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Friday, May 18, 2018

Loose Language in Murphy versus Deep Structure in McCulloch

Over the last couple of days, there has been an interesting pop-up symposium between Daniel Hemel, Ilya Somin, Brian Galle, and Jeffrey Schmitt over the true meaning of Murphy v. NCAA. Daniel (in the latest round) argues that the best reading of Murphy's definition of acceptable federal preemption excludes all "direct" federal prohibitions on state taxation and regulation. Brian Galle agrees, Ilya and I disagree, and Jeffrey has perhaps the best bottom line: "Murphy v. NCAA is Poorly Written and should be Narrowly Applied."

When I am confronted by loose language in a new precedent, my inclination is to sand off the rough edges and try to squeeze the new decision into the pattern of old cases in a way that conforms to common sense. Loose language in Murphy notwithstanding, Murphy should not be read to repudiate Congress' longstanding power to preempt state taxes and regulations, because that federal power of preemption rests on the same principle justifying state autonomy doctrine -- the principle that Congress does not need to commandeer state officials' services precisely because Congress can preempt state law. After the jump, I explain how a broad congressional power to preempt has, since McCulloch v, Maryland, been linked to a constitutional prohibition on Congress' commandeering state officials' services. Moreover, this tie between the pro-preemption and anti-commandeering rules makes sense. Put simply, the feds can create an alternative bureaucracy to regulate where the state bureaucrats refuse to implement federal law, but the feds cannot create an alternative citizenry to deregulate where state lawmakers refuse to waive state laws. Holdout problems, therefore, make preemption necessary (and, therefore, proper) and commandeering of state officials' services, unnecessary (and, therefore, improper).

1. What is the historical connection between the federal power to preempt state law and the prohibition on federal power to commandeer state officials?

As I argued 20 years ago, state autonomy from federal law is simply the mirror image and corollary of federal autonomy from state law. Both are creatures of this passage from McCulloch v. Maryland (emphasis added):

No trace is to be found in the Constitution of an intention to create a dependence of the Government of the Union on those of the States, for the execution of the great powers assigned to it. Its means are adequate to its ends, and on those means alone was it expected to rely for the accomplishment of its ends.

By McCulloch's reasoning, a federal bank charter (McCulloch) or federal coasting license (Gibbons v. Ogden) automatically set aside state law, because the rights conferred by the federal law could not be impeded or even affected by the existence of state law. By extension, the feds could not conscript state officials to implement federal law, because (again) federal law could not depend on the existence of state officials. That's why Justice Story concluded in Prigg v. Pennsylvania (the first "state autonomy" decision) that the 1793 Fugitive Slave Act could not compel state judges to adjudicate disputes about recovery of fugitive slaves: "the National Government, ... is bound, through its own proper departments ... to carry into effect all the rights and duties imposed upon it by the Constitution." Put another way, it cannot be necessary and proper for Congress to depend on state officials to implement federal law, because (quoting McCulloch) on [federal] means alone was [the federal government] expected to rely for the accomplishment of its ends."

Collector v. Day transformed Prigg's federal obligation into state governments' rights, and the SCOTUS in cases like United States v. Sharpnack gradually repudiated the idea that the feds were barred from delegating federal duties to the states. The "state autonomy doctrine, however, still depends implicitly on the intuition first suggested by McCulloch that the feds have broad discretion to accomplish federal ends with purely federal means. Put another way, it cannot be necessary and proper for Congress to conscript states into implementing federal law, because the normal presumption is that Congress can design systems that do not depend in any way whatsoever on state officials. Of course, if state officials could harass federal rights-holders with state law, then the independence of those purely federal systems would be compromised. The doctrine of preemption allowing the Congress to blot out completely state laws intruding into federally regulated "fields" is just a way to curb such harassment.

2. But why cannot the feds simply purchase the right to preempt from states?

Daniel has provided an interesting and important policy argument that state autonomy might increase the progressivity of taxation by requiring Congress to raise revenue with more progressive federal taxes in order to purchase state officials' cooperation. This argument has very little application, however, to the problem of preemption, because federal purchasing of states' non-interference with federal rights poses gigantic the holdout problems. (Daniel briefly discusses transaction costs of intergovernmental bargaining at 48-52, but he ignores holdout problems).

As I explained in my '98 article (pages 899-901), the premise of federal regulation is that the federal law needs to be enforced in every state in order for the benefits of the law to be achieved. Federal law is, in this sense, like large-scale infrastructure. Because half of a bridge or subway is no good at all, the land purchaser must secure the cooperation of every owner of land needed for the project in order for the project to succeed. Likewise, because a federal statute will not work well in any state unless it applies to every state, every governor and state legislature must sign on to a federal statute for that statute to succeed. Each of the sellers, therefore, has an incentive to holdout for the largest possible share of the "assembly surplus," knowing that their lot is necessary for purchaser's ultimate success.

The holdout problem is much less pressing when the feds seek to purchase the services of state or local officials, because the costs of securing a substitute for state cooperation is much lower. As I noted in my '98 piece (pages 875-886), the feds can always bypass holdout state officials either by building up federal regulatory capacity or by hiring county or municipal help. The longstanding tradition of allowing Congress to preempt state laws, therefore, has an underlying policy justification that does not apply to federal efforts to "commandeer" state officials' services.

It is a happy coincidence when longstanding legal tradition also makes good policy sense. I am optimistic that some loose language in Murphy will not break apart what does not need any fixing.

Posted by Rick Hills on May 18, 2018 at 08:00 AM | Permalink


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