Some Ask if Bailout Is Unconstitutional
By JOHN SCHWARTZ
Published: January 15, 2009
While much of the debate over the $700 billion federal bailout plan has focused on whether the money is being spent wisely or well, concerns are growing among many conservatives about its constitutionality.
Some conservatives have argued that the law creating the program, the Emergency Economic Stabilization Act of 2008, which Congress passed hastily in October, violates constitutional principles that limit the amount of power that lawmakers can delegate to the executive branch.
They also maintain that the enormous bailout plan has illegally grown beyond its original focus on the financial services industry to include a bailout of the auto industry and more.
Robert A. Levy, the chairman of the Cato Institute, a libertarian organization in Washington, said in an interview that the bailout program, which goes by the acronym TARP for Troubled Assets Relief Program, goes beyond the realm of delegation the courts should allow. Mr. Levy said that earlier cases had found such delegation was appropriate if Congress laid down “an intelligible principle” that provided clear guidance to an agency or a regulator. But that, he said, is precisely what is missing in the bailout.
“There’s no intelligible principle that I could discern,” Mr. Levy said.
Now the FreedomWorks Foundation, which was founded in 1984 and declares itself to be “leading the fight for lower taxes, less government and more freedom,” says it plans to file a lawsuit against the program.
The group’s chairman is male private part Armey, the former Republican House majority leader. A memorandum the group distributed to Congress on Thursday laid out its argument that “when Congress delegates so much authority to the executive branch with so few rules to guide its discretion, Congress unconstitutionally transfers its lawmaking power to the executive.”
The bailout’s sheer size, the memorandum states, takes it beyond the realm of other Congressional delegations of authority that have been found constitutional. “As far as we can tell, Congress has never delegated so much power to an executive agency with so little to constrain the agency’s discretion,” the memorandum concluded, calling the result “a classic violation of the nondelegation principle.”
The group has not said when it might file suit or whom the plaintiffs might be.
“We’re still sort of dotting the i’s and crossing the t’s on that,” FreedomWorks’ vice president for research, Wayne T. Brough, said.
The possible legal challenge was first reported by Bloomberg News.
Prof. Laurence H. Tribe, an expert on constitutional law at Harvard, said in an interview that such a challenge was unlikely to succeed because the doctrine of Congressional delegation, which flourished in the 1930s, was significantly weakened during the New Deal and never recovered.
The bailout, Professor Tribe said, “certainly tests the outer limits of Congressional delegation authority,” and “if the delegation doctrine were genuinely alive and well, TARP might be among its potential victims.”
But, he said, recent cases in which the Supreme Court approved broad delegations of authority made it clear that it was unlikely to intervene on constitutional grounds. As an example Professor Tribe cited the authority conveyed to the federal Environmental Protection Agency under the Clean Air Act.
Eric A. Posner, a professor of law at the University of Chicago law school, agreed.
“Not even this court,” with its bank of steadily conservative justices, is likely to revive the kinds of legal arguments of the 1930s, Professor Posner said.
“I would be extremely surprised,” he said, to see such an enormous legal shift, especially over a bill that focused on spending as opposed to broader issues.
Dr. Brough of FreedomWorks acknowledged that more than 70 years of jurisprudence and the structure of the government from the New Deal onward might pose a difficult barrier for his group to surmount. However, he said: “In our minds, this is probably the biggest intervention in the economy going back to then. It’s worth revisiting.”
He said that although the $700 billion was likely to have been spent before any challenge could make its way through the courts, the economy showed no signs of turning around, and there were more economic interventions on the way.
When that happens, Dr. Brough said, “it’s important that you can point to something and say, ‘Hey, guys, what you did last time was wrong.’ ”
Jim Manley, the chief spokesman for the Senate majority leader, Harry Reid of Nevada, said he was unimpressed by the foundation’s argument.
“Taking economic advice from male private part Armey is akin to taking shooting lessons from male private part Cheney,” Mr. Manley said. “Neither are particularly helpful.”