The Judicial Power of the Purse: How Courts Fund National Defense in Times of Crisis 9780226771151

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The Judicial Power of the Purse

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Also in the series: after the rubicon: congress, presidents, and the politics of waging war by Douglas L. Kriner

securing approval: domestic politics and multilateral authorization for war by Terrence L. Chapman

The Judicial Power of the Purse How Courts Fund National Defense in Times of Crisis N a nc y S t a u dt

The University of Chicago Press Chicago and London

Nancy Staudt is the Class of 1940 Research Professor of Law at Northwestern University Law School. The University of Chicago Press, Chicago 60637 The University of Chicago Press, Ltd., London © 2011 by The University of Chicago All rights reserved. Published 2011 Printed in the United States of America 20  19  18  17  16  15  14  13  12  11    1  2  3  4  5 ISBN-13: 978-0-226-77112-0 (cloth) ISBN-13: 978-0-226-77114-4 (paper) ISBN-10: 0-226-77112-1 (cloth) ISBN-10: 0-226-77114-8 (paper) Library of Congress Cataloging-in-Publication Data



Staudt, Nancy.   The judicial power of the purse : how courts fund national defense in times of crisis / Nancy Staudt.     p. cm. — (Chicago series on international and domestic institutions)   ISBN-13: 978-0-226-77112-0 (cloth: alk. paper)   ISBN-10: 0-226-77112-1 (cloth: alk. paper)   ISBN-13: 978-0-226-77114-4 (pbk.: alk. paper)   ISBN-10: 0-226-77114-8 (pbk.: alk. paper)  1. Judicial power—Economic aspects—United States.  2. War and emergency legislation—Economic aspects—United States.  3. Judge-made law—Economic aspects—United States.  4. United States. Supreme Court—Powers and duties—Economic aspects.  5. Fiscal policy—United States.  I. Title.  II. Series: Chicago series on international and domestic institutions.   KF6051.S73 2011   347.73'12—dc22 2010038491 a The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences—Permanence of Paper for Printed Library Materials, ANSI Z39.48-1992.

The Executive . . . holds the sword . . . the legislature . . . commands the purse. The judiciary, on the contrary, has no influence over either the sword or the purse. . . . alexander hamilton, The Federalist No. 78

c o ntents

List of Tables / viii List of Figures / ix Acknowledgments / xi intr o d u cti o n 

One

1

/ Federal Judges’ Budgetary Powers / 19

T w o / Pulling the Purse Strings: An Information Theory of Crisis Jurisprudence / 51

/ Mobilizing Judicial Resources: The Information Theory in Action / 75

T hree

Four

Five

/ The Judicial Understanding of Costly Foreign Policy Events / 109

/ The Next Stop: The Information Theory in the Domestic Context / 131 C o ncl u si o n 

157

Notes / 177 Case Index / 191 Subject Index / 193

t a bles

I.1 The financial costs of major U.S. wartime activity since 1900 / 13 1.1 Judicial decisions undercut the excise tax on telephone services / 25 1.2 Amounts saved and collected through DOJ civil litigation efforts over a five-year window / 33 1.3 Bounds of judicial fiscal power / 46 2.1 Elected branches’ cues and judicial conclusions as to desired level of defense / 71 3.1 Summary of wartime periods, elected branches’ cues, and expected judicial reactions / 85 3.2 The effects of wars and defense spending on Supreme Court taxation votes / 91 3.3 The effects of wars and defense spending on Supreme Court taxation outcomes / 93 3.4 Judicial political preferences and Supreme Court taxation votes / 95 3.5 Supreme Court votes and outcomes in taxation: Robustness testing / 96 3.6 The effects of wars and defense spending on appellate court taxation votes and outcomes / 99 3.7 The effects of wars and defense spending on Supreme Court contract and tort cases / 103 3.8 The effects of wars and defense spending on Supreme Court civil rights and liberties cases / 105 5.1 Supreme Court votes and outcomes in taxation / 147 5.2 Supreme Court votes and outcomes in taxation in typical cycles by political party / 150 5.3 Supreme Court votes and outcomes in taxation in atypical cycles by political party / 151

fi g u res

I.1 Defense outlays, 1910–2010 / 14 1.1 Value of taxation controversies in federal court / 35 1.2 Upper and lower bounds of judicial fiscal power in billions of $2009 / 45 1.3 Possible upper bound values of tax cases in $2009 and as a percent of GDP, total outlays, and defense spending / 47 1.4 Upper and lower bound value of tax cases in billions of $2009 and as a percent of GDP, total outlays, and defense spending / 49 2.1 Judicial “budget constraint” and the optimal bundle of goods / 55 2.2 Congress and the president’s budget constraint and the optimal bundle of goods / 56 3.1 Frequency of taxation cases on Supreme Court and appellate court dockets / 78 3.2 Supreme Court and appellate court votes and outcomes juxtaposed with defense spending / 79 5.1 U.S. economy cycles through contractions and expansions / 137

Ackn o wled g ments

This book owes a debt to more than a few people. William Howell, my friend, advisor, and intellectual compatriot, helped shape this project from start to finish. His interest in wartime issues and interbranch dynamics is contagious, and his constant enthusiasm for the subject a true intellectual motivator. Bill Landes is an unbelievably fast and insightful reader; as an economist he continually highlighted portions of the manuscript that could be improved by drawing on fundamental economic concepts and ideas. Duncan Snidal understood the core of the project after just a short conversation and helped to identify connections with extant political science literatures that otherwise may have gone unexplored. Tyler VanderWeele offered fantastic insights with respect to the empirical component of the project; with his help I learned and applied new methodologies that will continue to serve well into future projects. My colleague Marty Redish, an expert in law and constitutional matters, was the first to read the first three chapters and offered countless and thoughtful suggestions for improving and clarifying my ideas. Emerson Tiller, Ezra Friedman, Jide Nzelibe, and Eric Posner offered wonderful insights that pushed the project along. I am also indebted to the group of sixteen scholars who showed up in Chicago for a two-day roundtable discussion of the manuscript, and to the workshop participants at the University of Chicago Harris School of Public Policy, Boston College Law School, University at Buffalo School of Law, Indiana Law School, Northwestern Law School, Texas Law School, and various conferences, all of whom offered useful comments and ideas on various chapters along the way. Various current and former government officials, including Nathan Hochman, Ed Kleinbard, Edwin Meese, and Ted Olson, agreed to be interviewed for this

xii / Acknowledgments

book. Their thoughts and ideas are weaved throughout the chapters—immeasurably improving the substance. David Pervin is an editor-extraordinaire. He, and the reviewers he chose, offered insights and proposed revisions that improved the book in countless and important ways. Without David, the book would have been less fun to write and, more important, a lot less fun to read. Lisa Wehrle and Francesca Celestre also provided fantastic copyediting and cite-checking assistance. Diane Whitmore Schanzenbach, April Wu, Haeil Jung, and my law school dean, David Van Zandt, offered enormous support along the way; in fact, without DVZ’s encouragement and backing, I am certain this book would not exist. Finally, my biggest supporter, my best friend, and the most patient person I know, Lee Epstein, must be thanked. Ironically, she refused to read the manuscript and routinely declined to discuss methods of any sort. Instead, she made sure of two things: the manuscript (1) would be entirely my own, and (2) would not interfere with hiking, fiction reading, or dining at high and low restaurants all over Chicago.

Introduction

Two months before Germany surrendered, six months before the United States dropped atomic bombs on Hiroshima and Nagasaki, and well before Congress repealed the World War II revenue laws, the U.S. Supreme Court heard oral arguments in the case Commissioner v. Court Holding Co.1 This 1945 controversy involved a three-way property transaction in which the Court Holding Company distributed real estate to its shareholders as a dividend; the shareholders then immediately sold the property to a predetermined third party. The evidence unambiguously indicated that the shareholders were involved in the deal for one reason: to enable Court Holding to avoid the status of seller, thereby steering clear of the high federal taxes imposed on the sale of corporate assets. Justice Black, writing for a unanimous Court, held in favor of the government, noting that “[t]o permit the true nature of a transaction to be disguised by mere formalisms, which exist solely to alter tax liabilities, would seriously impair the effective administration of the tax policies of Congress.”2 Four years later, in 1949, and six months before North Korea’s surprise attack on the Republic of South Korea, the Court heard oral arguments in United States v. Cumberland Public Service Co.,3 a case that involved remarkably similar facts to those in Court Holding. A corporation, its shareholders, and a third party engaged in a three-way property transaction undertaken to enable the Cumberland Public Service Company to sell its property while avoiding the negative tax consequences associated with the sales of corporate-owned assets. Justice Black, again writing for a unanimous Court,4 noted the transaction looked “shadowy and artificial,”5 but this time rendered a decision in favor of the taxpayer, thereby allowing Cumberland to avoid paying taxes. The Court acknowledged the “oddities in [the] tax

 / Introduction

consequences,”6 but justified the decision on the grounds that Congress had not enacted legislation specifically barring the use of shareholders as conduits to evade corporate taxes, and, moreover, the lower court tribunals themselves had reached a pro-government result in Court Holding and one that favored the taxpayer in Cumberland. Scholars, courts, and commentators have attempted to reconcile the two cases, but conventional wisdom holds that the Supreme Court did nothing more than foster confusion and incoherence in an important area of the law. After all, the two cases involved identical legal provisions and virtually identical facts and circumstances, yet the justices unanimously agreed to issue divergent outcomes. Moreover, changes on the bench in the interim period were minimal: The Court had eight Democratic appointees in 1945 and nine Democratic appointees in 1949. In short, while the justices decided Cumberland to “clear up doubts arising out of the Court Holding case,”7 they seemed to do just the opposite. This book argues that while Court Holding and Cumberland appear confusing and irreconcilable on their face, the cases are in fact wholly predicable if important factors are taken into account, namely the existence of wartime conditions. The justices considered Court Holding at a time when the United States was fighting major wars against enemy states on several fronts, but Cumberland emerged after World War II had dissolved into peacetime. Why would wartime emergencies cause Supreme Court justices to transform their decision-making calculus in a manner that favors the government in the taxation cases that appeared on the Court’s docket? Because in the words of President Roosevelt, and quoted by the Court itself: “War costs money.”8 In light of the massive and unavoidable financial costs that emerge in times of foreign policy crises, the justices have suggested in various ways and in various cases that “[i]n total war it is necessary that a civilian make sacrifices of his property and profits with at least the same fortitude as that with which a drafted soldier makes his traditional sacrifices of comfort, security and life itself.”9 Indeed, the Court has gone so far as to suggest that it has a role to play in raising the revenue necessary to meet the nation’s wartime needs. In a dispute involving World War II taxes, the justices noted, the country was “faced with revenue needs and a tax program of a magnitude unthought of in modern times, and we all realize it is necessary to raise every dollar of additional revenue that can be raised without seriously disturbing or shattering our national economy.”10 The justices, of course, are not in a position to adopt revenue-raising laws or directly seize property for the nation’s war effort, but they are able to render decisions in a manner that systematically favors the government in

Introduction / 

cases and controversies that implicate the fiscal pie in times of war, thereby indirectly providing economic assistance to the nation in times of need. This book aims to convince readers that the justices use cases such as Court Holding and Cumberland to advance not only their own but also the nation’s goals—providing access to economic resources, when necessary, to increase the probability of success on the battlefield. In short, the thesis of the book is that Supreme Court justices (as well as lower federal court judges) hold an implicit power of the purse, a power that can be used to realize extralegal and budget-related objectives. Not surprisingly, quite a few scholars have documented the manner in which Congress and the president have dealt with fiscal issues in wartime emergencies,11 but the extant literature is virtually silent on the financial role of the federal courts in times of crises. Students of the judiciary, to be sure, have investigated legal challenges to emergency funding measures, such as property seizures, banking regulations, and excess profits taxes, and have noted that courtroom disputes enable judges both to support and derail economic policy.12 But the literature has failed to explore the possibility that judges are in a position to engage in revenue raising and spending polices in their own right. More to the point, scholars have not identified federal judges as fiscal actors positioned to influence the size and use of the federal budget. A handful of scholars in both law and political science have explored federal judges’ ability to affect state and local funding decisions, and more than thirty years ago, the legal scholar Gerald Frug aptly characterized a series of federal judicial mandates as an exercise of the “judicial power of the purse” given that courts were able to force state and local governments to spend public funds on certain activities, irrespective of their own preferences or those of their constituents.13 The title of this book, of course, derives from Frug’s early and important insight vis-à-vis judicial powers. The substance of this study, however, moves far beyond Frug’s descriptive point and demonstrates that judges are able to both raise and spend federal monies irrespective of the preferences of the other two branches of government. Federal judges, in short may not have the formal power of the purse (it lies with Congress), but, as evidenced in the chapters that follow, they nevertheless can—and do—systematically exercise control over a surprising portion of the federal budget. Uncovering and describing federal judges’ roles in the national budgetary process charts new territory, but it also raises two important questions: Do judges have any penchant to employ their fiscal authority in times of crisis, thereby increasing the nation’s ability to adequately respond to perceived threats? If so, do judges in fact use their budgetary powers differently

 / Introduction

in times of crisis than in periods of relative calm? This study seeks to answer these inquiries through the lens of emergencies brought about by military threats or attacks from abroad. Stated most directly, the book sets aside the interesting questions that emerge in the context of domestic emergencies and focuses on the exercise of judicial purse powers in times of foreign policy crises. Foreign policy crises, as defined here, are emergencies that raise national defense issues associated with military safety and security, but not issues that implicate nonmilitary foreign aid, diplomatic and trade relationships, and so forth.14

The Plan of the Book and Its Place in the Extant Literature To investigate if, how, and when judges use their fiscal powers, this book sets forth an information theory of crisis jurisprudence, a theory that posits rational judges, like individuals and policymakers generally, prefer periods of safety and security to those plagued by danger and chaos. Given this preference, judges are likely to render decisions in the cases and controversies that show up on their dockets in a manner calculated to keep the nation safe. Preparing and readying the nation for possible engagement in military hostilities is an extremely costly endeavor, and thus the information theory argues that instrumentally rational judges will seek to enable the nation to fend off foreign threats by strategically using the judicial power of the purse. Judges, of course, are experts in legal and constitutional matters, and not foreign policy matters. Accordingly, they will have difficulty identifying foreign policy crises, yet they will want to deploy their decision-making powers to help fund national defense in dangerous times. Consequently, the information theory posits that judges will take judicial notice, perhaps sub silencio, of credible cues emerging from the elected branches of government that signal potential foreign policy crises. These cues can take a range of different forms, such as a congressional declaration of war, a major troop deployment by the executive branch, or the conscription of men into the army in preparation for military engagement. The important theoretical point made below is not the specific cue relied on, but the idea that judges will look to experts to determine the existence of a foreign policy crisis, not to their own perceived expertise or to that of the parties litigating before them. The cues received by the courts will generally contain consistent messages (that is, both Congress and the president will take action indicating a crisis either exists or does not exist), and in these circumstances judges will have no difficulty discerning the presence or absence of a foreign policy

Introduction / 

crisis. It is possible, however, that the elected branches will convey contradictory messages: Congress may refuse to support the president’s decision to deploy troops by withholding funds or through some other formal and public mechanism, suggesting the two bodies of government have diverging views on whether a foreign policy crisis is at hand. In this context, judges must assess the credibility of the messages and, in effect, side with one branch or the other on the question. For a number of reasons outlined below, including the long-standing judicial deference to legislative actions in times of foreign policy crises—but not necessarily to those undertaken by the executive branch—the information theory of crisis jurisprudence posits that judges will often trust cues emanating from Congress more than those sent by the president when the two branches are at odds and when the nation’s finances are implicated. The president, as the nation’s commander-in-chief, certainly has valuable information and expertise in the foreign policy context. The political scientist Aaron Wildavsky proposed the “two presidencies thesis” more than forty years ago, arguing that policymakers systematically support the executive branch in the foreign policy arena given the president’s foreign policy information, knowledge, and experience, but not in the domestic context where the two branches are assumed to be on equal footing.15 More recently, the legal scholars Eric Posner and Adrian Vermeule have focused specifically on federal courts and have made a strong case for federal judicial deference to the president’s foreign policy choices on grounds similar to Wildavsky’s two presidencies thesis.16 The information theory presented and empirically investigated below, however, is not in conflict with the idea that judges and policymakers should or do privilege presidential cues on specific wartime policies because it is a theory that addresses judges’ use of their budgetary powers in periods of crises more generally—not their decisions with respect to specific executive branch policy choices. Indeed, the cases and controversies that allow judges to operate as fiscal agents often do not involve military matters at all, but routine disputes in taxation and other financial areas of the law. The information theory posits that court-induced financial assistance is apt to emerge when Congress and the president send consis­­­­ tent cues indicating that the nation’s safety and security are threatened. If the president is supportive of increased levels of defense but Congress is silent or even opposed to military action, courts are unlikely to offer a funding boost on the grounds that military success does not depend on it. The information theory of crisis jurisprudence does not imply that when federal judges choose to act, they will always attempt to loosen budgetary

 / Introduction

constraints in an effort to enable the nation to consume greater levels of defense. Rather this new understanding of the courts posits that judges will deploy the judicial power of the purse both negatively and positively. More specifically, judges will support the government in times of crisis by rendering decisions that expand the fisc when they believe extant safety and security are inadequate and thus greater levels of defense are necessary to protect the nation’s interests. But if judges receive trustworthy cues indicating that current policy has gone astray—that military activities have become excessive—courts will seek to tighten the fisc by siding with private parties in litigation and against the government, thereby forcing the latter to make unwanted payouts and limiting the amount of public funds available for continued military endeavors. In these circumstances, judges will seek to shrink the size of the fiscal pie to promote their desire for the optimal level of defense spending. To see why judges are likely to adopt this strategy, consider a situation in which Congress formally repeals its prior support for a president’s wartime activities and reduces funds available for defense generally. In this scenario, judges are likely to employ their powers in a manner also intended to squeeze the budget and, in the process, implement judicial incentives for the executive branch to reconsider its course of action and possibly reduce the level of military activity perceived to be excessive. The information theory, in short, focuses on the trade-off that judges routinely face between “all other goods” (such as law, policy, institutional stability, personal legacy, and so forth) and “safety and security.” Judges seek the ideal level of defense, but must rely on the cues and signals emanating from the elected branches of government to determine whether extant levels are too high or too low. When they receive credible information that defense levels are insufficient to keep the nation safe, they will trade off all other goods for more defense; if they receive cues indicating defense levels have become disproportionate to the amount needed for safety and security, they will decide cases in a manner that enables greater consumption of the other desired goods, such as law and ideology. Absent such cues, judges will issue opinions that reflect their belief that current defense levels are optimal and thus they need not increase nor shrink the size of the budget: The ideal bundle of goods is already being consumed. This study builds on the extant literature in that it conceptualizes judges as instrumentally rational actors seeking to implement individual preferences over a range of goods, but it also presents a new understanding of the courts. Judicial scholars have long theorized and investigated the role of micro-level factors, such as the facts of a case, specific laws, and judicial

Introduction / 

political preferences (identified as “all other goods” above). Far less attention has been paid to macro-level factors in judicial decision making, and no study has provided an explicit model of judges’ willingness to use their budgetary authority in times of national danger. To be sure, legal and political science researchers have not entirely ignored macro-level factors and their effects on the judicial decision-making process. In one recent contribution to the literature, the legal scholar Barry Friedman has noted that judges account for the political and social environments when rendering decisions on important issues to maintain a certain level of popularity and public acceptance.17 As well, Robert Erikson, Michael MacKuen, and James Stimson have investigated the effects of political and economic trends on courts by devising a measure that simultaneously incorporates features of both.18 This study on the judicial power of the purse, unlike the existing literature, however, posits that judges account for the broader environment not to maintain legitimacy and popular support—but rather to shape national policy in ways that accord with their own (and the nation’s) preferences on safety and security. More on point are the studies that investigate the effects of macro-level events, such as foreign policy crises, on federal courts. Numerous legal and political science researchers have explored these effects, including Lee Epstein, Daniel Ho, Gary King, and Jeffrey Segal; Richard Posner; Eric Posner and Adrian Vermeule; Bruce Ackerman; Mark Tushnet; and Justice William Rehnquist.19 All have made important and noteworthy contributions to the literature. Because each of these studies, as well as many others, advances our understanding of judging in times of foreign policy crisis, it is worthwhile to investigate briefly just how this book builds on and extends this literature. First, the chief similarities: The contributions to the literature just listed, like this book, explore the reality that foreign policy crises exert an influence on the judicial decision-making process. Moreover, the existing studies, taken together, like this book, present a range of both qualitative and quantitative evidence, documenting how, why, and when judges are likely to privilege the views of the federal government vis-à-vis private parties during ongoing military crises. These commonalities exist, but important differences also distinguish this book from existing studies. First and foremost, scholars investigating judging in times of foreign policy crisis, including those listed above, have explored whether judges do or should decide civil rights and liberties cases differently in times of peace than in periods when the nation is in peril. Put differently, scholars have

 / Introduction

devoted their time and energy to understanding what might be labeled the judicial policing hand—they investigate whether judges should or do make trade-offs between individual rights and liberties, on the one hand, and law and order, on the other, in times of crisis. This study investigates the judicial fiscal hand to identify and understand judges’ financial role in fending off military threats from abroad. Scholars have entirely ignored the idea that judges operate as federal fiscal actors seeking to assure the country consumes the optimal level of defense, thereby assuring necessary trade-offs between safety and security and “all other goods.” Second, this book develops a theoretical basis for why we should expect judges to respond to foreign policy crises, and perhaps more importantly, why judges will rationally employ their decision-making power as a doubleedged sword when pursuing their preferences. To be sure, hints of the information theory of crisis jurisprudence presented here have emerged in the literature, but scholars have all focused on one side or the other of the judicial sword, or on normative rather than positive considerations. No scholar to date has attempted to flesh out a complete theory of the federal courts in times of foreign policy crises, nor have scholars attempted to clarify just how such a theory is able to accommodate and build on the long-standing court scholarship focusing on micro-level factors, such as facts, law, and judicial ideology. From a theoretical perspective, then, this book seeks both to organize and advance our understanding of judging in periods of crises and in times of peace. Third, this book investigates the empirical implications of the information theory with data that is quite a bit different from that used in the extant literature. With few exceptions,20 the literature has focused almost exclusively on judicial decision making at the apex of the judicial hierarchy: the U.S. Supreme Court. This study, by contrast, investigates the Supreme Court as well as the lower federal courts in times of crisis. While the Supreme Court is arguably the most important body in the judicial system given that the justices nearly always resolve issues of national significance and at the same time render opinions with great precedential value, lower federal courts also undeniably play a key role in judicial decision making given the large number of decisions they render every year and their ability to flout Supreme Court doctrine, at least at the margin. Moreover, existing studies tend to focus on narrow time frames or unique periods in court history, whereas this study investigates thousands of judicial decisions rendered both by the Supreme Court from 1900–2010 and federal appellate courts from 1925–2002, enabling far more detailed analyses of military crises than before attempted.21

Introduction / 

Why Investigate the Information Theory of Crisis Jurisprudence through the Narrow Lens of Foreign Policy Crises? Why it is useful to set forth and investigate an information theory of crisis jurisprudence through the lens of foreign policy crises, and not crises more generally? In short, why not conduct a far more expansive and comprehensive study with military crises as just one component of a larger investigation? To answer to these questions, consider the following. A large extant literature investigates how the federal government—all three branches—responds to foreign policy crises, but no study has sought to identify the judicial power of the purse or to document just how these financial powers are used to facilitate the nation’s military success in times of crisis. This book, then, fills a surprising and unfortunate gap in the literature and, in doing so, aims not only to expand our current understanding of judicial preferences, but also to illustrate the manner in which judges interact with and possibly influence the other two branches of government. This latter insight is important: Scholars have generally sought to identify the means by which Congress and the president seek to influence judicial decision making, but this study flips the causal arrow, demonstrating that judges will seek to influence the policymaking that transpires in the elected branches of government. Whether judges successfully transform the policymaking choices of Congress and the president is an empirical question that is not addressed here; the point is that judges will act as if they are able to exert such influence. The information theory of crisis jurisprudence can (and should and will) be investigated in a range of different crisis contexts, but it is worthwhile to flesh out and scrutinize this new theory in the milieu in which it is likely to have the greatest purchase: foreign policy crises. These crises are truly national events, posing a threat to the country’s interests and, perhaps, its very survival, while at the same time inflicting considerable costs on the public fisc. For these reasons, military crises involving high-risk situations are likely to take priority in policymaking circles, perhaps, in part, because the incidents tend to have homogenous effects throughout the nation in the sense that we have never observed one part of the country at war while another is at peace. Due to this experiential homogeneity, it is reasonable to expect that these crises will also have largely homogenous effects on judges all around the nation and up and down the judicial hierarchy, if they are affected at all. Of course, the local nature of military casualties and defense industry profits may lead to larger (or smaller) effects on courts located in different regions of the country, but these factors do not change the underlying

10 / Introduction

idea that a major military event will affect court outcomes throughout the country given the high stakes in every jurisdiction. Issues involving domestic crises, such as natural disasters, crime waves, major economic downturns, and other types of macro-level events, by contrast, are more likely to be contained to relatively narrow regions. In fact, data suggest that regional differences in many of these circumstances persist over time, and that different localities (even within the same state) often experience events quite a bit differently from the national average. To give just one example, hurricanes are far more likely to strike in the eastern and middle parts of the southern United States; they are unlikely to affect the Pacific Northwest. Local natural disasters such as hurricanes, then, are unlikely to exert a strong influence on the average federal judge, who will have very little—or no—information about the event or its costs to the federal budget. Whether the information theory, or a macro theory of the court more generally, could accommodate such issues is intriguing and certainly worthy of future consideration, but these issues will be investigated in a follow-up project rather than here. The notion that foreign policy crises pose distinct and all-encompassing threats to the nation as whole does not, of course, originate with this study. Judges themselves have suggested as much. In Yakus v. United States,22 for example, the Supreme Court considered a dispute involving wartime price controls implemented in the 1940s. The justices issued a series of opinions in Yakus implying that the ongoing wartime crisis was reason enough to sanction the new laws—even if a different view would likely prevail in peacetime. In the words of Justice Rutledge, who questioned the law’s procedural aspects but not the government’s substantive decision on price controls: Judged by normal peacetime standards, over-all nationwide price control hardly has accepted place in our institutions. . . . Whether control so extensive might be upheld in some emergency not created by war need not now be decided. That it can be supported in the present circumstances and for the declared purposes there can be no doubt.23

The justices are not alone in their view that foreign policy crises such as wars create unique circumstances warranting extraordinary federal actions, often at great expense to the budget. As the legal and political science scholar Edward Corwin notes in his well-known work Total War and the Constitution, “war, public war, total war, is still, no doubt, the emergency par excellence,”24 and this, in turn, justifies government intervention of a sort and

Introduction / 11

level unseen, and perhaps, undesirable in times of peace, as suggested by the Yakus Court. Consider other views also emanating from the political science literature. A prevailing view in the realist school of international relations posits that because the international system is plagued by a great level of competition and danger, a nation’s top priority is (and must be) its security and survival.25 This preference leads many realists to make strong claims about foreign versus domestic policymaking: While the latter is rife with conflicting viewpoints, partisan politics, and regional disagreements, the former is characterized by unanimity and accord given the high stakes involved.26 Scholars subscribing to this view of realism have investigated these contrasting dynamics in the context of Congress and have noted that in times of foreign policy crises, legislators rationally offer bipartisan support for the president to assure a successful resolution of the issues, thereby facilitating national safety and security. While a number of recent scholars, including William Howell and Jon Pevehouse, David Rohde, and John Tierney, convincingly challenge the realists’ assertion that partisan politics dissolve in times of crisis,27 no scholar has questioned the underlying claim that resolving foreign policy crises is a top priority in policymaking circles given the risks involved. Similarly, this study of the federal courts posits that foreign and military crises weigh heavily on the judicial mind given the severe national consequences of failure; to disregard crises is to jeopardize not only the well-being of the judges and the judiciary, but also the whole nation. Similarly, the idea underlying the “rally-around-the-flag effect” is linked to the unique nature of international and foreign policy events. Rally events, as defined by the political scientist John Mueller, are specific, dramatic, and sharply focused international events involving the United States, and the president in particular, that lead to sudden and substantial increases in presidential approval ratings.28 Rally events that have sparked notable and increased popularity ratings include the onset of the Korean War, the Iranian hostage crisis, and 9/11. The precise cause of the rally-around-the-flag effect is disputed; some argue these events are associated with patriotic feelings that Americans experience in times of danger, while others argue they are linked to political leaders’ willingness to refrain from publicly criticizing the commander-in-chief during an ongoing foreign crisis. Irrespective of the underlying cause, there is no dispute that international and foreign policy crises are unique incidents in American history involving high-stake issues that generate popular views unobserved in times of domestic crises or other macro-level events. Similarly, this study expects federal judges to respond to foreign policy crises in a way that differs from the decision making that

12 / Introduction

transpires in periods of domestic disorder and peacetime generally—they will decide cases in a manner that enables the nation to purchase the preferred levels of defense. There is one final reason why foreign policy crises are well suited for an initial investigation of the effects of macro-level events on courts—they impose massive costs on the nation, and thus it is reasonable to expect that judges will deploy their fiscal authority in a manner intended to aid the nation’s financial needs in these periods. While many of the costs are incommensurable and difficult to estimate, such as the suppression of individual rights and liberties, human suffering, and death, other costs, such as direct expenditures on military equipment, training, and deployment, can be calculated with some precision. Since the turn of the twentieth century, for example, U.S. policymakers have spent nearly $12,700,000 billion defending the nation from military threats abroad, an average of $115,000 billion every year (all numbers here and below are in 2009 dollars unless indicated otherwise). As the legal academics Steven Bank, Kirk Stark, and Joseph Thorndike have noted in their excellent history of fiscal policymaking in times of emergency: Wartime activities engender sheer necessity. “There is simply no other government activity that requires as much revenue,” the authors argue, “as fighting a war. Success on the battlefield requires economic resources, [and the nation must find a way] to marshal those resources.”29 These military costs, of course, have not been constant throughout all time periods, an empirical fact that will play an important role in both the theory and empirical findings presented below. In the first half of the twentieth century, defense outlays spiked in both world wars and then returned to near-peacetime levels at the end of each foreign policy crisis. Between 1900 and 1916, for example, the government spent an average of $266 million on military activities, but mean spending in 1917 and 1918 was $3,383 million, the years when the nation was involved in World War I. Similarly, the government invested $1,029 million on average between 1920 and 1940, but incurred roughly $52,180 million in defense operation expenses on average every year during World War II. This defense expenditure cycle—from high levels in times of foreign crises to low levels during peacetime and then back again—was the norm up through World War II, but after that time the cycle began to fade as military costs remained high and relatively constant in all years. Beginning with the cold war period, policymakers chose to devote substantial funds to military activities in all periods at least in part to assure the nation’s readiness to respond quickly to military hostilities as they emerged. Table I.1 depicts the costs incurred in the years the United States was

Introduction / 13 Table I.1  The financial costs of major U.S. wartime activity since 1900 War World War I World War II Korean War Vietnam War Gulf War War on Terror Total Costs

Period of Active U.S. Involvement

Cost in Billions of $2009 U.S.

1917–1919 1941–1945 1950–1953 1964–1972 1990–1991 2001–present

$253 $4,114 $320 $686 $96 $859 $6,328

Source: Stephen Daggett, Cong. Research Serv., RS22926, Cost of Major U.S. Wars, (July 2008), available at http://www.history.navy.mil/library/online/costs_of_major_us_%20wars.htm.

involved in “major wars” throughout the twentieth and early twenty-first centuries, totaling more than $6 trillion above what the nation would have incurred in military expenses absent a foreign policy crisis. World War II cost the nation more than $4 trillion and is, by far, the most expensive foreign policy crisis to date. The Iraq and Afghanistan Wars have led the government to spend close to $1 trillion in public funds; the other wars involved expenditures of far less monies: $686 billion (Vietnam War), $253 billion (World War I), $320 billion (Korean War), and $96 billion (Gulf War). Table I.1 informs on the cost of major wars, but it is misleading in two important respects. First, when the nation employs the military draft, as it did during the two world wars and the Korean and Vietnam Wars, recruits are paid below-market wages, and thus the costs depicted in table I.1 indicate actual outlays but substantially understate social costs. Second, the table ignores defense costs incurred by the nation in the absence of major military deployments. Accordingly, figure I.1 presents military spending in real dollars and as a proportion of the GDP, which addresses the second problem but not the first. The solid line in the figure depicts outlays in billions of 2009 dollars and is linked to the y-axis on the left-hand side of the figure; the dotted line presents defense outlays as a proportion of the GDP and is linked to the y-axis on the right-hand side of the figure. Figure I.1 suggests that major wars are often, but not always, correlated with high levels of defense expenditures. World War I, World II, the Korean War, the Vietnam War, and the Iraq/Afghanistan Wars all led to spikes in defense spending as represented in constant dollars and as portions of the GDP. The spike in spending correlated with the Vietnam War, however, did not take place until the late 1960s, notwithstanding the fact that the war is widely believed to have begun as early as 1963 when Congress passed the Tonkin Gulf Resolution supporting President Johnson’s military activities

14 / Introduction

I.1.  Defense outlays, 1910–2010 Note: Solid line represents total defense outlays in billion of 2009 dollars and dashed line depicts defense spending as percent of GDP.

in Indochina; perhaps even more notable, real defense spending decreased several times during this wartime period, as did defense spending as a proportion of GDP—suggesting that neither Congress nor the president were prioritizing the Vietnam War in their appropriations and spending decisions. Moreover, spending increased notably in the 1980s during a period of heightened tension and perceived international conflict, and yet there were no major troop deployments on the scale of those observed during the wartime periods. Finally, real defense spending increased sharply in the early twentieth century and has continued to increase throughout the Iraq/ Afghanistan Wars, but has increased only a small amount vis-à-vis the GDP during this time period. While both figure I.1 and table I.1 indicate that defense activities are costly, the nation also spends substantial monies responding to various other macro-level events, such as natural disasters, economic downturns, crime, immigration, and so forth. Unlike defense activities, however, these expenditures are not widely and routinely publicized in the media, extensively discussed in academic scholarship, or analyzed as unique budgetary items in policymaking circles. Indeed, identifying the costs of major military crises, and defense spending generally, is an easy task given that the costs are listed separately in the annual federal budget, which the government makes

Introduction / 15

widely available in print publications and on Internet sites. The federal costs associated with domestic crises and other macro-level events, by contrast, are not aggregated nor estimated in any single location and, with few exceptions, are virtually impossible to identify with any precision given that agency protocols do not require these costs to be singled out in the budget reporting process. These differences in budgeting practices, again, increase the likelihood that federal judges will strategically employ their budgetary powers to help the nation fund emergency costs brought about by foreign policy crises but not other types of crises or large-scale events that affect the nation.

The Organization of the Book Chapter 1 describes the judicial power of the purse from the perspective of each branch of government. With the help of published data and interviews with various current and former government officials, the chapter establishes the possible upper and lower bound of judicial fiscal power, thereby setting the groundwork for an investigation of how this budgetary authority is exercised in times of foreign policy crises. Chapter 2 sets forth the information theory of crisis jurisprudence, positing that judges wield their fiscal power as a double-edged sword with the goal of assuring the nation consumes the preferred level of defense. When military spending is perceived to be insufficient (perhaps due to unforeseen military threats from abroad), judges will employ their purse powers with the intent of expanding the size of the fisc and enabling consumption of greater levels of defense; when judges perceive defense spending to be excessive, they will seek to pinch the fisc in an effort to reduce the military activities undertaken by Congress and the president. Having neither information nor expertise with respect to foreign policy issues, judges will have difficulty determining whether they (and the nation) should trade off consumption of “all other goods” for greater levels of defense. For this reason, they will rely on cues and signals emanating from the elected branches. When these cues are consistent, judges will have no difficulty discerning whether the nation needs more or less defense to maintain the optimal level of safety and security, but when Congress and the president send conflicting messages, judges must side with one branch over the other on the issue at hand. The information theory hypothesizes that judges will often side with Congress rather than with the president when it comes to decision making in times of crisis for a number of reasons, which are suggested above and explored in detail below.

16 / Introduction

Chapter 3 conducts a large-N quantitative study of judicial decision making and finds substantial support for the information theory of crisis jurisprudence in the context of the Supreme Court but not the lower federal appellate courts. More specifically, the findings show that during World Wars I and II, the justices systematically sought to augment the size of the fisc, but after that period, judicial strategies became substantially more complex. Major troop deployments led the justices to markedly disfavor the government throughout the cold war period, yet during this same time the justices favored the government if defense spending increased. These twin findings in the cold war era suggest that the justices were willing to aid the nation financially when the elected branches of government devoted more of the nation’s financial resources to its military activities, but when Congress and the president failed to identify defense as a priority in their spending choices, the Court was apt to refuse to help fund the military efforts. Indeed, it tended to tighten the fisc as a means to encourage the government to reconsider its foreign policy tactics. Chapter 4 turns to qualitative evidence found in judicial opinions, courtroom filings, and law clerks’ memoranda and uncovers data that substantially mirror the quantitative findings presented in chapter 3. The qualitative evidence indicates that judges not only are aware of the high financial costs of war but also eagerly use their decision-making powers to enable the nation to purchase increasing levels of defense, but only when it appears necessary for success on the battlefield. The information theory of crisis jurisprudence presented here, along with its empirical implications, establish the groundwork for additional research exploring the effects of crises on federal courts in contexts well beyond foreign policy emergencies. These crises might include economic, health or crime issues, or natural disasters, but all would involve events beyond the control of either the litigants or the judges. The book, in short, invites further investigation of how national macro-level issues outside the foreign policy context affect courts. To explore this possibility, chapter 5 conducts an out-of-sample study of decision making in one domestic context—economic policymaking. This preliminary study finds the information theory, with minor adjustments, substantially aids in forecasting how and why judges respond to macroeconomic trends. The theory suggests, and the data confirm, that Supreme Court justices perceive the state of the economy as a credible cue of federal policymakers’ ability to manage the nation’s resources: When the economy is doing well, the justices tend to support the government in the decision-making process; but as the economy turns sour this support evaporates, and the justices begin issuing increased levels of

Introduction / 17

antigovernment decisions in financial cases. This “judicial business cycle” corresponds to the typical macroeconomic upturns and downturns, but with the onset of a serious economic contraction—such as the Great Depression in the 1930s—the justices are more likely to collaborate with federal policymakers rather than punish them for extant economic conditions. The book owes a debt to the literatures in both international relations and judicial decision making. Accordingly, the concluding chapter summarizes the extant scholarship and explores how the information theory and the empirical findings presented here build on and extend the current literatures in these areas. Finally, the chapter discusses briefly the normative implications of the judicial inclination to employ the implicit judicial power of the purse in times of crisis to advance judges’ and the nation’s goals.

