Author Archive | Todd Zywicki

WINE WARS, PART 11

An alternative argument that has been offered is that even if the 21st Amendment does not transfer Congress’s commerce clause authority to the states, Congress essentially reconveyed its commerce clause power to the states legislatively through the Webb-Kenyon Act. Thus, the dormant Commerce Clause is said to be irrelevant to this case, because protectionist state laws have been enacted pursuant to an affirmative exercise of Congress’s Commerce Clause power, not in contravention of the dormant Commerce Clause.



First, as noted earlier, this is clearly not what was initially done through the Webb-Kenyon Act, as the previously quoted colloquy between Sen. Wagner and Sen. Blaine made clear that Congress was affirmatively exercising its Commerce Clause authority to allow the states to apply their police powers to liquor shipped in interstate commerce on the same basis as domestically-produced liquor.



It is argued that the enactment of the Twenty-First Amendment Enforcement Act in 2000, 27 U.S.C. §122a, as an amendment to the Webb-Kenyon law, further evidenced this recoveyance of power. By its own terms, however, the Twenty-First Amendment Enforcement Act applies only to a state law “that is a valid exercise of power vested in the States” under the 21st Amendment, and further provides that the act “shall not be construed to grant the States any additional power.” 27 U.S.C. §122a(e).



This language was designed precisely to preclude the argument now advanced that the Act could be used to enforce discriminatory state laws. This language was a more general statement of the original “Goodlatte” amendment which had passed the House, and which provided, “No State may enforce under this Act a law regulating the importation or transportation of any intoxicating liquor that unconstitutionally discriminates against interstate commerce by out-of-State sellers by favoring local industries, thus erecting barriers to competition and constituting mere economic [...]

Continue Reading

WINE WARS, PART 10

The contemporaneous debates in Congress over the proposed but never enacted §3 of the 21st Amendment further indicate that the purpose of §2 was to restore the constitutional balance disrupted by the 18th Amendment by returning local police power authority to the states, but not to grant to the states new powers to interfere with federal authority over interstate commerce. Defenders of state alcohol protectionism have relied heavily on the defeat of this section as well as the debates surrounding it to suggest that it evidences an intent of Congress to give wet states a sword to engage in economic warfare against one another, as opposed to simply giving dry states a shield to protect themselves against being forced to tolerate evasions of their alcohol regimes. As a result, even though it was never enacted, it is an important part of the 21st Amendment debate.



Again, the entire thrust of the debate over §3 was whether the states would have sole control over local affairs governing alcohol, neither §3 itself nor the debates over it pertain to whether the states would be given new unprecedented, unjustified, and unnecessary powers to regulate interstate commerce, but merely to constitutionalize the Wilson Act and Webb-Kenyon, thereby enabling the states to apply their police power regulations on the same terms to alcohol shipped in interstate commerce equally as to alcohol produced inside the state.



Proposed §3 of the 21st Amendment read: “Congress shall have concurrent power to regulate or prohibit the sale of intoxicating liquors to be drunk on the premises where sold.” 76 Cong. Rec. 4141. This provision would have given the federal government concurrent power with the states to regulate saloons. Id. (Statement of Sen. Blaine). Notwithstanding this enumeration of “concurrent” power, however, the operation of the Supremacy Clause meant that federal [...]

Continue Reading

WINE WARS, PART 9

At last, we get to the 21st Amendment. Section 1 simply repeals the 18th Amendment (“Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.”). Section 2 of the 21st Amendment provides, “Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” As noted in Part 8, the problem with Prohibition was that it tried to nationalize alcohol prohibition by imposing it on communities that didn’t want it. In other words, not only was alcohol regulation traditionally a local affair, but there was good reasons why. The 21st Amendment essentially amounted to a “do over”—it was intended to restore the constitutional and political balance that had been upset by the 18th Amendment by removing the federal government from interfering in local affairs regarding alcohol and reinstating state police power authority over alcohol regulation.



