Greatest Heroes Who Fought FDR’s New Deal
by Jim Powell
the early 1930s, there were powerful political pressures to suppress
economic liberty, as the New Deal promoted price fixing and cartels
that benefited producer interests at the expense of consumers. But
for three years, the U.S. Supreme Court defended economic liberty
and struck down one New Deal law after another.
Deal historians long blamed these adverse Supreme Court decisions
on the "Four Horsemen of Reaction," meaning justices Willis
Van Devanter, James C. McReynolds, Pierce Butler and George Sutherland.
These were sometimes joined by others, particularly Chief Justice
Charles Evans Hughes and justice Owen Roberts. So in addition to
5-4 decisions, there was a key unanimous decision (striking down
the National Industrial Recovery Act) – even the "progressive"
justices Louis D. Brandeis, Benjamin Cardozo and Harlan Fiske Stone
were on board for that one. There was an 8-1 decision (striking
down New Deal restrictions in the oil business). Brandeis wrote
the majority opinion striking down the Frazier-Lemke Act that authorized
farmers to walk away from their obligations to creditors.
Van Devanter brought an appreciation of business risks to the Supreme
Court. He was born in 1859 in Marion Indiana. He graduated from
Indiana Asbury (now DePauw) University, then Cincinnati Law School
in 1879 and joined his father’s law firm. When his father retired,
Van Devanter headed for Wyoming. He hunted grizzly bears in the
Bighorn Mountains with Buffalo Bill. He handled a lot of legal business
for the two principal interests in Wyoming, cattlemen and railroads.
1888, he was elected to the territorial legislature and played a
major role codifying territorial laws that subsequently became the
basis of the state’s laws. President William McKinley appointed
Van Devanter Assistant Attorney General in the Department of the
Interior. President Theodore Roosevelt nominated Van Devanter to
the U.S. Court of Appeals for the Eighth Circuit. He was nominated
for the Supreme Court by President William Howard Taft in December
1910. He served 26 years, writing 346 majority opinions.
Clark McReynolds was a brilliant man and a prickly pear. He was
born in 1862 in Elkton, Kentucky. His father was a physician and
planter who didn’t approve of compulsory government schools. Young
McReynolds graduated from Vanderbilt University and earned a law
degree at the University of Virginia. He became a corporate lawyer
in Nashville. He ran unsuccessfully for Congress, then taught commercial
law at Vanderbilt and in 1903 was appointed Assistant Attorney General
in Republican Theodore Roosevelt’s administration. There he helped
enforce antitrust laws.
remained a Democrat, though, and supported Woodrow Wilson’s campaign
for the White House in 1912. Wilson named McReynolds Attorney General
the following year. Despite his volatile temper and abrasive manner
that made enemies, Wilson in 1914 nominated him to the Supreme Court.
A brash bachelor, McReynolds didn’t like the two Jewish justices,
Brandeis and Benjamin Cardozo. He wouldn’t speak to justice John
Clark whom he considered unfit for the job. After justice Stone
described one lawyer’s brief as dull, McReynolds told him, "The
only duller thing I can think of is to hear you read one of your
opinions." McReynolds reportedly didn’t like female attorneys
or tobacco smokers, either.
opinions focused on protecting private property, freedom of contract
and freedom of speech. In Meyer v. the State of Nebraska,
262 U.S. 390 (1923), he struck down a law which made it illegal
to teach a foreign language prior to the ninth grade. In Farrington
v. T. Tokushige, 273 U.S. 284 (1927), McReynolds overturned
a law that banned the teaching of the Japanese language. He was
horrified at the policies of FDR whom he called an "utter incompetent."
come up the hard way, Pierce Butler cherished individualism and
enterprise. He was born in 1866 in Pine Bend, Minnesota. His parents
had emigrated from Ireland after the potato famine of the 1840s.
His father operated a tavern, then tried to develop a farm on the
frontier. Pierce graduated from Carlton College and studied law
at a local law firm. As general counsel for the Chicago, St. Paul,
Minneapolis and Omaha Railroad, he became known as one of the best
was asked to help the federal government prosecute antitrust cases
during the Taft administration. He took on meat-packing companies,
and he later argued railroad cases before the Supreme Court. President
Warren Harding nominated him to the Supreme Court in November 1922.