One

Federal Judges’ Budgetary Powers

On its face, the U.S. Constitution is clear: Congress holds the power of the purse. Article I specifically provides that only members of Congress have the “power to lay and collect taxes, duties, imposts and excises . . . to borrow money . . . to coin money,” and permits expenditures only on authorization by the House and Senate. The federal judiciary, by contrast, has no formal budgetary power; its sole constitutional authority lies in Article III of the Constitution, which allows judges to render decisions in “cases” and “controversies” but affords no other power. Notwithstanding Article III’s narrow language, and perhaps unrecognized by the framers themselves, an unmistakable judicial power of the purse lies hidden in the U.S. Constitution. To understand the nature of this power, consider the thousands of lawsuits that show up in court every year in which private parties seek monetary payouts from the federal government in contexts as varied as taxation, tort, contract, and intellectual property. Court decisions that favor the government in these cases operate to protect the national budget whereas those that go against the government’s interests work to deplete it. The idea that judicial decisions can and do affect the size of the federal fiscal pie is so transparent, most litigators involved in the courtroom proceedings view it as an “obvious implication” of judges’ Article III decision-making power.1 In the words of former U.S. attorney general Edwin Meese, “the judiciary can and often does exercise power over the nation’s purse.”2 More to the point, the cases on the federal docket often have unavoidable monetary stakes for the parties involved, and for this reason judges cannot avoid their budgetary roles—even if they wished to do so. Scholars and commentators have virtually ignored federal judges’ ability to exert influence over the federal budget, but all three branches of government understand this power well. Members of Congress are keenly aware of

20 / Chapter One

judges’ propensity to encroach on their budgetary prerogative and, as a result, have established agencies and committees to monitor judicial fiscal activity with the goal of estimating—and often undoing—court-induced costs to the government’s coffers. Similarly, the executive branch appreciates the judicial power of the purse: Presidents frequently incorporate requests for additional appropriations in their annual budget proposals to account for court decisions that increase the cost of federally funded programs operated and maintained by the agencies. Indeed, the Department of Justice, which houses the federal government’s legal team and is located within the executive branch, publishes annual reports that generally include estimates of the monies saved through the judicial decision-making process. Neither the executive nor the legislative branch believes the money con­ trolled by the judicial fiscal hand is inconsequential, and these views are not wrong: When the size of the judicial purse is examined as a proportion of gross domestic product (GDP) or federal receipts and outlays, it is apparent that judges are well positioned to have more than a minor effect on the nation’s budget. Finally, the judiciary itself regularly notes the reality of its implicit judicial fiscal powers. Law clerk memoranda, as well as litigants’ court filings, routinely incorporate explicit references to the budgetary costs (and benefits) of deciding a case involving the U.S. government, and just as often, judges explicitly justify their decisions and outcomes on fiscal considerations. In the eyes of all three branches of government, then, judges have fiscal power. They are able to force government payouts through court decisions, just as Congress is able to adopt spending policies that effectuate identical budgetary consequences in the sense that both deplete the size of the fisc. Similarly, judges are able to mandate that private parties render monies to the government, just as Congress is able to adopt taxation or taking laws that operate to increase the level of the nation’s economic resources. The judicial power of the purse is, of course, distinct from, and certainly less extensive than, the taxing and spending powers that the framers awarded to Congress in Article I, Section 8, of the Constitution. The most important difference is that members of Congress are empowered to implement virtually unlimited forms of revenue-raising and spending measures; judges’ role in the budgetary process, by contrast, is restricted to the cases and controversies that show up on their dockets. Put differently, if litigants fail to file lawsuits in federal court or settle them outside the courtroom context, judges will be in no position either to increase or decrease federal revenues or expenditures. Notwithstanding these institutional limitations, the federal courts’ financial powers are surprisingly far-reaching.

Federal Judges’ Budgetary Powers / 21

Before investigating the judicial power of the purse, it is worthwhile to comment on the nature of the inquiry as well as the available data. First, the methodological approach adopted in this chapter is largely inductive: The evidence is comprised of statements obtained through interviews of members of the legislative, executive, and judicial branches of government, and from a variety of published reports, opinions, and analyses. Unfortunately, no branch of government provides a complete picture of judges’ budgetary power, and for this reason, empirical conclusions must be gleaned from a collection of largely qualitative evidence. Moreover, it is impossible to know whether the qualitative claims that do emerge in analyzing judges’ roles as fiscal agents reflect reality or are constructed for alternative purposes. Do courts note the fiscal consequences of their decisions to justify outcomes? Do presidents exaggerate the costs of judicial decisions in budget proposals to obtain increased levels of congressional appropriations? Do legislators underscore judicial fiscal power to gain traction in legal reform efforts that work to undermine judicial control over national resources? These concerns and drawbacks are important to consider, but the sum of the evidence nonetheless leads to the inexorable conclusion that judges have very real budgetary powers. Second, the discussion investigates the judicial power of the purse from an empirical viewpoint (through the lens of what judges have actually accomplished vis-à-vis the budget) rather than a theoretical perspective and for this reason may not account for the full extent of judges’ power. Put differently, the evidence will indicate that judges’ fiscal authority has lower and upper bounds, but in fact this power may be far greater than suggested by the data. Theoretically, judges could systematically refuse to enforce any revenue raising laws, thereby denying the government access to any and all resources, or, alternatively, judges could favor the government at every turn, effectively putting no limits on the government’s ability to raise revenue. Various factors, however, limit judges’ budgetary authority. The parties could avoid the courts altogether, or they could refuse to adhere to court decisions perceived to be illegitimate. Justice O’Connor noted that “[w]e don’t have standing armies to enforce opinions,”3 and this reality imposes limits on the judicial power of the purse. At the same time, as the political science scholars Gregory Caldeira and James Gibson have noted, the American federal court system has enjoyed substantial levels of public confidence, and thus its decisions are not systematically disregarded and ignored but are respected as legitimate law.4 This widespread respect implies that judges cannot—and will not—veer too much from accepted practices to retain the veneer of neutrality. In short, it is possible that the data presented below

22 / Chapter One

reflects not only the empirical bounds, but also the theoretical bounds of judicial power.

Three Views of the Judicial Power of the Purse Each branch of government has a unique perspective on the judicial power of the purse, but all agree that judges cannot help but affect the size of the budget. The frameworks adopted by each branch of government for purposes of identifying the power diverge, but they all lead to a single conclusion—judges have more than a modicum of control over the federal fiscal pie. The legislative branch conducts systematic surveys of court decisions and estimates their far-reaching budgetary effects by accounting for precedential value (the reality that cases govern similarly situated parties who are not directly involved) and for this reason will aid in establishing the upper bound value of the judicial power of the purse. The executive branch, by contrast, tends to emphasize the monies directly implicated in individual court decisions without regard for precedential value and thus offers a useful lower bound value of the judicial power of the purse. The evidence emanating from the judicial branch sheds light on the nature and extent of federal judges’ own knowledge of their purse powers but cannot be relied on for purposes of identifying either the upper or lower bound of that power. As discussed further, the evidence demonstrates that judges are not unknowing and uninformed cogs in the wheel of the national budgetary process—they are fully aware of their fiscal powers and their ability to loosen and tighten the fisc. The Legislative Branch: Identifying the Far-Reaching Effects of Judicial Decisions Given that Article I of the Constitution awards to Congress the formal power of the purse, it is perhaps unsurprising that the legislative branch spends more time and energy investigating the effects of judicial decisions than any other branch of government. To appreciate the nature and extent of Congress’s efforts, consider first that federal court decisions involving fis­ cal matters routinely show up in legislative debates, hearings, and analyses. Many of these court decisions are unrelated to the nation’s war efforts but nonetheless implicate the budget. To give just one example, after the Supreme Court rendered a decision in Anderson v. Mt. Clemens Pottery Co.,5 interpreting federal mandates found in the Fair Labor Standards Act (FLSA) and federal mandates with respect to employee compensation, legislators noted in subsequent hearings and legislation that the decision would cause

Federal Judges’ Budgetary Powers / 23

the “Public Treasury [to] be deprived of large sums of revenues and public finances would be seriously deranged by claims against the Public Trea­ sury. . . .”6 Legislators’ response to Mt. Clemens Pottery was not an isolated event but rather part of a deliberate and systematic focus on the effects of judicial decisions, especially those implicating national budgetary policy. In the context of taxation, arguably one of the most important areas of fiscal policymaking, empirical data indicate that between 1953 and 2005, the Supreme Court issued nearly three hundred decisions interpreting the tax code; legislators, in turn, discussed and commented on more than 50 percent of these cases—by name—in a range of contexts, including proposals to modify, codify, and override the Court’s outcomes.7 To be sure, legislative discussion and debate tends to be wide-ranging and vague, often incorporating statements that reflect the obvious: “judicial tax decisions can affect the budget,” and “courts can rearrange legislative fiscal priorities.” Over time, however, legislators have sought to identify the precise quantitative effects of judicial decisions and have established agencies and committees to assist. The two most important bodies contributing to Congress’s understanding of the judicial power of the purse are the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). Congress commissioned both groups of policy analysts after a period of budgetary chaos in the early 1970s to investigate and estimate the costs of existing law as well as proposed legal reforms. Their work offers a surprising level of detail about the nature and extent of judicial fiscal power. To assist Congress with its budgetary decision making, the CBO produces extensive economic and policy analyses, including budget and economic reports, an assessment of the fiscal effects of the presidents’ budget proposals, and cost estimate reports for virtually every bill reported out of a congressional committee. Many of these reports and analyses discuss judicial fiscal powers, often noting the reality of “court-induced” costs and highlighting the extent to which federal revenues and outlays “vary due to court rulings.” Indeed, the CBO has gone so far as to note that by virtue of their Article III authority, federal judges are able to “gain budgetary powers” and thus are well positioned to reorder and undermine Congress’s policy priorities.8 Given the considerable effect that judges have over the nation’s budget, it is no surprise that the CBO continually monitors judicial decision making. In a public database containing over 2,500 published reports, for example, well over 1,000 mention courts, litigation, or judicial review. Many of these references are linked to an assessment of the monetary effects of court

T h e C o n g r e ssio n al B udg e t O ffic e ( C B O ) .  

24 / Chapter One

decisions—at every level of the judicial hierarchy—on the national budget. To illustrate the legislative attention given to federal court rulings, consider the CBO’s Budget and Economic Outlook Reports, which include baseline estimates of future revenue and spending against which all new legislative proposals are compared for purposes of understanding their fiscal effect. In constructing the baseline for each new report, the CBO considers legal changes that transpired since the publication of the last baseline; CBO analysts, therefore, must monitor judicial rulings to incorporate them into the new estimate. Numerous reports issued by the CBO since its inception have included a detailed discussion of the effects of specific federal court cases on baseline estimates, suggesting that CBO officials not only systematically monitor the courts but also believe they play an important role in the size of the national budget. The 2007 Budget and Economic Report notes that tax revenues were expected to decrease due to a series of lower federal court cases involving the excise tax on telephone services. Congress originally enacted this tax to defray the costs of the Spanish War and subsequently reenacted and broadened it to help fund the costs of World Wars I and II, as well as the Vietnam War. The tax remained on the books since that time and has consistently generated roughly $6 billion in annual revenue. In early 2002, however, a large corporate taxpayer, OfficeMax, sought a $400,000 refund, arguing that the language of the telephone tax did not specifically cover its phone ser­ vice;9 Amtrak, Hewlett-Packard, AOL Inc., and many other companies raised similar challenges.10 Federal district and appellate courts across the country agreed with the taxpayers, virtually gutting the tax. The CBO estimated that the court rulings would cost the government over $60 billion and would transform the tax—once a revenue raiser—into a revenue loser in a single decade. Table 1.1 depicts the CBO’s projections of the long-term revenue gains and losses associated with the telephone excise tax as reported in the Budget and Economic Outlook for fiscal years 2007–2016 (before the implications of the court decisions became apparent) and 2008–2017 (after the court decisions’ effects on the budget were understood). The estimates, based entirely on the expected effects of the federal court decisions, indicate that before the federal courts issued a series of pro-taxpayer decisions, Congress expected to gain a total of $57.7 billion in revenue over a ten-year period, but after that time the tax would cost the government $5.9 billion in light of the judicially mandated refunds. An important component of the CBO’s work—and one that will play a key role in the estimation of the upper bound value of court cases—is its focus on the far-reaching effects of the individual court outcomes. Note,

5.3 5.0 −.3

4.6 −11.0 −15.6

2007 4.9 −1.3 −5.2

2008 5.2 0.5 −4.7

2009 5.3 0.2 −5.1

2010 5.3 0.2 −5.1

2011 5.3 0.1 −5.3

2012

5.4 0.1 −5.3

2013

5.4 0.1 −5.4

2014

5.5 0.1 −5.4

2015

5.5 0.1 −5.4

2016

57.7 −5.9 −63.6

Total

Source: Cong. Budget Off., The Budget and Economic Outlook: Fiscal Years 2007–2016 (Jan. 2006), available at http://www.cbo.gov/ftpdocs/70xx/doc7027/0126-BudgetOutlook.pdf; Cong. Budget Off., The Budget and Economic Outlook: Fiscal Years 2008–2017 (Jan. 2007), available at http://www.cbo.gov/ftpdocs/ 77xx/doc7731/01-24-BudgetOutlook.pdf.

2006 Report Issued Before Judicial Decisions 2007 Report Issued After Judicial Decisions Lost Revenue Plus Court-Mandated Refunds

2006

CBO reports estimating long-term budgetary effects (billions of current dollars)

Table 1.1  Judicial decisions undercut the excise tax on telephone services

26 / Chapter One

for example, that the CBO estimated the effects of OfficeMax’s case, which involved just $400,000 in disputed taxes, would lead to a loss of more than $60 billion in expected long-term revenue. By recognizing the precedential effects of the decisions, the CBO realizes that court outcomes govern not only the taxpayers directly involved in the case but all similarly situated taxpayers. This suggests that a single judicial decision may represent just a small amount, here 0.00006 of its true value to the national budget. Although the CBO does not routinely provide this level of detail, when it does the data consistently suggest that the budgetary effects of judicial decisions far exceed the money involved in any individual case or controversy. The Budget and Economic Outlook published in 2002 provides another example of congressional monitoring of the fiscal effects of judicial decisions. In that report, the CBO discussed a case involving a licensing dispute between the Federal Communications Commission (FCC) and NextWave Personal Communications, Inc., which was expected to affect CBO baseline estimates. NextWave went into bankruptcy after obtaining a loan from the FCC to acquire a spectrum license necessary for radio and broadcast ser­ vices; after the bankruptcy, the FCC reclaimed the license, and NextWave challenged this reclamation in court. The CBO estimated that a judicial decision in favor of the government would lead to $16 billion in collections, but an unfavorable outcome would reduce collections to $6 billion. Because the CBO uses a probabilistic approach that assumes the government wins 50 percent of all litigated cases, the CBO included an additional $11 billion into its baseline revenue estimate ((.5*16) + (.5*6) = 11).11 Interestingly, Theodore Olson, who represented NextWave in its efforts to obtain a large payout from the government, later served as a U.S. solicitor general, fighting to protect the nation’s budget from massive claims of this sort.12 One of the most widely discussed uses of judicial fiscal power in and around Congress was the 1996 Supreme Court decision in United States v. Winstar Corp.13 Winstar involved a series of lawsuits filed against the government alleging contractual breaches after Congress amended the statutory law governing capital requirements imposed on savings and loan institutions. The controversies arose after the government, in an effort to preserve resources in the 1980s, encouraged viable banks to purchase ailing saving and loans by lowering capital requirements, thereby removing the threat of a federal takeover (and a massive expenditure of public funds). The incentive worked, and numerous banks merged with or acquired vulnerable institutions, thereby keeping them afloat. Subsequently, Congress changed the rules governing capital requirements and, in doing so, imposed major costs on the very banks that helped prevent the massive federal bailout in

Federal Judges’ Budgetary Powers / 27

the earlier years. In response, the savings and loans sued for breach of contract, and CBO analysts began monitoring the legal disputes as the cases made their way through the courts. After the Supreme Court issued a final decision, the CBO submitted a report to Congress noting that [b]udget watchers [in and around Congress] have paid a good deal of attention to July’s Supreme Court decision Winstar. The Court held that the federal government breached contracts with three savings and loan institutions when it ceased to count supervisory goodwill toward regulatory capital requirements. As a result of that decision, the government could be liable for large damages to cover losses of those and other thrift institutions that are attributable to such breached contracts. Based on the likelihood that the Supreme Court would uphold the Circuit Court, which had ruled for the thrift institutions, the CBO included $9 billion in federal payments—$1.5 billion in each year from 1997 through 2002—in its May baseline.14

The CBO estimated that, because of its high precedential effect, Winstar would cost the government $9 billion. The analysts calculated the budgetary effects of Winstar based not only on the monetary amounts owed to the individual plaintiffs, but also on the expectation that the decision would force the government to make judicially mandated payments to many more complainants over time. To this day, budget analysts worry about Winstartype claims against the government; some argue that all major legislation is likely to produce costs on the government due to subsequent interpretations by the federal courts and possible breaches of contract.15 The Budget and Economic Outlook Reports systematically include estimates of the cost of individual cases to the national budget, but the CBO also publishes other reports and analyses that incorporate similar estimates. In a review of President Clinton’s 1992 Budget Proposal to Congress requesting supplemental appropriations for the Supplemental Security Income (SSI) program of $0.1 to $0.2 billion every year due to an expected increase in beneficiaries, the CBO noted that the request was grounded in the Supreme Court’s decision in Sullivan v. Zebley.16 While the Court in Zebley simply interpreted the meaning of the term “disability” and neither noted nor discussed the fiscal implications it its decision, the CBO agreed with the president that the decision would be costly, even including a graph in its report to Congress depicting a notable spike in the SSI payouts due to the Zebley decision.17 Similarly, in a background paper on Social Security published in 1977, the CBO discussed the Supreme Court’s decision in Califano v. Goldfarb,18 a case in which plaintiffs argued the Social Security

28 / Chapter One

Act discriminated against men as spousal beneficiaries by requiring proof of dependency. The Court ruled against the government, holding that the Social Security laws did violate the Equal Protection Clause, thereby leading to an increase in husbands seeking spousal benefits and resulting in increased costs estimated by the CBO to be $500 million in 1978 and rising slowly thereafter.19 The CBO’s reports and analyses contain cost estimates of decisions previously rendered in cases and controversies, but they also anticipate future court action, reflecting a deep understanding of the judicial power of the purse. In response to a 2007 legislative proposal to eliminate remedies for certain patent violations, for example, CBO analysts noted that “[i]n this case, the likelihood of litigation alleging a taking of private property is very high; based on Supreme Court precedents, there is a high likelihood that the federal government will have to pay damages; . . . the expected value of the federal government’s liability . . . would total about $1 billion . . . [or] substantially more.”20 In a 2006 military appropriations bill allowing court-ordered child support, the CBO estimated an increase in military spending by $500,000 a year over the 2006–2015 period due to expected judicial action.21 And in a 2005 proposed amendment to the Omnibus Indian Advancement Act eliminating Indian gaming sites, the CBO noted that it was difficult to assess the cost of such action: “If a court were to determine that the government must compensate the tribe from such a possible loss, however, federal spending (probably from the Claims and Judgments Trust fund) would be significant.”22 The CBO, in short, seeks to identify courtinduced costs to the federal government to the fullest extent possible, in light of both past and future decisions, and irrespective of the size of these effects.23 The JCT also monitors judicial decision making for Congress, often incorporating legal developments emanating from the courts into reports and analyses. To illustrate the JCT’s work, recall the series of court cases that seriously weakened the telephone excise tax. In response to the court-induced revenue losses as well as the belief that the tax had become inequitable due to its narrowed application, legislators proposed repealing the telephone tax altogether. The JCT estimated that repealing the tax on the residual group of taxpayers still subject to the law would cost the government roughly $721 million every year or $7 billion over the course of a decade.24 Ultimately, Congress determined that the budget effects of the proposed repeal were too costly, suggesting that revenue sources as small as $721 million a year play an important role in the budgetary process. T h e J oi n t C ommitt e e o n T a x atio n ( J C T ) .  

Federal Judges’ Budgetary Powers / 29

More to the point, consider the 2001 dispute in Gitlitz v. Commissioner,25 a complex case involving an S corporation, debt, and individual losses; in this case the government sought to recover nearly $500,000 of unpaid taxes from two individuals. The case eventually ended up in the Supreme Court, which rendered a decision on behalf of the taxpayers, thereby costing the government nearly $500,000 in revenue losses. Congress responded by overruling the outcome, but before doing so it requested a revenue estimate of the overruling. The JCT calculated that while Gitlitz itself involved a relatively small amount of money, the override would increase revenue by nearly $1 billion over the course of a ten-year period given the range of taxpayers governed by the Court’s decision. The amount of money involved in Gitlitz, in short, was just 0.0005 of its true value to the national budget, or, put differently, the JCT forecast that 2,000 future taxpayers, each with an average of $500,000 in disputed taxes, could take advantage of Gitlitz, thereby imposing massive costs to the system in the absence of a congressional override. Because the JCT, like the CBO, seeks to account for the precedential effects of court outcomes, its work also plays a role in establishing an upper bound on the value of judicial purse powers, discussed in more detail below. Congress routinely considers specific court outcomes, such as Gitlitz, the telephone excise tax cases, and many others, but it also considers the legal doctrines that emerge in the opinions themselves. A long-standing doctrinal rule in cases litigated in the tax court, for example, imposed the evidentiary burden of proof on taxpayers, effectively creating a baseline assumption that individuals owe taxes when the government makes such an allegation, unless the former proffer convincing evidence otherwise. In 1998, Congress contemplated and ultimately adopted statutory reform that shifted the burden of proof to the government, thereby making it easier for taxpayers to prevail in court. The JCT examined the likely budgetary consequences of this reform and estimated that changing the courtroom burden of proof would cost the government $795 million in lost revenue over a ten-year window from 1998–2007.26 More recently, legislators have considered imposing a doctrinal change on courts that would help deter tax avoidance and the use of tax shelters. Courts deter these activities by denying tax benefits to taxpayers who pursue transactions that lack “economic substance” and thus are undertaken for no reason other than to reduce taxes. The courts, however, have devised diverse standards for determining when economic substance is present, and many have allowed taxpayers to pay less taxes than Congress believes are owed. At times, of course, legislators have adopted decision-making rules that allow certain taxpayers to avoid high taxes, but in this case it is the federal judges

30 / Chapter One

who have created the rule—and it is one that Congress dislikes. In response to the problem and courts’ inability (or refusal) to remedy it, legislators proposed (and in 2010 enacted)27 legal reform that would constrain judicial discretion to determine when transactions have (or do not have) economic substance and thus increase total taxes rendered to the government. The JCT valued this doctrinal change to be approximately $45 billion in revenue over ten years.28 The legislative branch, in short, continually monitors the cost of judges’ actions—and inactions—to the federal budget. With the help of CBO and JCT economic and policy experts, legislators are able to understand and forecast the effects of individual judicial decisions on government coffers. Although no single data source identifies the precise monetary value of judicial decision making in the aggregate, it is nonetheless possible to identify the boundaries of the power given the available evidence. These limits are discussed further below, but for now it is worthwhile to note that the work of the policy analysts inside the legislative branch demonstrates that cases and controversies implicate the budget, and these implications are far greater than the actual amounts involved in the litigation; the amounts actually in dispute are the primary foci of the executive branch. The Executive Branch: Identifying the Narrow Effects of Judicial Decisions The executive branch’s views of the judicial power of the purse are found in a range of public documents, and all lead to the same conclusion: Judicial decisions have national budgetary consequences. Many of the presidents’ annual budget proposals, for example, make reference to the financial implications of court decisions for ongoing tax and spending policies. Moreover, the Department of Justice (DOJ), which houses the federal government’s legal team and is located in the executive branch, pays substantial and systematic attention to the fiscal consequences of judicial outcomes. The DOJ’s interest in judicial fiscal power is unsurprising: Its lawyers are responsible for litigating fiscally important cases and, when they prevail, successfully defend the government’s financial interests; but when they lose, the government suffers costs. For this reason, the attorney general publishes annual reports incorporating quantitative estimates of the amounts of money involved in the DOJ’s litigation efforts and thus, implicitly, under control of the judiciary. The DOJ’s valuation efforts aid in setting the lower bound value of the judicial power of the purse because they identify the immediate budgetary effects but not the precedential impact of the court decisions. Before turning to the DOJ’s annual reports, consider presidential docu-

Federal Judges’ Budgetary Powers / 31

ments illustrating the executive branch’s understanding of federal judges as fiscal actors. The judicial power goes in two directions, leading presidents to seek both increased and decreased resources from Congress. The former is illustrated by President Clinton’s request for millions of dollars in congressional appropriations in 1992 to pay the increased costs of SSI after the Supreme Court issued its ruling in Sullivan v. Zelbey, the case that expanded the definition of the term “disability.” President Clinton viewed Zelbey as a spending mandate and consequently sought Congress’s assistance in fulfilling this court-induced funding obligation. In 1987, President Reagan proposed that Congress decrease federal spending on its conservation efforts on the grounds that a federal court had mandated that oil companies contribute massive amounts of money to environmental funds as punishment for violating federal pricing laws. President Reagan essentially viewed the court decision as both a taxing mechanism and a spending choice, thereby limiting the need for the elected branches of government to play this role, at least in the environmental context. In 1982, President Carter proposed legislative reforms intended to unravel the effects of lower federal court decisions interpreting the unemployment insurance laws in a manner expected to cost the government billions of dollars in increased spending. President Carter recognized that federal courts had effectively imposed a spending mandate but sought to avoid it by engineering a legislative override. The important point here is not how each president responded to the individual court decisions, but rather that each clearly understood that judicial decisions have budgetary consequences and cannot be ignored in the lawmaking process. The attorney general operates as an important channel through which both the president and Congress obtain the information necessary to respond to court-mandated legal changes. Named by the president and at the helm of the DOJ, the attorney general serves as the chief law enforcement officer of the U.S. government and, as such, represents the federal government in legal matters and “gives advice and opinions to the President and to the heads of the executive departments of the government when so requested.”29 Each year, the attorney general publishes a report summarizing the DOJ’s activities, goals, and aims. These reports, available from 1870 through the present, substantially differ in substance, but nearly all note that as the “nation’s litigator,”30 the DOJ must defend U.S. interests and protect the fisc in cases and controversies that “expose the government to potentially staggering losses.”31 In the words of John Ashcroft, the attorney general serving in 2003, protecting the nation’s budget from unwarranted claims is a key feature of the agency’s work given that this money must be

32 / Chapter One

available to the government if it is to fund its “counterterrorism fight, military objectives, economic stimulus efforts, or other top initiatives.”32 The DOJ’s general litigation component includes five divisions: antitrust, civil, civil rights, environment and natural resources, and tax. The 2008 annual report indicates DOJ litigators obtained pro-government decisions in 79 to 81 percent of the cases litigated in federal court. More specifically, the report indicates that the antitrust division collected more than $700 million in fines, primarily against the transportation industry; the civil division defeated “billions of dollars in unmeritorious claims” against the government and pursued litigation resulting in “the return of over a billion dollars to the Treasury”; the environment and natural resources division obtained $15 million in penalties from an Ohio electric power company; and the tax division obtained $5 million from the actor Wesley Snipes for tax fraud.33 While the 2008 report fails to include specific estimates of the aggregate fiscal savings to the government for each division, in various years throughout the last century the attorneys general have included this information, thereby shedding light on the immediate budgetary effects of the federal judiciary. The 2003 report provides estimates of annual government savings over a five-year window through its civil litigation efforts, as depicted in table 1.2. The numbers depicted in the table incorporate the monies saved and collected at every level of the judicial hierarchy, including federal district and appellate courts and the U.S. Supreme Court. Recall that the numbers incorporated in the table reflect the actual amounts at issue but not the far-reaching budgetary effects that would account for the role of precedent. The analytic framework used by the DOJ ignores precedent and thus underestimates the true fiscal value of its litigation efforts. But the department’s data nonetheless are useful in establishing the lower bound value of judicial decisions. The civil division, often referred to as the “steward of the public fisc”34 given its large caseload involving financially important cases (including contract, tort, patent infringement, and other types of claims in which parties seek payouts from the government) saved the government $33.7 billion for the years 1999–2003. The environment and natural resources division, which defends against environmental challenges to government programs and activities, enabled the government to protect at least $20.5 billion; and tax lawyers protected roughly $3.7 billion in federal monies over the course of five years. Table 1.2 provides valuable information, but it also illustrates the drawbacks to the DOJ’s reporting protocols. The chief problem with table 1.2 is that the numbers represent the amounts “saved and collected” by the government lawyers, but not the amounts that federal courts forced the govern-

Federal Judges’ Budgetary Powers / 33 Table 1.2  Amounts saved and collected through DOJ civil litigation efforts over a five-year window Estimated budgetary effects if cases have zero precedential effects (billions of current dollars)

2003 2002 2001 2000 1999 Five Year Total

Antitrust

Civil

Civil Rights

Environmental

Taxation

Annual Total

$0 $0 $0 $0 $0

$21.8 $3.6 $3.9 $3.61 $1.79

$0 $0 $0 $0 $0

$5.4 $6.7 $1.5 $3.9 $3.0

$.868 $1.274 $.816 $.221 $.507

$28.068 $11.574 $6.216 $7.731 $5.297

$0

$34.7

$0

$20.5

$3.686

$58.886

Source: U.S. Dep’t of Just., FY 2003 Performance and Accountability Report (Jan. 2004), http:// www.justice.gov/archive/ag/annualreports/ar2003/p2sg4.htm.

ment to spend due to unfavorable rulings. Second, the amounts saved and collected include monies won through court judgments but also monies obtained through settlement agreements reached outside the judicial context. These settlements, although reached in the shadow of judicial power, were not the direct result of the judicial fiscal hand. Third, note that the attorney general fails to report the budgetary effects of its work in the antitrust and civil rights divisions in table 1.2, and yet, as discussed above, both Presidents Clinton and Reagan submitted budget proposals indicating the executive branch interpreted decisions in these legal areas as having serious financial implications for the nation’s budget. This disparity arises because the DOJ relies on the amounts demanded in lawsuits to estimate the fiscal value of a case or controversy, but neither private parties nor the government routinely makes such demands in civil rights and antitrust disputes. In the Zebley case, for example, the legal issue involved the interpretation of the term “disability,” and while the resolution of this issue had major fiscal implications for the government, the case itself did not contain a monetary demand. This suggests additional reasons why the DOJ underestimates judicial fiscal authority, so although the estimates are useful for constructing the lower bound of this power, they may be implausibly low. Every attorney general report since 1870 incorporates some discussion of budgetary matters, but unfortunately the monetary benefits of litigation are not systematically derived and at times are absent altogether. In many years, for example, the reports simply list notable cases involving substantial sums of money saved, similar to the exposition found in the 2008 report (discussed above), but they do not indicate the total amounts at issue in

34 / Chapter One

the lawsuits or the aggregate savings to the government, as was done in the 2003 report presented in table 1.2. Even though somewhat sporadic or uneven, the annual reports clearly indicate that attorneys general throughout history have all believed that courtroom decisions can and do affect the size of the fiscal pie. The best and most systematic evidence of this belief emerges from the aggregate estimates of the lower bound value of taxation controversies. Cre­ ated in 1933 by President Roosevelt, the DOJ’s tax division took the unusual step of reporting aggregate annual statistics of amounts saved and collected throughout two periods, 1947–1972 and 1999–2003.35 Although the rationale for the attorneys general’s decision to exclude budgetary information prior to 1947, between 1973 and 1998, and again after 2003 is unavailable, the data offer insight into the possible lower bound value of judicial fiscal authority in the context of taxation. Figure 1.1 presents the available data on amounts saved and collected over the thirty-one-year period; the top panel of the figure identifies these amounts in billions of 2009 dollars, and the bottom panel presents the information as a percent of total federal outlays and as a percent of one particular spending program: defense. The top panel indicates that the amounts saved and collected through the judicial fiscal hand in both periods are remarkably similar on many dimensions, thereby suggesting that neither the real amounts at issue nor the judicial decision-making strategies have substantially changed over the course of years. On average, the courts saved the government $0.7 and $0.9 billion in 1947–72 and 1999–2003, respectively. The minimum and maximum amounts awarded in the early period were $0.01 and $1.4 billion, while in the later periods these amounts were equal to $0.2 and $1.5 billion. These figures and conclusions, of course, might differ if more data were available, but the fundamental point is this: The actual amounts of money awarded to the government in a single area of the law are small but hardly irrelevant to the national budget. The bottom panel of figure 1.1 depicts the actual amounts awarded as a percentage of total federal outlays (solid circular markers) and defense spending (hollowed circular markers). The data indicate that tax awards ranged from 0.01 to 0.4 percent of spending on defense activities and between 0.005 and 0.2 percent of total federal outlays; the awards, in short, were less than 1 percent of spending measured either in the aggregate or in the context of a single national program. These small percentages, however, should not lead to the conclusion that the lower bound value of the judicial purse is meaningless to budgetary policymakers. Legislators appear to worry about budgetary items that have less of an effect on the budget, first of all.

1.1.  Value of taxation controversies in federal court Note: Top panel depicts actual amounts saved and collected by the government in taxation cases in billions of $2009 from 1947–1972 and 1999–2003; the bottom panel depicts these amounts as a percent of total federal outlays (lower line with dark circular markers) and as a percent of defense spending (top line with hollowed circular markers) for the same years.

36 / Chapter One

And, even more importantly, figure 1.1 reflects the actual amounts awarded only in taxation controversies; it does not include other areas of the law that tend to involve substantially more money, such as the civil and environmental disputes depicted in table 1.2. Table 1.2, for example, indicates that the DOJ saved a total of $59 billion in current dollars between 1999–2003 through its litigation activities, or 4 percent of the defense budget and 0.3 percent of total federal outlays. These percentages substantially grow when the calculations account for the far-reaching precedential effects of the cases; if the cases have, on average, precedential effects similar to those observed in the Gitlitz case discussed above, then the value of the judicial fiscal hand over the course of the thirty-one-year period exceeds $9 trillion in real dollars—a figure that dwarfs both the defense budget and total federal outlays. Of course, it is implausible to project that the fiscal effects of each case on the federal docket will be two thousand times greater than the actual amount at issue, as observed in the Gitlitz case; but even assuming less substantial monetary effects, the size of the judicial purse is notable. By accounting solely for actual monetary awards, attorneys general recognize their estimates ignore precedent and underestimate judicial fiscal authority. In 1940, for example, the attorney general noted that the amounts reported “[do] not, of course, include substantial amounts of revenue involved in cases not in [current] litigation [but] which are affected by the principles laid down in the cases decided favorably to the Government.”36 In the 1971 report, the attorney general commented that the tax division could calculate the immediate direct effect of the cases it actually litigated, and that the “indirect [far-reaching] effect[s], while not susceptible of calculation, would probably dwarf the determinable dollar value by comparison.”37 In 1998, the report indicated that tax litigators won a judgment in Unum Corp. v. United States38 in the federal appellate court, which “protected the Treasury from a claimed refund of approximately $80 million”;39 but if the precedential value were taken into account, the Unum case would be worth approximately $1 billion to the national budget; the case, in short, was estimated by the attorney general to be worth just 0.08 of its true financial value to the federal coffers. Other DOJ divisions have drawn attention to the precedential value of specific court cases. After the Court of Appeals for the District of Columbia upheld a regulation denying veterans medical care for pregnancy-related costs, the 1984 report included Veterans Administration estimates indicating that the court victory would save the fisc $75 million over five years.40 In 1976, the civil division noted that lawsuits involving more than $7.3 billion were filed in federal courts but that the dollar statistics would “not

Federal Judges’ Budgetary Powers / 37

adequately indicate the significance of the Division’s work [given that] comparatively small claims frequently present crucial questions of law and the decisions may, therefore, have lasting, far-reaching effects on Government operations.”41 The quantitative data published by the DOJ, along with the series of presidents’ budget proposals, together indicate that the executive branch fully understands the reality that federal judges are fiscal actors empowered through Article III of the Constitution to affect national budgetary policy. While the data cannot identify the value of federal court decision for all areas of the law, the DOJ’s tax division offers a lower bound value for those amounts over the course of a thirty-one-year period in one context. Before further examining the possible bounds of the judicial power of the purse, the next section briefly investigates federal judges’ own view of their financial power. The Judicial Branch: Inevitable Budgetary Effects United States v. Standard Oil Co. is a 1947 case involving John Etzel, a soldier wounded by a negligent truck driver in the Los Angeles.42 The government paid Etzel’s medical costs along with his soldier’s pay during his period of disability and then sought reimbursement from the negligent driver and his employer. In arguing the case, the government’s lawyer noted that in the three years prior, more than 450 soldiers required hospitalization due to the negligent actions of private parties, and the War Department had reported additional such injuries at a rate of 40 per month—all at the government’s expense. For this reason, the government argued, the Court should render a decision in its favor, thereby protecting the fisc from unnecessary expenditures associated with third party torts. The justices acknowledged that indemnity for the government’s losses would protect the nation from its postwar financial burdens but, at the same time, noted Congress had failed to adopt a specific law authorizing such a recovery. Refusing to create a cause of action allowing the government to recapture its losses, the Court commented, Whatever the merits of the policy, its conversion into law is a proper subject for congressional action, not for any creative power of ours. Congress, not this Court or the other federal courts, is the custodian of the national purse. By the same token it [Congress] is the primary and most often the exclusive arbiter of fed­­­­ eral fiscal affairs. And these comprehend, as we have said, securing the trea­ sury or the government against financial losses however inflicted, including

38 / Chapter One requiring reimbursement for injuries creating them, as well as filling the trea­ sury itself.43

Yet in rendering a decision against the government, the Court managed to exercise the very financial powers it argued rested with Congress alone: The decision required the government to expend resources on medical and disability claims. While the justices hoped to avoid making financial decisions on behalf of the nation, in fact, their decision operated to deplete the size of the federal budget against the government’s wishes. Legally the Court’s decision may have been completely proper (although this is not at all clear, as suggested by Justice Jackson in his dissent), but this does not undermine the reality of the judicial process: In rendering (or refusing to render) progovernment decisions in cases and controversies implicating the fisc, the judiciary cannot escape exercising the power of the purse. Judges are fiscal actors irrespective of their preference to take on such a role. Moreover, Standard Oil is not an anomaly; the federal courts issue hundreds, if not thousands, of decisions every year that involve national budgetary matters, inevitably affecting the depth of the nation’s coffers. The government’s argument in Standard Oil illustrates just why federal courts play more than a trivial role in fiscal policymaking notwithstanding the framers’ unmistakable decision to allocate formal budgetary powers to Congress. John Etzel’s injuries cost the government just $173 ($1,677 in 2009 dollars), but as noted in the government’s brief and recognized by the Court itself, hundreds of other soldiers incurred injuries due to negligent actions of third parties. Thus a decision in favor of the government had implications that went beyond John Etzel. The judicial power of the purse, in effect, is linked to the role of precedent in the decision-making process and specifically to the principle of stare decisis et quieta non movere, a Latin phrase meaning “to stand by and adhere to decisions and not disturb what is settled.” If the government had prevailed in the Standard Oil case, it could have obtained indemnity for the costs associated with the hundreds of other injuries involving similar issues and circumstances. The Standard Oil case can be analyzed using the framework of the elected branches of government. The $173 claim by the government is the immediate and narrow cost associated with the individual case and is the type of cost accounted for by the DOJ and in the attorneys’ general reports. The farreaching effects of the case, the costs associated with the hundreds of other military personnel harmed by third parties, are of much greater magnitude and are the type of budgetary effects the CBO and JCT seek to estimate in their scoring system. The War Department, for example, noted that military

Federal Judges’ Budgetary Powers / 39

personnel required hospitalization due to the tortuous acts of third parties at a rate of 40 per month; if the subsequent costs were, on average, similar to Etzel’s, then the Standard Oil case would effectively mandate that the U.S. government incur annual expenses of $805,000, or $4 million over the course of five years in 2009 dollars. The actual amount involved in Standard Oil, then, would be equal to just 0.0004 of its true value to the federal budget over a five-year window. Once again we can see that the seemingly minor amounts at issue in individual cases and controversies mask the major effects on the budget—and the surprising reach of the judicial fiscal hand. While the Court relied on the law to justify financial costs imposed on the government in Standard Oil, in other contexts the justices have reached just the opposite conclusion: Budgetary concerns justified the legal conclusion. In the tax context, for example, the justices have long noted that the purpose of the tax laws “is to put money into the federal treasury”; 44 thus courts should “not unduly help . . . refund claimants.”45 Rather courts should “interpret laws in light of their “purpose for the protection of the federal revenue”46 and avoid rendering decisions that would have a “disastrous impact on the Government’s revenue.”47 Throughout history, the justices have continually commented on the importance of fiscal considerations in rendering decisions involving the U.S government. In the 1976 case of Mathews v. Eldridge,48 the Court refused to grant plaintiffs the right to an evidentiary hearing before the government could legally terminate Social Security disability benefits. In reaching this decision, the justices noted that constitutionalizing rights has financial consequences and should be avoided if possible: The most visible burden would be the incremental cost resulting from the increased number of hearings and the expense of providing benefits to ineligible recipients pending decision. No one can predict the extent of the increase. . . . The parties submit widely varying estimates of the probable additional financial cost. We only need say that experience with the constitutionalizing of government procedures suggests that the ultimate additional cost in terms of money and administrative burden would not be insubstantial.49

In 1994, the Court refused to recognize a cause of action for damages against federal agencies, noting it would create a “potentially enormous financial burden for the Federal Government . . . [and such] decisions involving ‘federal fiscal policy’ are not ours to make.”50 While it is impossible to determine whether the justices would have made the same decision absent the observed fiscal consequences, this is not the important point. Rather,

