$700 Billion Worth of Vagueness

by: thomas e. brewton | published: 10 15, 2008

Despite what you read in the press, the $700 billion "Wall Street bailout" program granting the Treasury and the Fed almost unlimited and only slightly defined authority to implement the bailout bill is hardly unprecedented.

Most new regulatory programs are approved in broad principle by the public and by Congress. Legislative implementing language typically is along the lines of, "An act to create X agency for the purpose of regulating Y, with powers to write, enforce, and adjudicate all necessary regulations for the purposes of, but not limited to, Z."

Such broad enabling legislation may call for Congressional oversight, but the real power always lies in the hands of unelected bureaucrats and the Federal judiciary, which will be called upon to interpret disputes over subsequent regulations.

Unintended damage comes from the expansionist urge of bureaucrats that leads them to broaden their agencies' powers far beyond the original intention of Congress.

The twofold presumption of liberal-progressive-socialism is that only collectivized government can understand and properly administer the affairs of society, and that only academic experts in specialized fields are qualified to impose the necessary regulations.

Hence Congress proposes broad goals, then leaves matters in the hands of "experts."

One example of this expansionist impetus is the 1972 Clean Water Act, passed in the heat of environmental agitation, with broad public support and hardly any searching questions about the act's implementation or its consequences.

Congress intended that the act regulate water pollution in navigable streams and lakes, which could be construed as within the Federal power to regulate interstate commerce, conferred by Section 8 {3} of the Constitution. But for more than three decades under the Clean Water Act, the EPA and the Army Corps of Engineers extended the original legislative intent to create the vast body of wetlands regulations.

Under that construction nearly every stray puddle in the country that might become a habitat for migratory birds crossing state lines was declared to be a regulated wetland. Their rulemaking was derisively called the "glancing geese" test, meaning that if a migrating bird even glanced at a water-filled pothole it became part of interstate commerce.

Bernard Goode, the chief wetlands regulator for the Corps of Engineers until 1989, admitted that "it was not the original intent of Congress" to protect wetlands under the Clean Water Act. In 1993, U.S. District Court Judge Roger Vinson called the Corps' arguments "worthy of Alice in Wonderland" in that "a landowner who places clean fill dirt on . . . dry land may be imprisoned" for "discharging pollutants into navigable waters."

In that grand tradition we already have seen daily unprecedented initiatives undertaken by the Treasury and the Fed to stabilize the financial markets.

The push for Federal regulatory agencies first became a big deal under the administrations of Teddy Roosevelt between 1901 and 1909.

The 1930s New Deal of his young cousin Franklin Roosevelt, however, went to extremes, creating dozens of agencies with a corresponding explosion of regulation to cover everything from farm prices and production levels, to labor organization and prices of industrial and consumer goods. The Federal government, for the first time in our history, assumed responsibility for managing the economy. It was in that era that the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) were created to regulate the financial community.

The truly insidious effect of the New Deal was the elimination of previously accepted ideas about limits on governmental powers and activities.

Above all else, based on their experience under the British Parliament, the writers of the Declaration of Independence and the Constitution feared concentration of power in any hands. The Constitution is distinguished by an elaborate and extensive series of overlapping separations of power, between the Federal government and the states, and among branches of the Federal government.

Madison, Hamilton, and Jay focused in The Federalist essays on assuaging the public's fear of an over-powerful Federal government that might subject the states and their citizens to arbitrary abuses of power. Constitutional law prior to 1937 reflected a tug-of-war between Federal and state authority in regulation of commerce and finance. Since then, unfolding of Constitutional law has been a one- way expansion of Federal regulatory authority and subordination of private property rights.

Much of the enormous Federal regulatory bureaucracy is founded upon Section 8 {3} of the Constitution . "Congress shall have the power. {3} To regulate Commerce with foreign Nations, and among the several states, and with the Indian Tribes..." Even liberal-progressive- socialist Justice Oliver Wendell Holmes, Jr., warned against extending reach of the commerce clause. Every action, birth, or death indirectly affects commerce.

