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CONFLICTING VIEWS ON THE COURT
The second attempt to formulate a general doctrine was made in New York v. United States,[246] where, on review of a judgment affirming the right of the United States to tax the sale of mineral waters taken from property owned and operated by the State of New York, the Court was asked to and did reconsider the right of Congress to tax business enterprises carried on by the States. Justice Frankfurter, speaking for himself and Justice Rutledge, made the question of discrimination vel non against State activities the test of the validity of such a tax. They found "no restriction upon Congress to include the States in levying a tax exacted equally from private persons upon the same subject matter."[247] In a concurring opinion in which Justices Reed, Murphy, and Burton joined, Chief Justice Stone rejected the criterion of discrimination. He repeated what he had said in an earlier case to the effect that "'* * * the limitation upon the taxing power of each, so far as it affects the other, must receive a practical construction which permits both to function with the minimum of interference each with the other; and that limitation cannot be so varied or extended as seriously to impair either the taxing power of the government imposing the tax * * * or the appropriate exercise of the functions of the government affected by it.'"[248] Justices Douglas and Black dissented in an opinion written by the former on the ground that the decision disregarded the Tenth Amendment, placed "the sovereign States on the same plane as private citizens," and made them "pay the Federal Government for the privilege of exercising powers of sovereignty guaranteed them by the Constitution."[249] In the most recent case dealing with State immunity the Court sustained the tax on the second ground mentioned in Helvering v. Gerhardt—that the burden of the tax was borne by private persons—and did not consider whether the function was one which the Federal Government might have taxed if the municipality had borne the burden of the exaction.[250]
THE RULE OF UNIFORMITY
Whether a tax is to be apportioned among the States according to the census taken pursuant to article I, section 2, or imposed uniformly throughout the United States depends upon its classification as direct or indirect.[251] The rule of uniformity for indirect taxes is easy to obey. It exacts only that the subject matter of a levy be taxed at the same rate wherever found in the United States; or, as it is sometimes phrased, the uniformity required is "geographical," not "intrinsic."[252] The clause accordingly places no obstacle in the way of legislative classification for the purpose of taxation, nor in the way of what is called progressive taxation.[253] A taxing statute does not fail of the prescribed uniformity because its operation and incidence may be affected by differences in State laws.[254] A federal estate tax law which permitted a deduction for a like tax paid to a State was not rendered invalid by the fact that one State levied no such tax.[255] The term "United States" in this clause refers only to the States of the Union, the District of Columbia, and incorporated territories. Congress is not bound by the rule of uniformity in framing tax measures for unincorporated territories.[256] Indeed, in Binns v. United States,[257] the Court sustained license taxes imposed by Congress but applicable only in Alaska, where the proceeds, although paid into the general fund of the Treasury, did not in fact equal the total cost of maintaining the territorial government.
PURPOSES OF TAXATION
Regulation by Taxation
The discretion of Congress in selecting the objectives of taxation has also been held at times to be subject to limitations implied from the nature of the Federal System. Apart from matters which Congress is authorized to regulate, the national taxing power, it has been said, "reaches only existing subjects."[258] Congress may tax any activity actually carried on, regardless of whether it is permitted or prohibited by the laws of the United States[259] or by those of a State.[260] But so-called federal "licenses," so far as they relate to trade within State limits, merely express "the purpose of the government not to interfere * * * with the trade nominally licensed, if the required taxes are paid." Whether the "licensed" trade shall be permitted at all is a question for decision by the State.[261] This, nevertheless, does not signify that Congress may not often regulate to some extent a business within a State in order the more effectively to tax it. Under the necessary and proper clause, Congress may do this very thing. Not only has the Court sustained regulations concerning the packaging of taxed articles such as tobacco[262] and oleomargarine,[263] ostensibly designed to prevent fraud in the collection of the tax; it has also upheld measures taxing drugs[264] and firearms[265] which prescribed rigorous restrictions under which such articles could be sold or transferred, and imposed heavy penalties upon persons dealing with them in any other way. These regulations were sustained as conducive to the efficient collection of the tax though they clearly transcended in some respects this ground of justification.
Extermination by Taxation
A problem of a different order is presented where the tax itself has the effect of suppressing an activity or where it is coupled with regulations which clearly have no possible relation to the collection of the tax. Where a tax is imposed unconditionally, so that no other purpose appears on the face of the statute, the Court has refused to inquire into the motives of the lawmakers and has sustained the tax despite its prohibitive proportions.[266] In the language of a recent opinion: "It is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. * * * The principle applies even though the revenue obtained is obviously negligible, * * *, or the revenue purpose of the tax may be secondary, * * * Nor does a tax statute necessarily fall because it touches on activities which Congress might not otherwise regulate. As was pointed out in Magnano Co. v. Hamilton, 292 U.S. 40, 47 (1934): 'From the beginning of our government, the courts have sustained taxes although imposed with the collateral intent of effecting ulterior ends which, considered apart, were beyond the constitutional power of the lawmakers to realize by legislation directly addressed to their accomplishment.'"[267] But where the tax is conditional, and may be avoided by compliance with regulations set out in the statute, the validity of the measure is determined by the power of Congress to regulate the subject matter. If the regulations are within the competence of Congress, apart from its power to tax, the exaction is sustained as an appropriate sanction for making them effective;[268] otherwise it is invalid.[269] During the Prohibition Era, Congress levied a heavy tax upon liquor dealers who operated in violation of State law. In United States v. Constantine[270] the Court held that this tax was unenforceable after the repeal of the Eighteenth Amendment, since the National Government had no power to impose an additional penalty for infractions of State law.
The Protective Tariff
The earliest examples of taxes levied with a view to promoting desired economic objectives in addition to raising revenue were, of course, import duties. The second statute adopted by the first Congress was a tariff act which recited that "it is necessary for the support of government, for the discharge of the debts of the United States, and the encouragement and protection of manufactures, that duties be laid on goods, wares and merchandise imported."[271] After being debated for nearly a century and a half, the constitutionality of protective tariffs was finally settled by the unanimous decision of the Supreme Court in Hampton and Company v. United States,[272] where Chief Justice Taft wrote: "The second objection to Sec. 315 is that the declared plan of Congress, either expressly or by clear implication, formulates its rule to guide the President and his advisory Tariff Commission as one directed to a tariff system of protection that will avoid damaging competition to the country's industries by the importation of goods from other countries at too low a rate to equalize foreign and domestic competition in the markets of the United States. It is contended that the only power of Congress in the levying of customs duties is to create revenue, and that it is unconstitutional to frame the customs duties with any other view than that of revenue raising. * * * In this first Congress sat many members of the Constitutional Convention of 1787. This Court has repeatedly laid down the principle that a contemporaneous legislative exposition of the Constitution when the founders of our Government and framers of our Constitution were actively participating in public affairs, long acquiesced in, fixes the construction to be given its provisions. * * * The enactment and enforcement of a number of customs revenue laws drawn with a motive of maintaining a system of protection, since the revenue law of 1789, are matters of history. * * * Whatever we may think of the wisdom of a protection policy, we can not hold it unconstitutional. So long as the motive of Congress and the effect of its legislative action are to secure revenue for the benefit of the general government, the existence of other motives in the selection of the subject of taxes cannot invalidate Congressional action."[273]
SPENDING FOR THE GENERAL WELFARE
The grant of power to "provide * * * for the general welfare" raises a two-fold question: How may Congress provide for "the general welfare" and what is "the general welfare" which it is authorized to promote? The first half of this question was answered by Thomas Jefferson in his Opinion on the Bank as follows: "* * * the laying of taxes is the power, and the general welfare the purpose for which the power is to be exercised. They [Congress] are not to lay taxes ad libitum for any purpose they please; but only to pay the debts or provide for the welfare of the Union. In like manner, they are not to do anything they please to provide for the general welfare, but only to lay taxes for that purpose."[274] The clause, in short, is not an independent grant of power, but a qualification of the taxing power. Although a broader view has been occasionally asserted,[275] Congress has not acted upon it and the Courts have had no occasion to adjudicate the point.