40 / Chapter One

the purpose is to illustrate that judges’ opinions reflect the reality that judicial resolution of legal disputes can and will have notable (negative and positive) effects on the nation’s resources. While the cases illustrate judicial knowledge of fiscal powers, the justices do not make regular and explicit reference to this authority in their published decisions. Indeed, a review of every U.S. Supreme Court taxation case decided between 1913 and 2010 uncovers merely a handful of opinions making such a reference. This lack of explicit commentary, however, does not mean that federal judges do not comprehend the fiscal implications of their decisions. The legislative and executive branches are aware of this fiscal power, making it implausible that the decision makers themselves fail to recognize or understand the nature and reach of their constitutional authority. Federal judges, of course, are experts in legal and constitutional matters and generally are not well versed in financial and economic issues. Moreover, it is often posited that judges concern themselves only with relatively narrow legal issues and thus are not likely to ponder the consequences, financial or otherwise, of their decisions. Their exclusive focus on the law may or may not be true, but third parties continually assure that federal judges are cognizant of the budgetary consequences of their decisions. The legislative and executive branches, as well as the litigants and the judges’ own law clerks, all help to play this informational role. After interpreting the FSLA in the 1946 case discussed earlier, Mt. Clemens Pottery Co., legislators noted in a subsequent hearing that the decision would have a major and negative impact on the treasury.51 The Court took note of this view in a later case that involved an amendment to the FLSA; while the congressional views did not lead the Court to render a pro-government decision in the subsequent case, the reference to the legislature strongly implies that judges understand their opinions have national budgetary consequences and that Congress monitors these effects. Similarly, in March 1941, the Court rendered three opinions interpreting the estate tax laws, and on the very next day, the Acting Treasury Secretary Ogden Mills wrote a letter to the Speaker of the House suggesting that the cases would have “disastrous effects” on the fisc and urged Congress to “correct this situation.” The Court relied on the Treasury’s response, which showed up in legislative hearings, in a later dispute and, this time, used the information as grounds for rendering a pro-government decision. Perhaps the most important sources of budgetary information are the government lawyers who readily present fiscal evidence to the courts in an effort to persuade judges to accept their arguments. In the 2005 case of Lockhart v. United States,52 the government sought to withhold welfare benefits

Federal Judges’ Budgetary Powers / 41

from individuals who had previously failed to repay their student loans. In defending the welfare offset, government lawyers noted that student loan defaults constituted a significant financial burden to the federal treasury; the government was owed at least $33.6 billion in delinquent student loan debt. Social Security offsets, it was argued, would substantially aid the government in recouping these losses, thereby protecting the nation in a time when the deficit was soaring due to the Iraq and Afghanistan Wars. In a 2001 controversy, American Mutual Life Insurance Co. v. United States, the government noted in its brief, The issue presented here arises with respect to all mutual life insurance companies. . . . The Internal Revenue Service estimated . . . revenue loss[es] of almost $2 billion. . . . These figures are so large that in the aggregate they actually affect a significant fraction of total revenue the federal government collects in corporate income taxes.53

In the 1965 case of United States v. Atlas Life Insurance Co.,54 the government noted that the dispute was “regarded as a test case by the life insurance company” and that losing the case would “subject the government to . . . claims for refunds of approximately $400,000,000.”55 Similar fiscal arguments are presented in briefs to lower federal courts. In Rite Aid Corp. v. United States,56 the government argued to the Federal Circuit Court that the disputed tax issue was “a matter of exceptional importance for the federal fisc . . . [involving] approximately $1.2 billion in tax.”57 Government lawyers continually present fiscal arguments to the courts but do not always succeed in convincing the judges to issue rulings in their favor, perhaps due to the arguments made by opposing counsel in their effort to win a government payout. While the government routinely invokes the fisc, private parties seek to downplay it as a justification for a court decision. In response to broad generalizations about fiscal costs, private parties have argued, for instance, that “[t]he government cannot point to any definite loss of revenue it might sustain, . . . and surely hypothetical losses cannot supply a compelling reason to [side with the government].”58 Indeed, private parties regularly take the position in their briefs that fiscal policy arguments are “vague,”59 “speculative,”60 and “irrelevant”61 for judicial decision making. “It is quite understandable that the government would like . . . additional revenues,” they note, “but the federal government’s fiscal situation does not provide reason for misapplying the [law].”62 Fiscal matters, in short, are not germane to courtroom activities and should be left to the experts—members of Congress. Importantly, neither the government lawyers

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nor those representing private parties suggest that judges can actually avoid affecting the fisc. Rather, the dispute centers on whether revenue losses and gains should hold any import in the decision-making process. Not only do the judges hear from Congress, the Treasury, and litigants on budgetary matters, even law clerks weigh in on the issue. Clerks on the Supreme Court, for example, author memoranda exploring reasons for granting or denying certiorari, and these documents often reflect concerns for the national budget. In United States v. Hill, a Supreme Court law clerk recommended that the Court grant certiorari, noting the possible precedential effects of a decision going against the government: The fiscal consequences of the case are enormous. From 1985 to 1989 alone, the IRS reports that more than $5 billion of revenue from the minimum tax on tax preference income is affected by this decision. Since that decision below, the IRS has already received refund claims aggregating over $400 million. . . . [T]he revenue losses to the government as a result of this ruling therefore will be at least one billion dollars a year and could be much more.63

In fact, the justices granted certiorari in the Hill case and noted the reason was due to “the importance of this issue to the federal fisc,” suggesting that judges comprehend the far-reaching effects of their decisions and that judges should play a role in allocating the enormous revenue gains or losses. Ultimately, the Court exercised its power of the purse by rendering a pro-government decision in Hill, thereby saving the government billions of dollars. Many other memoranda contain similar language. In United States v. Centennial Savings Bank, the law clerk wrote that if the Supreme Court permitted the lower court to stand, it would affect at least 108 cases with more than $128 million at stake in taxes; in United States v. Goodyear, the law clerk went so far as to argue that “a grant would help with the deficit” because the issue involves “more than $900 million in tax credits” that the government would like to withhold; in Commissioner v. Indianapolis Power & Light Co., the author wrote that “more than 150 cases involving more than $300 million in potential tax liabilities” were implicated by the single lower court decision; in Colonial American Life Insurance Co. v. Commissioner, the memo indicated that the dispute was significant given that it involved the tax consequences of more than $1.78 trillion in reinsured life insurance funds. Whether the clerks’ discussion persuaded the justices to act is not clear, but one thing is unmistakable: Courts are constantly on notice of the budgetary implications of the cases they decide.64

Federal Judges’ Budgetary Powers / 43

Federal judges not only are continually aware that their decisions can both increase and decrease the size of the fisc, but they also understand that they are in a position to rearrange government spending priorities given the reality of finite resources. In the 1970 case, Goldberg v. Kelly,65 the Court mandated certain administrative procedures to be undertaken before the government could terminate welfare benefits. Although the majority did not comment on the costs associated with imposing such procedures, Chief Justice Burger noted in his dissent that offering additional procedural protections to welfare recipients would force agencies to use funds earmarked for food, clothing, and other essentials for other administrative purposes, thereby undermining the very purpose of the program.66 In the Mathews case discussed above, which involved a Court denial of procedural safeguards in the Social Security context, the justices commented that the costs of such safeguards would “in the end come out of the pockets of the deserving since resources available for any particular program of social welfare are not unlimited.”67 Moreover, the litigants involved in the cases are not shy about noting that judicial decisions can lead the government to “misallocate limited federal resources.” In Boyle v. United States, the Center for Administration of Criminal Law filed an amicus curiae brief with the Court arguing that the justices should avoid interpreting the law in a manner that required the federal government to expend resources prosecuting state crimes in federal courts given that national interests were best served by the governments’ lawyers focusing on “security, fraud and other distinctly federal interests.”68 To force the government to prosecute state crimes would arguably undermine the substantive and fiscal policy priorities of the federal government. The judicial branch’s view of its own fiscal powers strongly suggests that court decisions can and do have budgetary effects, and judges understand this facet of their Article III power. The evidence, however, is primarily qual­ itative and offers no basis for assessing the aggregate value of court outcomes to the treasury. While precisely estimating this figure is impossible, the work of the legislative and executive branches of government discussed above helps to establish the lower and upper bounds of the value of judicial power of the purse.

The Upper and Lower Bounds of the Judicial Power of the Purse While the data discussed above lead inexorably to the conclusion that judges possess fiscal powers, no single piece of evidence offers a precise estimate of the monetary resources subject to judicial control. Identifying the reach of

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judicial budgetary power, however, is a valuable step toward understanding and explaining federal courts’ use of these powers in the foreign policy context. Accordingly, this section seeks to shed light on the possible upper and lower bound values of the judicial power of the purse. Recall the nature of the evidence. The DOJ estimates the actual amounts collected and saved, and if these estimates represent the entire value of the cases to the national budget, then they reliably reflect the underlying value of the judicial fiscal hand. For this to be true, however, the individual court decisions could have no precedential effects; each decision would govern the parties involved in the litigation, but virtually no other individual or entity would be subject to the law as set forth in the opinion—an implausible scenario. Indeed, one justification for litigating a case up the judicial hierarchy is the belief that a pro-government decision will affect many more similarly situated individuals and thus offer substantial savings to the fisc. For this reason, the reports contain, at best, the lower limit of judicial fiscal power. The legislative branch seeks to calculate the precedential effects of court decisions and thus helps to fill the measurement gap created by the executive branch. It is possible, however, that the legislative branch prioritizes court decisions expected to have unusual influence on the budget in its publications. The CBO estimated the true effects of the OfficeMax case on the budget were likely be 157,000 times greater than the telephone tax refund sought by the company, and the JCT estimated the true value of the Gitlitz case to be 2,000 times greater than the actual amount involved and litigated in court. Put differently, the CBO’s calculations suggested that roughly 157,000 future taxpayers would avoid paying, on average, $400,000 in taxes; the JCT’s report on the Gitlitz case suggested that roughly 2,000 additional taxpayers would avoid paying approximately $500,000 in taxes due to the Supreme Court’s decision. It is possible, indeed likely, that most court decisions will affect far fewer taxpayers or taxpayers with much less money at stake. This is especially true with respect to the court opinions issued by the federal district and appellate courts, which by definition do not have the same pre­ cedential effects as opinions rendered by the High Court. Nonetheless, the framework used by the legislative branch will aid in the construction of the upper limit of judicial fiscal power. To investigate the possible upper and lower bounds in detail, consider first figure 1.2, which again uses the attorneys’ general reports on taxation cases decided in 1947–72 and 1999–2003. Figure 1.2 depicts both the possible lower bound value of the cases (that is, assuming cases have no pre­c­ edential value) and upper bound value (assuming the cases will all affect

Federal Judges’ Budgetary Powers / 45

1.2.  Upper and lower bounds of judicial fiscal power in billions of $2009 Note: The y-axis on the left represents the possible lower bound value and right-hand y-axis represents the possible upper bound value of tax cases in 2009 dollars. Lower bound reflects amounts collected and saved by the DOJ and the upper bound estimates assume each case will affect 2,000 similarly situated taxpayers.

roughly 2,000 similarly situated taxpayers as in Gitlitz). The y-axis on the left depicts the lower bound values in billions of 2009 dollars and indicates that federal judges controlled between $0.012 and $1.5 billion of federal funds on an annual basis over the course of the thirty-one-year period. These are exactly the same amounts reflected in the top panel of figure 1.1. The y-axis on the right adds new information with respect to the possible upper bound values of the amounts saved and collected by the government through its litigation efforts. The y-axis on the right assumes that each court decision generates precedential effects similar to those observed in the Gitlitz case (that is, each case will affect 2,000 subsequent taxpayers) and indicates that the upper bound values each year range from $24 to $3,060 billion. Figure 1.2 is a useful starting point for investigating the bounds of judicial powers, but it also poses a serious impediment to the estimation process: The upper and lower bounds are so far apart that the numbers are less than enlightening. In 2003, for example, figure 1.2 indicates that federal judges controlled either $1.53 billion or $3 trillion. These numbers in turn suggest that federal judges’ fiscal power was equal to either 0.03 or 78 percent of the nation’s GDP. It is improbable that all the cases and controversies have zero precedential value or that judges’ fiscal authority is as consistently farreaching as that observed in the Gitlitz case, thereby enabling judges to

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control amounts that exceed three-quarters of the GDP in a single area of the law. We cannot precisely identify the actual limits of judicial fiscal power, but we know the lower bound cannot be below that depicted by the left y-axis in figure 1.2 and that the upper bound must be below that depicted by the right y-axis in the figure. Consider the possibility that the cases, on average, affect 5, 10, or 20 subsequent taxpayers in ways similar to that observed in the cases themselves, but not 2,000 taxpayers as suggested by the Gitlitz case. Table 1.3 presents the possible different lower and upper bounds on the assumption that the precedential value can range from zero to minor (the cases affect, on average, 5 taxpayers), medium (the cases affect, on average, 10 taxpayers), major (the cases affect, on average, 20), and maximum (the cases are all similar to Gitlitz). These numbers reflect the reality that many of the judges rendering decisions sit on district and appellate courts and thus affect substantially fewer parties than Supreme Court justices, who tend to grant certiorari to cases of national importance and thus affect the finances of individuals in every district and circuit across the country. To provide a better sense of the possible (more reasonable) upper bound values of the cases, figure 1.3 presents the alternative upper bound value of tax cases measured under the assumption that they have minor, medium, or major precedential effects but neither zero nor maximum precedential effects. The figure presents the three alternative upper bounds in billions of 2009 dollars and as a percent of GDP, total federal outlays, and defense spending. The top left panel of the figure indicates that the possible upper Table 1.3  Bounds of judicial fiscal power Possible precedential value of court judgments over thirty-one-year period (in billions of 2009 dollars) Mean Lower Bound No precedential value Upper Bound Minor precedential value Medium precedential value Major precedential value Maximum precedential value

0.72

1.4 3.6 14.5 1,450.0

Minimum

0.012

.02 .06 .25 24.0

Maximum

Total

1.53

23.0

3.06 7.65 30.6 3,060.0

43.5 108.8 435.3 43,528.0

Note: Estimated values are linked to amounts depicted in attorneys’ general (AG) reports and scored as follows: no precedential value = AG’s estimates reflect entire effect on the budget; minor = AG’s estimates reflect 0.5 of effects; medium = AG’s estimates reflect 0.2 of effects; major = AG’s estimates reflect 0.05 of effects; maximum = AG’s estimates reflect 0.0005 effects (as in the Gitlitz case).

Federal Judges’ Budgetary Powers / 47

1.3.  Possible upper bound values of tax cases in billions of $2009 and as a percent of GDP, total outlays, and defense spending Note: In each panel, the top-most line with square markers indicates upper bound value of tax cases if they have, on average, major precedential value; middle line with triangular markers indicates upper bound if cases have, on average, medium precedential value; lower line with circular markers indicates upper bound if cases have, on average, minor precedential value. Reliable data prior to 1947, between 1973–1998, and after 2003 is unavailable.

bound dollars controlled by the federal courts could be as high as $3 or $30 billion in 2009 dollars. While the upper bound as measured by the maximum precedential effects discussed above indicated the courts could control amounts up to 78 percent of the GDP, the more modest measures depicted in the top right corner of figure 1.3 indicate the upper bound annual value of the tax cases is between 0.08 and 0.8 percent of the GDP. With respect to the amount of federal outlays depicted in the lower left corner of figure 1.3, the possible upper bounds indicate that on an annual basis, courts control monies via their tax decisions ranging from a high of 0.4 and 4.1 percent of federal outlays. And finally, with respect to one portion of the budget, defense spending, the three possible upper bounds indicate that federal tax cases implicate monies between 0.7 and 7.8 percent of the total

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amounts spent on military activities as depicted in the lower right corner of figure 1.3. As noted above, we know exactly where the lower bound value lies because the attorneys’ general annual reports identify the amounts collected and saved for the government over the course of the thirty-one-year period. No reliable method exists, however, to identify the upper bound value of the tax cases: It is clear that the cases do not have the maximum level of pre­ cedential value similar to Gitlitz, but it is certainly plausible that each court decision will affect, on average, up to twenty similarly situated taxpayers at a later date. If this is true, then the upper bound lies along the top-most line in all four panels of figure 1.3. Assuming cases do affect, on average, twenty similarly situated taxpayers, figure 1.4 depicts the possible upper and lower bounds in billions of 2009 dollars and as a percent of GDP, total federal outlays, and defense spending. Figure 1.4, of course, raises the question of why it is appropriate to select an upper bound that assumes the precedential value of each tax case is twenty times greater than the actual monetary amounts involved in the individual cases. Again, recall that the attorneys’ general reports indicate the amounts collected and saved through litigation in federal courts at every level of the judicial hierarchy, but federal district and appellate court judges render the majority of opinions. Collectively, the courts issue decisions in roughly one thousand taxation disputes every year; the district courts issue the majority of the opinions while the Supreme Court renders roughly five to ten tax decisions annually. The lower court cases, by definition, have lesser precedential value than those issued by the Supreme Court, and thus even if every Supreme Court decision had Gitlitz-type effects, it is unlikely that the lower courts, on average, would also issue opinions with similar far-reaching effects. The assumption that the average judicial decision, irrespective of the court rendering the opinion, has precedential effects equal to 1 percent of that observed in Gitlitz is a means by which the upper bound accounts for the reality that federal district and appellate court decisions, on average, do not involve the same level of money in dispute or the same expansive effects as that observed in the Supreme Court. Perhaps this sets the upper bound too low, but it is unlikely that this assumption sets the upper bound too high. Consider further that in assessing the value of the judicial fiscal hand, the data presented in figures 1.2, 1.3, and 1.4 depict the monies associated only with respect to taxation cases. Moreover, recall from table 1.2 that tax cases involve only a small fraction of the government monies implicated in federal court filings; table 1.2 suggests that the tax cases are worth 10 per­cent

Federal Judges’ Budgetary Powers / 49

1.4.  Upper and lower bound value of tax cases in billions of $2009 and as a percent of GDP, total outlays, and defense spending Note: Left-hand y-axis on each panel depicts lower bound values, and right-hand y-axis depicts upper bound values. The top left panel presents upper and lower bound values in billions of 2009 dollars; the top right panel presents the bounds as percent of GDP; the lower left panel presents the bounds as percent of total federal outlays; and the bottom right panel presents the bounds as percent of defense spending.

and 18 percent of the value of civil and environmental disputes, respectively. Indeed, the former attorney general, Edwin Meese, confirms what table 1.2 suggests: “[T]he most substantial cases to show up on federal courts’ dockets, in terms of amounts of money at stake, involve tort and contract cases filed by or against the federal government and litigated by the DOJ attorneys found in the civil division.”69 The taxation cases obviously implicate the fisc, but the decisions rendered in the tort and contract cases are likely to increase or shrink the size of the pie to a far greater extent. If this disparity is taken into account and we assume that the lower bound value of the tax cases are just 10 percent of the lower bound value of civil and environmental lawsuits, then the data and analyses above suggest that the lower and

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upper bound values of federal court filings in the tax, civil, and environmental areas collectively is likely to be $227 billion and $4.6 trillion in 2009 dollars over the thirty-one-year period. These numbers, in turn, suggest the judicial fiscal hand represents between 3 and 73 percent of federal spending on defense activities and 0.22 and 4 percent of total federal outlays. These numbers, although purely hypothetical, are grounded in existing facts and analyses from both the executive and legislative branches.

Conclusion The judicial power of the purse exists, and it is surprisingly far-reaching. While scholars and commentators ignore this fiscal authority, the available evidence indicates that every branch of government is keenly aware of this power and explicitly accounts for it in their respective decision-making processes. Judges frequently justify their opinions and outcomes on fiscal considerations; the executive branch accounts for the judicial fiscal hand in the presidents’ budget proposals and through DOJ reporting; the legislative branch continually monitors judicial activities in an attempt to assess courtinduced costs and benefits to the federal fisc. Because the legislative branch accounts for the precedential effects of judicial decisions, its work is useful for identifying the upper bound value of the judicial hand. The executive branch also seeks to quantify the budgetary effects of court decisions, but because it focuses on the amounts actually involved in each case litigated and ignores precedential effects, its work is useful for identifying the lower bound value of judicial fiscal authority.

two

Pulling the Purse Strings: An Information Theory of Crisis Jurisprudence Foreign policy crises involve threats to a nation’s interests and often entail an increased probability of armed conflict with an enemy state.1 Under these conditions, nations intensify military planning, preparation, and readiness, but leaders also seek to develop a sound financial strategy to assure adequate resources are available to provide troops with pay, weaponry, supplies, and equipment in the event that war breaks out.2 The political scientist Christopher Layne has noted “wealth is the foundation of military power,” and it is, perhaps, obvious that without material resources, no nation, state, or group could succeed in its attempt to play a dominant role in the international system or successfully protect itself from outside aggressors.3 Unlike the details of military strategizing, which are left to the experts in the legislative and executive branches, funding the nation’s defense operations falls to every part of the federal government—including the judiciary. Federal judges, of course, have no formal revenue-raising or appropriation powers, or, indeed, any formal wartime powers whatsoever. Yet, judges are able to use their implicit budgetary authority to aid the nation in times of crisis, thereby enabling Congress and the president to acquire the resources necessary to keep the nation safe and secure from outside threats. If, how, and when judges deploy their Article III decision-making power in an attempt to advance the nation’s defense-related endeavors is the subject of this chapter. The goal is to present a positive theory of federal courts, one that accounts for judges’ views and preferences on military matters as well as their control over federal resources. The degree and extent to which judges actually succeed in shaping or transforming Congress’s or the president’s defense strategy is an important empirical question, but it goes beyond the scope of the book: The point is to identify and explain the behavior of courts given the cues that emerge from the elected branches

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of government, the nature of judges’ preferences, and the limits of judicial power. To this end, the investigation focuses on the behavior of federal judges, specifically U.S. Supreme Court justices and appellate court judges, in cases and controversies that implicate the size of the federal budget. While judges in all jurisdictions are likely to have defense-related preferences, the two groups of interest here are apt to have the greatest impact on the nation’s budget given their position in the judicial hierarchy. Federal district courts, specialty courts, and even state courts may at times be in a position to exert a modicum of control over the size of the budgetary pie, but lower court opinions have a high probability of oversight whereas Supreme Court and federal appellate court judges are less likely to face review and thus are better positioned to advance their goals in the decision-making process. The account of judicial behavior presented below forecasts that federal judges will employ their decision-making powers to promote their preferred level of national safety and security, although they may not explicitly state this as their goal. Not only are judicial preferences often unspoken, but it is also possible that judges do not deliberately set out to use their authority to advance seemingly extralegal concerns such as the nation’s safety. Put differently, there is no reason to expect that judges will overtly note foreign policy aims and goals in their written opinions, but their voting behavior will implicitly suggest they have these goals.

The Information Theory of Crisis Jurisprudence The idea that rational judges strategically use their budgetary authority to influence the nation’s military planning grows out of a straightforward claim about the men and women appointed to the federal bench: Judges, like virtually all policymakers and citizens, prefer periods of national safety and security to those plagued by turmoil and danger. Perhaps this preference emerges from judges’ roles in the development of law and policy, their privileged status in the prevailing institutional framework, or simply because they care very much about their own safety and that of their families. The theory does not explain why federal judges prefer secure conditions to those beset by risk and threat; rather, the point is more fundamental: Judges gain utility from certain states of affairs and suffer disutility from others. As a result, judicial decisions can be expected to reflect the preferences of the judges that render them. While safety and security are assumed to enter the judicial utility function, this presumption does not lead to the conclusion that judges always prefer peacetime to wartime. International relations scholars including Hans

Pulling the Purse Strings / 53

Morgenthau, Kenneth Waltz, and many others have noted that aggressive behavior is often necessary for the safety and survival of the state.4 The political scientist and realist John Mearsheimer notes that policymakers seeking to fend off outside aggressors have recognized “[t]he sad fact is that international politics has always been a ruthless and dangerous business, and it is likely to remain that way.”5 Federal judges are assumed to understand this reality and thus are willing to accept and support wartime aggression when it is necessary to advance the goal of a secure state. Members of the judiciary desire safety and security but not to the exclusion of all other goods: Justice, institutional legitimacy, personal legacy, and so forth also provide utility to the decision makers. Judges must make trade-offs between these goods,6 and because they are instrumentally rational individuals they will pursue the optimal mix through the judicial process. Standard assumptions forecast that judges, like most people, desire more of all goods, but experience decreasing marginal utility as they obtain increasing amounts of any given good. This, in turn, implies that utilitymaximizing judges will prefer a weighted average of the available goods rather than bundles with extraordinary amounts of one good to the exclusion of all other goods. More to the point, if extreme bundles with excessive amounts of one good do materialize, then judges, being rational, will foster trade-offs to obtain the desired combination. Consider, for example, the possibility that judges could decide cases in a manner that supports defense spending by systematically issuing pro-government decisions in disputes implicating the budget, thereby increasing the size of the fiscal pie and (by implication) the funds available for military activities; alternatively, judges could prioritize other preferences such as justice and fairness for specific litigants, causing the federal budget to contract. Judges routinely face such trade-offs and will seek to balance their goals in the decision-making process. If they believe current levels of one good, say safety and security, are dangerously low, then they will decide cases in a manner intended to expand the level of the nation’s defense operations. If, by contrast, judges believe the nation is consuming excessive amounts of defense, they will rationally issue antigovernment decisions in cases that affect the nation’s budget, thereby making less money available to the elected branches in an effort to reduce military activities. Theoretically, then, judges will determine whether defense levels are too high or low and will decide cases in a manner intended to promote the optimal level, given the security needs of the nation. More than a few scholars have identified fiscal strategies intended to affect the level and supply of government-provided goods by individuals

54 / Chapter Two

outside the judicial context. Legal academics, including Peter HansenRavenswood, Geoffrey Miller, and John Yoo, have noted that Congress itself is constitutionally authorized to—and often does—wield its power of the purse to check the president’s inclination to initiate and conduct military activities as commander-in-chief.7 The political scientists William Howell, Jon Pevehouse, James Lindsay, and Randall Ripley, together and separately, have also investigated the reality that Congress routinely uses its budgetary powers to reign in the president when legislators believe he has provided excessive amounts of security; Rui de Figueiredo has investigated the ways in which legislators shape budgetary institutions to achieve policy-oriented goals in a wide range of contexts, inside and outside the military arena.8 Indeed, the macroeconomists Torsten Persson, Lars Svensson, Alberto Alesina, and Guido Tabellini have all made convincing arguments that, as a matter of course, government officials strategically expand (and contract) available budgetary resources to facilitate (and obstruct) the spending choices of government agents.9 With this long line of researchers, it is assumed that judges are strategic when it comes to the judicial power of the purse: Judges will use their decision-making power to expand or contract the size of the federal fiscal pie to promote their defense-related preferences in times of crisis. Figure 2.1 depicts the judicial trade-off between defense (on the x-axis) and all other goods, such as justice, institutional legitimacy, personal legacy, and so forth (on the y-axis), along with a resource constraint, and hypothetical judicial indifference curves. The courts’ financial docket determines the “judicial resource constraint” because the cases and controversies that show up in court enable judges indirectly to “purchase” the goods they desire. They can decide cases in a manner that prioritizes justice, interpretive norms, or institutional legitimacy, or they can prioritize their desire for defense. Recall the latter entails systematically issuing pro-government outcomes, thereby augmenting the size of the fisc and increasing available funds for defense operations, while the former, by assumption, involves deciding cases against the government, which, in turn, works to pinch the fisc. Since judges are assumed to prefer more to less of all goods, they will not select bundles that lie below the budget constraint, and as they obtain more of one good they will increasingly be willing to exchange it for the other in light of diminishing marginal rates of utility. The combination of goods that is associated with the highest indifference curve (the highest level of utility) is the optimal choice and, as noted above, will generally reflect a weighted average of the available goods rather than extreme bundles. In figure 2.1, the preferred quantity of defense is equal to q2. The quantities q1 and q3 are affordable—they lie on the budget constraint—but they are not

Pulling the Purse Strings / 55

2.1  Judicial “budget constraint” and the optimal bundle of goods Note: “All other goods” on the y-axis denotes decision making that prioritizes law, justice, ideology, modes of statutory interpretation, and so forth. “Defense” on the x-axis indicates decision making that increases the size of the budget, which, in turn, increases the elected branches’ ability to pay the cost of military activities. By assumption, prioritizing defense means systematically issuing pro-government decisions and prioritizing all other goods entails systematically issuing decisions that go against the government’s interests.

desirable because they are associated with a lower indifference curve than identified with q2. Now consider figure 2.2, which illustrates the effects of judicial decision making on the elected branches. Like the judiciary, Congress and the president also have resource constraints, which are fixed by tax revenue, borrowing choices, and—as argued here—judicial decisions that work to increase or decrease the size of the federal pie. Congress and the president will choose to spend on defense and nondefense spending projects given available funds and the location of their indifference curves. The optimal bundle lies at q5. But suppose the courts respond to a crisis by issuing a series of decisions that favor the government and thus operate to increase the size of the fisc. This judicial choice will cause Congress and the president’s budget line to shift to the right, thereby enabling the government to purchase more of everything. The new optimal bundle given the court’s reaction will move to q6. If the courts squeeze the fisc on the belief that defense spending has

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2.2  Congress and the president’s budget constraint and the optimal bundle of goods Note: “All other goods” on the y-axis denotes Congress and the president’s nondefense spending. “Defense” on the x-axis denotes spending on military activities. Courts will attempt to shift Congress and the president’s budget constraint to the right when they believe defense levels are inadequate and to the left when they believe defense levels are excessive.

become excessive, however, they effectively shift the budget line back to the left and undermine Congress and the president’s ability to spend, possibly inducing them to choose the quantity q4. Figure 2.2 presents Congress’s and the president’s budget constraints along with their respective utility curves together, as if they are shared and identical. In reality, the legislative and executive branches are likely to have different perspectives and resource constraints. For purposes of discussion, however, they are grouped together on the assumption that judicial decision making will have identical effects on both branches: Pro-government decisions in court will loosen the fisc and move the budget constraint to the right, whereas decisions that favor private parties and go against the government’s interests will tighten the fisc and move the constraint to the left. The courts, obviously, do not manage the federal budget and cannot force the government to increase or forgo consumption (and thus provide the nation with more or less defense). Moreover, the elected branches theoretically could choose to retain their initial bundle, say q5, by simultaneously adopting strategies that offset the court-induced budget effects. Congress and the president could increase borrowing and taxes in times of a “judicial

Pulling the Purse Strings / 57

pinch” or reduce the flow of income into government coffers at a time when the courts’ decisions are adding to the fisc, thereby shifting the budget line back to its original position. These potential responses by the elected branches may unwind the budgetary effects of judicial decisions, but judges are nonetheless likely to anticipate them. To see this, consider the possibility that courts believe defense spending is insufficient, decreasing the probability of military success. Consequently, judges adopt a pro-government position in the cases and controversies that show up on their financial docket, but Congress and the president simultaneously institute a tax reduction. This scenario could realistically emerge in periods when the crisis is abating and the country is moving toward peace and stability, reducing defense needs. When the elected branches take this action, it not only offsets the judicial infusion of funds but also cues the end of a crisis. With knowledge that the funding emergency has expired, judges will return to q2 in figure 2.1. While judges may have prioritized defense for a longer than necessary period of time, the nation nonetheless remained safe and secure—the very goal of the courts. The more complex and interesting scenario is the opposite: when Congress and the president respond to a judicial budgetary pinch by adopting policies and programs that enable continuing high levels of defense spending. This state of affairs could emerge if judges believe the emergency has decayed and fewer resources should be devoted to the nation’s defense, but the elected branches disagree with this assessment. The judges, in effect, are attempting to induce Congress and the president to move from q5 to q4 in figure 2.2, but the bid is rejected and high levels of defense are maintained. To understand why this is not problematic from the view of the judges, it is useful to recognize (as rational judges must) that when the elected branches increase taxes or inflate the size of the deficit to pay the cost of defense in a time when judges are shrinking available resources, they engage in politically costly maneuvers. Most politicians prefer to support tax cuts and reduced deficits; they suffer political costs when they must impose financial costs on constituents to provide what they believe is the optimal level of public goods. A budgetary squeeze, therefore, may not decrease military spending but is nonetheless likely to produce political costs. In this scenario, judges will predictably and inevitably disrupt current funding choices and thus require the elected branches to reconsider and reassess their priorities—the very goal of the courts. The information theory does not posit a judge that seeks to independently determine the optimal level of defense spending or a judge that seeks to usurp the role of the elected branches of government

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vis-à-vis military strategizing. Rather, judges aim to ensure that Congress and the president actively and thoughtfully pursue the nation’s interests in the defense context. Not only must judges account for the possibility that the elected branches of government can and will undo the budgetary effects of their decisions, judges must consider the prospect that Congress and the president may not want courts to alter their decision-making calculus in times of crisis. When faced with foreign policy emergencies, Congress and the president may pursue strategies that they believe are optimal and have the highest probability of success. The government, for example, may adopt tax laws, enter defense contracts, and implement tort rules during wartime with the expectation that courts will have an opportunity to review the policies and programs but will issue unbiased and neutral decisions on the issues that show up in court. Congress and the president, in short, may assume the factors that affect judicial decision making in times of peace will also be at play in times of war, and this predictability may aid the military strategists in deciding how best to pursue the nation’s interests. If judges, however, respond to the military emergency as posited by the information theory of jurisprudence, they will issue votes and outcomes that diverge from those expected in peacetime periods. In doing so, they will, in effect, unilaterally amend the tax and liability system to make them more or less pro-government. To illustrate, assume that courts decide more taxation cases in favor of the government in an effort to expand the fisc because they believe the nation needs greater levels of defense. This court-induced amendment process could lead individuals to substitute to leisure, thereby causing tax revenues to decrease to suboptimal levels. To give another example, if the liability rules emerging from the courts in times of crisis are too strict, the defense industry will avoid entering contracts with the government except at premium prices. The judges’ decision-making strategy, in short, could impose higher costs on the system and effectively tighten the budget, the very opposite of what they intend. Enforcing the law in a more neutral way would avoid these problems, assuming that Congress and the president have successfully identified the optimal mix of rules and regulations in time of crisis and do not themselves predict a change in the judicial decision-making calculus when the nation moves into a period of crisis.10 Yet, it is possible that Congress, the president, and the nation as a whole will benefit from a judicial mechanism that accounts for crises, even if the problems just noted emerge. The increased costs—if they exist at all—are likely to emerge well after the crisis has abated given the lag that exists between the time that the judicial decisions are rendered and the expected

Pulling the Purse Strings / 59

behavioral responses. In the short term, the judges will have succeeded in increasing the size of the budget by mandating that taxpayers immediately pay their tax debts and by disallowing private individuals and entities the right to recover large sums of money from the government in contract or tort cases. In the long term, given the precedential effects of the decisions, it is possible, perhaps even likely, that both taxpayers and parties to government contracts will respond to the pro-government outcomes by altering their behavior. But herein lies the rub: Rational individuals and entities are not likely to change their behavior over the long term because as the crisis decays, so too does the pro-government bias. At the end of the crisis, the tax rates will effectively decrease, and parties to government contracts will not be subject to high loss rates in court. Judges will, in effect, have eliminated the incentive for individuals to substitute to leisure and demand a premium in contract negotiations. Moreover, rational judges will not use their Article III power as a blunt instrument incapable of accounting for the possible negative consequences of their decisions in certain contexts. The financial docket is quite broad, encompassing a vast range of controversies that implicate the fisc: Some will be directly related to the war effort (those involving defense contracts), but many others will be entirely unrelated to the war (tax, patent, and so forth). This nuanced docket will, in turn, allow judges to exercise their fiscal hand in a fine-tuned manner. They can adopt a neutral stance even in times of crisis when it is warranted to avoid imposing costs on the government, but favor the government in other cases when it would not undermine the nation’s military goals. Thus to avoid the scenario in which the defense industry demands a premium when entering a government contract as insurance against a loss in the event of litigation, judges can remain neutral in these types of cases in all periods, both wartime and peacetime. In the vast bulk of cases that show up on the docket (which are controversies unrelated to the war effort), the court would rationally pursue the crisis jurisprudence described above. Finally, and perhaps most importantly, Congress and the president are well positioned to avoid crisis-motivated jurisprudence if they believe it will undermine the nation’s military goals. If the elected branches believe the courts will favor the government’s interests too heavily in wartime periods, thereby awarding too little to private parties (in terms of outcomes or monetary compensation), they can remedy the problem through settlement negotiations. If the government prefers, it can avoid the courts entirely. Given the government’s ability to evade the hand of the court, rational judges will interpret the choice to litigate as a cue that the government understands

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and accounts for the judicial biases that are likely to emerge. The elected branches may not only expect but also rely on crisis jurisprudence to aid in their military aims and goals.

Informational Cues and the Judicial Demand for Safety and Security How do judges decide when to offer or withhold financial support for the government, thereby affecting the resource constraints of the elected branches of government and indirectly the nation’s safety and security? Judges are legal and constitutional experts and generally do not have the training or expertise necessary to understand the intricacies of foreign policy and, more important, the dangers posed by foreign aggressors. And yet, judges—like virtually all policymakers and citizens—desire safety and security over conditions plagued by conflict and danger. To obtain the preferred level of safety, judges need not rely on their own (limited) expertise and knowledge of national defense matters; they can look to a wide range of informational cues to determine when and how to use their financial powers to pursue their preferences. The notion that individuals, including federal judges, rely on cues to achieve their goals is by no means novel. Scholars and commentators in a variety of disciplines have noted that cue-triggered responses systematically serve as a useful mechanism for advancing preferences. The economist David Laibson argues that individuals habitually rely on environmental cues for purposes of identifying consumption bundles that maximize utility;11 psychologists note that lawyers rely on cues when selecting jurors in the voir dire to increase their chances of prevailing at trial;12 and various legal and political scholars note that legislators and voters rely on a series of cues and signals to make the best possible decisions on a variety of law and policy issues.13 Indeed, Joseph Tanenhaus, Sidney Ulmer, and their colleagues noted more than thirty years ago that U.S. Supreme Court justices rely on a range of cues for purposes of identifying “certiorari worthy” cases.14 The identification of trustworthy cues, of course, is key if judges are to succeed in advancing their goal of safety and security. One source of information for judges seeking to consume the ideal level of safety and security is the lawyers who litigate the cases on the courts’ dockets. In fact, courtroom procedures are devised to enable judges to uncover the relevant facts and circumstances necessary for rendering decisions on difficult legal issues. Each side makes arguments and presents information about the case in court

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filings, in oral presentations, through expert witnesses, by affidavits, and so on. With an array of information and competing presentations, judges are able to assess the credibility of both sides’ positions and find answers to the important issues at hand. Theoretically, it is possible that litigants could provide information on the nature and extent of a foreign policy crisis and thus the nation’s need for defense. Lawyers representing private parties challenging government laws and actions, however, are unlikely to have either the information or the expertise necessary to address whether the nation is facing a crisis and thus needs increased or decreased levels of defense. The government’s lawyers are perhaps better positioned to inform the courts on this matter because they have greater access to the elected branches of government and serve as agents of the executive branch when defending government policies and programs in court. But government lawyers have an obvious incentive to systematically assert that (1) a crisis exists, (2) financial resources are essential to the government’s military efforts, and (3) defense spending should be augmented. In short, government lawyers are (rationally) motivated to make exaggerated claims about ongoing crises to win pro-government votes and outcomes (the means by which courts expand the fisc), irrespective of the true nature of the emergency. In light of the high stakes involved and the fact that government lawyers tend to be repeat players who retain high levels of credibility in court, it is possible that judges will be predisposed to accept the government’s claims with respect to crisis conditions and defense issues. The political scientist Kevin McGuire and various legal academics have documented judicial deference to government lawyers for exactly these reasons.15 Nonetheless, it would be irrational for a judge to mechanically and systematically favor the government in financial cases, thereby shifting the government’s budget constraint out and generating consistently high levels of available funds and thus high levels of defense spending. Rational judges are not likely to rely on litigants’ courtroom claims but will turn to alternative and more reliable sources to determine the nature and extent of the crisis, and by implication the level of defense needed to keep the nation safe. Specifically, judges are likely to take judicial notice of publicly available facts emanating from Congress and the president that concern crisis conditions when deciding the cases and controversies on their docket. Courts routinely take on-the-record judicial notice of such facts (either at the behest of the litigants or at their own discretion) when reaching decisions. In fact, Article II of the Federal Rules of Evidence indicates that judges are free to notice facts that are “not subject to reasonable dispute,”

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that are “generally known,” or are “capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.”16 Wartime conditions and emergency actions undertaken by the elected branches are often the very types of facts that courts judicially notice in their decision-making process. To illustrate the judicial inclination to account for wartime activities (even in cases that do not involve the war itself ), consider Lenroot v. Interstate Bakeries Corp.,17 a 1944 case involving allegations that a baking company had employed minors in violation of the child labor laws. The evidence indicated that the “stress of war” and the increasing demand for the defendant’s goods led plant foremen to relax and evade the company’s employment procedures in clear violation of federal and state law. The district court noted that although the defendant had hired minors, legislators had adopted the child labor laws during peacetime and the changed conditions should be accounted for in the legal proceedings. “The court,” it was noted, “must take judicial notice of war conditions, emergency enactments and regulatory orders as outstanding contemporaneous facts. The court, in short, held that laws (here employment laws) would be interpreted differently due to the wartime activities undertaken by Congress and the president, and for this reason did not enjoin the defendant’s behavior notwithstanding its clear violation of the law. Similarly, in a 1916 case the Supreme Court considered a dispute involving an alleged antitrust violation among companies engaged in ocean transportation to and from foreign countries.18 The Court took judicial notice of the ongoing wartime activities, noting “the European war which is now flagrant” makes the legal issues that arose with respect to ocean transportation entirely moot.19 Against the parties’ wishes, the Court dismissed the case. Judges will take on-the-record judicial notice of wartime crisis conditions in cases where these conditions are directly related to the issues litigated. In the vast majority of the cases, however, the crisis conditions, while relevant to a judge seeking to promote safety and security, will not be directly and proximately related to the issues under investigation. In this large group of cases, judges will take off-the-record judicial notice of the crisis environment to reach decisions and outcomes that advance their defense-related aims and goals. Crisis conditions will affect judges’ decision whether judicial notice is on- or off-the-record, but only in the former will judges explicitly note them as a factor in the decision-making calculus. The most reliable information vis-à-vis foreign policy crises and the nation’s concomitant need for defense will emerge when Congress and the president exercise (or fail to exercise) their wartime powers. As the commanderin-chief, the president has the power to undertake a wide range of activities,

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including the deployment of troops and the seizure of private property; when the president issues military orders or takes some other specific action, the courts receive informational cues that the executive branch believes the nation’s interests are at risk. Congress, too, is in a position to send informational cues. When legislators issue a declaration of war, increase government revenue streams for military activities, or appropriate substantial funds to these endeavors—beyond what is typical in peacetime periods—they provide judges with information that a national emergency may be on hand and more defense is necessary to keep the nation safe. Congress and the president are also capable of sending cues that the emergency has begun to abate and that defense operations should likewise subside. The president, for example, may sign a peace treaty or repatriate troops; Congress may repeal emergency revenue bills and decrease defense appropriations to peacetime levels. All these public actions aid courts in their decision-making process; they provide reliable evidence to the judges on the nature of a crisis and assist courts in deciding whether financial support or opposition is warranted and for what length of time that support or opposition should be offered to the elected branches. At times, the information emerging from the two branches of government may conflict. In that case, judges may find it difficult to interpret the range of cues in a manner that ensures their preferred mix of defense and other goods in the face of divergent messages. Depending on the cues received, judges will prioritize the views of the president in some contexts but side with Congress in others. To understand the judicial calculus, it is useful to consider the three options that Congress and the president are able to exercise, each of which cues the courts on the state of foreign policy affairs.20 Option 1: Take action that supports increased levels of defense. Option 2: Take no action. Option 3: Take action that opposes increased levels of defense.