During his career on the High Court, Butler wrote 323 majority opinions,
44 dissenting opinions and 3 concurring opinions.
most impressive thinker was George Sutherland, a champion of natural
rights jurisprudence. He believed the most important function of
law was to protect individual liberty by restraining government
power – historically, the biggest threat to liberty everywhere.
Sutherland understood that for ordinary people, economic liberty
was generally the most important liberty. Intellectuals tended to
rate First Amendment liberties more highly because they spoke out
publicly and published their political views, but every individual’s
livelihood depended on freedom to choose where to work, where to
live, where to travel, where to spend money, what to buy and how
much to pay. Freedom of contract was absolutely essential for all
these things. It would be hard to find a Supreme Court justice who
ever did a better job defending economic liberty than George Sutherland.
was born in 1862 in Stony Stratford, England, and his family emigrated
to America when he was a child. They moved to Utah, the second state
to adopt woman suffrage, and he was educated at Brigham Young University
and the University of Michigan. He began practicing law in 1883.
He entered Republican politics, serving in the U.S. House of Representatives
(1901-1903) and the Senate (1905-1917). As a U.S. Senator, Sutherland
had introduced the "Anthony Amendment," the proposed constitutional
amendment which would give women the right to vote. "When we
have established the righteousness of the case for a Democracy,"
he declared in a 1915 speech, "when we have proven the case
for universal manhood suffrage, we have made clear the case for
womanhood suffrage as well."
during the 1916 elections, he became an advisor to Warren Harding
and was nominated to the U.S. Supreme Court soon after Harding was
elected president in 1920. Sutherland wrote the majority opinion
in Adkins v. Children’s Hospital, 261 U.S. 525 (1923), striking
down the Minimum Wage Act of 1918 that applied only to women. The
case was argued before the Supreme Court by Felix Frankfurter who,
like his mentor Louis Brandeis, submitted a brief (a thousand pages)
full of sociological data.
could a champion of woman suffrage oppose a minimum wage law for
women? The case involved 21-year-old Willie Lyons, an elevator operator
who earned $35 per month plus two meals a day at the Congress Hotel,
Washington, D.C. The new minimum wage law prevented employers from
paying women less than $71.50 per month, and since the going rate
for elevator operators was only about $35 per month, she was soon
unemployed. If the hotel had persisted in paying her the going rate,
it would have been subject to penalties provided by the minimum
wage law. Because there wasn’t a minimum wage law for men, her job
was filled by a man at $35 per month. Thus did a "progressive"
law, intended to help protect the "health and morals"
women, throw women out of work.
Minimum Wage Act of 1918, Sutherland wrote, "is not for the
protection of persons under legal disability or for the prevention
of fraud. It is simply and exclusively a price-fixing law, confined
to adult women…who are legally as capable of contracting for themselves
as men. It forbids two parties having lawful capacity -- under penalties
as to the employer -- to freely contract with one another in respect
of the price for which one shall render service to the other in
a purely private employment where both are willing, perhaps anxious,
to agree, even though the consequence may be to oblige one to surrender
a desirable engagement and the other to dispense with the services
of a desirable employee…surely the good of society as a whole cannot
be better served than by the preservation against arbitrary restraint
of the liberties of its constituent members."
so-called "progressives" promoted more and more interference
with economic liberty, and Sutherland wrote another landmark decision
in New Ice Co. v. Liebmann, 285 U.S. 262 (1932). In 1925,
the Oklahoma legislature had passed a law declaring that the ice
business was "public," and no firm could enter it without
securing a permit. This involved hearings where competitors could
testify that new firms weren’t necessary, and apparently the Corporation
Commission denied permits to new competitors. Subsequently Liebmann,
without a permit, bought land and started an ice business. New State
Ice Company, in Oklahoma, filed a lawsuit to stop Liebmann from
observed that "a regulation that has the effect of denying
or unreasonably curtailing the common right to engage in a lawful
private business, such as that under review, cannot be upheld consistent
with the Fourteenth Amendment…The control here asserted does not
protect against monopoly, but tends to foster it. The aim is not
to encourage competition, but to prevent it; not to regulate the
business, but to preclude persons from engaging in it."