Hamilton v. Madison
With respect to the meaning of "the general welfare" the pages of The Federalist itself disclose a sharp divergence of views between its two principal authors. Hamilton adopted the literal, broad meaning of the clause;[276] Madison contended that the powers of taxation and appropriation of the proposed government should be regarded as merely instrumental to its remaining powers, in other words, as little more than a power of self-support.[277] From an early date Congress has acted upon the interpretation espoused by Hamilton. Appropriations for subsidies[278] and for an ever increasing variety of "internal improvements"[279] constructed by the Federal Government, had their beginnings in the administrations of Washington and Jefferson.[280] Since 1914, federal grants-in-aid,—sums of money apportioned among the States for particular uses, often conditioned upon the duplication of the sums by the recipient State, and upon observance of stipulated restrictions as to its use—have become commonplace.[281]
Triumph of the Hamiltonian Theory
The scope of the national spending power was brought before the Supreme Court at least five times prior to 1936, but the Court disposed of four of them without construing the "general welfare" clause. In the Pacific Railway Cases[282] and Smith v. Kansas City Title and Trust Company,[283] it affirmed the power of Congress to construct internal improvements, and to charter and purchase the capital stock of federal land banks, by reference to the powers of the National Government over commerce, the post roads and fiscal operations, and to its war powers. Decisions on the merits were withheld in two other cases—Massachusetts v. Mellon and Frothingham v. Mellon[284]—on the ground that neither a State nor an individual citizen is entitled to a remedy in the courts against an unconstitutional appropriation of national funds. In United States v. Gettysburg Electric Railway Co.,[285] however, the Court had invoked "the great power of taxation to be exercised for the common defence and the general welfare,"[286] to sustain the right of the Federal Government to acquire land within a State for use as a national park. Finally, in United States v. Butler,[287] the Court gave its unqualified endorsement to Hamilton's views on the taxing power. Wrote Justice Roberts for the Court: "Since the foundation of the Nation sharp differences of opinion have persisted as to the true interpretation of the phrase. Madison asserted it amounted to no more than a reference to the other powers enumerated in the subsequent clauses of the same section; that, as the United States is a government of limited and enumerated powers, the grant of power to tax and spend for the general national welfare must be confined to the enumerated legislative fields committed to the Congress. In this view the phrase is mere tautology, for taxation and appropriation are or may be necessary incidents of the exercise of any of the enumerated legislative powers. Hamilton, on the other hand, maintained the clause confers a power separate and distinct from those later enumerated, is not restricted in meaning by the grant of them, and Congress consequently has a substantive power to tax and to appropriate, limited only by the requirement that it shall be exercised to provide for the general welfare of the United States. Each contention has had the support of those whose views are entitled to weight. This court had noticed the question, but has never found it necessary to decide which is the true construction. Justice Story, in his Commentaries, espouses the Hamiltonian position. We shall not review the writings of public men and commentators or discuss the legislative practice. Study of all these leads us to conclude that the reading advocated by Justice Story is the correct one. While, therefore, the power to tax is not unlimited, its confines are set in the clause which confers it, and not in those of Sec. 8 which bestow and define the legislative powers of the Congress. It results that the power of Congress to authorize expenditure of public moneys for public purposes is not limited by the direct grants of legislative power found in the Constitution."[288]
The Security Act Cases
Although holding that the spending power is not limited by the specific grants of power contained in article I, section 8, the Court found, nevertheless, that it was qualified by the Tenth Amendment, and on this ground ruled in the Butler case that Congress could not use moneys raised by taxation to "purchase compliance" with regulations "of matters of State concern with respect to which Congress has no authority to interfere."[289] Within little more than a year this decision was reduced to narrow proportions by Steward Machine Co. v. Davis,[290] which sustained the tax imposed on employers to provide unemployment benefits, and the credit allowed for similar taxes paid to a State. To the argument that the tax and credit in combination were "weapons of coercion, destroying or impairing the autonomy of the States," the Court replied that relief of unemployment was a legitimate object of federal expenditure under the "general welfare" clause; that the Social Security Act represented a legitimate attempt to solve the problem by the cooperation of State and Federal Governments; that the credit allowed for State taxes bore a reasonable relation "to the fiscal need subserved by the tax in its normal operation,"[291] since State unemployment compensation payments would relieve the burden for direct relief borne by the national treasury. The Court reserved judgment as to the validity of a tax "if it is laid upon the condition that a State may escape its operation through the adoption of a statute unrelated in subject matter to activities fairly within the scope of national policy and power."[292]
Earmarked Funds
The appropriation of the proceeds of a tax to a specific use does not affect the validity of the exaction, if the general welfare is advanced and no other constitutional provision is violated. Thus a processing tax on coconut oil was sustained despite the fact that the tax collected upon oil of Philippine production was segregated and paid into the Philippine Treasury.[293] In Helvering v. Davis,[294] the excise tax on employers, the proceeds of which were not earmarked in any way, although intended to provide funds for payments to retired workers, was upheld under the "general welfare" clause, the Tenth Amendment being found to be inapplicable.
Conditional Grants-in-Aid
In the Steward Machine Company case, it was a taxpayer who complained of the invasion of the State sovereignty and the Court put great emphasis on the fact that the State was a willing partner in the plan of cooperation embodied in the Social Security Act.[295] A decade later the right of Congress to impose conditions upon grants-in-aid over the objection of a State was squarely presented in Oklahoma v. United States Civil Service Commission.[296] The State objected to the enforcement of a provision of the Hatch Act,[297] whereby its right to receive federal highway funds would be diminished in consequence of its failure to remove from office a member of the State Highway Commission found to have taken an active part in party politics while in office. Although it found that the State had created a legal right which entitled it to an adjudication of its objection, the Court denied the relief sought on the ground that, "While the United States is not concerned with, and has no power to regulate local political activities as such of State officials, it does have power to fix the terms upon which its money allotments to State shall be disbursed. * * * The end sought by Congress through the Hatch Act is better public service by requiring those who administer funds for national needs to abstain from active political partisanship. So even though the action taken by Congress does have effect upon certain activities within the State, it has never been thought that such effect made the federal act invalid."[298]
"Debts of the United States"
The power to pay the debts of the United States is broad enough to include claims of citizens arising on obligations of right and justice.[299] The Court sustained an act of Congress which set apart for the use of the Philippine Islands, the revenue from a processing tax on coconut oil of Philippine production, as being in pursuance of a moral obligation to protect and promote the welfare of the people of the Islands.[300] Curiously enough, this power was first invoked to assist the United States to collect a debt due to it. In United States v. Fisher[301] the Supreme Court sustained a statute which gave the Federal Government priority in the distribution of the estates of its insolvent debtors. The debtor in that case was the endorser of a foreign bill of exchange which apparently had been purchased by the United States. Invoking the "necessary and proper" clause, Chief Justice Marshall deduced the power to collect a debt from the power to pay its obligations by the following reasoning: "The government is to pay the debt of the Union, and must be authorized to use the means which appear to itself most eligible to effect that object. It has, consequently, a right to make remittances by bills or otherwise, and to take those precautions which will render the transaction safe."[302]
Clause 2. The Congress shall have Power * * * To borrow Money on the credit of the United States.
The Borrowing Power
The original draft of the Constitution reported to the convention by its Committee of Detail empowered Congress "To borrow money and emit bills on the credit of the United States."[303] When this section was reached in the debates, Gouverneur Morris moved to strike out the clause "and emit bills on the credit of the United States." Madison suggested that it might be sufficient "to prohibit the making them a tender." After a spirited exchange of views on the subject of paper money the convention voted, nine States to two, to delete the words "and emit bills."[304] Nevertheless, in 1870, the Court relied in part upon this clause in holding that Congress had authority to issue treasury notes and to make them legal tender in satisfaction of antecedent debts.[305] When it borrows money "on the credit of the United States" Congress creates a binding obligation to pay the debt as stipulated and cannot thereafter vary the terms of its agreement. A law purporting to abrogate a clause in government bonds calling for payment in gold coin was held to contravene this clause, although the creditor was denied a remedy in the absence of a showing of actual damage.[306]
Clause 3. The Congress shall have power * * * To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.
Purpose of the Clause
This clause serves a two-fold purpose: it is the direct source of the most important powers which the National Government exercises in time of peace: and, except for the due process of law clause of Amendment XIV, it is the most important limitation imposed by the Constitution on the exercise of State power. The latter, or restrictive, operation of the clause was long the more important one from the point of view of Constitutional Law. Of the approximately 1400 cases which reached the Supreme Court under the clause prior to 1900, the overwhelming proportion stemmed from State legislation.[307] It resulted that, with an important exception to be noted in a moment, the guiding lines in construction of the clause were initially laid down from the point of view of its operation as a curb on State power, rather than of its operation as a source of national power; and the consequence of this was that the word "commerce," as designating the thing to be protected against State interference, came to dominate the clause, while the word "regulate" remained in the background.