In addition, the 21st Amendment also constitutionalized the Wilson and Webb-Kenyon Acts, thereby assuring dry states that the public sentiment that led to the repeal of Prohibition wouldn’t sweep within it a repeal of the Wilson and Webb-Kenyon Acts which had provided assurance to dry states that they wouldn’t be forced to accept interstate alcohol shipments. By contrast, there is nothing in the history that led up to the ratification of the 21st Amendment to suggest that there would have been any reason to give the states plenary power over interstate commerce regarding alcohol. This Part will discuss §2, which was intended to reinstate the regime that prevailed prior to the 18th Amendment. The next entry will discuss proposed but never enacted §3, which as will be seen, was rejected because it was inconsistent with the [...]

Continue Reading

ALL THINGS FAMILY GUY:

Ok, if you haven’t seen it yet, Family Guy is one of the funniest shows of all time and it is coming back to Fox this fall. FG is not for those who are easily offended and, do not–repeat, DO NOT–watch the Family Guy if you have PC sensibilities. Anyway I just learned of a web site that discusses all the obscure references and other things in the Family Guy: http://www.familyguyfiles.com/main.php



I have the dvd set of the first two seasons and must confess that the commentary tracks are really terrible and uninteresting, so if you catch them on Toon and Fox you aren’t missing much by not having the dvd’s.



And if you watch FG and offended, I deny ever recommending it. [...]

Continue Reading

WINE WARS, PART 8–THE FAIULRE OF NATIONAL PROHIBITION AND THE 18TH AMENDMENT:

In the era before the 18th Amendment, the state and federal governments had thus reached a general accommodation on the balance of authority between the state police power and national commerce power. The states had the authority to regulate purely local affairs, such as rules governing the manufacture and consumption of alcohol, especially with respect to bars and saloons, where alcohol was sold and consumed on the premises. The federal government retained complete control over matters involving interstate commerce. Under the Wilson Act and Webb-Kenyon, the federal government assisted the states in the enforcement of their police powers by making alcohol that was shipped in interstate commerce subject to the same rules as locally produced and sold alcohol—no better and no worse.



The ratification of the 18th Amendment and the enactment of the National Prohibition Act upset this balance. Although the 18th Amendment technically gave the state and federal governments concurrent power to regulate the manufacture, sale, and consumption of alcohol, because of the Supremacy Clause, it essentially gave the federal government absolute authority to regulate all aspects of alcohol, including purely local matters traditionally regulated by the states pursuant to their police powers, such as closing times of saloons, conditions of sale of alcohol, and the like. Stated more precisely, the states could impose stricter regulations pertaining to alcohol, but not weaker or different penalties that conflicted with the Volstead Act.



As Sidney Spaeth wrote in the California Law Review, “The enforcement of Prohibition represented the nadir of government regulation of liquor.” 79 Calif. L. Rev. 161, 162 (1991). Local communities that were wet prior to the imposition of Prohibition resisted national efforts to impose Prohibition. As one Congressman noted, “If prohibition can only be enforced by the use of sawed-off shotguns in the hands of irresponsible Government agents, [...]

Continue Reading

WINE WARS–SUPPLEMENTAL MATERIAL ON WEBB-KENYON:

Given the primacy of Webb-Kenyon to the understanding of the 21st Amendment, I thought it might be useful to post some additional excerpts from the legislative history of Webb-kenyon to illustrate the point that the purpose of that Act was to enable the states to enforce their police powers against interstate liquor, not to given them a new power to engage in protectionism:



Senate Judiciary Sub-Committee



Senator Nelson:

* “The police power of the State does not extend to all of these subjects [such as clothing and wheat]. It is only those that are considered detrimental to health and morals. There the police power of the State is complete; but the police power of the State would not extend to prevent the sale of flour or any wholesome commodity …. In the Mugler case … they passed upon the question of whether this commodity was within the police power of the State, and the question back of it all is the question that has not been discussed according to my mind, and that is this question: The Supreme Court has held that the State has complete police power over the sale and manufacture of liquor …. Now, if the people of Oklahoma have no right to engage in the manufacture and sale of intoxicating liquors in your State, why should I, as a citizen of Minnesota, have a greater right in your State than your own citizens?”



