congressional findings purporting to justify exercise of enforcement power under section 5 of the Fourteenth Amendment. See discussion under “enforcement,” infra. In Morrison itself, the Court determined that congressional findings were insufficient to justify the VAWA as an exercise of Fourteenth Amendment power. 529 U.S. at 619–20. 924 529 U.S. at 614. 925 529 U.S. at 615–16. Applying the principle of constitutional doubt, the Court in Jones v. United States, 529 U.S. 848 (2000), interpreted the federal arson statute as inapplicable to the arson of a private, owner-occupied residence. Were the statute interpreted to apply to such residences, the Court noted, “hardly a building in the land would fall outside [its] domain,” and the statute’s validity under Lopez would be squarely raised. 529 U.S. at 857. 926 529 U.S. at 618. 927 545 U.S. 1 (2005). 928 84 Stat. 1242, 21 U.S.C. §§ 801 et seq. 929 545 U.S. at 19. 930 545 U.S. at 25, quoting Webster’s Third New International Dictionary 720 (1966). 931 See also Taylor v. United States, 579 U.S. ___, No. 14–6166, slip op. at 3 (2016) (rejecting the argument that the government, in prosecuting a defendant under the Hobbs Act for robbing drug dealers, must prove the interstate nature of the drug activity). The Taylor Court viewed this result as following necessarily from the Court’s earlier decision in Raich, because the Hobbs Act imposes criminal penalties on robberies that affect “all . . . commerce over which the United States has jurisdiction,” 18 U.S.C. § 1951(b)(3) (2012), and Raich established the precedent that the market for marijuana, “including its intrastate aspects,” is “commerce over which the United States has jurisdiction.” Taylor, slip op. at 6–7. Taylor was, however, expressly “limited to cases in which a defendant targets drug dealers for the purpose of stealing drugs or drug proceeds.” Id. at 9. The Court did not purport to resolve what federal prosecutors must prove in Hobbs Act robbery cases “where some other type of business or victim is targeted.” Id. 932 545 U.S. at 18, 22. 933 545 U.S. at 23–25. 934 545 U.S. at 34–35 (Scalia, J., concurring). 935 567 U.S. ___, No. 11–393, slip op. (2012). 936 Patient Protection and Affordable Care Act (ACA), Pub. L. 111–148, as amended. This mandate was necessitated by the Act’s “guaranteed-issue” and “community-rating” provisions, under which insurance companies are prohibited from denying coverage to those with such conditions or charging unhealthy individuals higher premiums than healthy individuals. Id. at §§ 300gg, 300gg–1, 300gg–3, 300gg–4. As these requirements provide an incentive for individuals to delay purchasing health insurance until they become sick, this would impose new costs on insurers, leading them to significantly increase premiums on everyone. 937 Although no other Justice joined Chief Justice Robert’s opinion, four dissenting Justices reached similar conclusions regarding the Commerce Clause and the Necessary and Proper Clause. NFIB, No. 11–393, slip op. at 4–16 (joint opinion of Scalia, Kennedy, Thomas and Alito, dissenting). 938 See, e.g., Lopez, 514 U.S. at 573 (“Where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained”). 939 NFIB, No. 11–393, slip op. at 20, 26. 940 NFIB, No. 11–393, slip op. at 30. 941 Boynton v. Virginia, 364 U.S. 454 (1960) Henderson v. United States, 339 U.S. 816 (1950) Mitchell v. United States, 313 U.S. 80 (1941) Morgan v. Virginia, 328 U.S. 373 (1946). 942 Civil Rights Act of 1964, Title II, 78 Stat. 241, 243, 42 U.S.C. §§ 2000a et seq. 943 42 U.S.C. § 2000a(b). 944 Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964). 945 Katzenbach v. McClung, 379 U.S. 294 (1964). 946 Daniel v. Paul, 395 U.S. 298 (1969). 947 Heart of Atlanta Motel v. United States, 379 U.S. 241, 258 (1964) Katzenbach v. McClung, 379 U.S. 294, 301–04 (1964). 948 Heart of Atlanta Motel v. United States, 379 U.S. 241, 257 (1964). 949 379 U.S. at 252–53 Katzenbach v. McClung, 379 U.S. 294, 299–301 (1964). 950 Civil Rights Cases, 109 U.S. 3 (1883) United States v. Reese, 92 U.S. 214 (1876) Collins v. Hardyman, 341 U.S. 651 (1951). 951 The Fair Housing Act (Title VIIII of the Civil Rights Act of 1968), 82 Stat. 73, 81, 42 U.S.C. §§ 3601 et seq., was based on the Commerce Clause, but, in Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968), the Court held that legislation that prohibited discrimination in housing could be based on the Thirteenth Amendment and made operative against private parties. Similarly, the Court has concluded that, although § 1 of the Fourteenth Amendment is judicially enforceable only against “state action,” Congress is not so limited under its enforcement authorization of § 5. United States v. Guest, 383 U.S. 745, 761, 774 (1966) (concurring opinions) Griffin v. Breckenridge, 403 U.S. 88 (1971). 952 E.g., Barrett v. United States, 423 U.S. 212 (1976) Scarborough v. United States, 431 U.S. 563 (1977) Lewis v. United States, 445 U.S. 55 (1980) McElroy v. United States, 455 U.S. 642 (1982). 953 18 U.S.C. § 2421. 954 18 U.S.C. § 2312. 955 18 U.S.C. § 1201. 956 18 U.S.C. § 1951. See also 18 U.S.C. § 1952. 957 See Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 428 (1821). 958 See Luna Torres v. Lynch, 578 U.S. ___, No. 14–1096, slip op. at 4. 959 Title II, 82 Stat. 159 (1968), 18 U.S.C. §§ 891 et seq. 960 Perez v. United States, 402 U.S. 146 (1971). Taylor v. United States, 579 U.S. ___, No. 14–6166, slip op. at 3 (2016) Russell v. United States, 471 U.S. 858, 862 (1985).



Comments:

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  2. Eurylochus

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