While Congress and the president are able to choose any one of these options, each branch must choose a policy response that falls within its respective wartime authority as set forth in the Constitution. Article II awards to the president, as commander-in-chief, the positive power to ready the nation for combat and deploy the troops and equipment when necessary to protect the nation’s interests. The president, however, is not authorized to raise taxes to fund an army or a navy, nor is he constitutionally empowered to declare war. These powers are reserved for members of Congress via Article II. This formal division of power suggests that the president cannot

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realistically wage a successful war without the support of the legislators: Resources are the “foundation of military power,” and Congress formally controls the purse. The framers’ choice to disaggregate the wartime powers across two branches of government will aid the courts in their assessment of the nation’s need for more or less defense and, by implication, greater or lesser resources. When the president exercises his deployment powers, he definitively cues the court that he believes a foreign policy threat has emerged and defense levels must increase accordingly. Congress, however, must decide whether to fund the president’s activities, and because judges are also deciding if and how to exercise their implicit purse powers, they are apt to follow the lead of the legislators. After all, the president is widely believed to have the best knowledge and information about foreign policy threats, but budgetary expertise unambiguously rests with members of Congress. Judges will rationally privilege the views of the relevant experts when rendering decisions in the face of conflicting viewpoints. When it comes to budgetary matters—the focus of this book—judges will trust Congress. To understand the judicial calculus further, consider the three relevant combinations of cues that Congress and the president can send to the courts with respect to a given crisis: (1) the president and Congress both support increased defense; (2) the president supports increased defense, and Congress is silent; and (3) the president supports increased defense, and Congress is opposed. All three are conditional on the president exercising option 1, that is, supporting increased levels of defense. In each of the three scenarios, the information theory posits that the courts will follow Congress’s lead when deciding whether to expand or pinch the fisc. Why are the scenarios that involve the president remaining silent or opposing increased levels of defense (options 2 and 3) not relevant here? In these contexts, the executive branch cues the courts (and the nation) that extant levels of military activity are at or near the preferred level. To be sure, Congress may be at odds with this view. Congress may believe that defense levels are insufficient and that more is necessary to keep the nation safe, but legislators cannot force the president to act.21 Put differently, even if Congress adopts revenue bills, declares war, or issues defense-related resolutions, the legislators cannot compel the commander-in-chief to deploy forces abroad or take any other positive war-related action. More to the point, even if the courts trusted Congress and not the president on the matter and were eager to expand the size of the budget, a judicial decision to infuse the fisc with resources would not lead to greater defense activity because, like Congress, the courts are not empowered to force the president’s hand. A judicial bias

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in favor of the government in court may provide the nation with increased levels of resources but will not achieve the judicial aim of more defense because the executive branch has already cued the nation that it believes current levels are sufficient or even too high. Accordingly, the analyses below focus on circumstances in which the president cues a desire to increase the nation’s military activities. t he presiden t and c o ngress b o t h supp o r t increased le v els o f

When the elected branches provide consistent information on foreign policy events, both indicating a crisis has emerged and increased levels of defense are necessary to keep the nation safe from foreign aggressors, courts will have no difficulty determining whether extant security levels are optimal: They are not. Judges, in short, will believe that current defense levels are insufficient, that they are consuming the quantity of defense q1 in figure 2.1; thus judges will adopt a pro-government stance in the financial cases that come before their courts in an attempt to infuse the fisc with additional revenue believed necessary to keep the nation safe and secure. They will, in effect, seek to push Congress and the president’s budget constraint out to the right, thereby enabling the elected branches to afford the quantity q6 of defense in figure 2.2. Numerous incidents throughout history have led the president and Congress to signal the nation was in the midst of a major—and, for our purposes, costly—foreign policy crisis. Trustworthy signals that speak to the financial implications of a nationwide emergency have included wartime revenue bills and congressional increases in defense outlays in response to presidential budgetary requests. The elected branches, for example, passed and signed a tax bill into law in 1916, prior to the nation’s official entry into World War I but in a period of heightened hostilities, implementing an income surtax, an estate tax, and a munitions tax mandating individual “financial sacrifice” in the effort to assure “our common safety” in a time of increased danger.22 Noting that “[s]uccess on the battlefield requires economic resources, and taxation is the best means of marshalling those resources,” the legal authors Steven Bank, Kirk Stark, and Joseph Thorndike have tracked numerous other wartime enactments throughout U.S. history, supplying data indicating the elected branches are willing (often eager) to use their power of the purse to keep the nation safe—a cue to judges that they should follow suit. Many scholars have documented the exercise of presidential war powers in times of foreign policy crises: William Howell and Jon Pevehouse have identified deployment trends,23 the economist Robert Higgs has explored

defense .  

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department of defense employment decisions along with various executive orders to seize private property in wartime periods,24 and numerous historians have conducted in-depth studies of individual presidents and their actions in times of foreign policy crises.25 In many of these periods, including World War I, World War II, the Korean War, the Vietnam War, and the Iraq and Afghanistan Wars, the president issued orders and made choices that were similar, both temporally and substantively, to the wartime actions undertaken by Congress, thereby suggesting that both branches of government believed the nation was in danger and supported increased levels of defense. In such circumstances, rational judges take on- and off-the-record judicial notice of the coordinated actions of the elected branches of government, and employ their decision-making power as an instrument to expand the size of the federal fisc. t he presiden t supp o r t s increased le v els o f defense ; c o ngress is

When the president affirmatively supports increased defense, he not only expresses a strong opinion on the topic, he signals willingness to use his power and resources to advance these preferences. Congressional inaction, by contrast, does not necessarily mean that Congress lacks a viewpoint, but it does imply that Congress lacks a strongly held viewpoint. In this environment, the courts are likely to view outside threats as moderate— the president can be trusted to have reliable information on the matter, but the lack of a formal and unambiguous signal on the part of Congress suggests the threat is not elevated to the highest level requiring an emergency infusion of court-controlled resources. This combination of cues is likely to lead judges to believe they are at q2 in figure 2.1: Spending on defense is at the preferred level given the circumstances, which warrant neither a pro- nor an anti-government stance in the financial cases and controversies litigated in court. Evidence of a president who actively supports defense activities with a Congress that remains silent abounds throughout history. The most frequent occasion for this scenario involves a president who uses his power to deploy troops abroad while Congress does not declare war, adopt a resolution supporting the deployment, or increase federal funding for the activities—but does not oppose the president’s action either. The legal and political science researcher Mark Brandon has noted that the president has deployed troops abroad almost every year since 1900, and in nearly every context Congress has remained silent for a variety of possible reasons such as “the president’s direct authority to command the military, the president’s dominant role in foreign affairs, and the increasing importance of the United

silen t .  

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States—politically, economically, culturally, and militarily—throughout the world.”26 Generally these deployments have been minor (to deal with bandits in Mexico, communists in Formosa, revolutionaries in Congo, and so on), and perhaps they have been necessary to protect the nation’s interests but they do not, standing alone, suggest the nation has moved into a costly crisis necessitating emergency funding assistance from the courts. After all, if the commander-in-chief ’s decision to deploy a small number of troops is viewed as a major and costly emergency implicating the safety and security of the nation, then judges would be forced to conclude the country is in a constant state of emergency. This is obviously a flawed conclusion, one that would compel the courts to offer constant and high levels of financial support to the government on the theory that defense levels are always insufficient, thereby eliminating any other possible legal or political goals from the decision-making calculus. Accordingly, the deployment of troops in the absence of a congressional response will lead rational judges to conclude that although defense activity may be necessary to protect the nation’s interests, a judicial infusion of funds is not necessary to assure success in these endeavors. The scenario of an active president and a silent Congress does not cue the courts that the nation needs additional and court-supplied emergency funding, but does it suggest that the president has acted irresponsibly, thereby endangering the nation’s interests? In short, should judges pinch the fisc to deter ongoing defense operations? The answer to this question is unambiguously no. By remaining quiet, Congress does not oppose the president and perhaps even tacitly supports his endeavors. Rational judges will treat this informational environment as one that suggests that the current tradeoff between defense and all other goods is optimal, the resource constraints facing the electing branches should neither be loosened nor tightened, and the mix of public goods should remain at q5 in figure 2.2. It is worth noting that this conclusion implies judges, who essentially choose to do nothing, are emulating the policy choice of Congress over that of the president, who has chosen to affirmatively exercise his wartime powers. By failing to increase or decrease available funds, judges are neither advancing nor undermining the president’s wartime policies; and, like Congress’s strategy, theirs will have a null effect on the level of national defense. t he presiden t supp o r t s increased le v els o f defense ; c o ngress

The president, as commander-in-chief, is positioned to express support for increased defense primarily through troop and equipment

is o pp o sed .  

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deployments, but also through presidential orders and budgetary requests. Congress, in turn, is able to express opposition to the president by decreasing available funds for defense activities or withdrawing verbal support through the rescission of declarations and resolutions. This scenario will lead judges to act in a manner that surprises those who believe judges always defer—or should defer—to the president in times of military crisis; rather than supporting the executive, judges will seek to tighten the fisc—not to bar the president’s actions but to prompt a reconsideration of the ongoing defense strategy. To give just one possible example of such an environment, consider the fact that when President Johnson deployed troops in Southeast Asia in the early 1960s, Congress simultaneously decreased taxes and defense spending allocations. To be sure, the legislators issued a verbal resolution that supported the president’s military endeavors, but the financial cues unambiguously signaled the legislators opposed increased spending on defense. Moreover, congressional views became increasingly oppositional, and in 1970 the legislators formally repealed their earlier 1964 resolution supporting the president’s military activities. In circumstances like these, judges receive mixed messages suggesting that (1) the president believes the nation is in crisis and judicial financial support is warranted, and (2) Congress strongly opposes devoting increased resources to defense, suggesting the judiciary must squeeze the fisc to keep the nation safe. There are several reasons why judges are likely to prioritize congressional views in this particular context, a conclusion that implies judges believe they are located at q3 in figure 2.1 and should push the government’s budget constraint back to the left as depicted in figure 2.2. First, although the president is the commander-in-chief, the framers awarded Congress the formal power of the purse; consequently, legislators will enjoy the most trust and credibility when it comes to financial matters. When courts are deciding whether to expand or pinch the size of the fisc—how and when to exercise the judicial power of the purse—they are in effect deciding when to act like legislators and thus are apt to look to Congress for aid in making this decision.27 Second, judges want to keep the nation safe but do not have the electoral connections that tie the hands of legislators on matters of the purse and thus are better positioned to pinch the fisc when there is a widespread belief that the president has gone astray. Put differently, not only legal scholars but courts and legislators themselves have noted that it is almost impossible for members of Congress to cut military spending once troops have been deployed. Judges, by contrast, need worry less about widespread and popular criticism given their life tenure on the bench. More importantly, judges are

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able to exercise their purse powers in a more subtle manner than legislators, whose decisions are explicit and public given the nature of the legislative process.28 Third, recall that exercising the judicial fiscal hand operates neither as an authorization nor a bar to presidential military actions, but rather bolsters or weakens the executive’s will to engage the military. To see this, it is important to understand that a bigger fisc enables the elected branches to take on many more policies and programs, whereas a dwindling fisc forces prioritization of the wide range of possible options. By positing the idea that courts will rely on Congress as the more credi­ ble branch given legislators’ taxation and appropriation powers, the theory adopts a formal and legalistic understanding of the courts. Alternatives exist. Rather than considering formal constitutional powers as the relevant factor for determining the credibility of the informational cues in a context when the president acts in support of the crisis and Congress acts against it, judges could simply defer to the executive branch—the branch of government widely believed to have the most reliable information of foreign policy threats. This is the position adopted by the legal academics Eric Posner, Adrian Vermeule, and many others. Another option would be for judges to choose sides based on political preferences; specifically, rational judges could determine that whichever branch of government is politically aligned with the court is the more credible cue giver. In this scenario of mixed messages, it would then be possible to observe periods when the judges act to expand the fisc (when the courts are aligned with the president), but other times we might observe judges shrinking the fisc (when they are aligned with Congress). Ultimately, determining how judges interpret inconsistent cues will require an empirical investigation, which is the focus of chapters 3 and 4, but nonetheless the theory posited here favors the legalist understanding. Recall that the executive branch is arguably the most dangerous branch in the sense that only the president is able to deploy troops, take prisoners, and, in effect, provide excessive levels of defense to the nation. Given that courts seek the optimal level of defense, it is realistic that they will consider the possibility of excessive presidential military actions irrespective of party affiliation. Moreover, judicial decisions that pinch the fisc cannot force the president to abandon his military efforts; the most judges can do is encourage a reprioritization of policies and programs, and thus judicial deference to the president is not necessary to assure the latter achieves his military goals. For all these reasons, the theory forecasts that judges have a strong incentive to render decisions that motivate the president to rethink—and reconfirm—his commitment to the adopted military strategy when members of Congress have deemed it imprudent. Put differently, rational judges will

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recognize that judicially pinching the fisc will impose relatively minor costs to the nation (presidents are unlikely to abandon strategies deemed essential to the country’s safety and security) compared to the potential gains associated with deterring unwise or excessive military activities (presidents may abandon futile and risky strategies if encouraged to do so). Moreover, by deciding against the fisc, judges are able to obtain more of the other goods they desire such as justice, institutional legitimacy, and personal legacies. Table 2.1 summarizes the informational cues and depicts the conclusions that rational judges will reach about national defense when Congress and the president provide information on the nation’s security needs. The president’s cues are summarized in the first column, Congress’s cues are summarized in the top row, and the expected judicial conclusions with respect to whether defense is insufficient, excessive, or optimal are presented in the remaining nine cells. Judges will follow the lead of Congress conditional on the president signaling support for increased defense, but in all other contexts (irrespective of the legislators’ cues) will remain neutral. Lest it seem the discussion is somewhat abstract, judges themselves have suggested they will look to the informational cues emanating from the executive and legislative branches of government when it comes to foreign policy issues and will interpret the cues in a manner remarkably similar to that just outlined. The most well-known exposition of the cueing process is found in Justice Jackson’s opinion in Youngstown Sheet & Tube Co. v. Sawyer,29 decided in 1952. The issue in Youngstown Sheet & Tube involved President Truman’s decision to seize the steel industry out of fear that the nation would face a steel shortage during the Korean conflict due to the breakdown of labor negotiations in the industry. Justice Jackson wrote a now famous concurring opinion outlining the types of information that judges should consider in the decision-making process in the face of a national foreign policy crisis. Justice Jackson commented that judicial support for the president existed along a continuum and depended on the combination of executive and legislative cues that si­ multaneously emerge, implicitly answering the question of whether the nation was consuming an optimal, excessive, or insufficient level of defense. Jackson wrote that federal courts should maximally support the president when he acts pursuant to an express or implied authorization of Congress: When the joint cues unmistakably indicate the nation requires increased levels of defense, courts should use their decision-making power to support the nation’s military endeavors. When the president acts in a manner that is “incompatible with the expressed or implied will of Congress,” however, Justice Jackson suggested federal judicial support for the president should

Pulling the Purse Strings / 71 Table 2.1  Elected branches’ cues and judicial conclusions as to desired level of defense Presidential Cues

Legislative Cues Supports increased defense

Takes no action

Opposes increased defense

Supports increased defense

Insufficient

Optimal

Excessive

Takes no action

Optimal

Optimal

Optimal

Opposes increased defense

Optimal

Optimal

Optimal

Note: Judicial conclusions with respect to the levels of defense are denoted as “insufficient,” “optimal,” or “excessive” and are linked to the informational cues obtained from the elected branches of government.

be at its lowest, as evidenced by the Youngstown Sheet & Tube case itself— courts could reasonably conclude the president’s military activities were excessive and should be deterred and undermined. In the absence of either a congressional grant or a denial of authority—when Congress is silent— Jackson suggested that judicial support will depend on “the imperatives of events and contemporary imponderables rather than on abstract theories of law.”30 The important lesson to be learned from Justice Jackson’s concurring opin­ ion is that judges will take judicial notice of the informational cues emerging from the elected branches of government. Substantively, Jackson argued that the courts must decide whether to support the president’s military choices; he placed particular emphasis on Congress’s actions for making such a determination. Judges do not want to interfere with crisis-related strategies (various other judges and justices have also suggested as much), but they recognize that not all circumstances in which the government takes military action necessarily suggest the nation is in the midst of a foreign crisis, or suggest that judicial support is the only option available to courts.31

Theory-Generated Hypotheses and the Data that Will Confirm (or Falsify) Them The information theory of judging generates four testable hypotheses. 1. Federal judges will take off- and on-the-record judicial notice of the crisis cues sent by the elected branches of government when reaching decisions in cases and controversies that implicate the federal fisc.

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Off-the-record, or sub silencio, judicial notice of foreign policy matters, of course, cannot be directly documented: It is impossible to identify what is known but left unstated by the judges. If the judiciary behaves as posited by the theory (that is, they loosen and tighten the fisc depending on the cues received), however, they will act as if they are aware of the informational cues available. This component of the first hypothesis, then, is falsifiable, albeit indirectly through a large-N quantitative study assessing the behavioral trends in wartime versus peacetime. If wartime decisions diverge from those observed in peacetime in meaningful ways, it will be possible to assess whether judges account for foreign policy matters, even if such knowledge is not made explicit in their opinions. The proposition that judges take on-the-record judicial notice of informational cues emanating from the elected branches can be falsified by examining qualitative data found in published judicial opinions. If the judicial rhetoric, commentary, and dicta evince federal courts’ knowledge of foreign affairs, foreign policy crises, and the financial costs associated with the nation’s military endeavors, then the evidence will lend support for the hypothesis. Moreover, if judges frequently cite Congress and the president as the source of this information and knowledge via reference to wartime revenue laws, major troop deployments, defense costs, and so forth, then the data will lend yet further support for the proposition that judges take explicit and on-the-record notice of cues in the decision-making process. 2. All else being equal, judges will increase their level of financial support for the U.S. government in cases that implicate the federal fisc when the president and Congress affirmatively act in a manner that cues the courts that both branches believe crisis conditions exist and that increased military preparation and readiness is necessary to protect the nations’ interests and security.

This hypothesis will be confirmed or falsified in a large-N empirical study of judicial votes and case outcomes in the financial controversies that show up on the courts’ dockets. If judges’ propensity to issue pro-government votes and outcomes increases after the receipt of informational cues indicating both Congress and the president believe a costly crisis is on hand, then the courts will infuse the fisc with additional resources, and this behavior will be consistent with that forecast by the theory. If the courts fail to adopt a pro-government position as evidenced by their votes and outcomes in these circumstances—or systematically oppose the government—then the data will falsify the theory.

Pulling the Purse Strings / 73 3. All else being equal, judges will decrease their level of financial support for the U.S. government in cases that implicate the federal fisc when the president affirmatively acts in a manner that cues the courts that he believes crisis conditions exist and that increased military preparation and readiness is necessary to protect the nations’ interests and security, but Congress affirmatively acts in a manner that cues the courts that legislators oppose the president’s actions and believe they undermine the nation’s interests and security.

This hypothesis will be confirmed or falsified in a large-N empirical study of judicial votes and outcomes in the financial cases that show up on the courts’ docket. If judges’ propensity to issue votes and outcomes that go against the government’s interest increases after the courts receive informational cues indicating the president believes a costly crisis is on hand, but Congress is actively opposed to increased levels of defense, then the courts will seek to tighten the fisc as expected by the theory, and the hypothesis will be confirmed. If the courts fail to adopt an anti-government position in these circumstances—or systematically support the government in their votes and outcomes—then the theory will be falsified.

Conclusion Members of the judiciary, like individuals and policymakers generally, seek the optimal level of safety and security. To achieve their aims and goals, the information theory of crisis jurisprudence posits that judges will employ their Article III decision-making power as a double-edged sword: They will decide fiscally important cases and controversies in a manner intended to augment the size of the fiscal pie when defense levels are deemed insufficient, but will pinch the fisc when defense activities are deemed excessive. Judges are experts in law and constitutional matters and thus will not rely on their own information and expertise when making the determination to pursue more or less defense; instead they will take judicial notice, perhaps sub silencio, of the cues and signals emanating from the elected branches of government with respect to the military threats from abroad and the possible need (or lack thereof ) for a judicial funding boost. The next two chapters of the book investigate the empirical implications of the information theory and find both quantitative and qualitative support for the hypotheses set forth above. Chapter 5 conducts an out-of-sample investigation of the information theory of jurisprudence, and the final chapter discusses just how the theory fits with and builds on various extant literatures and investigates the normative issues that inevitably emerge in positive studies of judging.

Three

Mobilizing Judicial Resources: The Information Theory in Action

The judicial command over the nation’s resources enables judges to increase revenue streams coming into government coffers or impose massive and unwanted costs on the elected branches. Whether or not courts strategically and systematically deploy their fiscal authority to promote their preferred level of defense as posited by the information theory is the subject of this chapter. To identify if, how, and when federal judges react to foreign policy events, the initial focus is on taxation disputes, cases that plainly implicate the national budget: A pro-government decision operates to loosen the budget, whereas one that goes against the government’s interests denies the latter its sought-after funds and operates as a fiscal tightening measure. If judges behave as posited, they are most apt to do so in the disputes that clearly affect the nation’s finances. Taxation, of course, is not the only area of the law that brings the size of the fiscal pie into play. The government is party to many other legal disputes involving substantial pecuniary claims, especially those involving tort and contract claims, two areas of the law that Department of Justice lawyers widely believe have potential to seriously affect the budget.1 Accordingly, the empirical findings in the taxation context are compared and contrasted to those in other legal contexts involving economic issues, a comparison that enables an assessment of how willing judges are to dig into the nation’s fiscal pockets to promote safety and security in times of danger. The comparative analyses, however, do not stop with disputes that involve government finance: Decision making in the civil rights and liberties area is also considered vis-à-vis the taxation findings. The quantitative data suggest that the information theory is useful for un­ derstanding and explaining judicial behavior. Conditional on presidential support for increased defense, the results indicate that courts rely on Congress

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to aid both in the detection of a true foreign policy crisis and the determination of how best to respond. Judges do not treat all congressional signals alike: They rely less on verbal cues, such as wartime declarations and resolutions, looking instead to concrete behavior—arguably the more credible signal—such as wartime revenue-raising legislation and spikes in monetary outlays for the nation’s defense activities. Specifically, the findings show that during World Wars I and II, judges systematically sought to augment the size of the fisc, but after that period, judicial strategies became substantially more complex. Major troop deployments led judges to markedly disfavor the government in taxation cases throughout the cold war period, yet during this same time, judges favored the government if defense spending increased. These twin findings in the cold war era suggest that judges were willing to aid the nation financially when the elected branches of government devoted more of the nation’s financial resources to its military activities, but when Congress and the president failed to identify defense as a priority in their own spending choices, the courts were likely to refuse to help fund the military efforts. Indeed, they were apt to tighten the fisc as a means to encourage the government to reconsider its foreign policy tactics. The strongest empirical findings emerge in the context of the Supreme Court. The results indicate that military activities systematically lead the justices to vote in favor of (and against) the federal government in the manner just described, causing case outcomes to shift in favor of (or against) the government. The federal appellate court judges also respond to foreign policy crises, but not always in the manner forecast by the theory. Moreover, when appeals judges do respond as expected, the magnitude of the response is quite a bit lower relative to that observed in the Supreme Court. Precisely why the empirical findings differ so significantly up and down the judicial hierarchy is explored below. Before investigating the empirical results, this chapter begins with an outline of the strategy adopted for uncovering the effects of foreign policy crises on the judiciary. The first section describes the data, the measures relied on for identifying crises, the statistical models employed, and the potential empirical barriers to identifying the causal relationships of interest. The second section presents the findings with respect to taxation along with various robustness tests undertaken to account for possible confounding. The third section then compares the findings in taxation to a range of other cases and controversies involving monetary claims by and against the government as well as to civil rights and liberties type cases. As will become clear, the results presented below build on, and refine, extant understand-

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ings of judicial decision making depicted in the literature: judges, as scholars have widely contended, use their dockets to promote individual aims and goals. This behavior, however, is not limited to legal and policy developments related to the issues involved in the individual cases, as implicitly suggested by many students of the court, but extend deep into wartime finance and budgetary issues.

Assessing the Information Theory of Crisis Jurisprudence: Plans and Puzzles The Empirical Strategy Recall that the theory forecasts the following hypotheses: (1) when the president and Congress both support increased levels of defense, judges will increasingly cast votes and reach outcomes that go in favor of the government; (2) when the president supports increased levels of defense but Congress is silent, judges’ behavior will be unaffected; and (3) when the president supports increased levels of defense but Congress is opposed, judges will cast votes and reach outcomes that increasingly go against the government. These hypotheses speak to expected judicial behavior, not to the actual effects of court decisions on policymakers in the elected branches of government. The theory, in short, posits that judges will act as if they can affect the military choices of Congress and the president, but whether they in fact have such an effect is an empirical question that cannot be answered through an examination of the judicial decision-making process—the focus of this study. The primary dependent variable of interest, the variable this study explains, is the individual vote of each judge. These votes are captured by a binary variable, vote, indicating whether the judge voted with the federal government (= 1) or against the federal government (= 0) in the cases under investigation. Individual judicial votes, of course, may trend with foreign policy crises, but this does not necessarily lead to the conclusion that courts’ outcomes will differ in crisis and peacetime periods. Such a result requires the majority of judges on the panel to respond to the policy events as posited by the theory. Accordingly, a second dependent variable, outcome, is investigated, which is also binary and coded to indicate whether the federal government prevailed (= 1) or lost (= 0) in court. Given the binary nature of the two dependent variables of interest, the empirical investigation will rely heavily on probit models, but the possible drawbacks of this reliance will not be ignored.

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3.1.  Frequency of taxation cases on Supreme Court and appellate court dockets Note: Left panel depicts population of Supreme Court taxation cases, and the right panel depicts a random sample of federal appellate court taxation cases (the latter collected by Donald R. Songer, Ashlyn K. Kuersten, and Susan B. Haire, The Judicial Research Initiative (JuRI), http:// www.cas.sc.edu/poli/juri/appct.htm).

In the context of taxation, the Supreme Court justices cast 7,900 votes and rendered 924 published opinions in individual (or consolidated) controversies since the adoption of the modern tax laws between 1909 and 2010. In the appellate court context, the study relies on a random sample of published federal appellate decisions issued between the years 1925 and 2002 and collected by Donald Songer, Ashlyn Kuersten, and Susan Haire.2 The random sample includes 2,920 votes in 1,205 separate tax opinions.3 Figure 3.1 presents the frequency of the taxation cases; the left panel depicts the Supreme Court’s docket, and the right panel depicts a random sample of the federal appellate court’s docket. The left panel in the figure indicates that the Supreme Court granted certiorari to more tax cases in the 1930s than in any other time period. The decline in such cases, however, should not be interpreted as an indication that tax cases have had decreasing importance over time. While the total number of taxation cases on the docket appears to have fluctuated substantially— the size of the entire docket was also simultaneously fluctuating. When the numbers of taxation cases on the High Court’s docket are examined as a percentage of the total number of cases, they average roughly 5 per­cent in every era. The cases obtained in the random sample of appellate court decisions is depicted in the right panel and suggest that notably larger number of taxpayers (who have the right to an appeal and do not require leave by the appellate court to obtain review) appealed lower court judgments in the earlier years.

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To place the data into the context of national defense activities, the votes and outcomes are juxtaposed against military spending, represented in billions of 2009 dollars. The dashed line in each graph in figure 3.2 presents government spending; the solid line in the top left panel depicts Supreme Court votes, and in the top right panel it depicts federal appellate court votes. The solid line in the bottom right panel presents Supreme Court outcomes, and in the bottom left panel it depicts appellate court outcomes. Note that pro-government votes and outcomes in the Supreme Court (depicted in the top and bottom left-side panel) appear to track defense spending, and this correlation becomes tighter as the cold war era progresses. The votes and outcomes in the appellate courts (depicted in the top and bottom right-side panel) do not appear to be so closely correlated with wartime

3.2.  Supreme Court and appellate court votes and outcomes juxtaposed with defense spending Note: Dashed line in each graph presents defense spending in billions of 2009 dollars, and the solid line presents judicial votes and outcomes. The left panel depicts locally weighted smoothed curves of the scatter plots of U.S. Supreme votes (top) and outcomes (bottom,) and the right panel depicts smoothed curves of appellate court votes (top) and outcomes (bottom). Supreme Court votes and outcomes track defense spending more closely than those emerging from the appellate courts.

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spending or defense costs more generally. The figures presented here foreshadow the statistical findings that are explained in detail below: Supreme Court justices react to crisis situations as posited by the information theory, but the evidence with respect to the appellate court judges is quite a bit weaker and often suggests the lower federal judges do not respond at all to foreign policy events. The independent variables—the influences of most interest for purposes of this study—are costly foreign policy events. Judges identify these events, as theorized above, by the cues and evidence emerging from the legislative and executive branches of government. These cues, theoretically, could include formal declarations of war, congressional wartime resolutions, legal enactments related to military preparation and readiness (such as wartime tax laws), major troop deployments, or spikes in defense outlays. The courts’ response is conditional on presidential action signaling support for increased levels of defense—without such a cue from the commander-inchief, courts have no reason to believe defense levels are either insufficient or excessive, thereby necessitating either a loosening or a tightening of the budgetary belt. Once the president takes positive action, the courts’ reactions will depend on Congress’s views. To clarify the empirical implications of identifying the most credible cues, consider World Wars I and II. Congress declared war in 1917 and 1941, and the president simultaneously began to deploy massive numbers of troops, so these are the dates that scholars conventionally use when investigating the effects of war on the judiciary.4 But Congress and the president adopted revenue bills in 1914 and 1940,5 thereby preparing for war before the nation formally entered the conflict—a rational strategy, to be sure. Thus these earlier dates are arguably the better indicators of a costly crisis and increased financing needs. Given that the information theory forecasts how instrumentally rational judges will use their fiscal powers, it is reasonable to expect the judges will follow the fiscal cues when determining whether current defense levels are insufficient, excessive, or optimal. With respect to the Korean War, the hostilities erupted with little prior notice when North Korea invaded South Korea in June 1950. For this reason, Congress and the president began pursuing funding measures simultaneously with the decisions to deploy troops abroad. The start date of this conflict, then, is easy to identify. Notably, however, Congress failed to declare war, and although the U.N. issued a resolution supporting the use of force to repel North Korea from the South, U.S. legislators refused to issue a similar declaration supporting President Truman’s endeavors. It is possible that the courts interpreted this lack of a verbal cue as a lack of congressional

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enthusiasm for the ongoing military activities in Korea. Yet congressional funding choices unequivocally indicated that the legislators were willing to devote national resources to the foreign policy emergency. Thus, the information theory forecasts that the Korean War will lead federal judges to adopt a pro-government position in the taxation cases. The later wartime periods require more detailed examination. With respect to the Vietnam War, Congress adopted the Gulf of Tonkin resolution supporting President Johnson’s troop deployments to Southeast Asia in 1964,6 but it simultaneously adopted tax reductions, thereby suggesting that the nation was not in the midst of a financial crisis requiring more of the nation’s resources to fend off the foreign threat. Moreover, and perhaps more telling, defense spending was periodically reduced between 1964 and 1966, further confirming the congressional view that the nation had not entered a major and costly crisis. In 1967, however, defense spending began to increase, and by mid-1968, Congress enacted wartime revenue measures to pay the increasing costs of the military activities. But herein lies the rub: In 1969, defense spending began to abate, and in that same year President Nixon began the de-escalatory phase of the war and troops starting returning home. The president’s support for increased levels of defense, in short, had evaporated by 1969. This is an important empirical fact because the information theory posits that courts will seek to expand or contract the fisc conditional on the president’s support for increased levels; for this reason, judges would not be expected to react to the Vietnam War after 1969. For purposes of this study, it must be concluded that in the period when the president was escalating the war, Congress sent mixed fiscal signals. Between 1964 and 1966, Congress’s financial cues suggested the nation was consuming excessive amounts of defense, but between 1967 and 1968, the legislators offered financial support for the war, thereby indicating insufficient defense spending. In these circumstances, a rational judge is likely to believe defense was excessive during the early Vietnam War years, but insufficient in the later years. The cues with respect to the Gulf War in the early 1990s and the Iraq and Afghanistan Wars beginning in 2002 involve large troop deployments by the president, but no simultaneous revenue-raising measures by Congress to pay the costs of any of these wars. Indeed, President George H. W. Bush undertook a successful “tin cup” mission to obtain donations from a coalition of friends and allies, enabling Americans to avoid the cost of the first Gulf War and, by implication, tax increases.7 In fact, defense spending decreased in both 1990 and 1991, suggesting Congress was unwilling to devote its own funds to the war effort. It must be noted, however, that the

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legislators did express verbal support in 1991 for the president’s activities in the Persian Gulf War. Congress, in short, appeared to be opposed to spending its own money, but supported the war effort generally (exactly the opposite of the legislators’ response to the Korean War when they offered financial support but withheld verbal encouragement). The informational cues in the Gulf War context are mixed, but if courts follow the financial cues, as expected, they will reach the conclusion that defense levels are excessive. President George W. Bush deployed massive numbers of troops to Afghanistan in 2002 and Iraq in 2003, but this time Congress afforded unambiguous financial support by drastically increasing spending authority for military activities. Similar to the first Gulf War, Congress also passed resolutions supporting the president’s military activities. Both branches of government, then, cued the courts that increased levels of defense were necessary to keep the nation safe from foreign aggressors. Thus, the information theory predicts, judges would adopt the position that defense levels are insufficient, which in turn would lead to increased levels of pro-government votes and outcomes in tax cases. This now leads to the puzzle of which date marks the end of the crisis, thereby cueing judges that they no longer need to infuse (pinch) the fisc to keep the nation safe and secure. Given that the information theory focuses on courts’ willingness to deploy their financial powers to aid the nation in times of need, courts will again prioritize the budgetary cues over the verbal declarations and written treaties. The nation reached a cease-fire in World War I in the fall of 1918, but Congress continued to pursue wartime revenue legislation after that time, suggesting a continued state of heightened financial need. Eventually, the legislators repealed all the wartime revenue measures, but not until the spring of 1921. In World War II, Congress initiated its repeal of the war taxes in 1945. With respect to the Korean War, while Congress halted enactment of wartime legislation in the fall of 1951, it did not initiate any repeals. Thus the fall of 1953, when the parties signed an Armistice Agreement and when defense spending began to decrease, is the most useful end date of the Korean War for purposes of this study. In the Vietnam War, while the Paris Peace Accords were reached in 1973, as noted above, spending reductions and troop repatriations began in 1969 and thus signaled the courts that the nation’s financial needs had abated well before the war officially ended.8 The Gulf War ended when President George H. W. Bush repatriated troops in 1991, and the Iraq and Afghanistan Wars were ongoing in mid-2010 (the period when data collection ceased for purposes of this study).