Hon. Fred S. Caldwell (the speaker before the Sub-Committee):

* “[T]ake the Mugler case. There the Supreme Court of the United States held this: That Mugler had no right as a citizen of the United States to maintain and operate his brewery in the State of Kansas in violation of the laws of the State of Kansas, even though he intended the product [...]

Continue Reading

WINE WARS, PART 7–WEBB-KENYON ACT:

The enactment of the Webb-Kenyon Act is consistent with the history that came before it in reconciling the state¡¦s police power over local affairs with the federal government¡¦s power over interstate commerce. As noted in Part 5, under the traditional balance of power, the states had essentially plenary power to regulate the manufacture and consumption of alcohol pursuant to its police power (including imposing state-wide prohibition), but did not have the power to discriminate against interstate commerce (Walling v. Michigan). But under the prevailing interstate commerce clause jurisprudence of the 19th century, states could prohibit internal manufacture and sale of alcohol, but could not prohibit its importation and resale in its ¡§original package.¡¨ This effected a perverse discrimination in favor of interstate commerce. As noted in Part 6, the Wilson Act attempted to correct this problem by providing that alcohol imported into the state for sale would be treated the same as local liquor. Moreover, the Supreme Court held in Scott v. Donald that the Wilson Act did not authorize states to discriminate against out-of-state sellers of alcohol. But the Wilson Act also left a loophole, in that it did not allow dry states to prohibit the importation of alcohol for personal use.



The Webb-Kenyon Act was passed in 1913 to enable the states to close this remaining loophole that essentially discriminated in favor of out-of-state sellers of alcohol and undermined the states¡¦ ability to enforce their laws in dry states. Webb-Kenyon prohibited, as a matter of federal law, ¡§[t]he shipment or transportation¡¨ of alcohol into a State of intoxicating liquor that ¡§is intended, by any person interested therein, to be received, possessed, sold, or in any manner used, either in the original package or otherwise, in violation of any law of such State.¡¨ Webb-Kenyon, therefore, was an enforcement law, [...]

Continue Reading

AN ECONOMIC ANALYSIS OF THE CONSUMER BANKRUPTCY CRISIS

Law Review editors can be on the look-out for my new article, a comprehensive empirical analysis of the causes of the consumer bankruptcy crisis over the past twenty-five years. I have not yet posted the paper as a working paper (I’ll let you know when the working paper is available), but here’s the abstract for those who are interested:



ABSTRACT



Since the inception of the first permanent American bankruptcy law in 1898, the intellectual and political understanding of consumer bankruptcy has been anchored in a model that views bankruptcies as resulting from household financial distress. For much of the Twentieth Century, this “traditional model” provided a plausible explanation of bankruptcy filing patterns and clear normative policy implications. Moreover, the widespread intellectual and social consensus on the traditional model was reflected in the enactment of the current Bankruptcy Code in 1978, which rests on the intellectual foundation of the traditional model. To this day, leading bankruptcy scholars adhere to the traditional model and its implications. Over the past twenty-fiver years, however, the traditional model has broken down. During a period of unprecedented prosperity and economic stability, personal bankruptcies have soared, raising fundamental questions about the validity of the traditional model.



This article argues that there has been an unacknowledged sea-change in the economics of consumer bankruptcy in America. This article first provides a scientific analysis of the traditional model to determine whether these new trends can be accommodated within the traditional model. It focuses on the key variables offered by the traditional model as components of household financial distress: first, high levels of household indebtedness, including the influences of credit cards and home mortgages; second, unemployment and downsizing; third, divorce; and fourth, health problems, health care costs, and lack of health insurance. A scientific analysis of the evidence demonstrates that although [...]