Definition of Terms: Gibbons v. Ogden
"COMMERCE"
The etymology of the word, "cum merce (with merchandise)" carries the primary meaning of traffic—i.e., "to buy and sell goods; to trade" (Webster's International). This narrow conception was replaced in the great leading case of Gibbons v. Ogden, 9 Wheat. 1 (1824), by a much broader one, on which interpretation of the clause has been patterned ever since. The case arose out of a series of acts of the legislature of New York, passed between the years 1798 and 1811, which conferred upon Livingston and Fulton the exclusive right to navigate the waters of that State with steam-propelled vessels. Gibbons challenged the monopoly by sending from Elizabethtown, New Jersey, into the Hudson in the State of New York two steam vessels which had been licensed and enrolled to engage in the coasting trade under an act passed by Congress in 1793. Counsel for Ogden (an assignee of Livingston and Fulton) argued that since Gibbons' vessels carried only passengers between New Jersey and New York, they were not engaged in traffic and hence not in "commerce" in the sense of the Constitution. This argument Chief Justice Marshall answered as follows: "The subject to be regulated is commerce; * * * The counsel for the appellee would limit it to traffic, to buying and selling, or the interchange of commodities, and do not admit that it comprehends navigation. This would restrict a general term, applicable to many objects, to one of its significations. Commerce, undoubtedly, is traffic, but it is something more—it is intercourse."[308] The term, therefore, included navigation—a conclusion which Marshall supported by appeal to general understanding, to the prohibition in article I, Sec. 9, against any preference being given "'* * * by any regulation of commerce or revenue, to the ports of one State over those of another,'" and to the admitted and demonstrated power of Congress to impose embargoes.[309]
"COMMERCE" TODAY
Later in his opinion Marshall qualified the word "intercourse" with the word "commercial."[310] Today "commerce" in the sense of the Constitution, and hence "interstate commerce" when it is carried on across State lines, covers every species of movement of persons and things, whether for profit or not;[311] every species of communication, every species of transmission of intelligence, whether for commercial purposes or otherwise;[312] every species of commercial negotiation which, as shown "by the established course of the business," will involve sooner or later an act of transportation of persons or things, or the flow of services or power across State lines.[313]
From time to time the Court has said that certain things were not interstate commerce, such as mining or manufacturing undertaken "with the intent" that the product shall be transported to other States;[314] insurance transactions when carried on across State lines;[315] exhibitions of baseball between professional teams which travel from State to State;[316] the making of contracts for the insertion of advertisements in periodicals in another State;[317] contracts for personal services to be rendered in another State.[318] Recent decisions either overturn or cast doubt on most if not all of these holdings. By one of these the gathering of news by a press association and its transmission to client newspapers is termed interstate commerce.[319] By another the activities of a Group Health Association which serves only its own members are held to be "trade" within the protection of the Sherman Act and hence capable, if extended, of becoming interstate commerce.[320] By a third the business of insurance when transacted between an insurer and an insured in different States is interstate commerce.[321]
THE "NECESSARY AND PROPER" CLAUSE
In the majority of the above cases the commerce clause was involved solely as a limitation on the powers of the States. But when the clause is treated as a source of national power it is, of course, read in association with the power of Congress "* * * To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, * * *,"[322] with the result that, as is pointed out later, "interstate commerce" has come in recent years practically to connote both those operations which precede as well as those which follow commercial intercourse itself, provided such operations are deemed by the Court to be capable of "affecting" such intercourse.[323]
"AMONG THE SEVERAL STATES"
In Cohens v. Virginia, decided in 1821, Marshall had asserted, "for all commercial purposes we are one nation."[324] In Gibbons v. Ogden, however, he conceded that the phrase commerce "among the several States" was "not one which would probably have been selected to indicate the completely interior traffic of a State"; and added: "The genius and character of the whole government seem to be, that its action is to be applied to all external concerns of the nation, and to those internal concerns which affect the States generally; but not those which are completely within a particular State, which do not affect other States, and with which it is not necessary to interfere, for the purpose of executing some of the general powers of the government."[325]
This recognition of an "exclusively internal" commerce of a State ("intrastate commerce" today) appears at times to have been regarded as implying the existence of an area of State power which Congress was not entitled constitutionally to enter.[326] This inference overlooked the fact that, in consequence of its powers under the necessary and proper clause, Congress can, as Marshall indicates in the words above quoted, interfere with the completely internal concerns of a State "for the purpose of executing its general powers," one of which is its power over foreign and interstate commerce. It is today established doctrine that "no form of State activity can constitutionally thwart the regulatory power granted by the commerce clause to Congress."[327]
And while the word "among" serves to demark "the completely internal" commerce of a State from that which "extends to or affects" other States, it also serves, as Marshall further pointed out, to emphasize the fact that "the power of Congress does not stop at the jurisdictional lines of the several States," but "must be exercised whenever [wherever?] the subject exists. * * * Commerce among the States must, of necessity, be commerce [within?] the States. * * * The power of Congress, then, whatever it may be, must be exercised within the territorial jurisdiction of the several States."[328]
"REGULATE"
Elucidating this word in his opinion for the Court in Gibbons v. Ogden, Chief Justice Marshall said: "We are now arrived at the inquiry—What is this power? It is the power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the Constitution. These are expressed in plain terms, and do not affect the questions which arise in this case, or which have been discussed at the bar. If, as has always been understood, the sovereignty of Congress, though limited to specified objects, is plenary as to those objects, the power over commerce with foreign nations, and among the several States, is vested in Congress as absolutely as it would be in a single government, having in its constitution the same restrictions on the exercise of the power as are found in the Constitution of the United States. The wisdom and the discretion of Congress, their identity with the people, and the influence which their constituents possess at elections, are, in this, as in many other instances, as that, for example, of declaring war, the sole restraints on which they have relied, to secure them from its abuse. They are the restraints on which the people must often rely solely, in all representative governments."[329]
INTERSTATE VERSUS FOREIGN COMMERCE
There are certain later judicial dicta which urge or suggest that Congress's power to regulate interstate commerce restrictively is less than its analogous power over foreign commerce, the argument being that whereas the latter is a branch of the nation's unlimited power over foreign relations, the former was conferred upon the National Government primarily in order to protect freedom of commerce from State interference. The four dissenting Justices in the Lottery Case (decided in 1903) endorsed this view in the following words: "It is argued that the power to regulate commerce among the several States is the same as the power to regulate commerce with foreign nations, and among the Indian tribes. But is its scope the same? * * *, the power to regulate commerce with foreign nations and the power to regulate interstate commerce, are to be taken diverso intuitu, for the latter was intended to secure equality and freedom in commercial intercourse as between the States, not to permit the creation of impediments to such intercourse; while the former clothes Congress with that power over international commerce, pertaining to a sovereign nation in its intercourse with foreign nations, and subject, generally speaking, to no implied or reserved power in the States. The laws which would be necessary and proper in the one case, would not be necessary or proper in the other. * * * But that does not challenge the legislative power of a sovereign nation to exclude foreign persons or commodities, or place an embargo, perhaps not permanent, upon foreign ships or manufactures. * * * The same view must be taken as to commerce with Indian tribes. There is no reservation of police powers or any other to a foreign nation or to an Indian tribe, and the scope of the power is not the same as that over interstate commerce."[330]
And twelve years later Chief Justice White, speaking for the Court, expressed the same view, as follows: "In the argument reference is made to decisions of this court dealing with the subject of the power of Congress to regulate interstate commerce, but the very postulate upon which the authority of Congress to absolutely prohibit foreign importations as expounded by the decisions of this court rests is the broad distinction which exists between the two powers and therefore the cases cited and many more which might be cited announcing the principles which they uphold have obviously no relation to the question in hand."[331]
But dicta to the contrary are much more numerous and span a far longer period of time. Thus Chief Justice Taney wrote in 1847: "The power to regulate commerce among the several States is granted to Congress in the same clause, and by the same words, as the power to regulate commerce with foreign nations, and is coextensive with it."[332] And nearly fifty years later Justice Field, speaking for the Court, said: "The power to regulate commerce among the several States was granted to Congress in terms as absolute as is the power to regulate commerce with foreign nations."[333] Today it is firmly established doctrine that the power to regulate commerce, whether with foreign nations or among the several States comprises the power to restrain or prohibit it at all times for the welfare of the public, provided only the specific limitations imposed upon Congress's powers, as by the due process clause of the Fifth Amendment, are not transgressed.[334]
Nor does the power to regulate commerce stop with, nor in fact is it most commonly exercised in, measures designed to outlaw some branch of commerce. In the words of the Court: It is the power to provide by appropriate legislation for its "protection and advancement";[335] to adopt measures "to promote its growth and insure its safety";[336] "to foster, protect, control and restrain, [commerce]."[337] This protective power has, moreover, two dimensions. In the first place, it includes the power to reach and remove every conceivable obstacle to or restriction upon interstate and foreign commerce from whatever source arising, whether it results from unfavorable conditions within the States or from State legislative policy, like the monopoly involved in Gibbons v. Ogden; or from both combined. In the second place, it extends—as does also the power to restrain commerce—to the instruments and agents by which commerce is carried on; nor are such instruments and agents confined to those which were known or in use when the Constitution was adopted.[338]
INSTRUMENTS OF COMMERCE
The applicability of Congress's power to the agents and instruments of commerce is implied in Marshall's opinion in Gibbons v. Ogden,[339] where the waters of the State of New York in their quality as highways of interstate and foreign transportation are held to be governed by the overruling power of Congress. Likewise, the same opinion recognizes that in "the progress of things," new and other instruments of commerce will make their appearance. When the Licensing Act of 1793 was passed, the only craft to which it could apply were sailing vessels, but it and the power by which it was enacted were, Marshall asserted, indifferent to the "principle" by which vessels were moved. Its provisions therefore reached steam vessels as well. A little over half a century later the principle embodied in this holding was given its classic expression in the opinion of Chief Justice Waite in the case of the Pensacola Telegraph Co. v. Western Union Co.,[340] a case closely paralleling Gibbons v. Ogden in other respects also. The passage alluded to reads as follows: "The powers thus granted are not confined to the instrumentalities of commerce, or the postal service known or in use when the Constitution was adopted, but they keep pace with the progress of the country, and adapt themselves to the new developments of times and circumstances. They extend from the horse with its rider to the stage-coach, from the sailing-vessel to the steamboat, from the coach and the steamboat to the railroad, and from the railroad to the telegraph, as these new agencies are successively brought into use to meet the demands of increasing population and wealth. They were intended for the government of the business to which they relate, at all times and under all circumstances. As they were intrusted to the general government for the good of the nation, it is not only the right, but the duty, of Congress to see to it that intercourse among the States and the transmission of intelligence are not obstructed or unnecessarily encumbered by State legislation."[341] The Radio Act of 1927 whereby "all forms of interstate and foreign radio transmissions within the United States, its Territories and possessions" were brought under national control, affords another illustration. Thanks to the foregoing doctrine the measure met no serious constitutional challenge either on the floors of Congress or in the Courts.[342]
Congressional Regulation of Waterways
NAVIGATION
In the case of Pennsylvania v. Wheeling & Belmont Bridge Co.,[343] decided in 1852, the Court, on the application of the complaining State, acting as representative of the interests of its citizens, granted an injunction requiring that a bridge, erected over the Ohio under a charter from the State of Virginia, either be altered so as to admit of free navigation of the river, or else be entirely abated. The decision was justified by the Court on the basis both of the commerce clause and of a compact between Virginia and Kentucky, whereby both these States had agreed to keep the Ohio River "free and common to the citizens of the United States." The injunction was promptly rendered inoperative by an act of Congress declaring the bridge to be "a lawful structure" and requiring all vessels navigating the Ohio to be so regulated as not to interfere with it.[344] This act the Court sustained as within Congress's power under the commerce clause, saying: "So far, * * *, as this bridge created an obstruction to the free navigation of the river, in view of the previous acts of Congress, they [the said acts] are to be regarded as modified by this subsequent legislation; and, although it still may be an obstruction in fact, [it] is not so in the contemplation of law. * * * That body [Congress] having in the exercise of this power, regulated the navigation consistent with its preservation and continuation, the authority to maintain it would seem to be complete. That authority combines the concurrent powers of both governments, State and federal, which, if not sufficient, certainly none can be found in our system of government."[345] In short, it is Congress and not the Court which is authorized by the Constitution to regulate commerce.
