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September 2014 Policy Study, Number 14-4

   

A Citizens Introduction to Federalism: Federalism and the Future of Constitutional Government

   

Part V: A Brief Historical Review of Federalism

   

 

As President, Woodrow Wilson shared Roosevelt’s belief in a strong presidency, and during his administration Wilson continued to strengthen the administrative state through more regulation, further anti-trust laws, and the creation of the Federal Reserve System. Robert Higgs, a Senior Fellow in Political Economy at the Independent Institute, wrote that by “1917 Big Government seemed firmly ensconced in the United States.”[154] The Great War (World War I) also led to further centralization of federal power. As Higgs wrote:

 

Notwithstanding the accretions of governmental authority during the Progressive Era, the American economy remained, as late as 1916, predominantly a market system. The next two years, however, witnessed an enormous and wholly unprecedented intervention of the federal government in the nation’s economic affairs. By the time of the armistice the government had taken over the ocean shipping, railroad, telephone, and telegraph industries; commandeered hundreds of manufacturing plants; entered into massive economic enterprises on its own account in such varied departments as ship building, wheat trading, and building construction; undertaken to lend huge sums to businesses directly or indirectly and to regulate the private issuance of securities…It had, in short, extensively distorted or wholly displaced markets, creating what some contemporaries called ‘war socialism.’[155]

 

The devastating results of World War I brought a return to conservatism in American politics. The Progressive Era of Theodore Roosevelt and Woodrow Wilson was finally over as Republicans took control of the federal government. In the presidential election of 1920, Ohio Senator Warren G. Harding was elected in a landslide.

 

During the campaign Harding promised the American people a “return to normalcy,” which meant the restoration of constitutional limited government. Harding, along with his Vice President Calvin Coolidge, fought to restore limited government. The policies of the Harding administration were based on paying down the national debt, lowering income tax rates, and cutting government spending. Harding also appointed conservatives to the Supreme Court and other executive positions in the federal government. Jim Powell, a Senior Fellow at the Cato Institute, described the success of the Harding-Coolidge economic program when he wrote:

 

Altogether, spending and taxes were cut 50 percent during the 1920s, and about 30 percent of the national debt was paid off. There were budget surpluses throughout the 1920s. Unemployment fell to 1.8 percent, the lowest U.S. peacetime level in more than 100 years.[156]

 

Both Harding, who died early in his term, and Coolidge fought to reduce government spending, and this was especially true of Coolidge. Coolidge resisted agricultural subsidies and the push for federal involvement in public utilities. Paul Moreno wrote, “as President, he [Coolidge] often observed that demands for unconstitutional federal laws arose from the states’ failure to act…”[157] In fact some scholars have argued that he was “America’s last constitutional President.”[158] Both Harding and Coolidge defended the Constitution against progressivism during the 1920s.

 

In the election of 1924, President Coolidge was reelected in a landslide and his successor, Herbert Hoover, who previously served as Secretary of Commerce under both Harding and Coolidge, won the 1928 presidential election in a landslide. Hoover was seen as a moderate Republican, who was more progressive than Coolidge. Hoover’s presidency was soon challenged by the greatest economic crisis in the 20th century, the Great Depression. The Great Depression was a severe economic crisis as the national economy collapsed in regard to business and industry and agriculture. Unemployment was at a staggering 25 percent, banking and finance were in shambles symbolized by bank panics. Hoover responded to the Depression in an unprecedented fashion by using the federal government in an attempt to stabilize and end the Depression.

 

Although history often portrays Hoover’s response to the Great Depression as laissez-faire or hands-off policy, Hoover actually used government intervention as never before in American history. Although Hoover opposed direct relief he did marshal the resources of the federal government. He organized conferences consisting of leaders of business and labor to work together to keep wages high, and Congress passed Depression-fighting measures such as the Reconstruction Finance Corporation and countercyclical economic policies to stimulate the economy. Previously during an economic panic or depression the federal government did not intervene, but Hoover’s intervention was historic.

 

The Great Depression was a turning point in American constitutional history. Because of the severity of the crisis, the American people started to look even more to Washington for relief and provision. In the election of 1932, President Hoover, who had become the “Depression President,” lost in a landslide to New York Governor Franklin D. Roosevelt. During the campaign Hoover pled and warned the American people that Roosevelt would transform American government, but his warnings were ignored and rejected. Roosevelt was a progressive, and during the campaign he not only campaigned as both a conservative — criticizing Hoover’s reckless fiscal policies — but also as a progressive. He called for a New Deal for the American people and he promised bold experimentation in policymaking to fight the Great Depression. In the Commonwealth Club Address in the fall of 1932, Roosevelt not only stated that the “day of enlightened administration has come” but signaled his belief in the progressive philosophy of a “living” Constitution:

 

The Declaration of Independence discusses the problem of Government in terms of a contract. Government is a relation of give and take, a contract, perforce, if we would follow the thinking out of which it grew. Under such a contract rulers were accorded power, and the people consented to that power on consideration that they be accorded certain rights. The task of statesmanship has always been the re-definition of these rights in terms of a changing and growing social order. New conditions impose new requirements upon Government and those who conduct Government.[159]

 

In his first Inaugural Address, President Roosevelt told the nation that “he was ready to ‘ask Congress for the one remaining instrument to meet the crisis — broad executive power to wage a war against the emergency, as great as the power that would be given me if we were in fact invaded by a foreign foe.’”[160]  FDR’s New Deal was transformational, as the first 100 days of his administration witnessed a tremendous amount of legislative activity. The New Deal brought regulation to almost all levels of the economy. Some of the programs included the Securities and Exchange Commission (SEC), Agricultural Adjustment Act (AAA), Civilian Conservation Corps (CCC), National Industrial Recovery Act (NRA), Works Progress Administration (WPA), Tennessee Valley Authority (TVA), and Public Works Administration (PWA), among many others that were given the nickname of “alphabet soup” agencies. As Eugene Hickok described:

