Friday, April 24, 2015
The California Rasins Case, Horne v. United States Department of Agriculture, Is About Fundamental Freedom
The United States Supreme Court held oral arguments Wednesday in the case of Horne v United States Department of Agriculture. Marvin and Laura Horne are raisin growers in Fresno. They withdrew a decade ago from the Department of Agriculture enforced cartel for raisin producers. We forget that part of President Roosevelt’s early New Deal Program was to stabilize prices through government sponsored cartels in the National Industrial Recovery Act administered through the National Recovery Administration (NRA). Participants could proudly display the Blue Eagle. The Supreme Court ruled the act unconstitutional in the 1935 case of Schechter Poultry Co. v. United States (My history professor called it "The Sick Chicken" case). The industrial cartels supposedly terminated at that point. However, the New Deal continued programs to “stabilize” agricultural markets. A 1937 statute, The Agriculture Marketing Agreement Act, attempted to keep commodity prices steady by restricting supply. Some programs restrict output, which was upheld by the Supreme Court in the famous 1942 case of Wickard v. Filburn. A 1949 marketing order promulgated the Raisin Administrative Committee (RAC) to stabilize the raisin market. RAC is led by raisin farmers. The raisin program operates differently from the production levels and marketing regulations of other programs. RAC does not restrict the production of raisins, but determines how much of each crop, supposedly the excess production, raisin farmers are to turn over to the RAC, without compensation, to be put “in reserve.” It is not a production or marketing program. It is a take title and possession without compensation dictate. If the reserve raisins are subsequently sold by RAC, the net proceeds are to be distributed among the farmers. Eventhough RAC often reaps tens of millions of dollars from selling the raisins, its “expenses” almost always eat up the receipts, and thus little, if any, is allocated to the growers. The plaintiffs were told to forfeit 47%, almost half, of their 2002-03 production and 30% of the 2003-04 crop. They refused, and turned back the government truck when it arrived. The Department of Agriculture fined them $695,000 for their failure to cooperate. The government distributes and distributes the raisins outside the open market to school lunch programs, government agencies and overseas. In other words, regardless of how much lipstick you paint on a pig, the government confiscates the privately grown raisins and then reaps a profit and savings by redistributing them. The scheme is analogous to the government telling Apple that Apple must turn over 30-50% of its IPad production to the government to distribute to the nation’s public schools (essentially Justice Alito’s comment during oral arguments). No matter how it is glossed, it is an unconstitutional taking of private property without compensation, forbidden by the 5th Amendment. Any judge or justice who votes to uphold the program is showing contempt for the Constitution and the rights of the people. The Ninth Circuit had the temerity to uphold the program on the inane principle that the 5th Amendment only applies to real property and not personal property. Even Edwin Kneedler, the Deputy Solicitor General, did not use that argument before the Supreme Court. However, his argument is almost equally twisted. He justified the cartel, the seizure and confiscation of private property, as a “comprehensive program regulating the commercial marketing of a fungible agricultural product.” The government’s brief said the farmers are free to plant other crops if they don’t like the program. Another superficially shallow argument is that the Hornes have not suffered a loss because they benefit in the marketplace by selling their raisins at a higher price than would exist without the programs. The purpose of cartels is to restrict production and raise prices, but that is normally a per se violation of the nation’s antitrust laws. The big losers in this program are not so much the Hornes, although they have suffered economically. The major losers are consumers who are the victims of a blatant industry price fixing cartel, enforced by the federal government. 99% of the nation’s raisins, and 40% of the world’s raisins are grown in California. The assumption is that the Supreme Court will strike down the program. The only questions seem to be the vote count and the basis of the ruling. For example, Justice Breyer posited that if the program is a “takings,” then perhaps the remedy would be for the Hornes to seek compensation in the lower courts. Chirf Justice Roberts and Justices Alito and Scalia were clearly hostile to the program, but Justices Kennedy and Thomas (as usual) were quiet. The Chief Justice called it a “classical, physical taking.” The Court has unfortunately not always been consistent on physical appropriations. It held 5-4 in 2003 that a state could take the interest on lawyer’s client accounts and use these funds to subsidize legal assistance programs. I naively posited in 1972 that a balancing test should be used in determining if a government restriction or seizure would constitute a reasonable regulation or unconstitutional takings. The fallacy with this approach is that the government, as with legal assistance, can almost always come up with a compelling argument for its actions, thereby nullifying the Bill of Rights.