The law and doctrine of the earlier cases with respect to the fostering and protection of navigation are well summed up in the following frequently cited passage from the Court's opinion in Gilman v. Philadelphia,[346] decided in 1866. "Commerce includes navigation. The power to regulate commerce comprehends the control for that purpose, and to the extent necessary, of all the navigable waters of the United States which are accessible from a State other than those in which they lie. For this purpose they are the public property of the nation, and subject to all requisite legislation by Congress. This necessarily includes the power to keep them open and free from any obstruction to their navigation, interposed by the States or otherwise; to remove such obstructions when they exist; and to provide, by such sanctions as they may deem proper, against the occurrence of the evil and for the punishment of offenders. For these purposes, Congress possesses all the powers which existed in the States before the adoption of the national Constitution, and which have always existed in the Parliament in England."[347]
Thus Congress was within its powers in vesting the Secretary of War with power to determine whether a structure of any nature in or over a navigable stream is an obstruction to navigation and to order its abatement if he so finds.[348] Nor is the United States required to compensate the owners of such structures for their loss, since they were always subject to the servitude represented by Congress's powers over commerce; and the same is true of the property of riparian owners which is damaged.[349] And while it was formerly held that lands adjoining nonnavigable streams were not subject to the above mentioned servitude,[350] this rule has been impaired by recent decisions;[351] and at any rate it would not apply as to a stream which had been rendered navigable by improvements.[352]
In exercising its power to foster and protect navigation Congress legislates primarily on things external to the act of navigation. But that act itself and the instruments by which it is accomplished are also subject to Congress's power if and when they enter into or form a part of "commerce among the several States." When does this happen? Words quoted above from the Court's opinion in the Gilman case answered this question to some extent; but the decisive answer to it was returned five years later in the case of The "Daniel Ball."[353] Here the question at issue was whether an act of Congress, passed in 1838 and amended in 1852, which required that steam vessels engaged in transporting passengers or merchandise upon the "bays, lakes, rivers, or other navigable waters of the United States," applied to the case of a vessel which navigated only the waters of the Grand River, a stream which lies entirely in the State of Michigan. Argued counsel for the vessel: "The navigable rivers of the United States pass through States, they form their boundary lines, they are not in any one State, nor the exclusive property of any one, but are common to all. To make waters navigable waters of the United States, some other incident must attach to them besides the territorial and the capability for public use. This term contrasts with domestic waters of the United States, and implies, not simply that the waters are public and within the Union, but that they have attached to them some circumstance that brings them within the scope of the sovereignty of the United States as defined by the Constitution." Then as a sort of reductio ad absurdum counsel added: "* * * if merely because a stream is a highway it becomes a navigable water of the United States, in a sense that attaches to it and to the vessels trading upon it the regulating control of Congress, then every highway must be regarded as a highway of the United States, and the vehicles upon it must be subject to the same control. But this will not be asserted on the part of the Government."[354] The Court answered: "In this case it is admitted that the steamer was engaged in shipping and transporting down Grand River, goods destined and marked for other States than Michigan, and in receiving and transporting up the river goods brought within the State from without its limits; * * * So far as she was employed in transporting goods destined for other States, or goods brought from without the limits of Michigan and destined to places within that State, she was engaged in commerce between the States, and however limited that commerce may have been, she was, so far as it went, subject to the legislation of Congress. She was employed as an instrument of that commerce; for whenever a commodity has begun to move as an article of trade from one State to another, commerce in that commodity between the States has commenced."[355] Turning then to counsel's reductio ad absurdum, the Court added: "We answer that the present case relates to transportation on the navigable waters of the United States, and we are not called upon to express an opinion upon the power of Congress over interstate commerce when carried on by land transportation. And we answer further, that we are unable to draw any clear and distinct line between the authority of Congress to regulate an agency employed in commerce between the States, when the agency extends through two or more States, and when it is confined in its action entirely within the limits of a single State. If its authority does not extend to an agency in such commerce, when that agency is confined within the limits of a State, its entire authority over interstate commerce may be defeated. Several agencies combining, each taking up the commodity transported at the boundary line at one end of a State, and leaving it at the boundary line at the other end, the Federal jurisdiction would be entirely ousted, and the constitutional provision would become a dead letter."[356] In short, it was admitted inferentially, that the principle of the decision would apply to land transportation; but the actual demonstration of the fact still awaited some years.[357] See infra.
HYDROELECTRIC POWER
As a consequence, in part, of its power to forbid or remove obstructions to navigation in the navigable waters of the United States, Congress has acquired the right to develop hydroelectric power, and the ancillary right to sell it to all takers. By a long-standing doctrine of Constitutional Law the States possess dominion over the beds of all navigable streams within their borders,[358] but on account of the servitude which Congress's power to regulate commerce imposes upon such streams, they are practically unable, without the assent of Congress, to utilize their prerogative for power development purposes. Sensing, no doubt, that controlling power to this end must be attributed to some government in the United States and that "in such matters there can be no divided empire,"[359] the Court held, in 1913, in United States v. Chandler-Dunbar Co.,[360] that in constructing works for the improvement of the navigability of a stream, Congress was entitled, as a part of a general plan, to authorize the lease or sale of such excess water power as might result from the conservation of the flow of the stream. "If the primary purpose is legitimate," it said, "we can see no sound objection to leasing any excess of power over the needs of the government. The practice is not unusual in respect to similar public works constructed by State governments."[361]
Congress's Jurisdiction Over Navigable Streams Today
Since the Chandler-Dunbar case the Court has come, in effect, to hold that it will sustain any act of Congress which purports to be for the improvement of navigation whatever other purposes it may also embody; nor does the stream involved have to be one which is "navigable in its natural state." Such, at least, seems to be the algebraic sum of its holdings in Arizona v. California,[362] decided in 1931, and in the United States v. Appalachian Electric Power Co.,[363] decided in 1940. In the former the Court, speaking through Justice Brandeis, said that it was not free to inquire into the motives "which induced members of Congress to enact the Boulder Canyon Project Act," adding: "As the river is navigable and the means which the Act provides are not unrelated to the control of navigation, * * *, the erection and maintenance of such dam and reservoir are clearly within the powers conferred upon Congress. Whether the particular structures proposed are reasonably necessary, is not for this Court to determine. * * * And the fact that purposes other than navigation will also be served could not invalidate the exercise of the authority conferred, even if those other purposes would not alone have justified an exercise of congressional power."[364] And in the Appalachian Electric Power case, the Court, abandoning previous holdings which had laid down the doctrine that to be subject to Congress's power to regulate commerce a stream must be "navigable in fact," said: "A waterway, otherwise suitable for navigation, is not barred from that classification merely because artificial aids must make the highway suitable for use before commercial navigation may be undertaken," provided there must be a "balance between cost and need at a time when the improvement would be useful. * * * Nor is it necessary that the improvements should be actually completed or even authorized. The power of Congress over commerce is not to be hampered because of the necessity for reasonable improvements to make an interstate waterway available for traffic. * * * Nor is it necessary for navigability that the use should be continuous. * * * Even absence of use over long periods of years, because of changed conditions, * * * does not affect the navigability of rivers in the constitutional sense."[365]
Purposes for Which Power May be Exercised
Furthermore, the Court defined the purposes for which Congress may regulate navigation in the broadest terms, as follows: "It cannot properly be said that the constitutional power of the United States over its waters is limited to control for navigation. * * * That authority is as broad as the needs of commerce. * * * Flood protection, watershed development, recovery of the cost of improvements through utilization of power are likewise parts of commerce control."[366] These views the Court has since reiterated.[367] Nor is it by virtue of Congress's power over navigation alone that the National Government may develop super-power. Its war powers and power of expenditure in furtherance of the common defense and the general welfare supplement its powers over commerce in this respect.[368]
Congressional Regulation of Land Transportation
EARLY ACTS; FEDERAL PROVISION FOR HIGHWAYS
The acquisition and settlement of California stimulated Congress some years before the Civil War to authorize surveys of possible routes for railway lines to the Pacific; but it was not until 1862, in the midst of war, with its menace of a general dissolution of the Union, that more decisive action was taken. That year Congress voted aid in the construction of a line from Missouri River to the Pacific; and four years later it chartered the Union Pacific Company.[369] First and last, litigation growing out of this type of legislation has resulted in the establishment in judicial decision of the following propositions: First, that Congress may provide highways for interstate transportation (earlier, as well as today, this result 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); second, that it may charter private corporations for the purpose of doing the same thing; third, that it may vest such corporations with the power of eminent domain in the States; and fourth, that it may exempt their franchises from State taxation.[370]
BEGINNINGS OF FEDERAL RAILWAY REGULATION