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The obvious drawback to this approach is that the high level of aggregation works to ignore qualitative factors that are likely to be very relevant to judges’ perceptions of any given crisis. Consider, for example, that Congress adopted nearly identical wartime funding measures in World War II and the Korean War, and yet the latter cost just 0.7 percent of the total outlays involved in the former, thereby suggesting that revenue-raising legislation and spending increases may not fully capture distinctions that are important to judicial decision makers. Moreover, U.S. interests were directly attacked, and hundreds of Americans died at the hands of an enemy state prior to the nation’s involvement in four of the seven wars, specifically, when the Germans sank the Lusitania in 1915, the Japanese attacked Pearl Harbor in 1941, and the nineteen terrorists attacked New York City and Washington, D.C., with hijacked planes in 2001; no such attacks or casualties were related to the Korean, Vietnam, or Gulf Wars. While exogenous threats to U.S. interests emerged and prompted troop deployments in the latter three wars, the dangers were arguably less immediate and less portentous than those materializing prior to the world wars and the Iraq and Afghanistan Wars to most Americans, legislators, and judges. Many other notable differences exist: Congress formally declared war in World Wars I and II; issued resolutions supporting the president in the Vietnam, Gulf, Iraq, and Afghanistan Wars; but eschewed both options in the Korean War. Millions of men were drafted into the military for purposes of fighting the first four wars of the twentieth century, but the elected branches of government steered clear of conscription laws in the Gulf, Iraq, and Afghanistan Wars. All of these factors are worth noting because they suggest the nation— and therefore the courts—faced substantively different foreign policy challenges in each time period. The information theory posits that the courts will not independently examine the varying types of foreign policy events that emerge, admittedly a strong assumption given the evidence that judges do make reference to external events in the decision-making process. The more narrow and tractable argument, however, is that the most salient and valuable information for judges comes from the elected branches because they presumably will account for and filter the range of factors just identified. To address this problem, a second measure of crisis, defense spending, measured as a percent of the total federal budget, is also investigated. Defense spending signals the extent to which Congress and the president have chosen to devote national resources to military matters and, for this reason, is likely to capture the qualitative components listed above but buried by the indicator variables for war. Put differently, if the combination of a direct attack on the nation, a formal declaration of war, enactment of wartime

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revenue laws, and so forth all indicate an extraordinary crisis, then the elected branches are also likely to dedicate more money and more resources to military planning and preparation; federal courts, in turn, could take account of this reality. As the level of defense spending rises, the judges are likely to interpret this as a cue that the emergency is becoming more extreme and more costly, thereby generating a pro-government reaction in court. Defense spending is useful for yet another reason: It enables an empirical investigation of the possible effects of foreign policy crises that do not involve the breakout of hostilities or major troop deployments. Congress and the president may perceive heightened dangers from abroad and may actively commence preparing and readying the nation for possible military engagement, causing spending to spike, without ever engaging in a shooting war. Diplomacy, bargaining, and negotiation, in short, may abate the crisis before any fighting takes place. Defense spending, in effect, captures the wide array of foreign policy emergencies, such as the perceived threats from China vis-à-vis Taiwan in the mid-to-late 1950s and from the U.S.S.R. in the early 1980s, both of which led to massive defense build-ups and corresponding spending increases.9 Thus effects of defense spending on judicial decision making must be examined in addition to the major wartime deployments to fully capture which, if any, foreign policy cues affect the courts. A sharp distinction exists in the spending trends before and after 1950. Prior to 1950, Congress and the president spent very little on defense activities in the absence of a major foreign policy threat, but after that time, the elected branches continually devoted vast amounts of the nation’s resources to fending off outside threats. In the post-1950 period, the nation was virtually always prepared for military engagement, a reality that has led some to argue that it is now meaningless to distinguish between “wartime” and “peacetime.” Indeed, since 1950 when the Department of Defense began publishing reliable military personnel records, the nation has deployed more than 200,000 men and women abroad every year, thereby confirming the idea that the nation is in a constant state of heightened alert. This blending of wartime and peacetime conditions may make it more difficult for judges to discern when the nation has entered the type of foreign policy crisis that necessitates an extra infusion of funds or demands belt tightening to dissuade the government from continuing its ongoing military activities, but it also suggests yet another reason why defense spending is a particularly useful measure. While troops are continually deployed and the nation appears to be steadily at war, notable increases in defense spending imply that both Congress and the president perceive dangers that go beyond the

Mobilizing Judicial Resources / 85 Table 3.1  Summary of wartime periods, elected branches’ cues, and expected judicial reactions Elected Branches’ Cues Cued Foreign Policy Crises

President

Congress

Judiciary’s Expected Reaction

World War I (1914–21) World War II (1940–45) Korean War (1950–53) Early Vietnam War (1964–66) Late Vietnam War (1967–68) Gulf War (1991) Iraq/Afghanistan Wars (2002–10) Defense spending

Insufficient Insufficient Insufficient Insufficient Insufficient Insufficient Insufficient Insufficient

Insufficient Insufficient Insufficient Excessive Insufficient Excessive Insufficient Insufficient

Pro-government Pro-government Pro-government Anti-government Pro-government Anti-government Pro-government Pro-government

Note: “Insufficient” implies the nation requires more defense spending, and “excessive” cues the nation is spending too much.

expected and constant high levels. Thus the information theory projects that the courts will seek to provide financial aid to increase spending levels, even in the absence of a major war in the post-1950 era. To put the point most directly: Prior to 1950, the major deployments are clear indications of crisis, but after 1950, shooting wars become more commonplace and thus are less trustworthy signals of crisis. Table 3.1 presents the information theory’s predictions for how judges will react to wartime events and to changes in levels of defense spending. Column 1 lists the foreign policy events of interest, column 2 depicts the cues sent by Congress and the president, and column 3 forecasts judicial reactions. As noted, both branches unmistakably cued the courts that defense levels were insufficient during four wars: World War I, World War II, the Iraq War, and the Afghanistan War. Thus the theory predicts judges will react with pro-government votes and outcomes given their belief that defense levels are too low to keep the nation safe. The president supported increased defense during the Korean, Vietnam, and Gulf conflicts, but Congress sent multiple, often contradictory, messages on the question of whether a costly foreign policy crisis had emerged—a fact that will play an important role in the empirical analyses below. Assuming judges will trust the financial cues as the better signal of how to treat the tax and other financial disputes on their dockets, the information theory forecasts judges will seek to augment the fisc in the Korean War; pinch the fisc in the early Vietnam War period, but augment it in the later period of the war as the cues changed and became simultaneously supportive of defense. The joint cues that emerged during

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the Gulf War suggest judges would pinch the fisc to deter the military action undertaken by the president. The cases decided over the course of the last century during peacetime are the “control group” for these “treated” wartime crises. If the judges’ decisions differ between these two groups as predicted, the evidence will favor the information theory of judging. For purposes of testing the hypotheses, the statistical models include independent variables for each of the wars, coded (= 1) if the nation was involved in a shooting war as indicated below and (= 0) otherwise. The last row of table 3.1 depicts the expected effects of defense spending on judicial decision making. Given that defense spending increases only when Congress allocates money to military activities and the executive branch utilizes the resources for such a purpose, both branches signal insufficient defense. Thus judges are expected to react with increasing numbers of pro-government votes and outcomes as spending increases. The statistical models employed to investigate the empirical implications of the theory also include several control variables that theoretically could affect judicial decision making or that scholars have found to affect votes and outcomes. Specifically, the models include, when relevant, controls for the political preferences of all three branches of government; indicator variables for judges with prior military experience, judges who were appointed by the president who first engaged in the war, the identity of the appealing party (government or private party), the type of issue litigated; as well as tax rates, a time trend, and fixed effects for the judges, circuits, and chief justices when relevant. Potential Barriers to Identifying Causality This study relies on observational data, which means that the “treatments” of interest—wars and surges in defense spending—were not randomly assigned to the cases and controversies under investigation. With the lack of randomization, inferring causality is problematic in light of confounding that might emerge due to an unbalanced dataset or the presence of unobservable and unmeasurable variables. An unbalanced dataset can undermine the legitimacy of causal claims made with respect to the effects of foreign policy events on judicial decision making for various reasons. Existing judicial political theory, for example, posits that left-leaning judges are predisposed to favor the government in taxation cases, while right-leaning judges will favor the taxpayer (on the theory that the former prefer tax and spending programs, while the latter

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prefer less taxation and a smaller government).10 If by chance the federal bench is comprised of significantly more left-leaning judges in periods of crises compared to periods of relative calm, then it is entirely possible that judicial political preferences explain pro-government votes and outcomes and not judges’ desire for national peace and security as forecast by the information theory of jurisprudence. In fact, the datasets used in this study are unbalanced in the manner just suggested (as well as in other ways), and thus the study exhibits a selection bias because the treated group (wartime cases and controversies) and the control group (peacetime cases and controversies) differ in ways that could affect the dependent variables of interest—judges’ votes and case outcomes. While the probit models are able to adjust for the problem of imbalanced covariates, they do so by making various modeling and linearity assumptions whereas alternative methods, such as propensity score and coarsened exact matching methods, are also available for tackling this predicament but are not so hindered. All three approaches will be employed and presented for purposes of confirming the findings,11 and, as will be noted momentarily, all three produce substantially similar empirical results. To illustrate the second potential hurdle, unobservable and unmeasur­ able variables, consider the possibility that when the justices decide to review a lower court case, they grant certiorari to particularly weak taxpayer cases in times of war to augment the size of the fisc. A docket comprised of weak taxpayer claims will result in a disproportionate number of pro-government outcomes, thereby loosening budget constraints and enabling the elected branches to supply increased levels of defense. As the crisis abates, the justices could also reform their certiorari practices, choosing to review cases that reflect a mix of strong and weak taxpayer claims. Judicial selection procedures that differ in wartime and peacetime do not indicate, of course, that the information theory fails to explain judicial decision making. Just the opposite—such a practice would indicate that the justices respond to national crises and seek to aid the nation at every stage of their decisionmaking process in times of danger and not only at the merits stage of litigation when the courts decide the substantive issues involved. The more difficult problem is the possibility that the parties’ litigation strategies change in times of foreign policy crises, thereby causing court dockets to fill with disputes that substantially differ from those that emerge in peacetime periods. Taxpayers may pursue unusually weak cases, for example, on the assumption that government lawyers will be unable to mount an effective courtroom defense due to the high priority placed on crisis-related

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matters. This is not hypothetical: In early 1942, the attorney general stated that [p]roblems of defense command a growing share of the energies and resources of the Department. Special defense activities, described elsewhere in this report, have almost overshadowed the normal work of law enforcement which is the Department’s permanent concern. This is the inevitable consequence of new responsibilities acquired in the last 2 years. . . . The year has been marked by rapid expansion of the Department, due chiefly to the war abroad and to the national defense programs. Every division and bureau of the Department has been affected, but not in equal degree.12

While taxpayers may litigate a greater number of weak cases in crisis periods on the theory that they have a greater probability of winning due to the government’s inability to defend, they may ignore that judges are less likely to be so burdened and thus will issue increasing numbers votes and outcomes for the government. Put differently, the statistical models may suggest that courts have adopted a pro-government bias in times of crisis when, in fact, the judges are simply casting votes and generating outcomes against the taxpayers who accounted for the lower probability of the government strongly defending its cases but not the unchanged probability that judges would decide cases against taxpayers. This feature of the data-generating process is often described as a selection on unobservables because atypical litigants (and therefore atypical cases) select to go to court in times of war using unseen and unstated strategies. The selection effect, however, may operate in just the opposite fashion. Taxpayers may recognize that judges, being rational, will seek to infuse the fisc with extra funds in times of costly crises and thus will avoid litigating cases in federal court, knowing that they are likely to face judicial bias. They will seek to settle more claims out of court to avoid losing perhaps even more money at the hands of the judges. The qualitative evidence, discussed in more detail in chapter 4, suggests that courts often do adopt a pro-government position in times of crisis. As one taxpayer argued in a brief filed with the Supreme Court, certain wartime rulings cannot be explained unless one recognizes that crisis conditions lead decision makers to “resolve every question of construction in favor of the government so as to collect as much tax as possible.”13 Indeed, the Justice Department’s annual reports have suggested the character of the civil docket changes in wartime. The report filed for the years 1943–46 notes that private civil claims against the government

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decreased by roughly 16 percent, while government claims increased by nearly the same percentage: As a result of the war the character of the civil cases pending has changed materially. The number of private civil cases commended in district courts decreased by 16 percent, and the number of new bankruptcy proceedings decreased almost 33.3 percent. On the other hand, the number of government civil cases filed within the past fiscal year has increased by 12 percent.14

If private parties systematically avoid the courts except in circumstances in which they have unusually strong cases, this will make it more difficult for judges to reach pro-government decision. Thus empirical findings suggesting that crises cause judges to favor the government will be harder to uncover and—importantly—more reliable when they do surface. To understand the problem of selection on unobservables more formally, consider the problem in the context of the Supreme Court. The Court’s docket includes only the cases in which the government or the private party has petitioned for review and the justices have granted the petition. This means that the statistical models will be incidentally truncated because the sample is selected based on these two conditions. The problem is intractable but not impossible to solve. It can be addressed through the use of a model devised by the economist and Nobel Prize winner James Heckman, a model that estimates the variable of interest in a procedure that accounts for the possible selection effects operating behind the scene. More detail on the Heckman selection models is presented below, but the results, as we will see, indicate litigants adopt unique strategies in wartime and peacetime. Importantly, the empirical results vis-à-vis the parties indicate that the probit estimates are biased downward if they are biased at all, and thus the true effects of foreign policy crises on judicial decisions are likely to be substantively stronger than estimated and reported with the help of the probit models. Specifically, the results of the Heckman selection model indicate that the factors that operate to increase the parties’ desire to litigate also operate to decrease the likelihood of a pro-government vote or outcome. Thus it appears that taxpayers are pursuing their strongest cases in times of war and should be more likely to prevail; similarly it appears that the government is pursuing weak cases perhaps because of the explanation offered by the attorney general above: Government lawyers are spending time and energy on crisis-type activities and not on their civil litigation strategies.

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The Information Theory in Action: Empirical Findings in Taxation Disputes Supreme Court justices are at the apex of the federal judicial hierarchy; for this reason they have the greatest freedom to pursue their own interests and preferences in the judicial decision-making process. They can, in effect, maximize their personal preferences to a greater extent than judges sitting on important but nonetheless lower courts in the judicial hierarchy. While constraints exist for the justices (Congress is free to override or alter court decisions and can limit institutional funding when unhappy with judicial choices), these constraints, as well as others (including the lack of docket control and oversight bodies in both the judiciary and Congress), also plague the lower federal appellate courts, thereby inhibiting the appellate court judges’ ability to pursue personal preferences to a greater extent than observed in the Supreme Court. It is therefore likely that the information theory of jurisprudence will have more explanatory value for the votes and outcomes rendered by Supreme Court justices than for those emerging from the lower federal courts. Accordingly, the results obtained in each context are presented and analyzed separately. The Supreme Court in Times of Foreign Policy Crisis For purposes of identifying the effects of foreign policy crises on Supreme Court justices, the votes and outcomes in the context of taxation are investigated first with probit models and then with the range of alternative methods. To facilitate an easy interpretation of the statistical findings, the tables will include only the marginal effects of each regressor on the dependent variables. The results, then, should all be interpreted as the expected increase (decrease) in the probability of a pro-government vote or outcome given a unit increase in the independent variable under investigation. For purposes of comparison, the average pro-government votes and outcomes are identified in the last row of each table, and thus the probabilities indicate the percentage by which a crisis event increases or decreases this average. To begin the discussion, table 3.2 presents the effects of crises on judicial voting behavior as measured by major wars and defense spending—the indicators of crisis discussed and summarized in table 3.1. The first column in table 3.2 lists the foreign policy event of interest, and the second column presents the increased (or decreased) probability of a pro-government vote. The empirical findings indicate that, on average, the justices issue progovernment votes 66 percent of the time, but the justices’ propensity to

Mobilizing Judicial Resources / 91 Table 3.2  The effects of wars and defense spending on Supreme Court taxation votes Probit Models Depicting Marginal Effects with Robust Standard Errors Regressor

Pooled Votes

World War I World War II Korean War Early Vietnam War Late Vietnam War Gulf War Iraq/Afghanistan Wars Defense spending

.12(.03)*** .08(.02)*** −.13(.04) *** −.09(.04)** −.23(.05) *** −.47(.07) *** .13(.05) **

Observations Pseudo R2 Avg. pro-gov’t votes

7,900 0.04 .66

Pooled Votes

Post-1950 Votes

.01(.004)**

.05(.01)***

7,900 0.03 .66

2,568 0.05 .66

Note: Dependent variable is individual justice’s vote, coded = 1 if pro-government and = 0 otherwise. All the models include controls for the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; whether the case involved a constitutional issue; whether the case involved a wartime tax law; a time trend; and fixed effects for each justice. *p ≤ .10  **p ≤ .05  ***p ≤ .01

issue pro-government votes increased during World War I, World War II, and the Iraq/Afghanistan Wars by 12, 8, and 13 percentage points, respectively. The likelihood that the justices would side with the government, however, decreased during the early Vietnam War years and the Gulf War by 9 and 47 percentage points, respectively. Each of these five empirical findings is consistent with the theory and is highly statistically significant. The results with respect to defense spending are presented in the third and fourth columns of table 3.2, and also go in the direction forecast by the theory at statistically significant levels. Between the years 1909 and 2010, a 1 percent increase in defense spending (measured as a proportion of the total federal budget) led to an equivalent 1 percentage point increase in pro-government votes on the Court. This one-to-one relationship may not appear substantively strong, but consider spending patterns between the years 1941 and 1945, a period when defense as a proportion of the budget increased from 47 to 90 percent. This spike caused a corresponding increase in the probability that a given justice would vote in favor of the government by 43 percentage points. The government, in short, was almost certain to win its cases in these years—an empirical reality borne out by the data. In the post1950 period, defense spending, as expected, exerts an even stronger effect on the justices. In this later period, a 1 percent increase caused a 5 percentage point increase in the likelihood of a pro-government vote in the taxation cases on the docket. While spikes in defense spending were far less dramatic

92 / Chapter Three

after World War II, they nevertheless continually emerged. During President Reagan’s military build-up between the years 1981–87, for example, defense spending increased by 5 percent, leading to a 25 percentage point expected increase in pro-government votes; the government was again almost certain to prevail in this era. These results are robust to various measures of defense, such as real defense spending and defense spending as percentage of GDP. Moreover, to assure the findings were not driven by the post-2000 wartime period, the data were refit to the models excluding cases decided during the Iraq/Afghanistan Wars, and virtually the same results emerged. The theory’s predictions are borne out by the data in five of the seven wartime periods and in the context of defense spending, but unexpected results emerge in two contexts. The two anomalies, the Korean War and the late Vietnam War, led the justices to vote more often against the government, by 13 and 23 percentage points respectively, notwithstanding cues from the elected branches suggesting that increased levels of defense were necessary to keep the nation safe. To fully understand the results, however, recall from above that in the post-1950 era the president almost continually deployed troops and the nation was constantly in a high state of alert (compared to the pre-1950 era, when Congress and the president devoted far fewer resources to military activities on a steady basis). For these reasons, the information theory argues that courts will look to spikes in defense spending as the most credible cue of national danger and will not rely as heavily on the breakout of an actual war when deciding whether to loosen or tighten the fisc. Defense expenditures as a percent of the federal budget in fact surged during the Korean War by at least 17 percent and then slowly decreased until the late Vietnam War when they increased, although by a mere 0.6 per­ cent, at which point they began a steady decline until the onset of the Iraq/ Afghanistan Wars. Thus while column 2 of table 3.2 indicates that the probability of a pro-government vote decreases by 13 percentage points during the Korean War, columns 3 and 4 unambiguously indicate a 17 to 85 percentage point increase in the likelihood that the justices will favor the government over the private party.15 Overall then, the findings lend support for the information theory of judging during the Korean War period—the pro-government votes were likely to increase by 4 to 72 percentage points. With respect to the late Vietnam War, column 2 indicates a 23 percentage point decrease, and columns 3 and 4 imply a 1 to 5 percentage point increase—indicating that defense spending on the part of Congress and the president was not sufficient to offset the negative effects of the deployment, which the justices appear to have viewed with a high level of suspicion.

Mobilizing Judicial Resources / 93 Table 3.3  The effects of wars and defense spending on Supreme Court taxation outcomes Probit Models Depicting Marginal Effects with Robust Standard Errors Regressor

Pooled Outcomes

World War I World War II Korean War Early Vietnam War Late Vietnam War Gulf War Iraq/Afghanistan Wars Defense spending

.24(.06)** .07(.08) −.09(.16) −.24(.15)* −.41(.17)** all anti-gov’t*** .31(.01) ***

Observations Pseudo R2 Avg. Pro-gov’t votes

909 0.05 0.68

Pooled Outcomes

Post-1950 Outcomes

.05(.02)***

.16(.07)**

912 0.04 0.68

290 0.04 0.71

Note: Dependent variable is the Court’s outcome, coded = 1 if pro-government and = 0 otherwise. All the models include controls for the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; whether the case involved a constitutional issue; whether the case involved a wartime tax law; the percentage of justices with military experience; the percentage of justices appointed by the president who started the war; the identity of the chief justice; and a time trend. *p ≤ .10  **p ≤ .05  ***p ≤ .01

The empirical results with respect to wartime deployments and defense spending together offer a nuanced explanation for judicial behavior in the foreign policy context. They suggest that prior to 1950, the justices looked to Congress’s and the president’s military activities and less to defense spending to identify periods when the nation was in crisis and in need of judicial funding to fend off foreign threats. In the post-1950 period, when the elected branches chose to keep the nation in a high state of alert even in the absence of a major war, the justices began to rely more heavily on defense spending as the best and most trustworthy cue of crisis. Recall from above that Congress responded to the Korean, Vietnam, and Gulf War deployments with mixed signals, and this many explain why table 3.2 suggests that in the cold war era, the justices viewed military activities standing alone as dangerous to the nation’s safety and security, and thus not a time to infuse the fisc with judicial resources but a time to tighten it possibly in an effort to foster a reconsideration of defense policy. Table 3.3 now turns to an investigation of the issues with a focus on judicial outcomes. The substantive effects of wars and defense spending are identical to those described with respect to votes, although they do not all achieve statistical significance. Specifically, the government win rate increased during World War I, World War II, and the Iraq/Afghanistan Wars,

94 / Chapter Three

but decreased during the Korean, Vietnam, and Gulf Wars. The results with respect to defense spending are also substantively identical to those uncovered in the context of judicial voting: Pro-government outcomes increased by 5 to 16 percentage points with every 1 percent increase in the national budget devoted to military activities at statistically significant levels. The findings presented in table 3.3 with respect to case outcomes indicate that individual justices—the majority of them—voted as predicted by the theory in nearly all of the contexts of interest. Tables 3.2 and 3.3 offer insight into the judicial mind, but it is worthwhile to further investigate. The theory, for example, posits that the justices will respond to foreign policy events irrespective of ideology, but it is possible that right-leaning justices will exhibit substantially more pro-military behavior than left-leaning justices. To investigate this possibility, the data was partitioned to account for political preferences, as measured by the appointing president given that more sophisticated measures are unavailable for early appointees, and were refit to the probit models. The results are presented in table 3.4 and focus on judicial voting behavior, but the empirical results with respect to case outcomes are virtually identical. Consider first the judicial votes in wartime periods as depicted in columns 2 and 3 of table 3.4. The Democrats and Republicans exhibit similar, but not identical, voting trends in the wartime periods, but the findings are more often statistically significant in the context of the Democrats. With respect to defense spending, depicted in columns 3 through 6, both groups of justices respond positively to increases in spending, but only the Republicans do so at statistically significant levels. This collection of findings offers yet a further nuance on judicial behavior. The information theory argued that foreign policy events would have substantially similar effects on all the justices notwithstanding differences in individual political and legal preferences. This component of the theory, along with many of the specific hypotheses set forth above, has been borne out to a considerable degree by the available data. The results suggest, however, that Republicans and Democrats rely on different types of cues—both groups adjust their decision-making calculus in response to foreign policy events and largely in the same direction, but the Republicans rely more heavily on the monetary cues, while the Democrats appear to look to the deployment trends to reach decisions about the fisc in times of crisis. Before further discussing these findings, it is important to investigate just how robust they are to different modeling strategies. As it turns out, very robust. Table 3.5 presents the empirical results using four distinct statistical modeling methods: probit, coarsened exact matching, propensity

.08(.05) 4,065 0.03 0.68

3,835 0.03 0.64

.02(.009)**

Pooled Republican Votes

1,151 0.08 0.65

.02(.02)

Post-1950 Democrat Votes

1,417 0.04 0.67

.11(.03)***

Post-1950 Republican Votes

Note: Dependent variable is individual justice’s vote, coded = 1 if pro-government and = 0 otherwise. All the models include controls for the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; whether the case involved a constitutional issue; whether the case involved a wartime tax law; a time trend; and fixed effects for each justice. *p ≤ .10  **p ≤ .05  ***p ≤ .01

3,835 0.04 0.64

4,065 0.05 0.68

Observations Pseudo R2 Avg. pro-gov’t votes

.14(.05)*** −.008(.06) .05(.09) −.10(.06) −.14(.09) −.54(.06)*** .04(.07)

Pooled Democrat Votes

.13(.04)*** .08(.02)*** −.19(.05)*** −.06(.05) −.28(.07)*** −.21(.20) .15(.10)

Pooled Republican Votes

World War I World War II Korean War Early Vietnam War Late Vietnam War Gulf War Iraq/Afghanistan Wars Defense spending

Regressor

Pooled Democrat Votes

Probit Models Depicting Marginal Effects with Robust Standard Errors

Table 3.4  Judicial political preferences and Supreme Court taxation votes

96 / Chapter Three Table 3.5  Supreme Court votes and outcomes in taxation: Robustness testing Marginal Effects on Supreme Court Taxation Cases Major Wars Before/After the Cold War

Major Wars During the Cold War

Votes Probit model Coarsened exact matching model Propensity score matching model Heckman selection model

.06(.01)*** .08(.02)*** −.14(.07)*** .17(.06)***

−.09(.03)*** −.09(.04)** −.04(.02)*** no obs.

Outcomes Probit model Coarsened exact matching model Propensity score matching model Heckman selection model

.12(.05)*** .09(.05)* .51(.23)*** .67(.32)**

−.29(.22) −.29(.09)*** −.27(.12)*** no obs.

Note: The independent variable in the top panel is the individual justice’s vote, coded =1 if progovernment and 0 otherwise; the independent variable in the bottom panel is the Court’s outcome, coded = 1 if pro-government and 0 otherwise. no obs. = no observations *p ≤ .10  **p ≤ .05  ***p ≤ .01

score matching, and the Heckman selection model. The top panel presents possible bounds on the effects of wars with respect to votes, and the bottom panel presents the bounds with respect to case outcomes. Note that for purposes of estimating the effects of the wars, the events are pooled together based on the direction of the coefficients identified in the models above. Specifically, the major wars are grouped based on whether they occurred before or after the cold war or during the cold war. This procedure helps to assure sufficient data to identify the justices’ use of the double-edged sword in nearly all the modeling contexts. The first thing to note about the comparative statistics presented in table 3.5 is the remarkable consistency in terms of the substantive results across the different modeling strategies. Whether measured by vote or outcome, foreign policy events appear to affect the Supreme Court justices in a positive way before and after the cold war, but in a negative way during the cold war itself. The only anomaly in the results pertain to the propensity score model presented in the top panel, which suggests that the shooting wars before and after the cold war negatively affected the justices’ votes at statistically significant levels; this finding is at variance with the probit, coarsened exact, and Heckman selection models, all of which suggest that the crises in these times periods led the justices to increase their pro-government votes by 6 to 17 percentage points. The results with respect to the votes during the cold

Mobilizing Judicial Resources / 97

war period are entirely consistent and indicate that the crises in this time period caused justices to disfavor the government by 4 to 9 percentage points. Outcomes, presented in the bottom panel of table 3.5, indicate the government’s win rate increased by 9 to 67 percentage points before and after the cold war, but decreased by 27 to 29 percentage points during the cold war. Notably, the findings presented in the tables above are all completely consistent with the qualitative data, explored in detail in chapter 4. That chapter uncovers commentary, reasoning, and dicta in Supreme Court opinions evincing a very pro-government position on the part of the justices during the two World War periods and again during the Iraq and Afghanistan Wars, but the rhetoric was tamped down, and at times hostile, to the government during the cold war period. While these changes in judicial behavior, this flip-flopping back and forth, are identified in both the quantitative and qualitative data, the findings also raise the obvious question of why the justices would pinch the fisc in the cold war period. Stated differently, what, exactly, were the cues that convinced the justices that the nation was consuming excessive defense and that military strategy had possibly gone awry, thereby necessitating a judicial response that would incentivize a reconsideration of the ongoing foreign policy tactics at the time? This is an important question and goes to the heart of the information theory. After all, it is perhaps apparent why the Court would infuse the fisc with monetary resources when defense spending is deemed insufficient, but what would lead the justices to use their purse powers in an effort to discourage the elected branches from using their military power and weaponry in their preferred manner? To gain purchase on the issue, recall that the major wars listed in table 3.1 and investigated above necessarily conceal important factors. During the cold war period, for example, the nation was not directly attacked by enemy combatants; Congress never formally declared war; and wartime revenue bills were limited (Korea), slow to emerge (Vietnam), or nonexistent (Gulf ). If the events that transpired—or failed to transpire—during the cold war affected the justices’ views about the severity of the crises, as well as the legitimacy and usefulness of the military policies pursued, then the choice to pinch the fisc is rational. In effect, the combined set of cues (that existed in reality but are buried by the blunt measures of crisis employed in the wartime variables) appear to have led the justices to believe the military conflicts that took place in the cold war period—and in the absence of major increases in defense spending—were not foreign policy emergencies requiring an infusion of court-induced funding (and indeed, could have been dangerous to the nation’s interests). In short, with the onset of the cold war

98 / Chapter Three

period, the justices essentially required the elected branches of government “to put their money where their resolutions and troops are” or suffer the penalty of a judicial fiscal pinch. Implementing a budgetary squeeze was a useful means by which the justices could prompt the elected branches to reconsider their military activities when the commitment seemed less than firm given the lack of military expenditures. Finally, bear in mind that pinching the fisc does not require the elected branches of government to change course, but simply shrinks the size of the fiscal pie, thereby making a continued commitment to costly military activities more difficult at the margin. The Federal Appellate Courts in Times of Foreign Policy Crisis The empirical findings with respect to crises and the federal appellate courts suggest that lower court judges are less affected by foreign policy affairs than those sitting on the Supreme Court. Table 3.6 presents the findings for the appellate votes and outcomes, respectively. As above, the table depicts the marginal effects of each regressor on the dependent variables, and thus the results should all be interpreted as the expected increase (decrease) in the probability of a pro-government vote or outcome given a unit increase in the independent variable under investigation. Columns 2 through 7 of table 3.6 indicate how the crisis events affect the appellate courts’ votes and case outcomes. The wartime periods affect the judges’ votes and case outcomes in ways that were neither forecast by the theory nor discussed above with respect to the Supreme Court justices. More­over, the indicator variables for war do not achieve statistical significance. Defense spending, by contrast, affects the appellate courts’ voting behavior as expected—increases in defense spending lead to an increase in the number of pro-government votes—but even this finding disappears in the context of outcomes. In short, only one of the sixteen results presented in table 3.6 support the information theory of judging in the appellate context. The null findings in the appellate court context, especially when juxtaposed against the Supreme Court results, present something of a puzzle. Perhaps one of several factors explains the different judicial responses. First, notable time lags exist in the context of the appellate court but not the Supreme Court. Consider, for example, the possibility that the parties will appeal federal appellate court outcomes to the Supreme Court, and are especially likely to do so in circumstances in which the appellate court judges issue decisions consistent with the information theory (to protect safety and security) but that go against settled legal precedent. The Supreme Court is likely to reconsider at least a small portion of the appellate court decisions,

2,314 0.68 0.64

2,314 0.68 0.64

Observations Pseudo R2 Avg. pro-gov’t votes

1,242 0.68 0.66

.04(.002)**

Post-1950 Votes

1,203 0.07 0.67

−.02(.05) .07(.07) .04(.06) −.01(.09) .01(20) −.29(.24)

Pooled Outcomes

1,203 0.07 0.67

−.02(.0009)**

Pooled Outcomes

559. 0.08 0.69

−.02(.003)

Post-1950 Outcomes

Note: Dependent variables are individual judge’s votes and court outcomes, both coded = 1 if pro-government and = 0 otherwise. The models include controls for the political preferences of the appellate panel and the Supreme Court; the identity of the appealing party; the percentage of judges with military experience; the percentage of judges who issued pro-government votes; whether the case involved a constitutional issue; whether the case involved a wartime tax law; tax rates; and a time trend. The models presented in columns 2, 3, and 4 include fixed effects for each judge, and the models presented in columns 5, 6, and 7 include fixed effects for each circuit. *p ≤ .10  **p ≤. 05  ***p ≤ .01

−.0008(.007)

Pooled Votes

−.04(.03) .02(.03) .09(.05) .11(.09) −.008(.11) .38(.21)

Pooled Votes

World War II Korean War Early Vietnam War Late Vietnam War Gulf War Iraq/Afghanistan Wars Defense spending

Regressor

Probit Models Depicting Marginal Effects with Robust Standard Errors

Table 3.6  The effects of wars and defense spending on appellate court taxation votes and outcomes

100 / Chapter Three

and it is quite possible the rehearing will take place after the crisis has abated given the time lag associated with the appeals process. If this scenario obtains, then the Supreme Court will no longer be situated in “crisis mode” and thus will not necessarily support the “crisis-type” decision rendered by the lower court—even if the justices would have adopted precisely the same position vis-à-vis the government at the time the lower court decision was in fact rendered. Because judges (especially lower court judges, who may have little or no connection to the individuals responsible for military policymaking in and around the capitol) are unlikely to be in a position to forecast the length of any given war, a safe strategy is simply to ignore the crisis in the decision-making process to avoid systematic overrides. Fear of reversal, however, need not be present for rational federal appeals judges to ignore the reality of a crisis in the decision-making process. A second possible explanation incorporates the practical fiscal effects of the appellate court outcomes versus those that obtain in the Supreme Court. Taxpayers need not pay a court-ordered tax (and the government need not issue a refund) until the appeals process is exhausted. This means that appellate court judges may not be able to influence the budget during the crisis given the time lag associated with the appeals process. Finally, the null empirical results might be explained by the nature of the docket and not as a failure of the information theory. While lower court judges decide many more cases and controversies than Supreme Court justices, the average monetary amounts involved are likely to be quite a bit lower in the appellate court disputes (with less money at stake, the benefits of continued litigation decrease). Thus fewer opportunities exist for lower federal courts to perform the fiscal role in any meaningful way. The disputes that reach the Supreme Court involving large monetary amounts, of course, are more than likely to have made their way through the lower courts, but the disputes involving relatively miniscule amounts are likely to far outnumber the latter in the lower courts. This makes it impossible to identify a crisis effect, even if one exists with respect to the financially important cases at the lower levels of the judicial hierarchy. Of course, these are empirical claims that should be subject to investigation. Unfortunately, the appellate court decisions routinely fail to identify the budgetary implications of the cases on the docket, and thus it may be impossible to identify the empirical implications of these hypothesized explanations for the observed differences in the crisis effects throughout the federal judiciary. In sum, the evidence suggests that the information theory of jurisprudence has quite a bit of explanatory power in the Supreme Court: Both votes and outcomes shift as predicted by the theory. These results are consistent

Mobilizing Judicial Resources / 101

across the most credible cues of crisis and are robust to various modeling strategies. The information theory, however, appears to have little or no ability to explain votes and outcomes in the appellate court context. These findings, especially those uncovered in the context of the Supreme Court, invite comparative analyses. Specifically, it is worthwhile to investigate whether the results with respect to taxation are generalizable to other areas of the law, and to ask, if not, why not? These issues and queries are investigated immediately below.

The Information Theory in Action: Taxation Versus Other Areas of the Law Taxation cases plainly implicate the size of the fiscal pie, but disputes in various other financial and economic contexts may also affect the national budget. The federal coffers, for example, are continually vulnerable to monetary losses due to recurring claims advanced by private parties, especially in the context of tort and contract. At the same time, government lawyers often advance claims against private individuals and firms in these areas of the law, often seeking massive compensatory and punitive damages. Indeed, the Justice Department’s annual reports throughout the last century repeatedly note that taxation disputes are just one area of the law implicating the federal fisc; cases and controversies in other contexts can and do have a sizable affect on the budget. For this reason, government lawyers spend considerable time, energy, and resources seeking monetary recoveries and avoiding massive losses in a wide range of legal disputes.16 Moreover, while the information theory as presented in chapter 2 emphasizes the fiscal role that federal judges play when foreign policy crises explode onto the national agenda, it is likely that judges will also seek to play a policing role in times of national danger. The policing role, like the fiscal role, also entails a strategic response on the part of the justices to the crisis cues that emerge from the elected branches of government. Unlike the fiscal function, however, the policing function manifests itself in the civil and criminal cases that implicate domestic law and order. When the elected branches of government cue the onset of a foreign crisis, for example, the federal courts may respond by increasing (or decreasing) the number of pro-government votes and outcomes in disputes involving detainment issues, searches, seizures, free speech, habeas corpus petitions, and so forth. In fact, at least two empirical studies suggest as much. The legal and political science scholars Lee Epstein, Daniel Ho, Gary King, and Jeffrey Segal found that the Supreme Court justices were more likely to issue pro-government

102 / Chapter Three

outcomes in times of shooting wars than in times of peace; similarly, the political scientist Tom Clark found that the appellate courts were more likely to render pro-government outcomes in criminal cases in periods of war than in times of peace.17 The evidence presented both above and below shows that the information theory is useful for understanding how the justices on the Supreme Court will employ their fiscal hand, but possibly less useful for understanding the policing hand. The Fiscal Hand: Contract and Tort Disputes Involving the Federal Government as a Party If the justices believe exercising the judicial power of the purse promotes national safety and security, they would rationally exercise their fiscal powers to the greatest extent possible. This means that the justices will look not only to taxation, but also to the various other cases and controversies for purposes of promoting optimal defense levels. To investigate whether the findings presented above can be generalized to courtroom disputes beyond taxation, the analyses will focus on Supreme Court contract and tort cases decided between 1950 and 2010 that involved the U.S. government as either petitioner or respondent.18 These two areas of the law were selected based on Justice Department annual filings, which repeatedly indicate that the department’s civil division is the “protector of the national fisc,” and on interviews with Justice Department lawyers, all of whom indicated that the nation faces massive liability problems, primarily due to the tort and contract claims asserted by private individuals and entities, but at the same time stands to gain large sums of money in these cases when the government is the petitioner.19 Turning now to the empirical findings presented in table 3.7, the second and fourth columns present comparative statistics with respect to the wartime variables and suggest that the wars generally cause judicial votes and case outcomes to become pro-government, although this finding is statistically significant only with respect to votes during the Gulf and Iraq/Afghanistan Wars. The lack of statistical significance in the context of outcomes is due to the high standard errors, which in turn are caused by the small num­ ber of cases—at most the Court decided five tort and contract cases in any given wartime period. The findings set forth in table 3.7 suggest that the justices view contract and tort cases as an important mechanism for aiding the nation’s wartime needs. Indeed, given that all but the early Vietnam War findings are positively related to wars, it appears the Court issued a greater proportion of

Mobilizing Judicial Resources / 103 Table 3.7  The effects of wars and defense spending on Supreme Court contract and tort cases Probit Models Depicting Marginal Effects with Robust Standard Errors

Regressor

Post-1950 Votes

Korean War Early Vietnam War Late Vietnam War Gulf War Iraq/Afghanistan Wars Defense spending

.01(.10) −.03(.15) ~ .42(.06)*** .36(.08)***

Observations Pseudo R2 Avg. pro-gov’t votes

722 0.14 0.48

Post-1950 Votes

Post-1950 Outcomes

Post-1950 Outcomes

.76(5.48) .28(.72) ~ ~ .57(1.27) .01(.003)*** 722 0.13 0.48

.01(.01) 80. 0.19 0.46

82 0.15 0.45

Note: Dependent variable is individual justice’s vote, coded = 1 if pro-government and = 0 otherwise. The models include controls for the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; and a time trend. The models presented in columns 2 and 3 include fixed effects for each justice. ~ insufficient data  *p ≤ .10  **p ≤ .05  ***p ≤ .01

pro-government votes and outcomes in this collection of cases than in the taxation context. It is possible that these differences can be explained by the nature of the cases. The taxation cases virtually always have fiscal implications but do not routinely involve war-related claims by defense contractors, soldiers, and so forth. The tort and cases, by contrast, often have major implications for the fisc and directly involve wartime issues. Indeed, nearly 50 percent of the tort and contract cases involved a military-related matter, and the justices decided every one of them in favor of the government. This suggests that the justices wield a double-edged sword in the taxation cases but not the financial cases that address specific wartime strategies. With respect to this latter group, the Court defers to the legislative and the executive branches of government irrespective of the foreign policy cues received. This is a rational strategy. The information theory argues that judges will seek to increase and decrease the level of defense spending generally, but does not address the question of whether the justices will attempt to foster or disrupt specific wartime strategies pursued by the elected branches of government. The data indicate that the Court systematically supported the government in these cases, but this was neither addressed nor hypothesized by the theory. The results with respect to defense spending (measured as a percent of the federal budget) are found in column 3 and 5 of table 3.7 and indicate that spending leads to an increased level of pro-government votes and outcomes that go in favor of the government, although the findings are

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statistically significant only in the context of the votes. The substantive results suggest that the justices not only defer to the elected branches on the military issues that show up in Court, but also use the tort and contract cases to augment the size of the fisc upon receiving cues that the nation faces increased financial needs due to a foreign policy emergency. Just as in the context of the taxation cases, a 1 percent increase in the federal budget devoted to defense spending causes a 1 percentage point increase in the likelihood of a pro-government vote in the tort and contract cases. This collection of empirical findings adds to our understanding of judicial behavior. Table 3.7 demonstrates that like the taxation cases, the tort and contract cases are useful for aiding the nation in times of financial need. Moreover, given that the latter group tends to involve military-related matters, unlike taxation cases, we can also see that the Court will not pick and choose when to support the government in periods of major wars but will systematically support the government’s endeavors when those issues are involved. The Policing Hand: Civil Rights and Liberties Disputes As policing agents, the justices are not focused on the size of the budgetary pie, but rather on the level of domestic law and order. If the justices do adopt a policing role, then the information theory of jurisprudence may also be useful for describing and understanding decision making not only with respect to the fiscal portion of the Court’s docket but also with respect to the civil rights and liberties portion. To investigate whether the justices play their policing hand in times of foreign policy crisis, this section compares and contrasts the findings presented above to results obtained in disputes involving issues, such as the detainment of criminal suspects, searches, seizures, habeas corpus petitions, and so forth. The analysis again will focus on the two dependent variables, votes and outcomes, and will offer comparative statistics for 1950 to 2010. The empirical results presented in table 3.8 represent the marginal effect of each regressor on the dependent variable and thus can be interpreted as the increase or decrease in the probability of a pro-government vote or outcome given a unit increase in the independent variable. Beginning first with the justices’ voting behavior in the civil rights and liberties context. The second column of table 3.8 indicates that the wartime periods affect judicial voting as posited by the information theory: The inclination to support the government increases in the Korean, Iraq, and Afghanistan Wars, but decreases during the Gulf War. Only the Korean

Mobilizing Judicial Resources / 105 Table 3.8  The effects of wars and defense spending on Supreme Court civil rights and liberties cases Probit Models Depicting Marginal Effects with Robust Standard Errors

Regressor

Post-1950 Votes

Korean War Early Vietnam War Late Vietnam War Gulf War Iraq/Afghanistan Wars Defense spending

.09(.02)*** .02(.03) −.04(.03) −.09(.06)

Observations Pseudo R2 Avg. pro-gov’t

11,774 0.15 0.47

Post-1950 Votes

Post-1950 Outcomes

Post-1950 Outcomes

−.10(.10) −.04(.10) −.10(.10) .09(.18)

.06(.02)**

−.04(.10) −.01(.0007) 11,774 0.14 0.47

.04(.001)** 1,485 0.09 0.56

1,485 0.08 0.56

Note: Dependent variable is individual justice’s vote, coded = 1 if pro-government and = 0, otherwise. The models include controls for the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; and a time trend. The models presented in columns 2 and 3 include fixed effects for each justice. *p ≤ .10  **p ≤ .05  ***p ≤ .01

and Iraq/Afghanistan War findings, however, achieve statistical significance. Column 3 depicts the findings with respect to defense spending and indicates null effects. The findings with respect to judicial outcomes are presented in columns 4 and 5 of table 3.8. The first thing to note is that the findings with respect to the major wars do not hold up in the context of case outcomes; nearly all the results suggest a negative relationship between outcomes in civil rights/ liberties cases and wartime periods, but none are statistically significant. Defense spending, however, exerts a positive effect on judicial outcomes at statistically significant levels. A 1 percent increase in defense spending leads to a 4 percentage point increase in pro-government outcomes in the civil rights and liberties cases. Table 3.8 indicates that the judicial inclination to exert the policing hand is not as strong as the inclination to play the fiscal hand, especially in the context of taxation cases as demonstrated in tables 3.2 to 3.5. The legal historian Geoffrey Stone states that “[i]n war, the government may conscript soldiers, commandeer property, control prices, ration food, raise taxes, and freeze wages,” but he questions whether limits on rights and liberties are appropriate and “morally” acceptable.20 Stone’s sentiment is shared by many other scholars and commentators and may be one explanation for the divergent empirical results. The justices, in short, may believe it is acceptable

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to utilize the judicial power of the purse in ways similar to that observed in the other branches of government in times of emergency but may simultaneously subscribe to the view that they must function as the “protectors of individual rights and liberties” in perilous times. Indeed, the rhetoric and the dicta in the cases throughout the last century explicitly evidence the Court’s willingness to defer to the executive and legislative branches in the economic context as well as its simultaneous desire to independently review the legitimacy of the laws and regulations impinging on individual civil rights.21 A second explanation for the differences in the empirical findings exists. The cues outlined above for purposes of identifying foreign policy crises in the economic context all revolve around financial actions undertaken by Congress and the president, but judicial behavior in the civil rights and liberties context is more likely to respond to cues implicating law and order. Put differently, while increases in defense spending and wartime revenue bills lead the Court to loosen the fisc to assist the nation in fighting foreign dangers, the cues signaling a need for greater domestic law and order are likely to be associated with laws involving wartime speech, habeas corpus rights, and so forth. The information theory of judging does not take a position on which cues the justices will treat as credible outside the financial context, but posits that the justices will look to and rely on the cues that they find to be the most trustworthy given the situation at hand. Thus one lesson emerging from this study may be that the relevant cues differ depending on the specific cases and controversies that show up on the Court’s docket.