 

President Franklin D. Roosevelt’s New Deal initiatives were aimed at getting the various sectors of the economy under national regulatory control. Areas once under state regulation were to become subject to national regulation. Proposals to regulate agriculture, manufacturing, labor, transportation, banking, securities — virtually every sector of economic activity — were put forth in a massive package of proposals to fuel an economic recovery.[161]

 

Because of the severity of the Depression, states and localities could not respond to the Depression and Roosevelt’s New Deal provided an open door for federal policymakers to intervene:

 

People turned to the national government to start large-scale federal programs in traditionally state and local areas of activity. During a two-year period (1933-1935), federal laws were passed creating new grants for the distribution of surplus farm products to the poor, free school lunches, child welfare, maternal and children’s health and crippled children’s services, old-age assistance, aid to dependent children, aid to the blind, general health services, emergency highway expenditures, and emergency work relief. In addition, the federal government adopted major new programs regulating certain prices, limiting production of farm products, and protecting workers organized in labor unions.[162]

 

Eugene Hickok argued that the “modern administrative state came into full flower during the period from the Great Depression through the New Deal and World War II.”[163] Roosevelt and his “Brain Trust” group of New Deal advisors believed that not only had capitalism failed with the Depression, but limited government could no longer provide economic security to the American people. To the New Dealers the responsibility of providing economic security rested with the federal government.

 

Franklin Roosevelt through his New Deal also created a powerful political coalition, the New Deal coalition, which consisted of farmers, labor, small business owners, minority groups, progressives, Northern Catholics, and Southern Democrats into a large political coalition. All of these groups were brought to the political table and tied to the Democratic Party through New Deal programs. Political columnist Michael Barone wrote that “the New Deal changed American life by changing the relationship between Americans and their government.”[164] Perhaps the best example of this was the historic entitlement program of Social Security. Even with the financial structural problems of Social Security, today it is almost impossible to reform this entitlement program, because people fear that it will be taken away.

 

Although some of Roosevelt’s New Deal measures were temporary to fight the Depression, some of the fundamental constitutional changes occurred because of the Supreme Court during the 1930s. The New Deal has been described as a “constitutional revolution.” During the early stages of the New Deal, Roosevelt enjoyed success because the Democrats held strong majorities in Congress, but he ran into problems with the Supreme Court. The Supreme Court, under the leadership of Chief Justice Charles Evans Hughes, was a divided Court between conservatives and progressives. At first the conservative coalition of the Court struck down several New Deal programs such as the AAA and the NRA, which was considered the flagship program of the New Deal. Roosevelt grew frustrated with the conservatives on the Court and labeled them the Four Horsemen of the Apocalypse. The conservatives on the Court believed that much of FDR’s New Deal was unconstitutional because it went above and beyond the enumerated powers and against the Tenth Amendment:

 

The conservatives who struck down New Deal measures saw them as an assault on private property, contractual rights, and the laissez-faire market. Yet it is evident that the New Deal involved a tremendous extension of federal authority, much at the expense of the states.[165]

 

Judge Robert H. Bork described the concern conservatives had with the New Deal when he wrote:

 

The New Deal was an economic and governmental upheaval. It stood for a sudden and enormous centralization of power in Washington over matters previously left to state governments or left in private hands, a centralization accomplished largely through the assumption of greatly expanded congressional powers to regulate commerce and lay taxes.[166]

 

The Supreme Court’s conservatives would eventually lose their coalition, partly because of Roosevelt’s Court Packing scheme, when Chief Justice Hughes and Justice Owen Roberts switched to the progressive side of the Court. The result was a major constitutional revolution that still impacts the nation today. As Roger Pilon stated:

 

After a few critical opinions that the Court handed down between 1936 and 1938, the Constitution was standing on its head. Upon reflection, it is surprising how little it took to make so radical a change in our political lives; yet just two clauses of Article I, Section 8 — the General Welfare and the Commerce Clause — are the source, respectively, of the federal government’s modern redistributive and regulatory powers. Those clauses were radically reinterpreted by the Court…[167]

 

Pilon argues that the “General Welfare Clause could not have afforded the Congress an independent power to spend for the general welfare; for under such a reading, Congress would be able to spend for any end, enumerated or not…”[168]  In addition he argues that the Framers did not intend the General Welfare clause to be a blank check for Congress:

 

No, the clause was meant to serve as a shield against overweening power, not as a sword of power: it was meant to limit Congress’s spending for enumerated ends by requiring that spending be for the general rather than for any particular or local welfare. It was meant, in short, to limit Congress’s enumerated powers, not to undermine the doctrine of enumerated powers itself. Nevertheless, in 1936 the Court said, albeit in dicta, that Congress did have an independent power to spend for the general welfare; then in 1937 the Court announced that conclusion as part of its holding and added that it would not thereafter police Congress as to whether it was spending for the general or for some particular welfare but would leave it to Congress to police itself.[169]

 

The consequence, as Pilon states, is “an ever expanding welfare state as Congress has been unable to resist — when it has not itself abetted — unrestrained demands on the public treasury — all in the name of the ‘general welfare.’”[170] The same is true for the Commerce Clause and other parts of the Constitution. To demonstrate the Court’s New Deal overreach with the Commerce Clause, the Court in Wickard v. Filburn “ruled that Congress could regulate the wheat a farmer produces for his own consumption on his own farm.”[171]

 

   

 

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