Source: https://leastdangerousblog.com/2016/08/30/economic-protectionism-standing-alone-is-unconstitutional/
Timestamp: 2019-04-18 11:22:14+00:00

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Ever since the New Deal, federal courts have taken a very deferential approach to economic regulations coming from the federal or state governments. Fearing a return to the dreaded “Lochner Era” (which really was not that bad, when you get past the sensationalist invocations of this dreaded anti-canonical boogeyman and dig down into the facts), the Supreme Court has run fast and hard in the opposite direction, so much so that “[i]n areas of social and economic policy, a statutory classification that neither proceeds along suspect lines nor infringes fundamental constitutional rights must be upheld against equal protection challenge if there is any reasonably conceivable state of facts that could provide a rational basis for the classification.” FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 313 (1993). So long as a federal court can conjure up a hypothetical justification for a statute that interferes with an individual’s ability to go about their business as they see fit, the court will uphold that statute against constitutional challenge. That law can be “needless” and “wasteful,” it may be “unwise” or “improvident,” and it “need not be in every respect logically consistent with its aims,” in order to be upheld as constitutional. Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 487-88 (1955). As the language in Beach Commc’ns indicates, the standard of review which federal courts now apply to cases involving challenges to economic regulations is the so-called “rational basis test” (so-called, because the presumption of rationality which the name implies is, in many cases, either conclusory or an ipse dixit, but I digress). So long as a law has some coherent rationale – merely hypothetical or conceivable ones are perfectly ok, in this context – it is permissible.
More recently, the question has arisen as to what constitutes a “permissible” rational basis for an economic regulation. After all, even under rational basis review, there must still be “a rational relationship between the disparity of treatment and some legitimate government purposes.” Heller v. Doe, 509 U.S. 312, 320 (1993) (emphasis added).
Shockingly (well, given the state of the jurisprudence, not really, but let’s pretend for dramatic effect), some courts have decided that laws passed solely at the behest of rent-seeking parties to shield them from competition is a perfectly acceptable “legitimate government purpose” under the rational basis test. So in Sensational Smiles, LLC v. Mullen, 793 F.3d 281 (2d Cir. 2015), the Second Circuit addressed a challenge from a non-dentist teeth whitening service against a “Connecticut rule restricting the use of certain teeth-whitening procedures to licensed dentists . . . .” Id. at 283. Evidence brought forward by the challengers and amici suggested that “the true purpose of the Commission’s . . . restriction is to protect the monopoly on dental services enjoyed by licensed dentists in the state of Connecticut. In other words, the regulation is nothing but naked economic protectionism . . . .” Id. at 285.
Let me paint the picture clearly, in case some of the technical language was confusing. Challengers to a law which prevented them from providing rudimentary teeth-whitening services produced evidence which suggested that a bunch of relatively well-to-do dentists got the state to pass a law to protect them from competition from less well-to-do individuals trying to make an honest living by providing basic services that you can do at home, and they enacted this law under the guise of its necessity for “health and safety” (or at least so the court hypothesized). This is the sort of law which Justice Thomas or Justice Stewart might have called “uncommonly silly” (and the latter example is apt given that Stewart was referring to another “silly” Connecticut state law when he so famously quipped). But the state enacted it, and the challengers – who were faced with being put out of business, mind you – brought a lawsuit to try to show the court that the law was passed solely to protect rich dentists from competition.
With this evidence, you would think the court would look hard at the record to decide whether or not this was the case, because you would also think that naked economic protectionism for market incumbents could not possibly be a “legitimate governmental purpose,” right?
Wrong, at least according to a panel of federal judges. To them, “economic favoritism is rational for purposes of our review of state action under the Fourteenth Amendment.” Id. at 286. After all, “[m]uch of what states do is to favor certain groups over others on economic grounds. We call this politics.” Id. at 287.