Conclusion This investigation began with a study of judicial votes and outcomes in the taxation context and found that the justices wield their decision-making power to loosen and tighten the fisc as posited by the information theory of crisis jurisprudence. The justices decided taxation cases during both World Wars I and II in a manner that strongly supported the elected branches of government, thereby increasing the size of the fiscal pie at a time when the nation faced serious dangers from abroad and arguably had insufficient resources to combat its enemies. This unequivocal support, however, evaporated with the onset of the cold war when the Court rendered votes and outcomes that were systematically anti-government during the Korean, Vietnam, and Gulf Wars. Notably, however, the Court returned to its pro-government stance at the end of the cold war period when the nation became involved in the Afghanistan and Iraq Wars.

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The major wars are one measure of crisis, but defense spending was also investigated as a signal of a foreign policy emergency. As it turns out, the justices relied on this latter measure especially in the cold war era and exhibited a constant willingness to augment the size of the fisc when they observed Congress and the president devoting increased levels of the nation’s resources to military activities. This finding holds in all eras—before, during, and after the cold war—suggesting that the Court, in effect, agreed to exercise the judicial power of the purse to enable consumption of greater levels of defense conditional on the elected branches’ exercise of their own budgetary authority in a manner that suggested safety and security required more defense. Together, all these findings indicate that the justices are willing to employ their decision-making power as a double-edged sword: They will support the government in times of crisis, but only when credible cues indicate that costly military activities are necessary to keep the nation safe and secure from outside threats. Absent trustworthy cues, the justices are likely to view military activities as excessive and thus not in the nation’s interest, and they will seek to pinch the fisc to provide incentives for the government to rethink its military strategy. These findings are very strong in the context of taxation as well as in the other economic controversies, such those involving contracts and torts. The findings in the civil rights and liberties cases, however, are relatively weak, suggesting that the information theory has less explanatory value outside the financial docket. Finally, the theory offers little or no explanatory value for appellate court judging. The null findings in the appellate court context might be explained by the nature of the federal appellate court docket or by the litigation time lag that makes it more difficult for lower federal court judges to aid the nation at the time it faces the crisis. These explanations, however, are mere speculation, and additional empirical work must be undertaken to confirm them.

Four

The Judicial Understanding of Costly Foreign Policy Events

Trends in judicial decision making indicate that Supreme Court justices react to foreign policy events as posited by the information theory in controversies that unambiguously implicate the size of the federal fisc, such as taxation. This empirical finding advances our understanding of the Court’s behavior in times of foreign policy crisis, but it also raises an important question about the state of the judicial mind: Do the justices exhibit awareness of their propensity to rely on informational cues emanating from elected branches of government when exercising their implicit budgetary powers? If the answer is yes, then the qualitative evidence will lend further support to the plausibility of both the theory and the quantitative findings discussed so far. Moreover, locating such evidence would confirm the hypothesis that federal judges take on-the-record notice of Congress’s and the president’s foreign policy cues when reaching decisions in cases that implicate the fisc. Unearthing evidence that reveals a judicial understanding of the courts’ budgetary role in times of foreign policy crisis is not an easy task given that the justices tend to focus on facts and legal issues when rendering decisions, suggesting that broader extralegal concerns—such as promoting optimal levels of defense spending—are often completely irrelevant to the decisionmaking process. Indeed, the justices do not address emergency conditions in the vast majority of decisions; nonetheless, more than a handful of published opinions include holdings, remarks, and dicta that show appreciation for the massive monetary costs associated with foreign policy emergencies and the justices’ corresponding ability to aid the nation in times of need. As might be expected, no justice has ever gone so far as to state explicitly that federal courts can or should strategically employ the judicial power of the purse as an instrument to affect substantive foreign policy. The justices have

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also failed to discuss explicitly the trade-offs between “all other goods” and safety and security to assure the nation avoids consuming either insufficient or excessive levels of defense. The rhetoric and commentary, along with the outcomes that justices have reached, however, suggest these goals and aims weigh heavily on the judicial mind. Scholars in the strong legalist tradition, such as Ernest Young, have noted that extant legal rules may invite (even require) the justices to account for emergency conditions in the decision-making process, and thus we should expect them to acknowledge and discuss wartime matters in some cases. More importantly, this rhetoric, it is argued, should not be interpreted as evidence of the justices’ pursuit of extralegal preferences and desires but as fidelity to existing legal doctrine.1 The judicial motivation for addressing costly national emergencies, however, is beside the point for purposes of this chapter—rather it is to demonstrate that the justices display the knowledge, facts, and data necessary to cast votes and render outcomes in accord with the information theory. In short, the goal of this chapter is not to provide a detailed account of the legal issues that show up in Court or to describe important doctrinal developments with respect to wartime matters. These are important and interesting issues to be sure, but the aim is substantially more modest: to account for and tally the judicial understanding of costly foreign policy events.

Judicial Wartime Rhetoric: Three Distinct Periods The Supreme Court justices have exhibited an awareness of the costs of war throughout the entire twentieth century and into the early twenty-first century. To place these judicial views into context, consider the early 1902 case, Patton v. Brady,2 which involved a taxpayer challenge to an excise tax on tobacco adopted by Congress to finance U.S. involvement in the Spanish American War. The complainant alleged that after having paid taxes on his original purchase of tobacco, the government unexpectedly and illegally charged him more than $3,000 in supplementary taxes under the new wartime revenue statute. Writing for a unanimous Court, Justice Brewer noted first that individuals have financial obligations to the state, and these obligations are proportional to public needs. Specifically, Justice Brewer contended that unforeseen foreign policy emergencies inevitably spark new fiscal demands, and the lack of forewarning about tax changes may be unfortunate but is not illegal. Summing up a judicial view that would reflect the Court’s view in similar challenges for the next several decades, Brewer noted:

The Judicial Understanding of Costly Foreign Policy Events / 111 A war had been declared. National expenditures would naturally increase and did increase by reason thereof. Provision by way of loan or taxation for such increased expenditures was necessary. . . . Courts may not in this respect revise the action of Congress. That body determines the question of war, and it may therefore rightly prescribe the means necessary for carrying on that war.3

The Patton opinion states that Congress has the power to prescribe the financial “means” for carrying on wars, and in recognition of the obvious need for increased resources, the Court would avoid interfering with the government’s strategy for raising funds. Importantly, the notion that the Court “may not revise the action of Congress” implies that the justices will not obstruct the legislators’ goals but will vote in favor of the government and issue pro-government outcomes in the cases on the docket—the argument set forth by the information theory. Not only has the Court systematically recognized the importance of revenue for achieving foreign policy goals, but it has gone so far as to suggest that while the power to tax has its limits when it is exercised to support the government in “the prosecution of war, [or for] the National defence, any limitation is unsafe.” In these circumstances, the Court has argued, the “entire resources of the people should . . . be at the disposal of the government.”4 Judicial concerns for the federal government’s fiscal needs in times of crisis remained strong up through the two world wars, but with the onset of the Korean War, this concern weakened, and by the tail end of the Vietnam War it seemed to disappear entirely. By the start of the Iraq and Afghanistan Wars, however, judicial rhetoric once again supported the government’s wartime activities, though not to the extent observed during the two world wars. These three distinct periods reflect the judicial views unearthed in the quantitative evidence presented above: The justices sought to expand the fisc before and after the cold war period, but systematically attempted to pinch the fisc during the cold war in the absence of spikes in defense spending. World Wars I and II: A Time for Patriotism and Total Sacrifice Both prior to and during the two world wars, elected officials enacted a range of policies and programs in the effort to prepare and enable the nation to deal with its foreign aggressors.5 As suggested by the Court in Patton, these measures often emerged without forewarning and imposed considerable personal and financial costs on individuals throughout the nation. For this reason, they were continually challenged in federal court on grounds that they were unconstitutional and/or inapplicable to particular facts and

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circumstances at hand. In deciding the cases and controversies that showed up in Court, the justices repeatedly authored opinions reflecting what virtually every military strategist takes for granted: Material resources are essential to winning wars and often require significant sacrifice on the part of private individuals and companies. To illustrate judicial thinking on these matters, consider the series of revenue bills adopted by Congress to fund World War I and World War II. These bills incorporated extraordinarily high tax rates, which the Court subsequently declared to be both constitutional and applicable to parties challenging them. In LaBelle Iron Works v. United States,6 the Court reviewed a taxpayer’s Fifth Amendment challenge to a wartime excess profits tax that led to an assessment of more than $1 million on the value of LaBelle Iron Work’s property in 1917. Delivering a unanimous decision in favor of the government, Justice Pitney commented on the importance of revenue for the nation’s wartime preparation efforts and noted that Congress intended the excess profits tax to raise money for the “Special Preparedness Fund,” a fund intended to enable the nation’s fortification activities.7 “The great war in Europe had been in progress since 1914,” the Court noted, “and the United States had become directly involved in the conflict in the spring of 1917, necessitating heavy increases in taxation.”8 The LaBelle decision, like many decisions discussed further below, shows that the justices took judicial notice of foreign policy events and attribute their knowledge to the formal acts of the elected branches of government as posited by the theory. United States v. Allen-Bradley Co.9 involved a manufacturer of radio parts, which were in critically short supply during World War II. At the request of government procurement officers, the company agreed to improve its facilities to boost output, and subsequently sought to write off the improvement costs as a deduction against taxable income. The Allen-Bradley Company argued its deductions were warranted under current tax law because the costs were incurred after 1939, but the government contended the law barred the deductions unless the costs were incurred after 1939 and the War Production Board certified them as necessary to the nation’s defense. Taking judicial notice of wartime conditions and congressional actions intended to facilitate wartime success, the justices unanimously held in favor of the government: In 1940 this country embarked on the greatest program of defense preparedness in its history. Such an undertaking called for a vast expansion of the nation’s industrial capacity. New and improved facilities were desperately

The Judicial Understanding of Costly Foreign Policy Events / 113 needed, not only for the production of guns, planes and other obvious weapons of war, but also for the innumerable items that are essential to the prosecution of a large-scale conflict. This unprecedented program of expansion demanded a full and immediate cooperation of everyone who could lend assistance.10

The “assistance” to which the Court referred included not only tax revenue but also military equipment and other material resources that were “so necessary for successful prosecution of the war.”11 The Allen-Bradley Company aided the war effort on one front (manufacturing radio equipment for sale to the government) but was forced by the Court to render assistance on the second (paying higher taxes on its wartime profits) given the War Production Board’s failure to formally certify the company’s improvements for the nation’s defense activities. The important feature of the Allen-Bradley decision for our purposes is not whether the decision was grounded in law or fact, but that it demonstrates that the justices were taking judicial notice of the government’s wartime preparation efforts along with the high costs associated with these activities. United States v. Koppers Co.12 involved a controversy that started with a taxpayer’s 1941 tax filing. In the case, the Court considered the taxpayer’s effort to recover interest charges on taxes that were left unpaid, but owed, during the ongoing military activities of World War II. The Court denied the recovery, and while the decision was not unanimous (two justices dissented without opinion), the justices in the majority again took judicial notice of the fact that the tax laws were a “device initiated by Congress, late in 1940, in great part for the quick collection of large sums needed by the Government in a national emergency,” and “if the instant taxpayer had paid its required tax in 1941, the Government would have received an additional $460,408.91 . . . during the crucial war years.”13 The suggestion in both Allen-Bradley and Koppers is that in wartime the government needs money— and needs money fast—and when the elected branches credibly cue the courts of that financial need, the justices will aid the nation by redirecting revenue streams from private parties into the hands of the government, thereby helping the nation to achieve optimal levels of defense. Kennedy v. Silas Mason Co.14 was also a World War II case involving the application of overtime provisions found in the Fair Labor Standards Act to individuals working in a government-owned munitions plant during World War II. The justices did not reach the merits of the case, but issued a pro-government decision on procedural grounds and noted the important fiscal implications of the case:

114 / Chapter Four [The s]ubstantial claims of petitioners may be denied or large sums added to the cost of the war by the answers to these questions, and many cases other than this will be controlled by its decision. . . . The short of the matter is that we have an extremely important question, probably affecting all . . . war contractors . . . and ultimately affecting by a vast sum the cost of fighting the war.15

Further, in 1944, the Court considered the United States v. County of Alle­ gheny case, 16 which involved a War Department’s contract with a Pennsylvania company for large field guns, the sales of which were subsequently taxed by Allegheny County. In a unanimous decision, the Court noted that validation of a local tax on government activities would “measurably increase the cost of waging the war” 17 and then proceeded to invalidate the local tax on the federal government, thereby saving the latter substantial wartime expenses. Indeed, even when the Court imposed wartime costs on the government during the wartime years, it emphasized their insignificance to the budget. In United States v. Plesha,18 six members of the Court held that the Soldiers’ and Sailors’ Civil Relief Act of 1940 barred the government from obtaining reimbursement for insurance premiums paid on behalf of military personnel during World War II. In holding in favor of the soldiers returning from war, the Court noted that in World War I similar claims against the government were “so sporadic and so insignificant,” costing less than $20,000, or $42 per policy, that it was reasonable to assume the costs would be equally negligible in the later war.19 The Court, in short, considers not only the law and facts of each case, but worries about the effects of the decisions on the federal budget and, by implication, the attainability of ideal defense levels. This is precisely the point underlying the information theory of judging in times of foreign policy crises. The Supreme Court has recognized the importance of revenue for the nation’s success, but the justices have also commented on the need to deny such resources to foreign enemies to undermine the military goals of the nation’s opponents. In United States v. Caltex, 20 the Court upheld the government’s refusal to compensate complainants for property destroyed during World War II. A unanimous Caltex Court included dicta in the opinion that showed a surprising depth of information and knowledge about the military strategies pursued by the executive branch. Writing for the Court, Chief Justice Vinson noted: At 5:40 p.m., December 31, 1941, while Japanese troops were entering Manila, Army personnel completed a successful demolition. All unused petro-

The Judicial Understanding of Costly Foreign Policy Events / 115 leum products were destroyed, and the facilities were rendered useless to the enemy. The enemy was deprived of a valuable logistic weapon. . . . [T]he sole objective of destroying property of strategic value [was] to prevent the enemy from using it to wage war the more successfully.21

Vinson commented that federal courts have long recognized—albeit only in dicta—that the sovereign can act with virtual immunity when it comes to private property “in times of imminent peril.”22 In short, over and over, the justices exhibit an awareness of the cost of war—and the important role they play in aiding the nation’s fiscal needs. Perhaps is it obvious that military activities are expensive endeavors that require substantial access to property and resources to succeed, but the justices do not rely merely on intuition when observing the correlation between money and military success. Judicial opinions are replete with references to presidential and legislative statements informing the nation (and the courts) about the defense costs. In upholding legislation allowing the government to retroactively negotiate wartime contracts, thereby saving substantial sums of money during World War II, the Court cited President Roosevelt’s plea to the nation to contribute in every way possible to the war effort. “‘War cost money,’” the Court quoted the president, “‘our war program for the coming fiscal year will cost $56,000,000,000 or, in other words, more than one-half of the estimated annual national income. This means taxes and bonds and bonds and taxes.’”23 Similarly, the Court cited to legislative history that indicated in 1942 the nation had no choice but to adopt the extreme taxing measures in unanimously denying a taxpayer a bad debt deduction under wartime revenue legislation. Legislators, the Court noted, were “faced with revenue needs and a tax program of a magnitude unthought of in modern times, and we all realize it is necessary to raise every dollar of additional revenue that can be raised without seriously disturbing or shattering our national economy.”24 Underscoring the importance of economic resources during the two world wars, President Roosevelt argued money and equipment were as important to the nation’s military success as the labor provided by the troops: When the very life of the nation is in peril the responsibility for service is common to all men and women. In such a time there can be no discrimination between the men and women who are assigned by the Government to its defense at the battlefront and the men and women assigned to producing the vital materials essential to successful military operations. . . . [E]ach citizen [will be asked] to serve his Nation to his utmost where he is best qualified.25

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Echoing the president’s sentiment regarding “drafting business entities for the war effort,” the Court in United States v. Bethlehem Steel Corp.,26 a case challenging a wartime tax, noted in 1941 that “Congress can draft men for battle service. . . . Its power to draft business organizations to support the fighting men who risk their lives can be no less.”27 In United States v. Lichter,28 a later case involving wartime contracts and the importance of keeping government costs low to the detriment of the private parties, Justice Burton wrote for eight members of the Court contending, “[i]n total war it is necessary that a civilian make sacrifices of his property and profits with at least the same fortitude as that with which a drafted soldier makes his traditional sacrifices of comfort, security and life itself.”29 In addition to the commentary of the elected branches of government reproduced in the Court’s opinions, litigants’ briefs also provide information about wartime costs, which appear to shape judicial views or, at a minimum, place the justices on notice of important foreign policy issues. Government lawyers have continually argued that judges must adhere to the law when interpreting peacetime statutes, but when it comes to “war-time statutes the situation is different.”30 Judges, the government lawyers have argued, should not interfere with the elected branches’ efforts to collect taxes and seize property: “If the seizure of privately owned property becomes necessary for the proper prosecution of war, it stands to reason that the Government’s attempted seizure should not be restrained. . . . [T]o do so would frustrate the very purpose of such statutes and render them impotent and nugatory”31 in the nation’s time of need. Indeed, government lawyers have contended that due process rights should not hinder the government’s seizure of private assets during wartime because “the proceeds shall be put in the Treasury of the United States and invested in liberty bonds or the proceeds in some way used for the prosecution of this war, which has been precipitated upon us by the barbarous conduct of the German Empire.”32 In United States v. Dickerson, the government informed the Court that the War Department estimated that a judicial decision allowing army reenlistment bonuses during World War II would cost between $10 and $15 million at a time when the nation was already facing a financial emergency due to wartime activities, and thus the statute should be interpreted to deny these bonuses.33 Earlier, when defending World War I taxes, the government noted that the Revenue Act of 1917 was passed when “additional revenue was urgently needed by the Government to defray the heavy expenditures incurred and to be incurred in the prosecution of war,” and thus the Court should defer to legislative choices.34 Tax experts supported this position in an amicus curiae brief, arguing first that the Court must look to the history

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and times of the legal enactment and then noting that “[t]he entrance of the United States into the Great War created an astounding need for revenue. Congress turned to the income tax, then a comparatively new instrument of taxation, to collect the main portion of this revenue.”35 As demonstrated above, and almost needless to say, the Court sided with the government in its opinions denying the taxpayer the relief sought during these wartime periods. The lawyers have also made emotional appeals to the justices in the hopes of winning revenue for the government. In response to a private party seeking to avoid paying the excise taxes adopted to fund World War I, the government’s lawyer concluded his brief suggesting that parties who challenged wartime taxes were not only disloyal to the country, but greedy and selfish, while other more patriotic individuals were sacrificing their lives. In the words of Solicitor General James Beck, the Court should not hesitate to “inject” patriotism into the veins of uncooperative citizens: In my opinion, these war measures should be interpreted so as to produce the effect desired by Congress; and if any banker is unpatriotic enough to attempt to defeat the intent and purpose of this law, and thus avoid paying his just share toward the war expenses of this Government, which places its protecting arm around him and enables him to accumulate great wealth, this court should inject a little patriotism into his veins by compelling him to bear his small part of the war expenses, while his fellow citizens were freely offering their lives for their country and for his good.36

The wording of the brief states that it is unpatriotic for bankers to defeat the intent and purpose of the law, but implies, as well, that judges who refuse to adopt a pro-government position in times of emergency are equally suspect—as an anti-government decision would “defeat the intent and purpose of the law.” So great is the perceived wartime decision-making bias that private parties litigating against the government seek to use this fact to their advantage. In a World War I controversy, Keith v. Johnson,37 the taxpayer set forth numerous law-related arguments in his brief to convince the Court that he did not owe the disputed taxes and then argued that he must have a particularly strong case because he prevailed in the lower court in a wartime period. “It is true and notable also that the Court of Claims against strong pressure and the weight of the World War time prejudice against any claim on the Government, had made a similar decision [in favor of the taxpayer],” and this, the taxpayer contended, should be convincing evidence that he should

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also win on appeal.38 Indeed, private parties have argued that the anti-taxpayer sentiment exists throughout the government in times of crisis and leads to unfair rulings that must be remedied in court. “We cannot conceive of how such a ruling can exist,” one taxpayer argued with respect to the tax commissioner, “except on the theory that it was made when the law was new . . . [and] when war conditions prevailed and everything was in a jumble, and the officers felt it to be the safer course to resolve every question of construction in favor of the Government so as to derive as much tax as possible.”39 Litigants, in short, seem to subscribe to the information theory of jurisprudence: When courts perceive the nation to be in danger, judicial decision makers react with pro-government rulings. This increased propensity to issue decisions that favor the government irrespective of the laws and facts involved is precisely the scenario recognized and disliked by private litigants. So deep is the notion that wartime conditions lead to a pro-government bias that often the parties litigate whether in fact a war existed so as to take advantage of (or avoid) the perceived biases of the courts. In such cases, the justices, as theorized above, may take judicial notice of the conditions that existed at the time the statute was adopted; and the justices themselves have suggested as much. In Ashwander v. Tennessee Valley Authority,40 private parties sought to set aside a contract with the government, arguing in part that the government had no constitutional authority to construct the Wilson Dam. For a unanimous Court, Chief Justice Hughes noted, “We may take judicial notice of the international situation at the time the Act of 1916 was passed, and it cannot be successfully disputed that the Wilson Dam and its auxiliary plants, including the hydro-electric power plant, are, and were intended to be, adapted to the purposes of national defense. . . . ‘[T]he maintenance of said properties in operating condition and the assurance of an abundant supply of electric energy in the event of war, constitute national defense assets.’”41 For this reason, the justices determined that the government acted within its constitutional authority when constructing the Wilson Dam and its power plant. Moreover, the Tennessee Valley Authority case highlights the justices’ understanding of the reality that the nation invests resources to assure military success well before the war is declared or troops are deployed. In this context, the Court noted that such preparation for World War I began as early as 1916, while the “official” U.S. entry into the war was not until the spring of 1917. The collection of cases involving wartime rhetoric in the first half of the twentieth century indicates that the Court continually took judicial notice of the nation’s military activities and the need for money and resources to

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facilitate success on the battlefield. While many opinions—most—are silent with respect to the foreign policy issues of the day, the evidence suggests that the justices were nonetheless both aware and anxious about defense issues during the two world war periods. The qualitative data suggests the information theory is a plausible account of judicial decision making, and lends further support for the quantitative evidence uncovered in the previous chapter. The Cold War: From Steel Seizures to Agent Orange to Embassy Hostages The onset of the cold war produced substantial changes in the courtroom rhetoric pertaining to both the nation’s wartime activities and the massive costs involved in defending the country from outside threats. No longer were justices remarking on the desperate need for “guns, planes and other obvious weapons of war,” noting the policy parallels between laws that conscripted men into the army and those that permitted the taking of private property for the war effort, or implying the need for total sacrifice in times of “total war.” Moreover, absent from litigants’ briefs were arguments suggesting that courts “should inject a little patriotism into [the] veins” of bankers who refuse to contribute their assets to the nation’s defense, or that agency officials and lower court judges were unfairly biased due to the “strong pressure and the weight of the [wartime] prejudice.” Perhaps these changes are understandable and predictable given the vast changes in the behavior of the elected branches of government as well as popular views on military activities during the two world wars, on the one hand, and the Korean, Vietnam, and Gulf Wars, on the other hand. The most important and notable difference that emerged in the elected branches involves official wartime declarations: Congress issued a formal declaration of war at the onset of both world wars, but failed to exercise this constitutional option in the later wars. Indeed, Congress refused to issue a resolution supporting President Truman’s military activities in Korea in the early 1950s, and while legislators adopted a formal resolution supporting President Johnson’s military deployments to Indonesia in 1964, it was rescinded in the 1970s, thereby suggesting support for the Vietnam War had waned, if not evaporated altogether. Other factors may also have cued the Court that the cold war era involved foreign policy emergencies on a far smaller scale than experienced in the earlier part of the century. While the president deployed troops in each wartime period, the deployments were considerably more limited during the Korean, Vietnam, and Gulf Wars relative to the two world wars, implying

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the government was less in need of money and resources to achieve military success. Moreover, immediately prior to the world wars, the nation’s defense spending was extremely low and virtually nonexistent, and consequently a fiscal emergency materialized when the nation sought to quickly prepare itself for possible participation in the foreign hostilities. This type of budgetary crisis was avoided in the cold war era given that the government had adopted a spending strategy that enabled a high level of military readiness in all periods. In fact, various scholars have argued that distinguishing between peacetime and wartime in the post–World War II era is nearly impossible due to a “preparedness mentality” that lead to high levels of defense spending and constant military readiness.42 To be sure, Congress adopted specific wartime revenue bills after World War II, but the nation managed to achieve a revenue surplus during the Korean War, delayed enacting any tax bills during the Vietnam War until at least five years after troops were deployed, and avoided major costs altogether during the Gulf War due to President H. W. Bush’s tin cup mission. During the world wars, by contrast, Congress and the president swiftly enacted revenue bills, and yet the nation continued to be deep in deficit until well after the hostilities subsided. This section does not seek to explain why the elected branches of government acted differently in the two wartime periods or why popular opinion was so vastly different. Rather, the point is to offer a description of the courtroom rhetoric that emerged in the cold war period concerning the costs of foreign policy crises, and to note that the justices and litigants tamped down their commentary and at times affirmatively expressed hostility to the nation’s military activities. This evidence, in turn, suggests the plausibility of the double-edged sword posited by the information theory of crisis jurisprudence: Judges have the option to support or undermine defense activities and will choose the best course of action given the cues emanating from the elected branches of government. To illustrate the difference in the rhetoric that emerged pre- and post1950, consider again judicial opinions interpreting wartime revenue bills. Jarecki v. Searle43 involved a dispute in which a taxpayer sought to avoid paying more than $3.5 million in taxes under the excess profits tax act adopted by Congress in 1950 to help fund the Korean War. While Chief Justice Warren authored a unanimous pro-government opinion, he did not extensively remark on the importance of the revenue laws for the nation’s defense nor did he comment on individuals’ obligations to contribute to the nation’s military success in the form of both labor and property. Instead, the Searle Court almost blandly noted that the revenue bill was similar to a World

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War II measure and was “intended to tax at high rates unusually high profits earned during the Korean War.”44 Similarly, litigant briefs were not filled with wartime rhetoric. The government’s brief included a legislative history of the tax, but offered no dramatic or powerful language on the importance of collecting this tax, its relevance for helping the nation win the war against foreign aggressors, or patriotic duties in times of crisis.45 In Allen v. Grand Central Aircraft Co.,46 the Court considered whether President Truman had the power to take administrative action to assure enforcement of the wage stabilization provisions found in the Defense Production Act of 1950 (DPA). Grand Central Aircraft had allegedly paid wage increases to its employees in 1951 in violation of an administrative order freezing wages, making it likely that the Internal Revenue Service would respond by barring the company from deducting roughly $750,000.47 Justice Burton, writing for a unanimous Court, upheld the agency action, noting that Congress derived portions of the DPA from similar World War II legislation and that both were intended to stabilize prices, wages, and salaries. “The military demands in Korea and elsewhere in 1950 made it necessary to maintain a large production of military goods,” the Court noted, “while seeking also to meet the long-denied and increasing needs of the Nation’s civil economy.”48 Unlike his opinions written in the context of World War II, such as Lichter quoted above, Burton did not opine on the importance of individual sacrifice or comment on the extraordinary financial needs brought about by the war. Instead, he implied that Congress and the president were as much concerned with the domestic economy as with its military success abroad. These dual concerns existed in earlier periods, but the justices consistently wrote alarmist opinions emphasizing the massive financial demands associated with wartime activity and virtually ignored possible domestic and economic troubles in the pre-1950 era. Not only did the Court tamp down its rhetoric on the costs of war and the importance of individual sacrifice, it seemed more willing to deny the government access to resources in times of foreign crisis. The most wellknown judicial decision during the Korean War period is Youngstown Sheet & Tube Co. v. Sawyer,49 decided in 1952. Youngstown Sheet & Tube involved President Truman’s decision to seize the nation’s steel mills to assure ready access to a commodity deemed essential to the war effort. The government argued the order was necessary to avert a national catastrophe associated with the cessation of steel production, a possibility given the breakdown of collective bargaining efforts inside the steel industry. Justice Black delivered an anti-government decision for a divided Court, first noting that Congress’s wartime financial powers are vast:

122 / Chapter Four The power of Congress to adopt such public policies as those proclaimed by the order is beyond question. It can authorize the taking of private property for public use. It can make laws regulating the relationships between employers and employees, prescribing rules designed to settle labor disputes, and fixing wages and working conditions in certain fields of our economy. The Constitution does not subject this lawmaking power of Congress to presidential or military supervision or control.50

The problem, the Justice Black noted, was that Congress did not enact any such policy, and thus the president had no authority to seize the mills, unlike the executive action at issue in Grand Central Aircraft, which was autho­ rized by the legislators. Congress, in effect, cued the Court that the Korean War emergency was not on par with that of World War II—a period when Congress had authorized President Roosevelt to act in exactly the same manner and was sanctioned by the Court in the decision-making process.51 Together Jarecki, Grand Central Aircraft, and Youngstown Sheet & Tube reflect judicial knowledge of wartime activities as well as the inevitable expenses the nation must incur in times of foreign policy crisis. But the cases also suggest that federal courts will not necessarily support the government in times of crisis, and even when they do, the support can take a different, more restrained form than observed during the two world wars. And this is especially the case if Congress does not affirmatively support the positive wartime actions of the president. An armistice agreement signed in the fall of 1953 ended the Korean War, but less than a decade later, the nation found itself in the midst of another major conflict, this time in Indonesia. The judicial opinions rendered during the Vietnam War era, like those issued during the Korean War, exclude the alarmist dicta and commentary on the crisis and its costs to the nation. Moreover, in the early years of the Vietnam War, the Court produced mixed results for the government, but these mixed results soon lead to open hostility on the part of the Court—a response unseen in the pre-1950 era. In Lockheed Aircraft Corp. v. United States,52 the Court considered a case involving a failed attempt to evacuate wartime orphans near Saigon due to an airplane crash that killed nearly 150 people. The family of one of the victims, an employee of the U.S. Navy, sought damages from Lockheed Aircraft Corporation, the manufacturer of the plane, and Lockheed, in turn, sought indemnification from the U.S. government. The government argued the law barred such actions to limit “the overall monetary liability of the United States,” but Justice Powell, writing for eight justices, disagreed and interpreted the Federal Tort Claims Act to allow third party actions against the

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government, subjecting the latter to massive unwanted monetary claims due to wartime actions and effectively pinching the fisc. The Court, however, was not always sympathetic to private parties’ indemnification claims against the government for activities undertaken during the Vietnam War period. Hercules, Inc. v. United States53 involved government contracts with various chemical manufacturers to purchase phenoxy herbicide, code-named Agent Orange, to spray on trees and plant life to eliminate hiding places and destroy food sources. The government ordered several chemical manufacturers to produce the herbicide in the 1960s when it had armed forces stationed in Southeast Asia. The companies apparently objected to the mandate, but under the Defense Production Act of 1950, President Johnson had the authority to, and did, order the companies to manufacture Agent Orange on pain of civil and criminal penalties. The president ordered the companies to divert all of their relevant resources to manufacturing Agent Orange and apparently never told them “about the hazards of producing the defoliant as specified by the United States, even though the government had long been aware of those hazards.”54 When veterans began filing claims against the manufacturers for exposure to the chemical, the latter sought indemnification from the government. Chief Justice Rehnquist wrote an opinion for the Court, over the strong dissent of Justices Breyer and O’Connor, barring the indemnity claims, in effect, protecting the fisc from massive losses due to the wartime endeavors. As the Vietnam War progressed, numerous plaintiffs lodged challenges to the constitutionality of the war and sought to enjoin the government from carrying out or issuing orders associated with the military activities in Indochina. Various lower federal courts held the Vietnam War activities were constitutional given that Congress had manifested its support through the Gulf of Tonkin resolution and had appropriated funds to the war effort, while others determined the issue was political and thus not a true case or controversy as required by Article III for courts to get involved.55 The Supreme Court continually refused to opine on the constitutionality of the war, repeatedly denying certiorari to the petitions that came to the Court seeking a rehearing of the lower courts’ decisions. Nonetheless, Justices Brennan, Harlan, Douglas, and Stewart argued on numerous occasions that the Court should grant certiorari, often employing language and rhetoric that revealed open hostility to the war. In one dissent to the denial of certiorari in Holmes v. United States,56 Justice Douglas argued that the world war crises were different than the ongoing conflict in Vietnam given the outright attacks on U.S. interests resulting in the deaths of the Americans in the former contexts and the merely distant threats posed by

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the latter: “[D]efending our shores against an aggressor is certainly quite dif­ ferent from launching hostilities against a nation or a people overseas.”57 Moreover, Douglas argued congressional support for the president’s wartime activities could not necessarily be inferred from the Gulf of Tonkin resolution or from revenue and appropriations decisions.58 These views are entirely consistent with the findings above: With the onset of the cold war, the quantitative data suggest the Court was less likely to trust deployments and wartime revenue bills as cues of a foreign policy crisis. While Douglas does not indicate as much, defense spending as a percentage of the total federal budget became the trusted signal, and spikes in spending were often absent or notably minor in the Vietnam War. Four years later, after the Court refused to hear several more cases involving the constitutionality of the war, Justice Douglas wrote: [W]e did not defer . . . in the Steel Seizure Case [Youngstown Sheet & Tube], when the issue was presidential power, in time of armed international conflict, to order the seizure of domestic steel mills. Nor should we defer here, when the issue is presidential power to seize, not steel, but people. . . . While we debate whether to decide the constitutionality of this war, our countrymen are daily compelled to undergo the physical and psychological tortures of armed combat on foreign soil. Families and careers are disrupted; young men maimed and disfigured; lives lost.59

This type of open hostility was virtually absent, and certainly left unstated, during the earlier wartime periods. Given the Court’s reluctance to decide the Vietnam War cases and the obvious antipathy that at least one justice held for the government’s actions, it is possible that the Court would seek to pinch the fisc in these circumstances to encourage reconsideration of the ongoing military activities. Put differently, the justices were unwilling to declare the deployment of troops and other tactical efforts as an unconstitutional use of presidential power, but it is possible (in fact, the data show as much) that a majority of the Court would nonetheless conclude that military activity had become excessive and thus would employ the judicial fiscal hand—in cases unrelated to the war—to deter these defense activities or, at least, to foster reconsideration of the military plans. The end of the Vietnam War did not end cold war military activity or judicial decisions that could affect the nation’s financial interests in times of foreign crises, but it did signal a turnaround in judicial views on foreign policy matters. In Dames & Moore v. Regan,60 the Court considered a cor-

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poration’s claim against the Iranian government for roughly $3.5 million for losses experienced after the American Embassy in Tehran was seized in 1979. President Carter, and later President Reagan, acted to block this suit and others to protect available funds for use in negotiations with Iran over the release of the hostages. Writing for the Court in a pro-government decision, Justice Rehnquist noted the importance of available funds for facilitating successful foreign policy, and his words are worth quoting at length: This Court has previously recognized that the congressional purpose in authorizing blocking orders is “to put control of foreign assets in the hands of the President. . . .” Such orders permit the President to maintain the foreign assets at his disposal for use in negotiating the resolution of a declared national emergency. The frozen assets serve as a “bargaining chip” to be used by the President when dealing with a hostile country. Accordingly, it is difficult to accept petitioner’s argument, because the practical effect of it is to allow individual claimants throughout the country to minimize or wholly eliminate this “bargaining chip” through attachments, garnishments, or similar encumbrances on property.61

The Court, in short, once again revealed its understanding that access to money and resources was necessary to enable the nation to address foreign policy emergencies, and the Court would not sanction private claims against these resources. To be sure, the Court rendered a decision on legal grounds, but it also took note of the “practical effects” of protecting economic resources for use by the government in times of peril. In a related case, United States v. Sperry Corp.,62 the Court considered a law that allowed the government to deduct a percentage of all monetary awards ultimately paid to the claimants after the 1979 seizure of the U.S. Embassy in Tehran. The Sperry Corporation argued the law was an unconstitutional taking of property, but the government responded by arguing the law was not only constitutional, it was also necessary to protect the fisc and offset the growing budgetary deficit. Sperry admitted that Congress believed the law would “ensure that the bulk of the amounts recovered to date, over $6 million, would remain in the Treasury. Further, it would guarantee that an additional $12 to $20 million in revenues, which the Department of State estimates would be collected under our bill, would go into the Treasury to offset the deficit,” but argued that concerns for the state of the nation’s finances were not relevant to the case.63 The Court, in a unanimous opinion by Justice White, did not comment on the importance of the law to the fisc,