Continue Reading

U.S HOOPS DODGES A BULLET:

Wow, did the U.S. Basketball team look terrible yesterday at the Olympics. I missed the Puerto Rico game assuming that the U.S. would waltz through as usual, but watched yesterday once I learned there was some drama to this. This team is a joke–can’t shoot, can’t pass, and can’t play team defense. Michael Wilbon’s column today reports that they missed 15 straight shots at one point–during warm-ups! They really do just dribble around and throw up off-balance runners and have no clue how to play team defense. As a fan of college ball who rarely watches the NBA, it is amazing how much the quality of fundamental basketball has declined due to all those guys bypassing college and going to the NBA. The varying styles that teams play in college, I think, would help these guys to learn how to adapt to the different styles that these international teams throw at them.



As a soccer fan, it is interesting to compare the experiences of the U.S. in soccer versus basketball. In basketball, the rest of the world has worked hard and selflessly and has gained on the spoiled, fundamentally weak U.S. team. In soccer, a youthful, talented, driven U.S. team with a chip on its shoulder keeps gaining and gaining on the rest of the world. The U.S, is now 7th in the FIFA World Rankings (ahead of England, Italy, Argentina, and Portugal, among others), and advanced beyond many traditional powers at the last World Cup.



So here’s my suggestion: (1) only send to the Olympics players who have 3 or more years of college basketball experience and have shown they can actually learn how to play a team game and are fundamentally sound, and (2) stop supporting guys like Rip Hamilton, Jason Kidd, and Shaq who refuse to play [...]

Continue Reading

WINE WARS, PART 6

As noted in Wine Wars, Part 5, the alcohol jurisprudence of the 19th Century had the peculiar effect of discriminating in favor of out-of-state alcohol production. The Supreme Court had blessed the power of states to exercise their police power over local affairs to enact state prohibition or to allow local jurisdictions to exercise a “local option” to ban the production and consumption of alcohol, including even the production for personal use. On the other hand, the Supreme Court held that under the “Original Package” doctrine interpretation of the Commerce Clause, dry states could not prohibit the delivery of alcohol in its original package from out-of-state sellers and manufacturers. Because of the Original Package doctrine, the States were unable to regulate imported alcohol until the first sale in the State or until it was removed from its original package. As a result, states could regulate saloons and bars, but could not regulate even the resale of liquor that remained in its original package.



Congress responded to this anomaly by passing the Wilson Act, 26 Stat. 313 (1890), which provides that intoxicating liquors or liquids transported into any State or remaining therein for use, consumption, sale or storage, shall, upon arrival, be subject to the laws of the State “enacted in the exercise of its police power to the same extent and in the same manner as though such liquids or liquors had been produced in such State * * *, and shall not be exempt therefrom by reason of being introduced therein in original packages or otherwise.”



The language permitting States to regulate imported liquor “to the same extent and in the same manner as though such liquids or liquors had been produced in such State or Territory,” thereby eliminated the privileged status of interstate sellers under the Leisy [...]

Continue Reading

WINE WARS, PART 5–19TH CENTURY ALCOHOL JURISPRUDENCE:

During the Nineteenth Century it was recognized that the states could exercise their police power to regulate alcoholic beverages within their borders and to prohibit the in-state manufacture and sale of alcohol. License Cases, 46 U.S. (5 How.) 504 (1847); Mugler v. Kansas, 123 U.S. 623 (1887). In the License Cases, Chief Justice Taney wrote, “If any state deems the retail and internal traffic in ardent spirits injurious to its citizens, and calculated to produce idleness, vice, or debauchery, I see nothing in the constitution of the United States to prevent it from regulating and restraining the traffic, or from prohibiting it altogether, if it thinks proper.” Several similar cases followed over the next 40 years, such that the Court in Mugler wrote, “These cases rest upon the acknowledged right of the states of the Union to control their purely internal affairs, and, in so doing, to protect the health, morals, and safety of their people by regulations that do not interfere with the execution of the powers of the general government, or violate rights secured by the constitution of the United States.” Mugler dealt with the peculiar situation of whether the state could ban the manufacture of alcohol for purely personal use, as opposed to manufacture for sale or commerce. The court said that this was a valid exercise of the state’s police power: “But by whom, or by what authority, is it to be determined whether the manufacture of particular articles of drink, either for general use or for the personal use of the maker, will injuriously affect the public? Power to determine such questions, so as to bind all, must exist somewhere; else society will be at the mercy of the few, who, regarding only their own appetites or passions, may be willing to imperil the peace [...]