Congress began regulating the railroads of the country in a more positive sense in 1866. By the so-called Garfield Act of that year "every railroad company in the United States, whose road is operated by steam," was authorized by Congress "* * * to connect with roads of other States so as to form continuous lines for the transportation of passengers, freight, troops, governmental supplies, and mails, to their destination";[371] while by an act passed on July 24 of the same year it was ordered, "in the interest of commerce and the convenient transmission of intelligence * * * by the government of the United States and its citizens, that the erection of telegraph lines shall, so far as State interference is concerned, be free to all who will submit to the conditions imposed by Congress, and that corporations organized under the laws of one State for constructing and operating telegraph lines shall not be excluded by another from prosecuting their business within its jurisdiction, if they accept the terms proposed by the National Government for this national privilege."[372]
Another act of the same period provided that "no railroad company within the United States whose road forms any part of a line of road over which cattle, sheep, swine, or other animals are conveyed from one State to another, or the owners or masters of steam, sailing, or other vessels carrying or transporting cattle, sheep, swine, or other animals from one State to another, shall confine the same in cars, boats, or vessels of any description, for a longer period than twenty-eight consecutive hours, without unloading the same for rest, water, and feeding, for a period of at least five consecutive hours, unless prevented from so unloading by storm or other accidental causes."[373]
REGULATION OF RAILROAD RATES: THE INTERSTATE COMMERCE COMMISSION
On account of the large element of "fixed charges" which enters into the setting of rates by railway companies, competition between lines for new business was from the first very sharp, and resulted in many evils which, in the early 70's, led in the Middle West to the enactment by the State legislatures of the so-called "Granger Laws"; and in the famous "Granger Cases," headed by Munn v. Illinois,[374] the Court at first sustained this legislation, in relation to both the commerce clause and the due process of law clause of Amendment XIV. The principal circumstance, however, which shaped the Court's attitude toward the "Granger Laws" had, by a decade later, disappeared, the fact, namely, that originally the railroad business was largely in local hands. In consequence, first, of the panic of 1873, and then of the panic of 1885, hundreds of these small lines went into bankruptcy, from which they emerged consolidated into great interstate systems. The result for the Court's interpretation of the commerce clause was determinative. In the case of Wabash, St. Louis and Pacific R. Co. v. Illinois,[375] decided in 1886, it was ruled that a State may not regulate charges for the carriage even within its own boundaries of goods brought from without the State or destined to points outside it; that in this respect Congress's power over interstate commerce was exclusive. The following year, Congress, responding to a widespread public demand, passed the original Interstate Commerce Act.[376]
By this measure a commission of five was created with authority to pass upon the "reasonableness" of all charges by railroads for the transportation of goods or persons in interstate commerce and to order the discontinuance of all such charges as it found to be "unreasonable," or otherwise violative of the provisions of the act. In Interstate Commerce Commission v. Brimson,[377] decided in 1894, the validity of the Commission as a means "necessary and proper" for the enforcement of Congress's power to regulate commerce among the States was sustained, as well as its right to enter the courts of the United States in order to secure process for the execution of its orders. Later decisions of the Court, however, including one in which the act was construed not to give the Commission power to set reasonable maximum rates in substitution for those found by it to be unreasonable, disappointed earlier expectations.[378]
The history of the Commission as an effective instrument of government dates from the Hepburn Act of 1906[379] which was followed four years later by the Mann-Elkins Act.[380] By the former the Commission was explicitly endowed with the power, after a full hearing on a complaint made to it, "to determine and prescribe just and reasonable" maximum rates. By the latter it was further authorized to set such rates on its own initiative, and without waiting for a complaint; while any increase of rates by a carrier was made subject to suspension by the Commission until its approval could be obtained. At the same time, the Commission's jurisdiction was extended to telegraphs, telephones and cables.[381]
THE INTERSTATE COMMERCE COMMISSION TODAY
The powers of the Commission, which has been gradually increased to a body of eleven, are today largely defined in the Transportation Act of February 28, 1920. By that act they were extended not only to all "railroads," comprehensively defined, but also to the following additional categories of "'common carriers' * * * all pipeline companies; telegraph, telephone, and cable companies operating by wire or wireless [See note 3 above][Transcriber's Note: Refers to Article I, Footnote [381].]; express companies; sleeping-car companies; and all persons, natural or artificial, engaged in such transportation or transmission as aforesaid as common carriers for hire." The jurisdiction of the Commission covers not only the characteristic activities of such carriers in commerce among the States, but also the issuance of securities by them, and all consolidations of existing companies, or lines. Furthermore, for the first time, the Commission was put under the injunction, in exercising its control over rates and charges, to "give due consideration, among other things, to the transportation needs of the country and the necessity (under honest, efficient and economical management of existing transportation facilities) of enlarging such facilities in order to provide the people of the United States with adequate transportation."[382] Railway rate control itself, which was originally entered upon by the National Government exclusively from the point of view of restraint, has thus been assimilated to the idea of "fostering and promoting" transportation.
Two types of constitutional questions have presented themselves under the legislation just passed in review: 1. Those arising out of the safeguards which the Bill of Rights throws about property rights; 2. Those arising out of the intermingling of the interstate and intrastate operations of the same carriers, and the resulting tangency of State with national power. Only the latter are considered at this point.
THE SHREVEPORT CASE
Section 1 of the act of 1887 contains the proviso "that the provisions of this act shall not apply to 'transportation' wholly within the State." Section 3 of the act prohibits "any common carrier subject to the provisions" of the act from giving "any unreasonable preference or advantage" to any person, firm, or locality. In the Shreveport Case,[383] decided in 1914, the Commission, reading Sec. 3 independently of Sec. 1, had ordered several Texas lines to increase certain of their rates between points in Texas till they should approximate rates already approved by the Commission to adjoining points in Louisiana. The latter rates, being interstate, were admittedly subject to the Commission. The local rates were as clearly within the normal jurisdiction of the State, and had in fact been set by the Texas Railway Commission. The Court found that the Interstate Commerce Commission had not exceeded its statutory powers. The constitutional objection to the Commission's action was stated thus: "That Congress is impotent to control the intrastate charges of an interstate carrier even to the extent necessary to prevent injurious discrimination against interstate traffic." This objection the Court met, as follows: "Wherever the interstate and intrastate transactions of carriers are so related that the government of the one involves the control of the other, it is Congress, and not the State, that is entitled to prescribe the final and dominant rule, for otherwise Congress would be denied the exercise of its constitutional authority and the State, and not the Nation, would be supreme in the national field."[384] This, the Court continued, "is not to say that Congress possesses the authority to regulate the internal commerce of a State as such, but that it does possess the power to foster and protect interstate commerce, and to take all measures necessary or appropriate to that end, although intrastate transactions of interstate carriers may thereby be controlled."[385]
THE ACT OF 1920 AND STATE RAILWAY RATE REGULATION
The power of the Commission under Sec. 3 of the act of 1887, as interpreted in the Shreveport Case, was greatly enlarged by Sec. 416 of the act of 1920, which authorizes the Commission to remove "any undue, unreasonable, or unjust discrimination against interstate or foreign commerce." Thus, commerce as a whole, instead of specific firms or localities, is made the beneficiary of the restriction. In the Wisconsin R.R. Comm. v. Chicago, B. & Q.R.R. Co.,[386] the Court held that this section sustained the Interstate Commerce Commission in annulling intrastate passenger rates which it found to be unduly low, in comparison with rates which the Commission had established for interstate travel, and so tending to thwart, in deference to a merely local interest, the general purpose of the act to maintain an efficient transport service for the benefit of the country at large.[387]
REGULATION OF OTHER AGENTS OF CARRIAGE AND COMMUNICATION
In the Pipe Line Cases, decided in 1914,[388] the Court affirmed the power of Congress to regulate the transportation of oil and gas in pipe lines from one State to another and held that this power applies to such transportation even though the oil (or gas) in question was the property of the owner of the lines.[389] Thirteen years later, in 1927, the Court ruled that an order by a State commission fixing rates on electric current generated within the State and sold to a distributor in another State was invalid as imposing a burden on interstate commerce, thus holding impliedly that Congress' power to regulate the transmission of electric current from one State to another carried with it the power to regulate the price of such electricity.[390] Proceeding on this implication Congress, in the Federal Power Act of 1935,[391] conferred upon the Federal Power Commission the power to govern the wholesale distribution of electricity in interstate commerce; and three years later vested in the same body like power over natural gas moving in interstate commerce.[392] In Federal Power Commission v. Natural Gas Pipeline Company,[393] the power of the Commission to set the prices at which gas, originating in one State and transported into another, should be sold to distributors wholesale in the latter State, was sustained by the Court in the following terms: "The argument that the provisions of the statute applied in this case are unconstitutional on their face is without merit. The sale of natural gas originating in the State and its transportation and delivery to distributors in any other State constitutes interstate commerce, which is subject to regulation by Congress. * * * It is no objection to the exercise of the power of Congress that it is attended by the same incidents which attend the exercise of the police power of a State. The authority of Congress to regulate the prices of commodities in interstate commerce is at least as great under the Fifth Amendment as is that of the States under the Fourteenth to regulate the prices of commodities in intrastate commerce."[394]
Other acts regulative of interstate commerce and communication which belong to this period are the Federal Communications Act of 1934, which regulates, through the Federal Communications Commission,[395] "interstate and foreign communication by wire and radio"; the Federal Motor Carrier Act of 1935, which, through the Interstate Commerce Commission, governs the transportation of persons and property by motor vehicle common carriers;[396] the Civil Aeronautics Act of 1938, enacted for the purpose of bringing under the control of a central agency, called "the Civil Aeronautics Authority" (functioning through the Civil Aeronautics Administrator and the Civil Aeronautics Board) all phases of airborne commerce, foreign and interstate.[397] None of these measures have provoked challenge to the power of Congress to enact them.