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but sided with the government on the issue. Importantly, these controversies emerged in the early to mid-1980s when defense spending began to surge during President Reagan’s military build-up—exactly the time when the information theory forecasts that the Court will increasing favor the government in its votes and decisions. The War on Terror: Assuring Military Success While Limiting the Cost of Defense In response to the 9/11 attacks, Congress and the president pursued a variety of defense-related activities: Legislators adopted a congressional resolution supporting the commander-in-chief, and President Bush subsequently deployed troops to both Iraq and Afghanistan.64 The courtroom rhetoric that emerged after this time reflects a judicial view of the nation’s military activities that is more positive than the views that generally emerged in the cold war period, although perhaps not as positive and enthusiastic as observed during the two world wars. It is possible that the justices sought to support the elected branches after 9/11 because the nation was directly attacked by outside aggressors, as it was prior to the country’s entry in World Wars I and II. At the same time, the justices’ rhetoric and dicta was substantially more attenuated after 9/11 when compared to that observed during the two world wars, and this may be because Congress failed to exercise its power to formally declare war or to adopt emergency wartime revenue legislation, suggesting that although Congress believed a foreign policy emergency was on hand, the crisis was not as extreme as those faced during the two world wars. As noted above, this chapter does not seek to explain the choices of the elected branches of government but to uncover judicial views on the cost of foreign policy crises and the possible role for the courts in supporting (or undermining) the nation’s military efforts through the judicial purse powers. Consider, first, the 2009 Supreme Court decision in Iraq v. Beaty,65 a case involving claims against the Iraqi government by a group of individuals who were captured and apparently cruelly mistreated by Iraqi officials a de­ cade earlier. The complainants sought substantial compensation from the Iraqi government, but Iraq, along with the United States as amicus curiae, argued that the National Defense Authorization Act gave sovereign immunity to Iraq, thereby barring claims against the country and potentially saving “‘billions of dollars of Iraqi assets at a crucial juncture in that nation’s reconstruction efforts.’”66 Beaty contended that Congress could not have

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intended to fund the Iraq/Afghanistan Wars “by sacrificing the claims of American soldiers and civilians who were tortured” during the first Gulf War, but intended only to enact a law that would raise revenue and taxes to fund the rebuilding efforts.67 Authoring a unanimous pro-government opinion, Justice Scalia noted that Congress had adopted the law in 2008 during the later wars and after Saddam Hussein’s regime had collapsed, and coalition forces had shifted “from combat operations to the longer term project of rebuilding Iraq, with the ultimate goal of creating a stable ally in the region.”68 Justice Scalia wrote that the Court’s decision favoring the government was sensible: As a policy matter, moreover, we do not find that result particularly “perplexing.” . . . The [U.S.] Government was at the time spending considerable sums of money to rebuild Iraq. What would seem perplexing is converting a billiondollar reconstruction project into a compensation scheme for a few of Sad­ dam’s victims.69

The Court was once again reluctant to sanction individual access to the resources deemed necessary for the nation’s success in the foreign policy arena. While the wartime rhetoric in Republic of Iraq noted the cost of war, the commentary was not as patriotic and exuberant as that observed in judicial decisions addressing World War I and II issues. But it does seem qualitatively more positive than that observed in the cases decided during the height of the cold war period. Moreover, this positive slant and the importance of money and resources for assuring the nation’s military preparedness begins to reemerge in litigants’ briefs after 9/11, suggesting that lawyers also believed the justices were again apt to be sympathetic to the idea that courts should foster military success through their financial assistance. Amicus curiae continually employed wartime finance arguments in cases completely unrelated to the Iraq/Afghanistan Wars in the effort to win over the judicial mind. In District of Columbia v. Heller,70 a group of former highranking military officers and civilian leaders filed a friend-of-the-Court brief, arguing, “For over a century, Congress has authorized and funded programs to promote the marksmanship of young Americans so that they might make the transition from civilian to the military more effectively and at a less cost to our national defense.”71 Private access to “rifles and pistols is a predictor of success in basic training and in the military,” they argued, and is a cost-efficient means to deter gun-related accidents such as one involving

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“General David H. Petraeus . . . who was nearly killed as a result of a training accident.”72 Heller involved a Second Amendment issue and not a funding matter, but the former military officers and leaders nonetheless argued the case had financial implications for the nation and, more importantly, for the nation’s military success in the ongoing war. Similarly, in Rumsfeld v. Forum for Academic & Institutional Rights,73 the American Legion, a veterans’ organization, filed an amicus curiae brief supporting military recruiting on college and university campuses to identify qualified young professionals to deal with important matters such as the “handling of detainees in the War on Terror.” The brief argued that the Court should support on-campus recruiting because it was a cost-effective mechanism. [T]he government’s financial resources are finite. The monies necessary to implement the “more costly” alternatives cited by the [lower] court are currently devoted to other areas. Even apart from recruiting, the growing demands of the war in Iraq and the global military environment, as well as the domestic budgetary process in general, are placing increasing constraints on the military’s resources. It is not clear which of the funds currently invested in the war on terror or supporting our soldiers, Marines, sailors, Coast Guardsmen and airmen the court suggests the military divert.74

To be sure, fiscal costs in times of war do not always lead the Court to side with the government, but it is noteworthy that both the Court and the litigants have once again begun to express concern for the costs and financial burdens that could impede the nation’s military agenda. Moreover, like the World War II Courts, the justices expressed willingness to impose wartime costs, but only when they were perceived to be relatively minor and thus not harmful to the war effort. In Boumediene v. Bush,75 the Court considered whether prisoners held in Guantanamo Bay had habeas corpus rights. In finding that they do, Justice Kennedy, writing for the majority, recognized that [t]here are costs to holding the Suspension Clause applicable in a case of military detention abroad. Habeas corpus proceedings may require expenditure of funds by the Government and may divert the attention of military personnel from other pressing tasks. While we are sensitive to these concerns, we do not find them dispositive. . . . The Government presents no credible arguments that the military mission at Guantanamo would be compromised if habeas corpus courts had jurisdiction to hear the detainees’ claims.76

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The Boumediene opinion generated dissents by Chief Justice Roberts and Justices Scalia, Thomas, and Alito with arguments suggesting that the antigovernment decision would “make the war harder . . . [and] will almost certainly cause more Americans to be killed,”77 but neither dissent articulated a concern for monetary costs. The important point for our purposes is that the majority of the justices understood the underlying idea of the information theory: Courts are in a position to impose costs on the government and fully recognize these costs could have an effect on military strategizing and eventual success.

Conclusions and Comments on the Qualitative Evidence The qualitative data indicate that the justices have substantial knowledge about foreign policy crises as well as the financial costs associated with military readiness. This information comes from Congress, the president, and litigants—all of whom provide cues on the abiding question of how much defense is necessary to keep the nation safe and secure from outside aggressors. The Court’s rhetoric and dicta demonstrate a strong pro-government position during the two world wars; a subdued, and at times openly hostile, position during the cold war period; and a renewed supportive position with the onset of the Iraq/Afghanistan Wars. The qualitative evidence and the courtroom commentary, in short, further support the information theory of crisis jurisprudence, demonstrating the theory offers a credible and realistic account of judicial behavior: The justices can and will exercise the judicial power of the purse as a double-edged sword. The qualitative evidence also supports the hypothesis that the justices will take on-the-record judicial notice of crisis cues emanating from the elected branches of government when rendering decisions that implicate military matters. The limits of the qualitative evidence, however, should also be noted. The Court rendered its decisions in many, if not most, of the cases discussed after the crisis had abated. The rhetoric and dicta concerning World War I, for example, often showed up in Court in the 1920s and 1930s, while the commentary addressing World War II tended to emerged in the late 1940s and 1950s. This time lag is not surprising given that Congress and the president generally take action in preparation for possible military engagement immediately prior to and during a crisis, and these actions lead to lawsuits in court, but by the time the litigants have exhausted their appeals and find their way to the High Court, the crisis has often dissolved. While the time lag evinces judicial knowledge of crises and their costs after the emergencies faded away, this fact does not imply that the justices had no such knowledge

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as the crises were unfolding. In every era, the justices have expressed a qualitative understanding of the massive costs associated with protecting the nation, and the quantitative data presented in chapter 3 supply evidence that this knowledge affected judicial decision-making trends as predicted by the information theory.

Five

The Next Stop: The Information Theory in the Domestic Context

The information theory of judging in times of crisis, along with the empirical results supporting it, naturally raise the question of whether domestic crises such as prolonged periods of economic downturns, pandemics, severe crime waves, or unexpected immigration trends affect judicial behavior in predictable ways. Rational judges prefer safety and security to danger and chaos, but a second realistic account of the judiciary would theorize that judges favor prosperity over deteriorating economic conditions. Yet a third approach would posit judges, like virtually all policymakers and citizens, desire vigor and health to a life plagued by disease, virus, and ailment. The theory and data presented in the previous chapters may, in short, be the tip of the judicial iceberg: Judges could wield Article III powers as a doubleedged sword in a range of contexts not yet unexplored in an effort to advance individual goals and aims in the policymaking context. This chapter commences an out-of-sample investigation of the information theory of judging by exploring court behavior in one domestic arena— economic policymaking. As discussed in detail below, the information theory can easily be modified to account for judges’ economic preferences, and the preliminary evidence suggests that at least one group of decision makers, Supreme Court justices, use their docket as hypothesized above: Judicial decisions trend with the macroeconomy in a manner that indicates the justices hope to foster competent policymaking inside the elected branches of government, thereby increasing the likelihood of prosperity and growth.

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The Information Theory in One Domestic Context: National Economic Policymaking The information theory of jurisprudence as applied to economic policymaking begins with a claim similar to that identified in the context of foreign policy matters: Justices prefer national prosperity to an economy plagued by high unemployment, high inflation, and low productivity. It is possible that this preference emerges from the justices’ role in the development of law and legal policy, or perhaps it comes about from their status as individuals and family members who care very much about their private investments and purchasing power. It is not necessary to explain why the justices prefer national economic success to failure. Rather, the point is this: The justices gain utility from certain economic conditions and suffer disutility from others. This variation on the theory, of course, does not stop with the simple claim that the justices prefer an expanding to a contracting economy. The theory also posits that the justices are instrumentally rational actors and thus will seek to advance their economic interests through their Article III decision-making power. More specifically, members of the Court will seek to promote federal policies that encourage economic growth and development, but will attempt to deter policymaking perceived to steer the nation into economic stagnation, or worse, the serious economic decline associated with a depression. The justices, of course, are not in a position to craft economic policy: They have neither the constitutional authority nor the expertise and knowledge necessary to succeed in such an endeavor. The framers formally placed economic policymaking power into the hands of the elected branches of government. Article I, Section 8, grants legislators the authority to “provide for the general welfare of the United States” and to “regulate commerce,” and Article II, Section 3, mandates the president “shall take care that the law be faithfully executed.” Just as federal courts have no foreign policymaking powers but are theoretically able to influence military strategizing via their Article III decision-making power, so too can we expect the justices to facilitate and impede the elected branches’ economic policymaking choices, thereby affecting the substance of these policies at the margin. To understand how and why the justices are in a position to influence economic policy, it is useful to recall that Congress and the president continually exercise their constitutional powers through a range of programs implemented in legal contexts such as taxation, bankruptcy, antitrust, securities regulation, transportation regulation, and so forth. Indeed, government action in the economic field is so widespread that it touches on virtually

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every aspect of our daily lives in some form or another. Private parties, in turn, routinely challenge these policies in federal court, and it is this line of cases and controversies that enables the justices to affect domestic economic issues. By systematically issuing votes and outcomes in favor of the government’s position, the Court effectively supports the elected branches’ policy preferences, while disfavoring the government in these disputes undermines its economic aims and goals. There is an important distinction in the judicial strategies likely to emerge in the economic context versus the foreign policy arena discussed above. In the latter, the information theory hypothesized the justices would use the judicial power of the purse to augment or pinch the size of the fiscal pie, thereby facilitating or impeding the elected branches’ ability to pay the costs of expensive military programs. When it comes to the nation’s economy, the justices are apt to use their fiscal authority to advance and undermine costly economic programs, but they are also likely to perceive the substance of the cases—not simply their budgetary consequences—as relevant to their goals. Put differently, issuing anti-government decisions in taxation, securities regulation, and other economic disputes is not only an indirect means to squeeze the fisc, but it is also a direct mechanism for undermining the very programs believed to be problematic. Not every economic case or controversy, of course, implicates an important or even a relevant component of the elected branches’ macroeconomic policy, but the justices need not make such a fine distinction: Systematically favoring and disfavoring the government will assure their sanctioning scheme promotes the goal of supporting good policy and undermining bad policy.

Economic Cues: The State of the Economy Itself The information theory in the economic context is grounded in the idea that economic prosperity is more likely when policymaking rests in the hands of competent officials, and for this reason the justices will maximize their own utility by promoting the work of skilled decision makers and deterring ineptitude when it emerges. At first cut, the idea that Supreme Court justices, experts in law and constitutional matters, will seek to distinguish economic competence from incompetence in the elected branches of government might seem peculiar and more than a bit unrealistic. After all, trained economists are often unable to agree on or determine, as an empirical matter, the policies and programs that advance the nation’s economic interests. Thus a theory of judicial behavior that rests on the assumption that the justices are able to do so is entirely implausible. Just as the Court

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need not rely on its own (limited) expertise on military and defense matters in the foreign policy context, however, it need not rely on its proficiency in the economic policymaking context. The justices, being rational, will rely on credible cues to determine how and when to use their decision-making powers to advance their preference for economic prosperity. Indeed, unlike the foreign policy arena in which the justices must rely on Congress’s and the president’s verbal statements and positive actions for purposes of determining the merits of the government’s foreign policy choices, a far more reliable cue exists for the justices seeking to assess the merits of the government’s economic policymaking choices: the economy itself. Rational justices can and will draw inferences not from politicians’ claims about the economy or the policy positions they take, but from extant economic conditions. The justices will interpret an expanding economy as a cue that the legislative and executive branches are doing a good job—or at least have not imposed unnecessary harm on the economy—and thus should be supported. Judicial interpretation of the cues associated with economic downturns, however, will be slightly more nuanced. Rather than assuming that the justices will treat each and every contraction equivalently, the theory posits that minimally informed justices will understand that economic downturns are likely to be associated with the choices made by the nation’s leaders but also with unrelated and unexpected shocks to the economy such as wars, oil price fluctuations, trade barriers imposed by foreign governments, harvest failures, and so forth.1 This is a distinction with meaning: When the justices view the downturn as a product of substandard government policy choices—not to uncontrollable and exogenous shocks—they will punish the elected branches in courtroom proceedings as a means to deter incompetent policymaking. But should the justices believe that the negative economic conditions are the result of factors largely beyond the control of the government, they will not sanction federal policymakers but will seek to work as a team with the other branches of government to remedy the nation’s s economic problems. In the foreign policy context investigated in previous chapters, a similar judicial calculus emerged when the justices made the choice to support or oppose the nation’s military strategies. In the wars both prior to and after the cold war era—wars when the nation was directly attacked by outside aggressors and thus arguably in a state of crisis caused by factors beyond the control of either Congress or the president—the justices systematically sought to support the government in the decision-making process. But in

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the cold war era, the justices appeared to question whether the wartime conflicts were truly crises or perhaps manufactured by military planners and thus harmful to the nation’s interests. This uncertainty led the justices to look unfavorably on the government’s actions during the Korean, Vietnam, and Gulf Wars with adverse consequences in the courtroom. Similarly, the information theory in the economic context posits that judges will take judicial notice of cues that suggest the nation is facing the type of crisis that requires interbranch collaboration to remove the threats, or whether the financial problems are the result of unfortunate policymaking choices that should be anything but supported. Of course, in the context of economic planning, even the experts cannot hope to distinguish precisely between different types of economic downturns—those caused by policymaking failures and those that emerge from outside forces—and the justices certainly do not have a have higher level of economic aptitude than trained professionals. The macroeconomists Andrew Abel, Ben Bernanke, and Dean Croushore note that national economic conditions often materialize due to a complex amalgamation of factors both inside and outside the government’s control, making it extremely difficult for anyone to distinguish useful federal policies from those that impose harm across the nation.2 Importantly, the theory does not hypothesize that the justices have skill and expertise with respect to the modern macro­ economic theory, but it is possible that they are able to distinguish typical and recurrent economic downturns—recessions—from atypical and rare conditions associated with widespread poverty and hardship such as that observed in the 1930s and described as a depression.3 When it comes to the typical upswings and downswings that routinely take place in the economy, the justices will assign blame (credit) to Congress and the president out of a belief (rightly or wrong) that the economic peaks and troughs lie within the policymakers’ control. In atypical catastrophic periods, however, the justices will view economic conditions as primarily attributable to a series of unexplained and exogenous shocks beyond the control of the government and so will not seek to hold policymakers accountable. Actually, quite the opposite: The justices will join with the government to fend off the crisis in the effort to return the nation to a state of prosperity. It is no mystery why the theory posits that the economic downturns associated with the typical business cycle (or, more technically, the repeated sequence of recessions, giving way to periods of prosperity, which are then followed again by recessions) serve as a judicial proxy for government policymaking failure. The account reflects the extant literature in both economics

136 / Chapter Five

and political science on the political business cycle. Researchers have long noted that elected officials, specifically the president and members of Congress, are often willing to ignore, tolerate, or even risk short-term national economic losses for political gain.4 When an election becomes immanent, however, politicians want to appear competent and perform well to assure reelection. At the same time, various branches of the economics literature suggest that elected officials will work hard to fend off protracted periods of (costly) economic distortion given that such conditions cause widespread and serious damage not only to constituents but also to the long-term political reputations of incumbents. In fact, the idea that economic crises induce different types of policymaking choices than those observed during the typical business cycle is the “new orthodoxy.”5 Economic researchers have proposed a number of theories to explain why crisis-related policies are unique, including the weakened nature of ideological interests, the short-term suspension of self-interested behavior, and increased levels of teamwork in times of emergency.6 For our purposes, the underlying theory is less relevant than the twin ideas that elected officials have an incentive to shirk in the short term but work for the benefit of the nation in times of crisis. If it is true they are willing to risk a series of minor recessions but not vast and widespread depressionary conditions, then it is perfectly reasonable for the justices to believe that the economic downturns that take place during the typical business cycle are the product of inept policies, while economic crises (that is, precisely the economic conditions elected officials seek to avoid) are beyond their control. Figure 5.1 provides historical data on the state of the nation’s economy; the figure presents a locally weighted smoothed curve of a scatter plot of the business cycle, with periods of economic decline coded as equal to −1 and periods of economic expansion coded as equal to +1. As indicated in the figure, the economy suffered a major setback in the early 1930s, followed by a short period of recovery and then a second setback in the late 1930s. Importantly, both before and after the 1930s, the economy cycled through various expansions and contractions, and they were relatively modest when compared to that observed in the 1930s. That the justices have information and knowledge of the general state of the economy and are willing to consider it in the decision-making pro­ cess is evidenced in the text of their opinions. In Atchison, Topeka & Santa Fe Railway Co. v. United States,7 the Court in 1932 considered whether the petitioner was entitled to a rehearing on an agency decision regarding shipping rates given the substantial changes in the economy. The Court noted:

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5.1.  U.S. economy cycles through contractions and expansions Note: Locally weighted smoothed curve of a scatter plot of the business cycle. Economic expansions coded = +1, and economic contractions coded = −1. Depressions occurred only in the 1930s; all other economic downturns can be labeled recessions.

There can be no question as to the change in [economic] conditions upon which the new hearing was asked. Of that change we may take judicial notice. It is the outstanding contemporary fact, dominating thought and action throughout the country. . . . “[A] depression such as the country is now passing through is a new experience to the present generation.” . . . “[I]n such depressions the railroads suffer severely.”8

Again, in the 1937 case of Ohio Bell Telephone Co. v. Public Utilities Commission of Ohio,9 the justices noted that while they were not able to identify the effects of economic decline on specific industries, they were well aware of aggregate economic factors. “Courts take judicial notice of matters of common knowledge,” the justices stated. “They take judicial notice that there has been a depression, and that a decline of market values is one of its concomitants.”10 In Helvering v. Davis,11 the Court upheld taxation rules funding the social security laws and noted both the economic calamities associated with the depression, but also the need for policymakers’ collaboration to remedy it. In the Court’s words, The purge of nation-wide calamity that began in 1929 has taught us many lessons. Not the least is the solidarity of interests that may once have seemed

138 / Chapter Five to be divided. Unemployment spreads from State to State, the hinterland now settled that in pioneer days gave an avenue of escape. . . . Spreading from State to State, unemployment is an ill not particular but general, which may be checked, if Congress so determines, by the resources of the Nation.12

Of course, judicial awareness of macroeconomic changes in the 1930s does not necessarily lead to the conclusion that the justices follow aggregate fluctuations throughout the typical business cycle. As it turns out, judicial opinions, litigants’ briefs, and clerks’ memoranda are filled with rhetoric and commentary addressing economic conditions throughout the entire twentieth century, suggesting courtroom actors are continually apprised of the state of the economy and believe it is relevant to the justices’ votes and outcomes.13 Even if the justices take judicial notice of increasing and decreasing levels of economic factors, which they do as evidenced by the rhetoric above, the more difficult question is whether they account for these cyclical changes when casting votes and reaching outcomes. If the information theory of decision making in the economic context accurately captures the Court’s interest in promoting proficient policymaking, then its empirical implications are clear. Most obviously, the justices can be expected to reward the elected branches of government for periods of prosperity by adopting a pro-government position in litigation involving economic policy. Put another way, the government’s win rate should positively correlate with various economic indicators, such as employment rates, industrial production, GDP, and so forth. Conversely, when the economy turns sour and the justices hold elected actors responsible out of a belief they have privileged their short-term electoral interests—that is, during recessionary periods—the justices can be expected to punish the bad policy choices by ruling against the government. If the justices believe, however, that Congress and the president could not have prevented the downturn if only because the crisis worked against their electoral prospects—that is, deep depressions—the justices are unlikely to hold them responsible or even to second-guess their policymaking choices. In fact, the theory suggests that the justices will support the national government in its attempt to stabilize the economy by deferring to its arguments in the economic cases that appear on the docket in periods of major economic setbacks. Perhaps because the justices have little to no expertise in or knowledge about economic theory, they will support the government far more often than undermine it. Indeed, given the justices’ lack of macroeconomic knowledge, it is possible, as an empirical matter, that they will never seek to undermine the government in disputes involving economic policy. From a

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theoretical perspective, however, it would be entirely irrational for the justices to commit, ex ante, to a position that permits the use of a single blade in their double-edged weapon. This commitment would essentially require the justices to collaborate with the elected branches of government in all periods, even when the policies clearly and unambiguously undermine the justices’ preference for a strong and growing economy. In short, from a theoretical perspective, the justices must be prepared both to support and undermine the government depending on the perceived value of the economic policies and programs that emerge in the lawmaking process if they seek to promote competence in the nation’s financial managers. More to the point, rational justices intent on securing national economic prosperity will use their power to the fullest extent possible in an attempt to promote their economic desires. As we will see below, the justices are not only theoretically capable of using a double-edged sword to support and undermine economic policy, but in fact, they do.

The Information Theory and Economic Voting Behavior Generally The information theory as applied to judicial economic preferences has notable similarities to an account of voting behavior found in the political science and economic literatures. Researchers in both disciplines—beginning with Ray Fair in 1978 but including many others, such as Michael LewisBeck, Tom Rice, Raymond Duch, and Randolph Stevenson—have all theorized, and empirically found, that voting is a referendum on the state of the economy.14 While there are many components to the extant literature, two are particularly notable for purposes of this study. First, it is widely believed that voters and constituents seek to maximize their utility by voting for the most competent economic managers. Second, to solve the problem of information asymmetries, voters systematically rely on economic outcomes as the most credible signal of policymaking competence and, as a result, reward (or punish) incumbent politicians and parties for the market conditions that emerge. Voters, in short, tend to view a declining economy as evidence of policymaking failure on the part of the president and members of Congress and thus seek to oust the inept politicians by casting votes for their opponents in the election cycle. Prosperous conditions, by contrast, imply effective economic management and generally increase the vote share of incumbent parties. So important are economic indicators to the electorate that more than a few election forecasters have suggested that variables such as GDP, job creation, and consumer satisfaction are just as salient—

140 / Chapter Five

perhaps more so—than other factors traditionally believed to predict election outcomes, such as the voters’ political and ideological preferences. When it comes to voting behavior, the lesson from the extant political and economic literatures is clear: Voters steadily prioritize economic issues and, for this reason, are apt to forgo partisan preferences at the margin to obtain economic prosperity.15 The link between economics and politics in the voting context is an empirical reality that scholars have documented in a range of contexts; the strongest connection emerges in presidential elections, but it also surfaces at notable and significant levels in House, Senate, and gubernatorial races. Indeed, while scholars debate a number of issues—such as whether in­ dividual voting is retrospective or prospective and which economic factors have the greatest effect on election outcomes—none seem to quarrel with the idea that the macroeconomic factors work as a proxy for policymaking competence and, for this reason, trend with voting patterns.16 Just as voters take cues from the economy, attributing good economic times to effective policymaking in the elected branches of government and (most) bad economic times to government incompetence, so too will rational justices. And just as voters support and undercut politicians based on the relative state of the economy, so too will rational and instrumental justices intent on using their powers to advance the nation’s economic prosperity. Of course, the justices, unlike voters, do not have the power to throw out (or retain) incumbents, but they can reject (or support) the government’s policies through their judicial decision-making process. Assuming, as this study does, that both the voters and the justices rationally prefer economic prosperity to economic loss, the electoral success of the incumbent government along with its win rate in Court should trend with national economic conditions. In the foreign policy context, the information theory forecast that justices are strategic decision makers willing to use the power of the purse in an attempt to affect the level of defense spending. The theory as applied to economic preferences also hypothesizes strategic decision making, but it implies a second feature of judicial decision making that is somewhat more controversial: The justices are expected to be no more sophisticated than the average (perhaps largely ignorant) voter.17 This raises the question of why the justices would, as political appointees (nominated by the president, approved by the Senate, and with life tenure), ever echo or ally themselves with the voting masses on economic issues and not the Washington elite who helped place them into a position of power. The answer to this question is simple: With respect to economic policymaking, the justices can maximize their utility by siding with the voters. Recall that the information theory in

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this context is grounded in the idea that the justices prefer economic growth and stability to conditions associated with economic decline. If the justices believe that Congress and the president are shirking their management responsibilities for, say, political gain, and this shirking has negatively affected the economy, then it is entirely rational for the justices to punish this behavior in the effort to encourage policymakers to reform their behavior. If the justices are able to impede and undermine bad policy choices through the judicial process, Congress and the president will be less likely to make bad economic decisions in the future and will perhaps be less able to exert continuing harm on the economy in the short term. Similarly, it is rational for the justices to support the government in its economic efforts (just as the average voter will support the incumbent government) if they believe exogenous forces have led to severe economic setbacks. In these circumstances, sanctioning elected officials through the judicial decision-making process may aggravate the nation’s declining economic circumstances, thereby undermining the judicial goal of a stable and growing economy. Positing a judiciary that will increase its level of cooperation with the elected branches in periods of a national crisis does not, of course, lead to the conclusion that the justices suddenly become altruistic—they do not. Rather, this approach to cooperation (also hypothesized and observed in the foreign policy context), sparked by economic crises, implies that the advantages associated with putting the economy back on track aligns with the Court’s own preference for national prosperity. Cooperation and teamwork, of course, does not mean the Court will work alongside Congress and the president to identify creative solutions to the macroeconomic policy problems facing the nation. Rather, it is far more likely that cooperation, if it exists, will emerge in the form of increased deference to the federal government in the cases in which it is a party. This reflects the fact that the justices are legal and constitutional experts and are unlikely to have any economic expertise, or very little of it. With limited information and know-how, they will not seek to participate in the creation of new macro­ economic policy but will defer to the elected branches of government who have the ability, experience, and knowledge to address economic issues. That the justices have preferences in line with voters and look to similar cues before making the choice to offer or withhold support for the elected branches and their policy choices should not come as a surprise. Indeed, perhaps it should be expected. After all, why would two groups of instrumentally rational actors who are similar on important dimensions—both seek to promote economic prosperity through the reliance on economic conditions as a cue for assessing financial managers’ competence—be expected

142 / Chapter Five

to have divergent responses to the same stimuli? They would not. This observation does not reduce each justice to the average voter for one very important reason: The justices are simultaneously able to assess and respond to Congress and the president on multiple dimensions. The Court, for example, is theoretically able to support the government with respect to the latter’s economic policy choices, while concurrently adopting an anti-government position with respect to its military, health, and crime policies. This multi­­ dimensional response is made possible by the range of legal issues that show up on the Court’s dockets, each of which could theoretically generate distinct substantive judicial responses depending on extant macro­economic conditions. Voters, by contrast, cannot fine-tune their support or opposition; they must choose a single response and render a single vote at the poll booth on election day with respect to each politician on the ballot. They may believe that the policymakers have succeeded in some realms but not others, but as voters they are not in a position to convey this nuance. In short, similarities between voters and Supreme Court justices exist because we expect both groups to behave rationally, but beyond this trivial point the similarities begin to dissolve.

The Information Theory in Action: The Justices Respond to the State of the Economy The information theory of jurisprudence posits that the justices will support the elected branches of government in cases involving economic issues when the economy performs well or in times of severe economic crisis. In periods of minor economic downturns—recessions—by contrast, the justices will punish the elected officials on the assumption (right or wrong) that they have caused the economic setback by pursuing flawed policies and programs. To investigate this theory, the Court’s taxation docket is again put to use.18 While the theory could be explored in a range of different contexts, taxation is an excellent venue to begin the study of how the economy affects judicial behavior for several reasons. First, the theory implies that the government’s win rate in the Supreme Court will correlate with the state of the economy, and thus a useful test of the theory requires a collection of cases involving the U.S. government and taxation disputes to satisfy this criterion. Second, policymakers and macroeconomists widely believe tax laws can and will be used to effectuate economic growth and stability, and thus it is reasonable to expect the justices to rely on economic outcomes in assessing government tax policies challenged in the courtroom context.19 Finally,

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Congress and the president have constantly revised the tax laws over the period of this study, and this generates quite a bit of variation in the data, thereby enabling a useful investigation of our theory.20 It is worthwhile to note, however, that the information theory as applied to economic preferences should be (and will be) investigated more fully and completely in a follow-up project underway with two coauthors. The analyses presented above and below are, therefore, preliminary and will be probed further for their robustness. The empirical tests conducted here focus on three historical periods in the twentieth and twenty-first centuries: 1912–29 (typical recessionary years), 1930–39 (atypical depressionary years), and 1940–2010 (typical recessionary years). The focus on these three historical eras reflects the theoretical account set forth above and the fact that Congress began adopting the modern tax laws in 1909. While the economy experienced ups and downs in all these eras as demonstrated in figure 5.1, theory anticipates judicial responses will depend not only on whether the economy is growing or shrinking, but also on the extent to which it is doing so. For the cases and controversies in the first and third eras—eras of relative prosperity, though with the typical economic ups and downs—the Court is expected to reward the government during expansions and punish it during the (relative) contractions. In the second era—when, by any definition, the country experienced an economic crisis of epic proportions—precisely the opposite is expected: The justices will join with the other branches in an effort to prevent even further decline, deferring to, not punishing, the government in its litigation efforts. However preliminary, it might be argued that this test of the theory is a particularly difficult one. Given the voluminous literature on the showdown between President Roosevelt and the Court, it would seem—in contrast to theory—that the justices did anything but defer to the government in the period of severe economic crisis taking place in the 1930s.21 Given that theory forecasts the behavior of individual justices with a preference for economic prosperity over economic decline, the primary dependent variable of interest—the feature of decision making that this study hopes to explain—is the individual vote of each justice. These votes are captured by a binary variable, vote, indicating whether the judge or justice voted with the federal government (= 1) or against the federal government (= 0) in the cases under investigation. Individual judicial votes, of course, may trend with the macroeconomy, but this does not necessarily lead to the conclusion that Courts’ outcomes will in fact cycle with the economy; such an effect requires the majority of the justices to respond to the events as posited by the crisis theory. Accordingly, a second dependent variable,

144 / Chapter Five

outcome, is investigated, which is also binary and coded to indicate whether the federal government prevailed (= 1) or lost (= 0) in Court. These are the identical dependent variables used in chapter 3, and because both vote and outcome are binary, the empirical investigation of crises on judicial decision making relies on probit models. The study’s key independent variables relate to the state of the economy. As noted above, it is important to tap into both the “typical” business cycle—the repeated sequence of economic expansion, giving way to a decline, and then followed by recovery—as well as the extreme conditions that emerged during the Great Depression. The business cycle as noted above captures the series of economic peaks (high points) and troughs (low points) as identified by the National Bureau of Economic Research (NBER) Dating Committee; in the period after the economy achieves a peak, aggregate economic activity begins to fall and the economy is officially in a contraction or recession. At some point, however, the economy reaches a trough and returns to a period of expansion and is booming until it hits the next peak. While the NBER does not distinguish between recessions and depressions, it dates only the peaks and troughs, the nature of the economic decline and its severity can be inferred from the prolonged period of a setback. Thus the NBER business cycle measure is a useful measure of the economy for purposes of this study; it is lagged by three months and coded as equal to +1 if the economy is in a period of expansion at the time the justices heard oral argument and coded equal to −1 if the economy is in a state of contraction. The business cycle is a relevant indicator, but many other macroeconomic factors exist and are potentially useful for assessing the justices’ pursuit of their interest in aggregate prosperity. Gross domestic product (GDP), for example, is a definition of prosperity that the media uses frequently. Although standing alone, it is not the variable favored by macroeconomic professionals as the best indicator of the state of the economy,22 it nonetheless is potentially useful for the justices in identifying the state of the economy given its widespread coverage in the media. The average percentage change in GDP growth for the fiscal quarter prior to oral argument is the measure adopted for testing the effects of GDP on the justices’ decisions. Industrial production, yet a third measure, identifies the changes in output for the industrial sector of the economy, including manufacturing, mining, and utilities. Although these sectors contribute only a small portion of the GDP, they are highly sensitive to interest rates and consumer demand, and thus industrial production is viewed as an important tool for forecasting national economic performance. Accordingly, industrial produc-

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tion is included into the model and measured as the average percentage change over the three-month period prior to oral argument for each case. The average change rates in the variables national income and unemployment and the average six-month change rate in consumer sentiment (as measured by surveys conducted by University of Michigan researchers) over the period prior to oral argument are also incorporated into the models.23 Consumer sentiment is coded in six-month increments to capture the time lag that empirically exists between consumer information and the actual economic conditions that emerged. As we will see below, the average consumer takes twice the time to recognize changes in economic conditions than members of the Supreme Court. Owing to the lack of data, judicial responses could be assessed for all three historical periods but only with respect to two of the variables mea­ suring the state of the economy: business cycles and industrial production. The other variables, GDP, national income, unemployment, and consumer sentiment are investigated but only in the post-1940 era. Finally, due to the high correlation between the independent variables and to assure identification of the factors that have effects on judicial decision making, each is investigated in a separate model.24 Accordingly, six separate models are estimated in the hopes that they produce consistent results regardless of the particular economic indicator used. The models also include control variables that theoretically could affect judicial decision making or that scholars have found to affect votes and outcomes, including the politics of each branch of government, the identity of the appealing party (government or private party), whether the nation was at war, whether a constitutional issue was involved, maximum tax rates, a time trend, and fixed effects for the justices, when relevant. Recall that the theory forecasts that the justices will act like voters prior to 1930 and after 1940 and thus will reward the federal government for observed economic growth and productivity, but will punish policymakers for national economic decline. If the “justices as voters” model aptly characterizes the Court’s decision-making strategy, then economic downturns can be expected to cause a decrease in the government win rate. Accordingly, the variables, economic cycle, GDP, industrial production, national income, and consumer sentiment should positively correlate with the dependent variables, but the variable unemployment should negatively correlate with the Court’s votes and outcomes given that unlike the latter five variables, unemployment is countercyclical and thus decreases as the economy expands. In the 1930s, a period when the nation experienced a severe depression, the theory suggests the justices will not attribute economic outcomes to

146 / Chapter Five

policymaking incompetence but to exogenous shocks beyond the control of the economic managers. In this context, the theory posits the justices will not seek to punish elected officials for the economic conditions, but instead will work as a “team” in an effort to stimulate national recovery. Thus variables economic cycle and industrial production (the only two available for that decade) should negatively correlate with the dependent variables. As the economy declines in times of serious economic crisis, the government win rate is expected to increase. Table 5.1 presents the marginal effects of each regressor on the two dependent variables; the results should be interpreted as the increased (or decreased) probability of a pro-government vote or outcome, given a unit increase in the independent variable. Importantly, the table presents the findings for twelve separate models (listed in the first column), and only the findings of interest are presented—the control variables are listed in the note below the table. The findings vis-à-vis the justices’ voting behavior are depicted in the top panel, and the outcomes are presented in the bottom panel of table 5.1. The first thing to note is that when the years are pooled, the findings indicate that the probability of a pro-government vote or outcome decreases as the economy performs better, as measured by the business cycle and industrial production. When the eras are disaggregated, however, the findings become substantially more interesting and support the theory set forth above. As theorized, when the economy is in a period of typical economic fluctuations, the justices respond with pro-government votes during expansionary periods and anti-government votes during contractionary periods. Table 5.1, column 3, presents the findings for the pre-1930 typical period and evidences support for the theory: When the NBER Dating Committee identified economic expansions and when industrial production was increasing, the justices voted more often in favor of the government. This finding also generally holds between 1940 and 2010, the second “typical” period, but consumer sentiment is the only variable that achieves statistical significance. The problem with investigating the era between 1940 and 2010 is that it incorporates the most costly and major war in the history of the country—World War II—a time when the justices were expected to and did find for the government, but immediately after the positive correlation dissolved into a negative relationship as the war dissolved. Accordingly, it is useful to examine the data separately for the years 1950 to 2010, thereby eliminating the possible confounding effects of wartime decision making for the unique period in the 1940s. Notably the findings become substantially stronger. Indeed, the economic indicators all exert the expected effect on the

−.06(.01)*** −.30(.08)***

7,900

1. Business cycle 2. Industrial production 3. GDP 4. National income 5. Consumer sentiment 6. Unemployment

Observations Avg. pro-gov’t votes

916 .69

Observations Avg. pro-gov’t outcomes

.58

148 .58

.10(.04)** .89(.70)

1,284

.16(.03)*** .65(.26)***

Typical Pre-1930

.68

474 .73

−.009(.03) .23(.49) −.48(2.0) −.72(1.7) .62(.29)** −.15(.26)

4,074

−.01(.02) .31(.19) .07(.74) −.47(.62) .53(.11)*** −.09(.09)

Typical 1940–2010 (WWII)

.66

296 .70

.005(.03) 1.71(1.1) .15(2.3) −.49(2.3) .71(.31)** −.31(.29)

2,568

.04(.02) 1.80(.40)*** 1.98(.85)** 1.44(.84)* .66(.11)*** −.29(.10)***

Typical 1950–2010 (No WWII)

294 .67

−.11(.04)** −.34(.35)

2,535. .66

−.16(.03)*** −.28(.12)**

Atypical 1930–39

Note: The first column lists twelve separate models; each row presents the results for the separate model. The dependent variables, votes and outcomes, are both coded = 1 if pro-government and = 0 otherwise. All the models include controls for wartime; political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; constitutional claims; and a time trend. The models presented in the top panel also include fixed effects for each justice. *p ≤ .10  **p ≤ .05  ***p ≤ .01

−.02(.01) −.21(.23)

7. Business cycle 8. Industrial production 9. GDP 10. National income 11. Consumer sentiment 12. Unemployment

Outcomes

.66

Votes

Models

All Eras Pooled

Probit Models Depicting Marginal Effects with Robust Standard Errors

Table 5.1  Supreme Court votes and outcomes in taxation

148 / Chapter Five

justices’ votes—as the economy does better, the number of pro-government votes increases—and all but the business cycle achieve statistical significance. These results suggest the economy has strong and systematic effects on judicial votes. With respect to the “atypical” period that emerged in the 1930s with the Great Depression, the last column of table 5.1 also supplies evidence that supports the theory. As the economy cycled into a depression and as industrial production decreased, the justices adopted a pro-government stance in courtroom proceedings. The results indicate that the justices voted more often in favor of the government as the economy began to tank, thereby suggesting the Court was not willing to punish the elected branches for the extant economic conditions apparently caused by exogenous forces and not the ineptitude of the policymakers themselves. Turning now to judicial outcomes, the findings with respect to the outcomes are presented in the bottom panel of table 5.1 and are substantially weaker, suggesting that many of the economic indicators did not affect the majority of the Court. In the pre-1930 period, the NBER cycle affected the Court’s outcomes at highly statistically significant levels, but not industrial production, although both empirical findings go in the expected direction. In the post-1940 and post-1950 periods, the only indicator that is strongly correlated with judicial outcomes is consumer sentiment: As consumer sentiment regarding the economy improves, the government wins more often in Court. This suggests the justices are indeed behaving as voters in the sense that their own views of the economy seem to be correlated if not driven by those of the populace. From 1930 to 1939, the justices adopted the strategy anticipated by the theory. As the economy was in a virtual free-fall, the majority of justices adopted a pro-government position thereby shifting outcomes in favor of the national policymakers. The justices did not seek to reprove the elected officials for the bad state of the economy; they sought to work and collaborate with Congress and the president in the hopes of returning the nation to a period of prosperity. This finding is statistically significant with respect to the business cycle, but not to percent changes in industrial production. The findings in table 5.1 indicate that the information theory offers a useful explanation for judicial decision making not only in foreign policy context, but also with respect to macroeconomic issues. Although the theory is unambiguously better at predicting judicial votes than court outcomes, suggesting that some but not all of the justices move in the direction theorized. The findings in table 5.1 also appear to present a serious challenge to the existing constitutional literature arguing that the Court consistently

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decided cases against the U.S. government in the atypical 1930s, sparking President Roosevelt’s Court-packing plan. In fact, during the 1930s—at least in the context of taxation cases—the justices exhibited a strong and unambiguous preference in favor of the federal government and not against it, as the conventional wisdom holds. Importantly, the results are not driven by decisions rendered after February 1937, the date the Court-packing plan was unveiled; the models were reestimated with only the cases orally argued prior to that date and obtained nearly identical results. To investigate the robustness of the findings, it is worthwhile to partition the data by the political preferences of the individual justices. This is important because the conservative justices were widely believed to have opposed the elected branches’ policy decisions during the Depression, while those with more liberal political preferences were believed to have supported President Roosevelt and his administration’s economic strategies. For purposes of investigating the role of individual politics on voting behavior, the justices were divided into two groups according to the party of the appointing president given that more sophisticated measures of political preference were unavailable in the early years. To investigate the effects of politics on outcomes, the Courts were divided according to the political preferences of the majority of the Court using the same measure. The models all include control variables, which are listed in the notes below tables 5.2 and 5.3. Table 5.2 presents the findings with respect to the typical business cycles, that is, the pre-1930s, and post-1940s and 1950s—periods when the justices, irrespective of political preferences, are forecast to punish the government in Court as the economy turns sour. Beginning first with the empirical results associated with voting behavior, which are depicted in the top panel of table 5.2, the pre-1930 period shows virtually no difference between the Democrats and Republicans on the Court. All the justices, irrespective of party, voted in favor of the government in economic upturns (and thus against the government in economic downturns), and almost always at highly statistically significant levels. The findings in the post-1940 and post-1950 periods are also similar to those presented above. The important and notable difference, however, is that economic conditions appear to affect Republican appointees more strongly than Democratic ones. In the post-1950 period, for example, all the justices responded to industrial production and consumer sentiment as expected at statistically significant levels, but the Republican justices also responded to the NBER business cycle, GDP, national income, and unemployment changes. This suggests that Republicans are more attentive to economic indicators than the Democrats on the Court when rendering votes in taxation controversies, but not that

.13(.04)*** .36(.36)

577 .60

1. Business cycle 2. Industrial production 3. GDP 4. National income 5. Consumer sentiment 6. Unemployment

Observations Avg. pro-gov’t votes

0

Observations Avg. pro-gov’t outcomes

151 .58

.10(.04)** .89(.70)

707 .57

.18(.04)*** .97(.39)***

354 .74

−.02(.03) .14(.50) −2.4(2.2) −1.4(1.9) −.23(.46) −.08(.28)

2,435 .69

−.04(.02) .20(.22) −1.0(1.0) −.94(.80) .27(.18) .04(.112)

120 .68

.02(.06) 2.4(2.7) 8.4(5.5) 2.4(4.5) 1.3(.43)*** −.43(.75)

1,639 .66

.04(.03) .88(.40)** 2.3(1.1)** 1.09(1.0) .72(.15)*** −.32(.14)** .65

176 .71

−.005(.05) 1.7(1.2) −1.8(2.6) −.41(2.6) −.15(.54) −.30(.31)

1,151

.0005(.04) 1.27(.57)** .73(.1.2) .47(1.2) .47(.20)** −.20(.15)

Democrat

.67

120 .68

.02(.06) 2.4(2.7) 8.4(5.5) 2.4(4.5) 1.3(.43)*** −.43(.75)

1,417

.07(.04)** 2.27(.57)*** 3.04(1.1)*** 2.1(1.4)* .75(.15)*** −.38(.15)***

Republican

Typical 1950–2010 (No WWII)

Note: The first column lists twelve separate models; each row presents the results for the separate model. The dependent variables, votes and outcomes, are both coded = 1 if pro-government and = 0 otherwise. All the models include controls for wartime; the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; whether the case involved a constitutional issue; and a time trend. The models presented in the top panel also include fixed effects for each justice. no obs, = no observations  *p ≤ .10  **p ≤ .05  ***p ≤ .01

no obs. no obs.