Brandeis, supposedly the "progressive" defender of the
downtrodden, denounced "destructive" competition (price
cutting) and defended government-enforced monopoly in the New Ice
case. "It is no objection to the validity of the statute here
assailed that it fosters monopoly," he wrote. "That, indeed,
is its design."
believed that either a government monopoly or government-controlled
private monopoly would mean greater efficiency, less waste and better
living. He assumed government officials had superior knowledge about
the desires of customers, the competence of entrepreneurs, the quality
of service they offered, the potential of new technologies and other
factors. Brandeis further assumed that established firms contribute
more than new entrepreneurs. Finally, Brandeis assumed that even
if government officials knew what they were doing, they wouldn’t
be corrupted by lobbyists from established firms who wanted to suppress
competition. None of these assumptions have turned out to be true.
defended the Oklahoma ice monopoly by blaming the Great Depression
on what he called "unbridled competition." He insisted
"There must be power in the states and the nation to remould,
through experimentation, our economic practices and institutions
to meet changing social and economic needs." The "experimentation"
he referred to was government-enforced monopoly privileges which
friends of liberty had fought for hundreds of years.
first major New Deal case for which Sutherland wrote an opinion
(dissenting) was Home Building & Loan Assn. V. Blaisdell
290 U.S. 398 (1934), where the issue was freedom of contract. John
H. Blaisdell, a Minnesota man, took a $3,800 mortgage on some land
with a 14-room house. He and his family lived in three rooms, renting
the others. But his tenants lost their jobs, and he couldn’t keep
up the payments. Home Building & Loan Association foreclosed.
Two weeks before May 2, 1933, the redemption deadline provided in
his mortgage contract (when he could get the house back by paying
the amount due), the state enacted a law extending the deadline
until May 1, 1935. Blaisdell went to state court for a two-year
extension, which was granted. Home Building & Loan Association
protested that the state law violated U.S. Constitution’s impairment
of contract clause (Article 1, section 10).
Justice Charles Evans Hughes wrote the majority opinion upholding
the Minnesota law. He had served two non-consecutive terms, first
as associate justice, then chief justice. He was born in 1862 in
Glens Falls, New York, a small community on the upper Hudson River.
He graduated from Madison (now Colgate) University and subsequently
transferred to Brown University with the idea of becoming a minister
like his father. But he discovered baseball, poker and smoking and
decided it would be better to pursue a legal career. He was a "swing"
vote on the Court, often supporting the expansion of government
power before the New Deal, joining the "Four Horsemen"
against some important early New Deal decisions and later supporting
the New Deal.
Home Building & Loan Assn. V. Blaisdell, justice Hughes
acknowledged that the creditor couldn’t take possession, occupy
or dispose of the property. The creditor was only entitled to collect
rent of $40 per month. Hughes considered this a reasonable position
during the Great Depression.
dissenting opinion insisted that lenders deserved equal treatment
with borrowers and warned that efforts to disadvantage lenders would
almost surely backfire. The more borrowers were allowed to get out
of inconvenient contracts, the greater the risks for lenders anxious
to be repaid, and the less lending there was likely to be in the
future. Sutherland turned out to be right, and business investment
remained at historic lows throughout the Great Depression.
Nebbia v. New York, 291 U.S. 502 (1934), a Rochester grocer
was convicted of selling two bottles of milk for less than the 9
cents per quart ordered by the Milk Control Board (consisting of
three officials), which the New York State Legislature had established
in 1933. The aim was to protect the profit margins of milk producers
and distributors. The grocer claimed the law violated the equal
protection clause of the Fourteenth Amendment.
majority opinion was by justice Owen J. Roberts, another "swing"
vote on the Court. He was born in 1875 in Philadelphia, the son
of a Welch hardware merchant. Owen graduated from the University
of Pennsylvania and earned his law degree there, too. Then he started
private law practice in Philadelphia. After World War I, he was
named a special deputy attorney general to prosecute individuals
charged with violating the Espionage Act (he secured convictions
of several German and Lithuanian publishers). President Calvin Coolidge
made him a special counsel in the prosecution of the Teapot Dome
case which involved the bribery of the Secretary of the Interior
for oil leases. In March 1930, Herbert Hoover nominated him to the
Nebbia v. New York, justice Roberts was joined by the so-called
"progressive" justices Brandeis, Cardozo and Stone who
considered only the interests of the milk producers and upheld the
law suppressing price competition. Justice McReynolds wrote the
dissenting opinion which was joined by Sutherland, Van Devanter
and Butler. These supposedly reactionary justices defended the rights
wrote, "The Legislature cannot lawfully destroy guaranteed
rights of one man with the prime purpose of enriching another, even
if, for the moment, this may seem advantageous to the public…Not
only does the statute interfere arbitrarily with the rights of the
little grocer to conduct his business according to standards long
accepted, but it takes away the liberty of twelve million consumers
to buy a necessity of life in an open market."