As Princeton's Edward S. Corwin, the 1930s liberal-progressive Constitutional law guru, noted,. "The most important source of national power touching private conduct is, in ordinary times, the power of Congress to regulate commerce among the states."

The argument centered around what things were included under Congress's Constitutional power to regulate commerce between the states and what elements of commerce were excluded from Congressional reach and reserved to the states under the 10th Amendment. Historically, until the early 1930s, Congress had exercised its powers over interstate commerce, for the most part, only over interstate transportation, and especially transportation by rail.

The recently enacted $700 billion bailout program may, as represented by the Treasury and the Fed, be absolutely essential to prevent collapse of our banking system, an event which would precipitate a new Depression. Nonetheless, caution is advised, particularly with regard to the plans of Democrat/Socialists in Congress to impose additional, sweeping, even punitive, regulations on banks and mortgage lenders.

People are too ready to embrace sweeping, radical programs to solve problems once and for all time. Our bias ought instead to be toward cautious, pragmatic approaches with limited steps allowing assessment of the effects of law of unintended consequences. Clearly, that has not been the nature of Federal regulation since imposition of Federal agencies in the 1930s affecting banks, brokerage houses, and investment banks.

The paradigm of social order embodied in The Federalist papers, particularly the belief that the rights of private property were the foundation of all other political liberties, became anathema to educated Americans in the Depression of the 1930s.

One of the clearest expressions of the liberal-progressive-socialist bent toward harsh regulation of business was penned by Stuart Chase, the man who, according to historian Arthur Schlesinger, Jr., gave the name to Franklin Roosevelt's 1933 administration.

In his 1932 "A New Deal" Mr. Chase wrote:

The drive of collectivism leads toward control from the top. . At bottom the conception of economic planning is science supervising a people's housekeeping. . And so the final idea of a National Planning Board emerges; .a group which knows the past, can give capable advice as to the present, and sees into the future, especially the technological future. .The real work, the real thought, the real action must come from the technicians: that class most able, most clear-headed of all in American life, hitherto only half utilized in technical detail and in college class rooms. .This is a long-swing project we are starting, longer than the secular trend; longer than the industrial revolution itself. Errors will be made; methods will be tried out and discarded; but the principle of control from the top must go on...

The state is the embodiment of the whole community, and its rule of action, in theory at least, 'the public interest.' If your corporation is busily dynamiting the public interest, the state has the right to close you up. .To tell an American that he cannot invest his money in this project, or even to suggest that it is thrown away in that, is a bold and unheard-of step to the left; .But how else can the obsolescence rate be steadied, excess capacity and overproduction kept within bounds of market requirements, thoroughly vicious and wasteful enterprises be checked, the non-speculative investor be protected? .One of the most interesting tasks of the Planning Board will be an attempt to draw the line between those economic areas where competition is still useful and those where it has outlived its usefulness, and either is already supplanted or should be supplanted by some form of collectivism. .The balancing and regulating of man hours will, like minimum wages, operate to weed out parasitic enterprises, establishments so inefficient that they can make their margin only by driving workers through a ten or twelve hour day. . This is the program of the third road. It is not an attempt to bolster up capitalism, it is frankly aimed at the destruction of capitalism, specifically in its most evil sense of ruthless expansion. The redistribution of national income, the sequestration of excess profits, the control of new investments, are all designed to that end. .And woe to Supreme Courts, antiquated rights of property, checks and balances and democratic dogmas which stand in its path.

It is this 1930s paradigm that shapes today's liberal-socialist politicians, main-stream media writers, and Hollywood entertainers, leading to their fervent support of Senator Barack Obama's campaign for the presidency. We should not be surprised at the anti- Americanism emanating from our college campuses, given the close identification since the late-1800s of universities with the secular materialism of the socialist religion. In those ivy-covered halls, to be modern and scientific is to be a liberal-progressive-socialist.

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