ACTS OF CONGRESS PROTECTIVE OF LABOR ENGAGED IN INTERSTATE TRANSPORTATION
In the course of the years 1903 to 1908 Congress enacted a series of such measures which were notable both on account of their immediate purpose and as marking the entry of the National Government into the field of labor legislation. The Safety Appliance Act of 1893,[398] which applied only to cars and locomotives engaged in moving interstate traffic, was amended in 1903 to embrace "all trains, locomotives, tenders, cars," etc., "used on any railway engaged in interstate commerce * * * and to all other locomotives * * * cars," etc., "used in connection therewith."[399] In Southern Railway Company v. United States,[400] the validity of this extension of the act was challenged. The Court sustained the measure as being within Congress's power, saying: "* * * this is so, not because Congress possesses any power to regulate intrastate commerce as such, but because its power to regulate interstate commerce is plenary and competently may be exerted to secure the safety of the persons and property transported therein and of those who are employed in such transportation, no matter what may be the source of the dangers which threaten it. That is to say, it is no objection to such an exertion of this power that the dangers intended to be avoided arise, in whole or in part, out of matters connected with intrastate commerce."[401]
Four years later the Hours of Service Act of 1907[402] was passed, requiring, as a safety measure, that carriers engaged in the transportation of passengers or property by railroad in interstate or foreign commerce should not work their employees for longer periods than those prescribed by the Act. In sustaining this legislation the Court, speaking through Justice Hughes, said: "The fundamental question here is whether a restriction upon the hours of labor of employes who are connected with the movement of trains in interstate transportation is comprehended within this sphere of authorized legislation. This question admits of but one answer. The length of hours of service has direct relation to the efficiency of the human agencies upon which protection of life and property necessarily depends. * * * In its power suitably to provide for the safety of the employes and travelers, Congress was not limited to the enactment of laws relating to mechanical appliances, but it was also competent to consider, and to endeavor to reduce, the dangers incident to the strain of excessive hours of duty on the part of engineers, conductors, train dispatchers, telegraphers, and other persons embraced within the class defined by the act."[403]
But by far the most notable of these safety measures were the Federal Employers Liability Acts of 1906 and 1908,[404] the second of which merely reenacted the first with certain "unconstitutional" features eliminated. What the amended act does, in short, is to modify, in the case of injuries incurred by the employees of interstate carriers while engaged in interstate commerce, the defenses that had hitherto been available to the carriers at common law. The principal argument against the acts was that the commerce clause afforded no basis for an attempt to regulate the relation of master and servant, which had heretofore in all cases fallen to the reserved powers of the States; that indeed the rules of common law modified or abrogated by the act existed solely under State authority, and had always been enforced, in the main, in the courts of the States.[405] Countering this argument, the Court, speaking by Justice Van Devanter, quoted the following passage from the brief of the Solicitor-General: "Interstate commerce—if not always, at any rate when the commerce is transportation—is an act. Congress, of course, can do anything which, in the exercise by itself of a fair discretion, may be deemed appropriate to save the act of interstate commerce from prevention or interruption, or to make that act more secure, more reliable or more efficient. The act of interstate commerce is done by the labor of men and with the help of things; and these men and things are the agents and instruments of the commerce. If the agents or instruments are destroyed while they are doing the act, commerce is stopped; if the agents or instruments are interrupted, commerce is interrupted; if the agents or instruments are not of the right kind or quality, commerce in consequence becomes slow or costly or unsafe or otherwise inefficient; and if the conditions under which the agents or instruments do the work of commerce are wrong or disadvantageous, those bad conditions may and often will prevent or interrupt the act of commerce or make it less expeditious, less reliable, less economical and less secure. Therefore, Congress may legislate about the agents and instruments of interstate commerce, and about the conditions under which those agents and instruments perform the work of interstate commerce, whenever such legislation bears, or in the exercise of a fair legislative discretion can be deemed to bear, upon the reliability or promptness or economy or security or utility of the interstate commerce act."[406]
The Adair Case
But while the idea expressed here that the human agents of commerce, in the sense of transportation, are instrumentalities of it, and so, in that capacity, within the protective power of Congress, signalized the entrance of Congress into the field of labor legislation, the Court was not at the time prepared to give the idea any considerable scope. Pertinent in this connection is the case of Adair v. United States,[407] which was decided between the two Employers' Liability Cases. Here was involved the validity of Sec. 10 of the "Erdman Act" of 1898,[408] by which it was made a misdemeanor for a carrier or agent thereof to require of an employee, as a condition of employment, that he should not become or remain a member of a trade union, or to threaten him with loss of employment if he should become or remain a member. This proviso the Court held not to be a regulation of commerce, there being no connection between an employee's membership in a labor organization and the carrying on of interstate commerce. Twenty-two years later, however, in 1930, the Court conceded that the connection between interstate commerce and union membership was a real and substantial one, and on that ground sustained the power of Congress in the Railway Labor Act of 1926[409] to prevent employers from interfering with the right of employees to select freely their own collective bargaining representatives.[410]
The Railroad Retirement Act
Still pursuing the idea of protecting commerce and the labor engaged in it concurrently, Congress, by the Railroad Retirement Act of June 27, 1934,[411] ordered the compulsory retirement of superannuated employees of interstate carriers, and provided that they be paid pensions out of a fund comprising compulsory contributions from the carriers and their present and future employees. In Railroad Retirement Board v. Alton R.R. Company,[412] however, a closely divided Court held this legislation to be in excess of Congress's power to regulate commerce and contrary to the due process clause of Amendment V. Said Justice Roberts for the majority: "We feel bound to hold that a pension plan thus imposed is in no proper sense a regulation of the activity of interstate transportation. It is an attempt for social ends to impose by sheer fiat noncontractual incidents upon the relation of employer and employee, not as a rule or regulation of commerce and transportation between the States, but as a means of assuring a particular class of employees against old age dependency. This is neither a necessary nor an appropriate rule or regulation affecting the due fulfillment of the railroads' duty to serve the public in interstate transportation."[413] Chief Justice Hughes, speaking for the dissenters, contended, on the contrary, that "the morale of the employees [had] an important bearing upon the efficiency of the transportation service." He added: "The fundamental consideration which supports this type of legislation is that industry should take care of its human wastage, whether that is due to accident or age. That view cannot be dismissed as arbitrary or capricious. It is a reasoned conviction based upon abundant experience. The expression of that conviction in law is regulation. When expressed in the government of interstate carriers, with respect to their employees likewise engaged in interstate commerce, it is a regulation of that commerce. As such, so far as the subject matter is concerned, the commerce clause should be held applicable."[414] Under subsequent legislation, an excise is levied on interstate carriers and their employees, while by separate but parallel legislation a fund is created in the Treasury out of which pensions are paid along the lines of the original plan. The constitutionality of this scheme appears to be taken for granted in Railroad Retirement Board v. Duquesne Warehouse Company.[415]
BILLS OF LADING; THE FERGER CASE
Some years earlier the Court had had occasion in United States v. Ferger,[416] decided in 1919, to reiterate the rule laid down in the Southern Railway Case, that Congress's protective power over interstate commerce reaches all kinds of obstructions whatever the source of their origin. Ferger and associates had been indicted under a federal statute for issuing a false bill of lading, to cover a fictitious shipment in interstate commerce. Their defense was that, since there could be no commerce in a fraudulent bill of lading, therefore Congress's power could not reach their alleged offense, a contention which Chief Justice White, speaking for the Court, answered thus: "But this mistakenly assumes that the power of Congress is to be necessarily tested by the intrinsic existence of commerce in the particular subject dealt with, instead of by the relation of that subject to commerce and its effect upon it. We say mistakenly assumes, because we think it clear that if the proposition were sustained it would destroy the power of Congress to regulate, as obviously that power, if it is to exist, must include the authority to deal with obstructions to interstate commerce (In re Debs, 158 U.S. 564) and with a host of other acts which, because of their relation to and influence upon interstate commerce, come within the power of Congress to regulate, although they are not interstate commerce in and of themselves. * * * That as instrumentalities of interstate commerce, bills of lading are the efficient means of credit resorted to for the purpose of securing and fructifying the flow of a vast volume of interstate commerce upon which the commercial intercourse of the country, both domestic and foreign, largely depends, is a matter of common knowledge as to the course of business of which we may take judicial notice. Indeed, that such bills of lading and the faith and credit given to their genuineness and the value they represent are the producing and sustaining causes of the enormous number of transactions in domestic and foreign exchange, is also so certain and well known that we may notice it without proof."[417]