assaults on economic liberty began to alarm Chief Justice Hughes,
and he wrote the majority opinion in Panama Refining Co. v. Ryan,
293 U.S. 388 (1935). There were state and federal regulations restricting
the quantities of petroleum that could be produced, and on July
11, 1933 when FDR issued executive order 6199 which banned the interstate
shipment of any excess production. Anyone convicted of violating
these orders could be hit with a $1,000 fine and/or a six-month
regulations harmed many people. Panama Refining Company, which had
oil and gas leases in Texas, filed a lawsuit claiming that the regulations
amounted to an unconstitutional delegation of power from Congress
to the executive. Amazon Petroleum filed a similar lawsuit. Justice
Hughes agreed that the delegation of power violated the Constitution.
challenge to the National Industrial Recovery Act came from the
most unlikely source, a Jewish chicken producer. Joseph Schechter
operated Schechter Poultry Company, and Martin, Alex and Alan Schechter
operated A.L.A. Schechter Company, both of which were slaughterhouses
selling chickens to kosher markets in New York City. Schechter was
convicted of violating the Code of Fair Competition for the Live
Poultry Industry of the Metropolitan Area in and about the City
of New York, in the district court of the United States, Eastern
District. On April 13, 1934, FDR had issued his executive order
authorizing this code.
were two key issues. First, Schechter conducted its business entirely
within New York State. The company purchased chickens in New York
State and sold them in New York State. Schechter wasn’t involved
with interstate commerce.
the unanimous decision, written by Chief Justice Hughes,
he noted that the Constitution’s Commerce Clause (Article 1, section
8, clause 3) provides that "Congress shall have the power…to
regulate commerce…among the several States." This had long
been interpreted as a limitation on the power of the states, but
all the justices believed it
also a limitation on the power of Congress, barring it from interfering
with business which didn’t involve interstate commerce.
second key issue involved the delegation of legislative power to
a president. Hughes wrote, "The President in approving a code
may impose his own conditions, adding to or taking from what is
proposed…the discretion of the President in approving or prescribing
codes, and thus enacting laws for the government of trade and industry
throughout the country, is virtually unfettered."
violated the constitutional principle of delegated, enumerated powers,
that the branches of the federal government had only such powers
as were specifically delegated to them. So, on May 27, 1935, the
NIRA was struck down, and the NRA was out of business.
a press conference, FDR complained that "The whole tendency
over these years has been to view the interstate commerce clause
in the light of present-day civilization. The country was in the
horse-and-buggy age when that clause was written."
Schechter decision was a blow to FDR, but as things turned
out, it was boon for the economy. As economists Richard K Vedder
and Lowell E. Gallaway explained, "This was probably because
one wage-increasing piece of legislation, the National Industrial
Recovery Act, was found unconstitutional, and a second such piece
of legislation, the National Labor Relations Act of 1935, had not
yet had any real effect, as its constitutionality was still uncertain."
the Supreme Court had ruled on the NIRA, Congress passed the Bituminous
Coal Conservation Act, known as the Guffey Act. This was much like
the NIRA, only it applied to coal mining. The aim was to maintain
high coal prices and high wages amidst the depression. Under the
act, the National Bituminous Coal Commission was established to
issue a Bituminous Coal Code for enforcing coal mining cartels.
Sutherland wrote the 5-4 majority opinion, with justices Butler,
McReynolds, Roberts and Van Devanter concurring. The decision was
announced on May 18, 1936: the "firmly established principle
is that the powers which the general government may exercise are
only those specifically enumerated in the Constitution and such
implied powers as are necessary and proper to carry into effect
the enumerated powers…The supremacy of the Constitution as law is
declared without qualification. That supremacy is absolute; the
supremacy of a statute enacted by Congress is not absolute, but
conditioned upon its being made in pursuance of the Constitution."
next big Supreme Court case involved the Agricultural Adjustment
Act that New Dealers considered as important for reviving agriculture
as the National Industrial Recovery Act was thought to be for industry.