Now, to its defense, the court does invoke the very important principle of federalism as enshrined in the Tenth Amendment to note that to strike down the law in question “would be to interpret the Fourteenth Amendment in a way that is destructive to federalism and to the power of the sovereign states to regulate their internal economic affairs.” Id. I suppose it is good to see the federal judiciary care about the Tenth Amendment in some context at least, since it is usually dismissed as being “essentially a tautology.” New York v. United States, 505 U.S. 144, 157 (1992). Neat how it gets invoked any time the courts are asked to protect rights they don’t care about it from violations by state legislatures, but it gets handwaved away any time it is asserted with respect to rights that they happen to care about at any given moment – but again, I digress.
In any case, the court opines “[c]hoosing between competing economic theories is the work of state legislatures, not of federal courts.” Id. at 287. It is sure to clarify its decision by noting that “if economic favoritism by the states violates federal law,” such as the Dormant Commerce Clause, “then, like any state action that contravenes stated federal rules, it falls under the Supremacy Clause.” Id. at 288. To the court here, however, a law that was enacted simply for economically protectionist purposes does not violate federal law, even if it has the effect of depriving someone of the right to engage in an otherwise lawful business that in no way could be considered malum in se. To the court, “there are any number of constitutionally rational ground for the . . . rule, . . . one of them is the favoring of licensed dentists at the expense of unlicensed teeth whiteners.” Id.
What is a bit perverse is that it was the practice of economic protectionism in states that led the Framers to decide to ditch the Articles of Confederation in favor of the Constitution as we more-or-less have it today. “Under the Articles of Confederation commerce among the original states was subject to vexatious and local regulations that took no account of the general welfare. But it was for the protection of the general interests . . . that Congress, representing the whole country, was given by the Constitution full power to regulate commerce among the states . . . .” N. Sec. Co. v. United States, 193 U.S. 197, 352 (1904) (emphasis added). “[I]norder to succeed, the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation.” Hughes v. Oklahoma, 441 U.S. 322, 325 (1979). See also The Federalist No. 7 (Alexander Hamilton) (noting that the Constitution was needed in lieu of the Articles of Confederation because otherwise “[e]ach State . . . would pursue a system of commercial policy peculiar to itself. This would occasion distinctions, preferences, and exclusions . . . .”).
To be sure, this historical perspective on the evolution from the Articles to the Constitution is distinguishable and not precisely apposite. In the early days of the nation, the issue was not necessarily with intra-state protectionism of certain individuals’ commercial enterprises over others’, but rather inter-state protectionism of one state’s commercial enterprises over another’s.
But, in any case, if “states . . . favor[ing] certain groups over others on economic grounds” is simply a form of “politics,” Sensational Smiles LLC, 793 F.3d at 287, it is an impermissible form thereof. As Cass Sunstein observed, “[t]he prohibition of naked preferences captures a significant theme in the original intent,” to wit, the framers’ “fear that government power would be usurped solely to distribute wealth or opportunities to one group or person at the expense of another.” Cass. R. Sunstein, Naked Preferences and the Constitution, 84 Colum. L. Rev. 1689, 1690 (1984). “The constitutional requirement that something other than a naked preference be shown to justify differential treatment provides a means . . . of ensuring that government action results from a legitimate effort to promote the public good rather than from a factional takeover.” Id. Going on, he notes – after calming everyone’s nerves in anticipation of invoking Lochner (might as well be Blucher rather than Lochner [RIP Gene Wilder]) – that this “minimum requirement . . . has been embodied in constitutional doctrine under the due process clause before, during, and after the Lochner era.” Id. at 1692. Indeed, even if the aversion to Lochner is “well founded,” courts should “not respond to that aversion by abandoning the minimum requirements of due process and equal protection.” Sensational Smiles LLC, 793 F.3d at 291 (Droney, J., concurring in the judgment). Protecting the rights of individuals to engage in otherwise lawful commerce free from pointless and protectionist economic regulation is hardly “enact[ing] Mr. Herbert Spencer’s Social Statics,” Lochner v. New York, 198 U.S. 45, 75 (1905) (Holmes, J., dissenting), especially when you consider that those individuals are often the disadvantaged ones “left behind” by capitalism who are simply trying to get their hands on the low rungs of the ladder to begin climbing their way up. Nothing like a little economic protectionism to keep them down.

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