Congressional Regulation of Commerce as Traffic
THE SHERMAN ACT; THE "SUGAR TRUST CASE"
Congress's chief effort to regulate commerce in the primary sense of "traffic" is embodied in the Sherman Antitrust Act of 1890, the opening section of which declares "every contract, combination in the form of trust or otherwise," or "conspiracy in restraint of trade and commerce among the several States, or with foreign nations" to be "illegal," while the second section makes it a misdemeanor for anybody to "monopolize or attempt to monopolize any part of such commerce."[418] The act was passed to curb the growing tendency to form industrial combinations and the first case to reach the Court under it was the famous "Sugar Trust Case," United States v. E.C. Knight Co.[419] Here the Government asked for the cancellation of certain agreements, whereby, through purchases of stock in other companies, the American Sugar Refining Company, had "acquired," it was conceded, "nearly complete control of the manufacture of refined sugars in the United States." The question of the validity of the act was not expressly discussed by the Court, but was subordinated to that of its proper construction. So proceeding, the Court, in pursuance of doctrines of Constitutional Law which were then dominant with it, turned the act from its intended purpose and destroyed its effectiveness for several years, as that of the Interstate Commerce Act was being contemporaneously impaired. The following passage early in Chief Justice Fuller's opinion for the Court, sets forth the conception of the Federal System that controlled the decision: "It is vital that the independence of the commercial power and of the police power, and the delimitation between them, however sometimes perplexing, should always be recognized and observed, for while the one furnishes the strongest bond of union, the other is essential to the preservation of the autonomy of the States as required by our dual form of government; and acknowledged evils, however grave and urgent they may appear to be, had better be borne, than risk be run, in the effort to suppress them, of more serious consequences by resort to expedients of even doubtful constitutionality."[420]
In short, what was needed, the Court felt, was a hard and fast line between the two spheres of power, and in the following series of propositions it endeavored to lay down such a line: (1) production is always local, and under the exclusive domain of the States; (2) commerce among the States does not commence until goods "commence their final movement from their State of origin to that of their destination"; (3) the sale of a product is merely an incident of its production and while capable of "bringing the operation of commerce into play," affects it only incidentally; (4) such restraint as would reach commerce, as above defined, in consequence of combinations to control production "in all its forms," would be "indirect, however inevitable and whatever its extent," and as such beyond the purview of the act.[421] Applying then the above reasoning to the case before it, the Court proceeded: "The object [of the combination] was manifestly private gain in the manufacture of the commodity, but not through the control of interstate or foreign commerce. It is true that the bill alleged that the products of these refineries were sold and distributed among the several States, and that all the companies were engaged in trade or commerce with the several States and with foreign nations; but this was no more than to say that trade and commerce served manufacture to fulfil its function. Sugar was refined for sale, and sales were probably made at Philadelphia for consumption, and undoubtedly for resale by the first purchasers throughout Pennsylvania and other States, and refined sugar was also forwarded by the companies to other States for sale. Nevertheless it does not follow that an attempt to monopolize, or the actual monopoly of, the manufacture was an attempt, whether executory or consummated, to monopolize commerce, even though, in order to dispose of the product, the instrumentality of commerce was necessarily invoked. There was nothing in the proofs to indicate any intention to put a restraint upon trade or commerce, and the fact, as we have seen that trade or commerce might be indirectly affected was not enough to entitle complainants to a decree."[422]
THE SHERMAN ACT REVISED
Four years later occurred the case of Addyston Pipe and Steel Co. v. United States,[423] in which the Antitrust Act was successfully applied as against an industrial combination for the first time. The agreements in the case, the parties to which were manufacturing concerns, effected a division of territory among them, and so involved, it was held, a "direct" restraint on the distribution and hence of the transportation of the products of the contracting firms. The holding, however, did not question the doctrine of the earlier case, which in fact continued substantially undisturbed until 1905, when Swift and Co. v. United States,[424] was decided.
THE "CURRENT OF COMMERCE" CONCEPT: THE SWIFT CASE
Defendants in the Swift case were some thirty firms engaged in Chicago and other cities in the business of buying livestock in their stockyards, in converting it at their packing houses into fresh meat, and in the sale and shipment of such fresh meat to purchasers in other States. The charge against them was that they had entered into a combination to refrain from bidding against each other in the local markets, to fix the prices at which they would sell, to restrict shipments of meat, and to do other forbidden acts. The case was appealed to the Supreme Court on defendants' contention that certain of the acts complained of were not acts of interstate commerce and so did not fall within a valid reading of the Sherman Act. The Court, however, sustained the Government on the ground that the "scheme as a whole" came within the act, and that the local activities alleged were simply part and parcel of this general scheme.[425]
Referring to the purchases of livestock at the stockyards, the Court, speaking by Justice Holmes, said: "Commerce among the States is not a technical legal conception, but a practical one, drawn from the course of business. When cattle are sent for sale from a place in one State, with the expectation that they will end their transit, after purchase, in another, and when in effect they do so, with only the interruption necessary to find a purchaser at the stockyards, and when this is a typical, constantly recurring course, the current thus existing is a current of commerce among the States, and the purchase of the cattle is a part and incident of such commerce."[426] Likewise the sales alleged of fresh meat at the slaughtering places fell within the general design. Even if they imported a technical passing of title at the slaughtering places, they also imported that the sales were to persons in other States, and that shipments to such States were part of the transaction.[427] Thus, sales of the type which in the Sugar Trust Case were thrust to one side as immaterial from the point of view of the law, because they enabled manufacture "to fulfill its function," were here treated as merged in an interstate commerce stream. Thus, the concept of commerce as trade, that is, as traffic, again entered the Constitutional Law picture, with the result that conditions which directly affected interstate trade could not be dismissed on the ground that they affected interstate commerce, in the sense of interstate transportation, only "indirectly." Lastly, the Court added these significant words: "But we do not mean to imply that the rule which marks the point at which State taxation or regulation becomes permissible necessarily is beyond the scope of interference by Congress in cases where such interference is deemed necessary for the protection of commerce among the States."[428] That is to say, the line that confines State power from one side does not always confine national power from the other. For even though the line accurately divides the subject matter of the complementary spheres, still national power is always entitled to take on such additional extension as is requisite to guarantee its effective exercise, and is furthermore supreme.
THE DANBURY HATTERS CASE
In this respect, the Swift Case only states what the Shreveport Case was later to declare more explicitly; and the same may be said of an ensuing series of cases in which combinations of employees engaged in such intrastate activities as manufacturing, mining, building construction, and the distribution of poultry were subjected to the penalties of the Sherman Act because of the effect or intended effect of their activities on interstate commerce.[429]
STOCKYARDS AND GRAIN FUTURES ACTS
In 1921 Congress passed the Packers and Stockyards Act[430] whereby the business of commission men and livestock dealers in the chief stockyards of the country was brought under national supervision; and the year following it passed the Grain Futures Act[431] whereby exchanges dealing in grain futures were subjected to control. The decisions of the Court sustaining these measures both built directly upon the Swift Case.