Continue Reading

WINE WARS, PART 4–PURPOSE OF THE 21ST AMENDMENT:

As noted in prior posts (see archives from last week), there is no reasonable policy defense for discriminatory bans on interstate direct shipment of wine, the plain language of the 21st Amendment does not authorize discriminatory bans, and the dormant Commerce Clause does not automatically yield to other constitutional provisions, such as the 21st Amendment. This means that the effect of the 21st Amendment on the wine direct shipping debate must be found in the historical context of the 21st Amendment, which will be the focus of the next several postings on the topic.



The purpose of the 21st Amendment was to restore the constitutional and legal balance that was interrupted by the enactment of the 18th Amendment imposing federal prohibition. Under that regime, the states had the power under their general police power to regulate the distribution and sale of alcohol within their boundaries and Congress had used its Commerce power to enact several laws that eliminated a peculiar “reverse discrimination” that had been caused by several Supreme Court decisions that had forced dry states to admit imports of alcohol produced in other states. The states police power, however, did not extend to interference with interstate commerce–as it was expressly well-established that the states’ power to regulate alcohol under their police power authority did not authorize them to erect discriminatory barriers to interstate commerce. Thus, the states could impose restrictions on the manufacture, sale, and consumption of alcohol, but these rules were required to be imposed in an even-handed manner on all products regardless of state of origin.



This state police power was buttressed by the Wilson Act and Webb-Kenyon Act, which were enacted by Congress pursuant to its police power to enable dry states from being forced to accept imports from out-of-state, as was the case under the [...]

Continue Reading

TWO NEW FTC COMMISSIONERS AND THE NATIONAL DO-NOT-CALL REGISTRY:

Debbie Majoras takes over as Acting Chair of the FTC, along with Jon Leibowitz. Both are very able lawyers and people of great character, smarts, and integrity. Which will be needed, of course, to help the Commission recover from the “Zywicki interregnum.” Seriously, Majoras and Leibowitz are excellent choices to continue the amazing successes of the FTC over the past few years, under the leadership first of my new colleague Bob Pitofsky and then my old colleague Tim Muris. As recess appointees they can serve until 2005. The Post has an article today.



And a word on the National Do-Not-Call Registry, which is mentioned in the Post as being a “big government” initiative, and as such, has been criticized by many libertarians and conservatives. I believe the criticism is misplaced–the DNC registry is simply law & economics in action. It took an ambiguously defined property right (when can telemarketers call you), defined it clearly (telemarketers can call you whenever they want to), and provided a low-cost way of reallocating the property right (register on the DNC). Thus, it is nothing more than the Coase Theorem in action.



But even more, the DNC is actually the first example I can think of that illustrates a Contracts principle of an efficient minoritarian default rule. Usually contract default rules are allocated so as to create a majoritarian default rule (i.e., what the majority of people would want). Based on the registration numbers, a majority of Americans want to be free from telemarketing calls. So why not make the default rule “no calls” and make the telemarketers get your permission? Leaving aside the logistical problems (Would calling you to ask you if you want to be called count as a telemarketing call?), the minoritarian default rule is efficient because the transaction costs of reallocating [...]

Continue Reading

EXCELLENT ART EXHIBIT IF VISITING DC:

If you are visiting DC in the next few months, there is an excellent exhibit at the National Gallery of Art on “Hudson River School Visions: The Landscapes of Sanford R. Gifford.” I’ve admired the Hudson River School for some time, but will confess to be a bit of novice; nonetheless, I had never heard of Gifford previously, but really enjoyed this exhibit. There was a good review in yesterday’s Washington Post, but for some reason the Post has decided to refine its article search function so that it doesn’t ever actually find articles any more, which seems like a curious innovation.



And, of course, the baseball exhibit is still around for a few months too. [...]

Continue Reading