The idea was to tax food processors and channel the proceeds to
farmers who destroyed crops, thereby reducing supplies and maintaining
farm prices. Raising farm prices was viewed as the way to raise
farmers’ income, much as high wage rates were supposed to raise
the incomes of industrial workers.
the government billed Hoosac Mills, a bankrupt food processor, for
taxes under the Agricultural Adjustment Act, the receivers disregarded
them. The District Court ruled the taxes were valid, the Court of
Appeals reversed this ruling, and the case went before the Supreme
Roosevelt administration claimed that the tax was just another tax,
and taxpayers couldn’t refuse to pay because they disagreed with
the way it was spent. But justice Roberts, in his majority opinion,
observed that the sole purpose of this tax was to pay farmers who
reduced their cultivated acreage and destroyed crops, which meant
it wasn’t a legitimate tax: "A tax, in the general understanding
of the term, and as used in the Constitution, signifies an exaction
for the support of the Government. The word has never been thought
to connote the expropriation of money from one group for the benefit
continued, "The question is not what power the Federal Government
ought to have, but what powers, in fact, have been given by the
people…The federal union is a government of delegated powers. It
has only such as are expressly conferred upon it and such as are
reasonably to be implied from those granted. In this respect, we
differ radically from nations where all legislative power, without
restriction or limitation, is vested in a parliament or other legislative
body subject to no restrictions except the discretion of its members…From
the accepted doctrine that the United States is a government of
delegated powers, it follows that those not expressly granted, or
reasonably to be implied from such as are conferred, are reserved
to the states, or to the people."
anti-New Deal bloc was tested again in Morehead v. Tipaldo,
298 U.S. 587, that involved a New York laundry manager who had been
jailed for failing to pay the state-mandated minimum wage for women.
A majority of justices (apparently including Roberts as well as
Brandeis, Cardozo, Hughes and Stone) agreed to take the case because
the intention was to reverse Sutherland’s 1923 majority decision
in Adkins v. Children’s Hospital.
something happened along the way, and justice Roberts came to agree
with justices Butler, McReynolds, Sutherland and Van Devanter that
Adkins should be followed, and the New York State minimum
wage law should be struck down. Roberts found that the fundamental
provisions of the New York State minimum wage law (Morehead)
were similar to the District of Columbia law (Adkins), and
the circumstances were similar, too, so Adkins prevailed.
right to make contracts about one's affairs is a part of the liberty
protected by the due process clause," Roberts explained. "Within
this liberty are provisions of contracts between employer and employee
fixing the wages to be paid. In making contracts of employment,
generally speaking, the parties have equal right to obtain from
each other the best terms they can by private bargaining. Legislative
abridgement of that freedom can only be justified by the existence
of exceptional circumstances. Freedom of contract is the general
rule and restraint the exception."
suggested that the underlying purpose of the New York State minimum
wage law for women was to limit competition for jobs, benefiting
men. The New York State minimum wage law for women was struck down
on June 1, 1936.
"Four Horsemen of Reaction" carried on valiantly with
their lucky genes. Van Devanter retired from the Supreme Court in
June 2, 1937, and he died at his Maryland farm, February 8, 1941.
He was 81. Sutherland retired January 17, 1938. He died at 80, July
18, 1942, in Stockbridge, Massachusetts. Butler died on November
16, 1939, in Washington, D.C. He was 73. That left McReynolds, who
died on August 24, 1946, in Washington, D.C. He was 84.
Devanter, Sutherland, Butler and McReynolds, sometimes joined by
others, had done a splendid job articulating vital principles of
economic liberty in the worst of times. Very few authors of any
era have done better. These justices faced enormous political pressure
from a popular president with commanding majorities in Congress,
so they deserve credit for displaying the courage of their convictions.
Subsequent experience has made clear that the purported New Deal
"reform" measures which these justices struck down were,
in fact, prolonging the Great Depression. The economic liberty they
defended, criticized as an obstacle to recovery, has been vindicated
as the mainspring of human progress.
Powell [send him mail]
is a senior fellow at the Cato Institute and editor of Laissez
Faire Books. He is the author of The
Triumph of Liberty and FDR's
Folly: How Roosevelt and His New Deal Prolonged the Great Depression.
© 2003 LewRockwell.com