In Stafford v. Wallace,[432] which involved the former act, Chief Justice Taft, speaking for the Court, said: "The object to be secured by the act is the free and unburdened flow of livestock from the ranges and farms of the West and Southwest through the great stockyards and slaughtering centers on the borders of that region, and thence in the form of meat products to the consuming cities of the country in the Middle West and East, or, still as livestock, to the feeding places and fattening farms in the Middle West or East for further preparation for the market."[433] The stockyards, therefore, were "not a place of rest or final destination." They were "but a throat through which the current flows," and the sales there were not merely local transactions. "They do not stop the flow;—but, on the contrary" are "indispensable to its continuity."[434]
In Chicago Board of Trade v. Olsen,[435] involving the Grain Futures Act, the same course of reasoning was repeated. Speaking of the Swift Case, Chief Justice Taft remarked: "That case was a milestone in the interpretation of the commerce clause of the Constitution. It recognized the great changes and development in the business of this vast country and drew again the dividing line between interstate and intrastate commerce where the Constitution intended it to be. It refused to permit local incidents of a great interstate movement, which taken alone were intrastate, to characterize the movement as such."[436] Of special significance, however, is the part of the opinion which was devoted to showing the relation between future sales and cash sales, and hence the effect of the former upon the interstate grain trade. The test, said the Chief Justice, was furnished by the question of price. "The question of price dominates trade between the States. Sales of an article which affect the country-wide price of the article directly affect the country-wide commerce in it."[437] Thus a practice which demonstrably affects prices would also affect interstate trade "directly," and so, even though local in itself, would fall within the regulatory power of Congress. In the following passage, indeed, Chief Justice Taft whittles down, in both cases, the "direct-indirect" formula to the vanishing point: "Whatever amounts to more or less constant practice, and threatens to obstruct or unduly to burden the freedom of interstate commerce is within the regulatory power of Congress under the commerce clause, and it is primarily for Congress to consider and decide the fact of the danger and meet it. This court will certainly not substitute its judgment for that of Congress in such a matter unless the relation of the subject to interstate commerce and its effect upon it are clearly nonexistent."[438] And it was in reliance on the doctrine of these cases that Congress first set to work to combat the Depression in 1933 and the years immediately following. But in fact, much of its legislation at this time marked a wide advance upon the measures just passed in review. They did not stop with regulating traffic among the States and the instrumentalities thereof; they also essayed to govern production and industrial relations in the field of production. Confronted with this revolutionary claim to power on Congress' part, the Court again deemed itself called upon to define a limit to the commerce power that would save to the States their historical sphere, and especially their customary monopoly of legislative power in relation to industry and labor management.
THE SECURITIES AND EXCHANGE COMMISSION
Not all antidepression legislation, however, was of this revolutionary type. The Securities Exchange Act of 1934[439] and the Public Utility Company Act ("Wheeler-Rayburn Act") of 1935[440] were not. The former creates the Securities and Exchange Commission, and authorizes it to lay down regulations designed to keep dealing in securities honest and above-board and closes the channels of interstate commerce and the mails to dealers refusing to register under the act. The latter requires, by sections 4 (a) and 5, the companies which are governed by it to register with the Securities and Exchange Commission and to inform it concerning their business, organization and financial structure, all on pain of being prohibited use of the facilities of interstate commerce and the mails; while by section 11, the so-called "death sentence" clause, the same act closes after a certain date the channels of interstate communication to certain types of public utility companies whose operations, Congress found, were calculated chiefly to exploit the investing and consuming public. All these provisions have been sustained,[441] Gibbons v. Ogden, furnishing the Court its principal reliance.[442]
Congressional Regulation of Production and Industrial Relations
ANTIDEPRESSION LEGISLATION
In the following words of Chief Justice Hughes, spoken in a case which was decided a few days after President Franklin D. Roosevelt's first inauguration, the problem which confronted the new Administration was clearly set forth: "When industry is grievously hurt, when producing concerns fail, when unemployment mounts and communities dependent upon profitable production are prostrated, the wells of commerce go dry."[443]
THE NATIONAL INDUSTRIAL RECOVERY ACT
The initial effort of Congress to deal with this situation was embodied in the National Industrial Recovery Act of June 16, 1933.[444] The opening section of the act asserted the existence of "a national emergency productive of widespread unemployment and disorganization of industry which" burdened "interstate and foreign commerce," affected "the public welfare," and undermined "the standards of living of the American people." To effect the removal of these conditions the President was authorized, upon the application of industrial or trade groups, to approve "codes of fair competition," or to prescribe the same in cases where such applications were not duly forthcoming. Among other things such codes, of which eventually more than 700 were promulgated, were required to lay down rules of fair dealing with customers and to furnish labor certain guarantees respecting hours, wages and collective bargaining. For the time being business and industry were to be cartelized on a national scale.
THE SCHECHTER CASE
In the case of Schechter Corp. v. United States,[445] one of these codes, the Live Poultry Code, was pronounced unconstitutional. Although it was conceded that practically all poultry handled by the Schechters came from outside the State, and hence via interstate commerce, the Court held, nevertheless, that once the chickens came to rest in the Schechters' wholesale market interstate commerce in them ceased. The act, however, also purported to govern business activities which "affected" interstate commerce. This, Chief Justice Hughes held, must be taken to mean "directly" affect such commerce: "the distinction between direct and indirect effects of intrastate transactions upon interstate commerce must be recognized as a fundamental one, essential to the maintenance of our constitutional system. Otherwise, * * *, there would be virtually no limit to the federal power and for all practical purposes we should have a completely centralized government."[446] In short, the case was governed by the ideology of the Sugar Trust Case, which was not mentioned in the Court's opinion.[447]
THE AGRICULTURAL ADJUSTMENT ACT
Congress' second attempt to combat the Depression comprised the Agricultural Adjustment Act of 1933.[448] As is pointed out elsewhere the measure was set aside as an attempt to regulate production, a subject which was held to be "prohibited" to the United States by Amendment X.[449] See pp. 917-918.
THE BITUMINOUS COAL CONSERVATION ACT
The third measure to be disallowed was the Guffey-Snyder Bituminous Coal Conservation Act of 1935.[450] The statute created machinery for the regulation of the price of soft coal, both that sold in interstate commerce and that sold "locally," and other machinery for the regulation of hours of labor and wages in the mines. The clauses of the act dealing with these two different matters were declared by the act itself to be separable so that the invalidity of the one set would not affect the validity of the other; but this strategy was ineffectual. A majority of the Court, speaking by Justice Sutherland held that the act constituted one connected scheme of regulation which, inasmuch as it invaded the reserved powers of the States over conditions of employment in productive industry, was violative of the Constitution and void.[451] Justice Sutherland's opinion set out from Chief Justice Hughes's assertion in the Schechter Case of the "fundamental" character of the distinction between "direct" and "indirect" effects; that is to say, from the doctrine of the Sugar Trust Case. It then proceeded: "Much stress is put upon the evils which come from the struggle between employers and employees over the matter of wages, working conditions, the right of collective bargaining, etc., and the resulting strikes, curtailment and irregularity of production and effect on prices; and it is insisted that interstate commerce is greatly affected thereby. But, ..., the conclusive answer is that the evils are all local evils over which the Federal Government has no legislative control. The relation of employer and employee is a local relation. At common law, it is one of the domestic relations. The wages are paid for the doing of local work. Working conditions are obviously local conditions. The employees are not engaged in or about commerce, but exclusively in producing a commodity. And the controversies and evils, which it is the object of the act to regulate and minimize, are local controversies and evils affecting local work undertaken to accomplish that local result. Such effect as they may have upon commerce, however extensive it may be, is secondary and indirect. An increase in the greatness of the effect adds to its importance. It does not alter its character."[452] We again see the influence of the ideology of the Sugar Trust Case.[453]
THE NATIONAL LABOR RELATIONS ACT
The case in which the Court reduced the distinction between "direct" and "indirect" effects to the vanishing point, and thereby put Congress in the way of governing productive industry and labor relations in such industry was National Labor Relations Board v. Jones and Laughlin Steel Corp.,[454] decided April 12, 1937. Here the statute involved was the National Labor Relations Act of July 5, 1935,[455] which forbids "any unfair labor practice affecting interstate commerce" and lists among these "the denial by employers of the right of employees to organize and the refusal by employers to accept the procedure of collective bargaining." Ignoring recent holdings, government counsel appealed to the "current of commerce" concept of the Swift Case. The scope of respondent's activities, they pointed out, was immense. Besides its great steel-producing plants, it owned and operated mines, steamships, and terminal railways scattered through several States, and altogether it gave employment to many thousands of workers. A vast industrial commonwealth such as this, whose operations constantly traversed State lines, comprised, they contended, a species of territorial enclave which was subject in all its parts to the only governmental power capable of dealing with it as an entity, that is, the National Government. Yet even if this were not so, still the protective power of Congress over interstate commerce must be deemed to extend to disruptive strikes by employees of such an immense concern, and hence to include power to remove the causes of such strikes. The Court, speaking through Chief Justice Hughes, held the corporation to be subject to the act on the latter ground. "The close and intimate effect," said he, "which brings the subject within the reach of federal power may be due to activities in relation to productive industry although the industry when separately viewed is local." Nor will it do to say that such effect is "indirect." Considering defendant's "far-flung activities," the effect of strife between it and its employees "* * * would be immediate and [it] might be catastrophic. We are asked to shut our eyes to the plainest facts of our national life and to deal with the question of direct and indirect effects in an intellectual vacuum. * * * When industries organize themselves on a national scale, making their relation to interstate commerce the dominant factor in their activities, how can it be maintained that their industrial labor relations constitute a forbidden field into which Congress may not enter when it is necessary to protect interstate commerce from the paralyzing consequences of industrial war? We have often said that interstate commerce itself is a practical conception. It is equally true that interferences with that commerce must be appraised by a judgment that does not ignore actual experience."[456] |
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