7. Business cycle 8. Industrial production 9. GDP 10. National income 11. Consumer sentiment 12. Unemployment

Outcomes

Votes

Models

Republican

Democrat

Democrat

Republican

Typical 1940–2010 (WWII)

Typical Pre-1930

Probit Models Depicting Marginal Effects with Robust Standard Errors

Table 5.2  Supreme Court votes and outcomes in taxation in typical cycles by political party

The Next Stop / 151 Table 5.3  Supreme Court votes and outcomes in taxation in atypical cycles by political party Probit Models Depicting Marginal Effects with Robust Standard Errors Atypical 1930–39 Democrats Models 1. Business cycle 2. Industrial production Observations Avg. pro-gov’t votes

Republicans Votes

−.15(.05)*** −.42(.18)**

−.16(.04)*** −.17(.02)

1,053

1,482 .68

.64 Outcomes

3. Business cycle 4. Industrial production Observations Avg. pro-gov’t outcomes

−.27(.11)*** −1.5(.95)* 46

−.04(.05) .39(.46) 235

.65

.64

Note: The first column lists four separate models; each row presents the results for the separate model. The dependent variables, votes and outcomes, are both coded = 1 if pro-government and = 0 otherwise. All the models include controls for wartime; the political preferences of the Court, the House, the Senate, and the president; the identity of the appealing party; tax rates; whether the case involved a constitutional issue; and a time trend. The models presented in the top panel also include fixed effects for each justice. *p ≤ .10  **p ≤ .05  ***p ≤ .01

they are affected in divergent ways. As hypothesized above, all justices, irrespective of political party, desire greater levels of economic prosperity and will use their decision-making powers to promote this goal. The analyses with respect to the Court’s outcomes presented in the lower panel of table 5.2 are similar to that uncovered in the context of individual votes. Note, however, that the pre-1930s’ Court was monopolized by a Republican majority, and thus it is impossible to identify the effects of the economy on a Democratic-controlled Court in this early period. In the second “typical” economic period, whether measured as post-1940 or post1950, the models again indicate that the economy did not have a strong effect on the actual court outcomes, although the Republican Courts accounted for consumer sentiment in their decision making unlike the Courts controlled by the Democrats. Turning now to the votes and outcomes that emerged during the Great Depression, table 5.3 presents the findings for the aypical period, 1930–39, and includes only the variables for which data are publicly available: the

152 / Chapter Five

business cycle and industrial production. The top panel presents the findings with respect to judicial votes, and the bottom panel presents the Court outcome findings in this period. As indicated in the top panel, both the Democrats and the Republicans voted with the government as the economy continued to perform poorly and nearly always at statistically significant levels. This finding further undermines the conventional wisdom about the Court in the New Deal era: The Court’s conservatives, like its liberals, systematically supported the government, at least in the taxation cases, when the economy was performing poorly. With respect to the Court’s outcomes, the results continue to go in the expected direction for Democratic-controlled Courts at statistically significant levels, but not Republican-controlled Courts. Indeed, industrial production was positively correlated with the latter’s outcomes, suggesting that the Republican Courts were reacting to the economic environment as if it were typical rather than atypical. In fact, the rhetoric and dicta contained in the justices’ opinions issued throughout the 1930s suggest that the Democrats believed the economic conditions were atypical and depressionary, whereas the Republican justices at times suggested they viewed the nation as in the midst of a typical economic downturn, similar to those experienced in past (and in future) periods. Consider the 1934 case Home Building & Loan Ass’n v. Blaisdell,25 which vividly depicts the Democratic justices’ understanding of the devastating economic conditions that had begun to curse the nation, along with their view that policymakers were in a position to offset some of the misery and, most importantly, that the Court should not interfere with these legislative efforts. Blaisdell involved the Minnesota Mortgage Moratorium Law, which sought to aid homeowners in a number of ways, including by postponing pending bank foreclosures. Analogizing to other types of emergencies the nation has faced and the need for a government response, Chief Justice Hughes (a Republican) wrote the majority opinion, but all the Democrats joined. Hughes discussed the prevailing economic conditions at length. Moreover, in quoting the lower court, he makes clear that the majority considered the state of the economy as similar to an “Act of God” and thus not caused by the ineptitude or incompetence of government decision making but by exogenous factors. “The present nation wide and world wide business and financial crisis has the same results as if it were caused by flood, earthquake, or disturbance in nature. It has deprived millions of persons in this nation of their employment and means of earning a living for themselves and their families; it has

The Next Stop / 153 destroyed the value of and the income from all property on which thousands of people depended for a living; it actually has resulted in the loss of their homes by a number of our people and threatens to result in the loss of their homes by many other people, in this state; it has resulted in . . . widespread want and suffering among our people. . . .”26

Now consider the dissenting opinions of the four committed Republicans on the bench. Justice Sutherland, writing for himself and Justices Van Devanter, McReynolds, and Butler (often labeled the four horsemen because they continually voted as a block to strike down any and all commercial legislation), argued that the Minnesota legislation unconstitutionally impaired the right to contract. The dissenters took judicial notice of the economic conditions of the time, but argued that the present exigency is nothing new. From the beginning of our existence as a nation, periods of depression, of industrial failure, of financial distress, of unpaid and unpayable indebtedness, have alternated with years of plenty.27

The rhetoric contained in both the majority and dissenting opinions highlights the point of the theory—it indicates that the majority viewed the crisis as atypical and not attributable to the ineptitude of the elected officials and that the dissenters may have viewed the economic climate as no different from any other downturn; it was, in short, typical and thus most likely related to the clumsy decision making of the elected branches of government. Importantly, however, the individual justices, whether Republican or Democrat appointees, voted to support the government during the depression as posited by the theory. In sum, partitioning the data by judicial political preferences highlights several important factors. First, divergent political preferences do not spark dramatic differences in the way the justices take account of the macroeconomy: Both Republican and Democrats exhibit behavior forecast by the information theory—although certain variables exert a stronger or lesser effect on each group. Republican and Democrat appointees both cycle with the economy as expected in the typical recessionary periods, but the Republicans appear to be more strongly affected than the Democrats. Moreover, both Republican and Democrat appointees cycle with the economy as expected in the atypical depressionary periods, but the Democrats appear to be more strongly affected than the Republicans. Second, the findings suggest that conventional wisdom about the Supreme Court’s voting behavior in the 1930s needs reconsideration and revision. The Republicans did not

154 / Chapter Five

systematically attempt to tie the hands of the president (at least in the taxation cases) as many scholars have argued.

Conclusions and Future Directions This chapter conducted an out-of-sample study of the information theory of jurisprudence and lends further support for its arguments. The evidence indicates that the justices will use their Article III authority as a double-edged sword (sometime supporting but other times undermining the government in Court) not only with respect to foreign policy matters, but also in the context of economic policymaking. In a period of economic growth, the justices offered support for the government in Court, but in periods of economic decline this support turned into judicial opposition. This general trend emerged in every era throughout the last century except during the depressionary years in the 1930s—in that context the justices sought to support not undermine the government’s policymaking choices. The theory and findings presented in this chapter as well as in chapters 3 and 4 begin rather than end the investigation of judicial responses to macro-level trends. Are the justices willing to promote various other aims and goals, such as those associated with good health, domestic law and order, speedy responses to natural disasters, and so forth? And are the justices willing to promote these goals at the both federal and state levels? These are puzzles well worth investigating in subsequent studies of judicial behavior. While the theory and evidence presented in this book invites further investigation of the issues, it nonetheless advances our understanding of judicial decision making on a number of fronts. First, the justices may care very much about legal and political issues as widely discussed in the extant legal, political science, and economic literatures, but they are also concerned with macro-level issues that are often quite distinct from the legal and political implications of the cases and controversies that show up on their docket. This concern for matters involving foreign and domestic policy leads the justices to employ their decision-making powers in a complex and strategic manner intended to have far-reaching effects, well beyond the individual litigants and laws at play in each case. Moreover, a voluminous literature in law, political science, and economics offers a rich and nuanced explanation of judicial decision making in the civil rights and liberties context, but scholars have long struggled to explain and forecast judicial decisions in the financial and economic areas of the judicial docket, such as taxation. The information theory offers a new understanding of judicial decision making, one that has predictive power in areas

The Next Stop / 155

of the law that have consistently been difficult to explain and understand from a legal, political, or policy perspective. In these areas, it appears the justices may be motivated by macro-level rather than individual political and ideological preferences that emerge in their decisions in the civil rights and liberties-type cases. Finally, and perhaps most importantly, the information theory offers a revised understanding of interbranch policymaking dynamics. The separation of powers models in the extant literatures have historically sought to understand and explain judicial decision making, at least in the Supreme Court, by noting that the justices will moderate their behavior to account for the preferences of Congress and the president. The information theory suggests the causal arrow may also go in just the opposite direction—the justices seek to shape the choices of Congress and the president under penalty of judicial punishment in the courtroom leading to substantive losses and massive budgetary consequences. To be sure, various researchers such as the political scientist Andrew Martin have investigated the possibility that the justices are in a position to affect the policymaking choices of the elected branches of government,28 but these ideas have not been thoroughly investigated with the help of both theory and data.

Conclusion

The information theory of judging posits that instrumentally rational members of the judiciary will use the cases and controversies that show up on their dockets as a means to affect the elected branches’ policymaking choices, and empirical evidence offers support for the theory. As expected, the justices do not rely on their own skill and expertise when rendering decisions intended to shape national policy, but look to credible cues to determine how best to exercise their Article III decision-making power to promote their goals. In the context of foreign policy, the justices look to wartime revenue laws, troop deployments, and spending trends to determine if and when they should loosen or tighten the fisc, thereby affecting the budgetary constraints on the elected branches and promoting more or less defense activity. In the macroeconomic context, the justices rely on the state of the economy for purposes of determining whether the nation’s financial managers have succeeded in maintaining economic growth and stability, or were inept and should be restrained and redirected. It is important to note that although the information theory of crisis jurisprudence offers a new account of judicial behavior, it also builds on and extends the extant law, political science, and economics literatures. International relations scholars, for example, have proposed a theory of foreign policymaking that has similarities with the information theory, and more than a few researchers have investigated judicial decision making in ways that connect with the ideas presented here. It is worthwhile to briefly investigate these diverse literatures to highlight the book’s academic debts, but also to demonstrate how it charts new and unexplored territory in its examination of judicial behavior. Moreover, although this book seeks to understand and explain decision making from the judicial perspective, the theory and empirics invite

158 / Conclusion

investigation into normative issues—specifically, is the judicial inclination to support or undermine Congress and the president, via the judicial decision-making process, a proper role for the Court? Providing a complete and nuanced answer to this question goes well beyond the scope of this book; indeed many scholars, researchers, and commentators have invested substantial time and energy investigating just how judges should decide cases, what factors should affect outcomes, and what implications result from committing to one decision-making approach over another. But the question is an important one, and while this final chapter will not settle on an answer, it will address the relevant normative concerns.

Building and Extending the Extant Literatures in Political Science, Law, and Economics The Realist School of Foreign Policymaking The assumptions that safety and security enter the judicial utility function and that judges will rely on informational cues—not their own knowledge and expertise—to promote their preferred levels of national defense conform, in a very broad sense, to a realist or neorealist understanding of foreign policymaking found in the political science literature. While the realist school of international relations includes a diverse collection of thoughts and ideas, scholars subscribing to this theory generally agree that “the world is a competitive, potentially dangerous place,” and thus “the most basic goal of great powers is to gain security, and thus ensure their survival.”1 The fundamental and rational desire for survival means that the government actors prefer safety and security to perilous conditions and will prioritize these preferences in the decision-making process. Often deemed the “water’s edge approach” or the “two presidencies thesis,” realists argue that decision making in the context of domestic policymaking is plagued by conflict and partisan politics, but it becomes consensual and bipartisan as issues and debates move into the foreign policy arena. This bipartisanship is arguably both rational and necessary given the high stakes involved when the nation is threatened from abroad: Unity in policymaking circles, it is argued, increases the possibility of success in times of military crisis. The information theory of crisis jurisprudence extends the realist understanding of policymaking into judicial circles by suggesting that judges, too, maintain a water’s edge approach to decision making: They will set aside legal, political, and institutional preferences to assure the nation consumes the ideal level of defense.

Conclusion / 159

The realist claim that legislators will act in a bipartisan fashion is a component of the theory that scholars have roundly criticized from both theoretical and empirical perspectives. The political scientists William Howell, Jon Pevehouse, Mark Souva, and David Rohde, for example, have all argued that the electoral connection along with various other factors make it more than a bit unlikely that rational legislators will systematically and unthinkingly bury their political preferences to offer unwavering support for the president in foreign policy contexts, or in any other context for that matter.2 Moreover, empirical data strongly undermine the realist’s assertion of bipartisanship in times of crisis, showing that legislative votes on important foreign policy areas are routinely divided along partisan lines. Howell, Pevehouse, and others convincingly challenge the water-edge thesis that emphasizes the role of external factors, such as foreign attacks, in the congressional decision-making process over other factors, such as political supporters who supply money and resources and voters who keep legislators in office. The judicial calculus, however, is likely to be quite a bit different from that undertaken by legislators who must decide whether (or not) to defer to the president. Although it is widely understood that the president has access to military information and expertise, it must be recognized that the Senate and the House of Representatives also maintain committees and structures that enable its members to collect substantial information and data on foreign policy matters. Congress’s information and oversight powers, in turn, make it possible for legislators to determine independently whether it is in their interest to defer to the president or weaken his resolve concerning military activities: to determine, in short, whether the nation is consuming excessive, insufficient, or optimal levels of defense and thus whether trade-offs between goods are warranted to keep the nation safe. That legislators use this information in a partisan fashion is perhaps not a surprise. The federal judiciary does not have the authority to oversee Department of Defense activities, nor does it maintain armed services, foreign relations, homeland security, or veterans’ affairs committees. Federal judges must rely entirely on the information conveyed by the elected branches of government—both of which are able to transmit credible cues on foreign policy matters. Given this reality, and for the variety of arguments presented above with respect to the ability of each branch of government to advance—and undermine—the nation’s interests, the information theory of crisis jurisprudence posits the idea judges will exhibit nonpartisan voting in favor of (or against) the government in the cases and controversies that implicate the fisc. Importantly, the theory does not posit that all judges will react

160 / Conclusion

precisely the same irrespective of political preferences, only that the direction of the responses will be identical. All judges, for example, will seek to loosen the fisc when they receive consistent cues that the nation is consuming insufficient levels of defense, but it is possible Republican (or Democratic) appointees will exhibit greater support for the government in these circumstances—a possibility that the data bear out. Absent credible cues on defense spending, judicial voting behavior is likely to reveal legal, ideological, institutional, and various other biases. The information theory, then, accepts the conventional realist insight that bipartisanship can and will emerge in times of danger. Irrespective of judges’ political differences with each other and with the elected branches of government, they will seek to grow the federal fisc if they believe this will help the nation fend off foreign threats and will seek to pinch the fisc if they believe the nation is on a path that undermines rather than promotes its interests. Important differences, however, exist between the realist school and the information theory of judging. First, realists recognize that members of Congress have foreign policymaking powers (set out in Article I of the Constitution), but the desire to survive leads legislators to play a weak, even nonexistent, role in devising foreign policies and programs. The information theory, by contrast, recognizes that judges have no formal foreign pol­ icymaking authority. On various occasions throughout history, courts have obtained a modicum of power when they were put into a position to render an opinion on a specific foreign policy strategy, such as in the cases identified in previous chapters, including Lichter, Jarecki, Youngstown Sheet & Tube Co., and so forth. But these cases are very rare; the vast bulk of the federal courts’ docket is not directly related to foreign policy in any way. In short, the judicial branch, unlike Congress, is constitutionally feeble when it comes to shaping the details of foreign policy. But herein lies the rub: The information theory argues that while judges have no formal foreign policymaking powers, they will use their decision-making authority to promote national safety by expanding and contracting the fisc when deemed necessary to promote responsible decision making in the elected branches of government on military matters. This is a distinction with substance: The realist school argues that members of Congress surrender power to achieve their goals, whereas the crisis theory argues that judges seize power (by exercising their decision-making authority in ways unexpected by the framers) to achieve their policymaking goals. Second, the realist school focuses uniquely on foreign policymaking on the assumption that this is the only arena unambiguously implicating national safety and security, but the crisis theory posits that judges will view

Conclusion / 161

both domestic and foreign policy issues as potentially important mechanisms for keeping the nation safe. Indeed, the information theory argues that judges will systematically use domestic issues, such as those that emerge in taxation cases, to advance the nation’s foreign policy goals on the assumption that without this indirect financial assistance the nation could fail in its military endeavors. Third, and perhaps most important, the crisis theory forecasts that rational judges would both support and oppose the government, depending on whether they believe the government is providing excessive or insufficient levels of defense, whereas the realists take the position that legislators have a one-way ratchet that permits only support and deference to the president. In sum, the realists argue that members of Congress surrender their power in the narrow context of foreign policy to systematically support the president, whereas the information theory of judging argues that courts exploit their powers across all policy areas to both support and restrain the elected branches of government. The information theory, in sum, appears to share the fundamental assumptions set forth by the realist school’s critics. As suggested above, Howell, Pevehouse, Souva, Rohde, and many others argue that congressional decision makers will not systematically defer to the president on foreign policy matters, but will do so only when it is in their interest to do so. Similarly, the information theory presented here argues that judges, being rational, will support and oppose defense policy in a manner that maximizes their utility, and in certain circumstances—when credible cues emerge— judges will reach conclusions that challenge the president’s foreign policy choices. The Legal, Political, and Economic Schools of Judicial Decision Making By no means is the information theory the first to propose that judicial concerns for safety and security affect judicial votes and outcomes. In fact, at least since the 1940s, scholars have investigated what judges should do when the nation faces military threats from abroad and thus have presented normative arguments that courts should worry about safety and security, and by implication optimal levels of defense. Moreover, a rich positive literature on judicial decision making exists that suggests what judges will do in response to foreign policy crises, irrespective of the normative arguments for or against such reactions. Numerous and diverse perspectives are consumed within the normative school of thought, but two are especially th e n ormati v e l it e ratur e .  

162 / Conclusion

notable: One advocates a high level of judicial deference to the government’s wartime policies, and the other advocates little or no deference, perhaps even opposition, to these same policies. The legal academics Eric Posner and Adrian Vermeule label the first approach “the deferential view” and the second “the civil libertarian view” because, as they note, the first allows individual constitutional rights and liberties to be relaxed or suspended in times of emergency while the second argues it is exactly in these periods when individuals need increased levels of protection from government actors who are quick to overreach in light of the crisis at hand.3 With respect to the military events that transpired after 9/11, the legal and constitutional scholar Mark Tushnet points out that public discussion of the Constitution in wartime was dominated by these same two voices, “alarmists who see in every action taken by the Bush administration a portent of gross restrictions on civil liberties of all Americans, and administrative shills who see in those actions entirely reasonably, perhaps even too moderate, accommodations of civil liberties to the new realities of national security.”4 The underlying arguments of each view are varied and complex, but their main ideas and assumptions can briefly be summarized to highlight just how the two interrelate with the information theory of crisis jurisprudence. The deferential (or shill-like) view advocates judicial deference to the federal government, specifically the president as commander-in-chief, given his ready access to information and data regarding foreign policy threats, along with his ability to act quickly to protect the nation as “dangers gather.” Deference to the executive, in short, is necessary not only to allow the president to exercise his wartime powers as set out in the Constitution, but also to keep the nation safe and secure. The civil libertarian (or alarmist) view argues the framers did not intend that individual rights would be contingent on peacetime conditions. Moreover, they argue that systematic deference to the president essentially awards a blank check to the executive branch and could lead courts to sanction a series of questionable, if not clearly unconstitutional, policies. Finally, scholars subscribing to the civil libertarian view have argued that routine support for the president in times of crisis could lead the courts to create legal doctrines and principles that effectively (and dangerously) change the nature of constitutional rights even after the crisis has abated. In short, constitutional rights should not wane in times of crisis because they are unlikely to return fully to pre-crisis levels, thereby undermining democracy itself—the very thing the nation seeks to protect through military action. In response to all these arguments, the deferential camp argues that

Conclusion / 163

if judges were to place individual rights above the nation’s obvious interest in fending off security threats, they would essentially create a “suicide pact,” something the framers could not have intended. Scholars advocating the civil libertarian view of judicial decision making in times of crisis worry about individual rights and thus have the important insight that judicial preferences may at times diverge from those held by the executive branch, which is willing to prioritize safety and security over civil rights and liberties. Scholars advancing the deferential view understand that rights are worthless in the absence of a viable state and thus recognize that judges prefer safety and security and seek to advance this preference by deferring to the president in the context of foreign policymaking, given their lack of information and expertise on defense matters. In short, the information theory of crisis jurisprudence has much in common with the ideas and insights found in both strands of the normative literature on judging. The theory investigated in this book, however, does not merely transform the prescriptive into the descriptive: Important differences between the projects exist. First, the normative school seems to imply that courts have a single-edged sword that allows either systematic deference or systematic opposition to the federal government in times of crisis. The information theory, by contrast, posits a double-edged sword, thereby anticipating that rational judges are likely to support and oppose the government depending on the crisis environment, conditions that the judges will identify with the aid of Congress’s and the president’s informational cues. The information theory, in effect, expands on the options available to judges in the normative literature. It adopts the accommodationist view that judges are motivated to keep the nation safe, but also embraces the idea found in the strict view that judges may at times believe military activities have become excessive and thus will challenge the goals of the president. Second, the normative scholars focus exclusively on controversies that involve challenges to specific presidential actions taken in times of crisis; examples of these cases involving financial issues were noted in previous chapters and include Lichter, Jarecki, and Youngstown Sheet & Tube Co., but many other rights and liberties-related examples also exist such as Korematsu v. United States and Boumediene v. Bush.5 This narrow focus limits the normative claims, whether in the accommodationist or strict view of judicial behavior, to a small subset of cases that judges can use to advance their preferences on military matters. The information theory, by contrast, posited and found that judges will view the cases and controversies across their entire dockets as potentially useful for keeping the nation safe in times of

164 / Conclusion

crisis, and not only the disputes that are directly related to the crisis issues. The information theory’s broad-based and double-edged sword, then, has a much more expansive reach than the normative scholarship. Finally, scholars in the normative genre seem to assume that it is obvious when a foreign policy crisis exists—when the president acts to increase the nation’s military preparation and readiness—whereas the information theory suggests this is a difficult factual question that may lead to unexpected conclusions when all the relevant cues are considered. Under the information theory, courts will not simply assume a crisis has emerged when the president acts as if there is one, but will take on- and off-the record judicial notice of wide-ranging pieces of information before reaching a conclusion. Chapter 3 investigates this timing issue in detail, but to give just one example of why it is meaningful, consider that the normative theorists (along with most positive theorists) seem to assume that the Vietnam crisis lasted continually from 1964 through 1973. This would justify ten years of unambiguous support for the president under the accommodation view of the normative school of thought, and possibly opposition under the strict view for that same long period. The information theory, however, allows for the possibility that the emergency could wax and wane throughout this period depending on the cues that emerge from the elected branches. Indeed, given the various combinations of financial cues that emerged during the Vietnam War, the information theory forecast judicial opposition to the president in the early years of the war, but support in the middle years, and no reaction in the final years when defense spending was decreasing and the president was repatriating the troops. While the normative crisis theory of the courts substantially differs from the positive theory presented in this book, they nonetheless see eye to eye on the idea that macro-level events beyond control of either the litigants or the judges are relevant to judicial decision making. This is a notable departure from the widely accepted view among positive theorists, described immediately below, that micro-level factors motivate the decision-making process. Three positive theories of judicial decision making—the legal, political, and economic—exist in the extant literature and have had widespread appeal to scholars seeking to understand and explain judicial behavior. These theories are substantially interrelated, and more than a few scholars have investigated their similarities and differences. But for purpose of exposition, the theories will be investigated as if they are entirely separate and unrelated.6

th e positi v e l it e ratur e .  

Conclusion / 165

Beginning first with the legal theory of decision making, this model sets forth the argument that judges privilege existing legal tenets and doctrines when rendering opinions in cases and controversies. Judges, it is argued, are neutral and formalistic decision makers who apply the relevant legal materials, such as the Constitution, statutes, and judicial precedent, to the underlying facts of the case to produce reasoned rulings on the issues that show up on the dockets. Accounts of this sort do not necessarily imply that federal judges have no personal preferences or always agree on the interpretation of the law and relevant precedent as well as its applicability to the facts and circumstances that arise in the cases. Rather the legal theory holds that judges are willing to set their views aside to create a rational, efficient, and fair collection of laws and policies that ultimately promote the greater social good. The legal academic Frank Cross has usefully summarized a range of justifications for why rational judges engage in this type of legalist behavior. One branch of the legal school argues that judges set aside their personal preferences in the judicial process because they experience a strong sense of legal duty (perhaps obtained through legal training or the promotion to the bench) and enjoy fulfilling that duty; a second branch argues that judges adhere to the law because it is a fundamental source of power, and thus casually dismissing it undermines their own authority as judges; yet a third branch argues that judges engage in pure legal decision making to avoid the perceived costs associated with being reversed by higher-level decisionmaking bodies within the court system itself or by the elected branches of government.7 Irrespective of the specific aims that judges might have, all branches of the legal positivist school argue that judges operate as neutral decision makers seeking to obey and implement the law to the greatest extent possible. To understand how the legal model relates to the information theory, it is useful to examine whether and how judges account for foreign crises. Recall first that two types of controversies exist: those that involve actions taken by the elected branches of government to address a specific foreign crisis, and those that do not directly involve the crisis but that judges nonetheless could use to promote their interest in national safety and security. The legal model speaks to the former group but not the latter. With respect to the cases that involve direct government action to address a crisis, the legal model, like the information theory of judging, anticipates that judges will consider not only the existence of a foreign crisis, but also the cues from both branches of government with respect to the nature of that crisis and the relevant legal documents to reach decisions. As Justice Jackson’s concurring

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opinion in Youngstown Sheet & Tube Co., discussed in chapter 2, notes, judicial precedent requires judges to consider congressional cues in much the same way as outlined in the information theory. Specifically, Justice Jackson noted that when Congress expressly or impliedly affirms the president’s foreign policy decisions, judges too should support president; when Congress opposes the president, judges too should extend little or no support; and when Congress is silent, judges should have no clear legal guidance and must look to “abstract theories of the law” to decide the case. The information theory, in short, accords with the legal theory in the sense that both predict judges will look to the informational cues that emerge from the elected branches of government, and these cues will operate in the manner described above and by Justice Jackson. Although the legal theory as suggested by Cross implies that observed outcomes can be explained by the judges’ sense of duty, their institutional concerns, or their desire to avoid the embarrassment of reversal, and the crisis theory argues the outcomes emerge from judges’ desire to the keep the nation safe in times of crisis, both predict identical outcomes; thus we have a behavioral equivalence problem. Fortunately, this set of cases is only a small subset of the overall group of controversies implicated by the information theory, and in the larger subset the equivalence problem is absent. In the vast majority of cases on the docket, legal tenets and doctrines render foreign policy issues beside the point. In cases involving domestic issues such as taxation, contract, tort, and patent infringement allegations, for example, the law requires judges to consider various constitutional provisions, statutes, and judicial precedent, but foreign policy cues will be almost entirely irrelevant. Indeed, if judges were to consider crisis cues when they are not part of the body of law governing the case, they would violate the central point of the legal model: Judges obey and implement the law without regard to personal preferences or other extralegal factors. The information theory, by contrast, argues that judges will decide these cases in a manner that is intended to expand or pinch the fisc to maintain their preferred level of safety and security—and they will do this regardless of extant legal tenets and doctrines that exist. Indeed, legal doctrine will largely be irrelevant if the nation’s safety depends on a judge’s willingness to set it aside to provide emergency funding to the federal government. In all these contexts, which represent a considerable portion of courts’ dockets, the legal and crisis theories of jurisprudence have very different empirical implications. Turning now to the political model of judicial decision making, a model that assumes judges have political preferences and seek to embed these pref­­­­­­­­­ erences into the opinions they render. Judicial political preferences are

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likely to be correlated with gender, race, age, or some other factor, but in all cases judges seek to write opinions that reflect and advance their own political and ideological viewpoints. These accounts of judicial decision making do not imply that judges with political preferences systematically ignore precedent or law-related factors; rather, the political theory of judging views the development of doctrine as a means for implementing partisan and ideological viewpoints and for keeping lower court judges in line. Unlike the legal theory, however, the political theory of adjudication does not assume legal doctrine reflects inevitable, neutral, or fair outcomes after full consideration of the legal issues brought into court; doctrine is often simply a mechanism to realize political ends. The assumption that the judges pursue their own goals and aims does not always lead to the conclusion that individual judges have little regard for others or have no respect for the rule of law. The point of the political theory is that the judges do not become objective decision makers who check their personal opinions on legal controversies at the courtroom door. Instead the judges have personal viewpoints and give them weight when issuing decisions. Unlike the legal school of thought, which suggests that judges have just one mode of decision making—legalistic and formalistic—the political school suggests numerous modes, but all for the same underlying reason: political preferences. One branch of the judicial politics school advocated most strenuously by the political scientists Jeffrey Segal and Harold Spaeth, for example, argues that judges will sincerely vote their preferences and these preferences will systematically show up in the opinions and outcomes.8 A second branch advocated by a large group of legal and political scholars including Lee Epstein, Tonja Jacobi, Stefanie Lindquist, Max Schanzenbach, and Emerson Tiller posits the idea that judges are not naïve political actors, but are strategic in the sense that they will seek to embed their political views into doctrines and case outcomes and will do so in a manner that assures their preferences are not overturned by higher authorities with diverging political or ideological viewpoints.9 Thus judges, it is argued, will moderate their views, if necessary, to assure that they are not undermined later in the process. Under the strategic view of judging, for example, Republican judges might decide cases as if they hold moderate views because they fear a higher court or a legislature, with liberal preferences, will overturn their decisions if they render opinions that reflect their sincere beliefs, thereby completely undermining their political goals. In theorizing about judicial trends, political theorists tend to focus on specific cases and controversies and ignore macro-level trends that are likely to affect the judicial calculus. As an illustration, the theory posits that

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right-leaning judges will favor taxpayers (given their preference for small government) and left-leaning judges will systematically prefer the government (given their preference for taxing and spending programs) in the cases and controversies that show up on the docket. Judges will advance these preferences either sincerely or strategically, but these are the preferred outcomes. While the political theorists have never attempted to identify the effects of national events on judges’ voting behavior, it is possible to do so. Judges, as political actors, for example, are more than likely to have views on foreign policy issues. In fact, a large extant literature suggests that Republicans tend be hawks, with very different preferences on military spending, than Democrats, who tend to be doves. Thus if taxation cases are a means to subsidize wartime activities (as this book argues they are), then the political theory of judging might posit that the right-leaning judges will become pro-government in taxation cases in times of crisis, while left-leaning judges will become anti-government—a behavioral transformation motivated by political preferences. The information theory, by contrast, posits that judges of all political persuasions will move in a pro-government direction (although not necessarily to precisely the same degree) when the nation is threatened from abroad and the courts believe additional monies are necessary to achieve success, and in an anti-government direction when the judges believe pinching the fisc is necessary to protect the nation’s interests. In short, the utility of a proor anti-government vote increases for all judges depending on the circumstances that have arisen, rather than being conditional on party status as implied by the political model. Thus the political theory could be viewed as forecasting a flip in judicial preferences in peacetime and wartime, whereas the information theory accepts the argument that left-leaning judges are pro-government in peacetime but posits they may become even more so in times of crisis; right-leaning judges are anti-government in times of peace, but may become less so as the nation moves into a costly foreign policy emergency. Indeed, the predictions of the information theory of crisis jurisprudence diverge from the political theory even if courts assess the credibility of the crisis cues emanating from the elected branches of government based on political preferences, a possibility suggested by the strategic view of courts. As suggested above, this alternative school implies that judges do not want to account for the preferences of another body in the decision-making pro­ cess: Congress and the president are only relevant in the strategic political model if courts worry about the possibility of reversal or some other form of punishment (such as limited budgets or lower salaries, which are dis-

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cussed below in the economic model). In the strategic view, it is possible that judges will moderate their views to reflect those held by the president and members of Congress but not because judges believe the other two branches are more informed or knowledgeable about the cases at hand or know more than judges do about how to advance judicial preferences. Deference, to the extent it emerges, is grounded only in the fear of reversal or punishment, unlike the deference hypothesized by the information theory of judicial decision making, which is grounded in the idea that deference is warranted by the crisis conditions, not the misalignment of political preferences. To put the point most directly: The information theory forecasts deference whenever a crisis emerges, whereas the political model forecasts that deference will emerge from the courts only in the face of a politically unfriendly oversight body. Finally, the economic model of judicial decision making posits the idea that Congress need not engage in the costly process of overturning judicial decisions to achieve policy goals: Legislators can simply employ economic sanctions to assure federal judges reach outcomes that reflect congressional preferences. Members of Congress, for example, are well positioned to increase or decrease the number of judgeships (thereby increasing or decreasing judges’ workloads) and can alter annual budgetary allocations to the judiciary (thereby forcing judges to implement cost-saving measures, work with smaller operating expenses, forgo secretarial assistance, and so forth).10 The economist Eugenia Toma suggests that Congress can and will deploy these techniques in an effort to assure courts reach outcomes reflecting the former’s substantive political and policy preferences in individual cases and controversies.11 The economic model, in short, parallels the strategic model of political decision making in the sense that both posit a Congress that will use its power and authority to shape judicial outcomes. That judges are likely to consider their own economic interests in the decision-making process has importation implications for the context under investigation. Consider the fact that economically rational judges will expect Congress and the president to redirect the nation’s resources to defense activities and away from all other federal policies and programs—including the judicial budget—in times of crisis. This reality, in turn, will work as an incentive for judges to use their decision-making powers to augment the size of the fisc to fend off threats from abroad, but more importantly, their own budgetary losses.12 The legal and economic scholars Stephen Choi, Mitu Gulati, and Eric Posner provide evidence that federal judges consistently express concern and lobby for increased levels of judicial resources and higher salaries in particular.13 Moreover, the legal historians Daniel Klerman and

170 / Conclusion

James Pfander have recently and convincingly argued that judicial compensation and financial self-interest played more than a minor role in the development of the federal judiciary as well as important legal doctrines.14 Judges, in short, need not have foreign policy goals for or preferences about defense spending to react to national emergencies. That the information theory of crisis jurisprudence does nothing more than capture federal judges’ micro-level financial preferences and not the (asserted) macro-level foreign policy aims and goals is a possibility, but unlikely. When judges decide cases in a manner that increases the size of the fisc, they unambiguously put more resources into the hands of Congress, and some of these resources may trickle down to the judiciary—a situation in which both judges and elected officials have aligned preferences. When judges decide cases in a manner that pinches this fisc, however, they withhold resources from Congress and increase the likelihood that they, too, will suffer financial setbacks in the appropriations process. It is unclear why members of Congress would ever seek a smaller budget (although Congress itself seeks to shape substantive military policy through the strategic use of its fiscal powers, it does not follow that rational legislators seek simulta­ neous cutbacks on their own budget) or why federal judges would ever increase the likelihood of future economic losses upon themselves: No economic model of judging suggests as much. The economic model highlights hidden consequences of judges’ use of the double-edged sword and underscores the reality that pinching the fisc may not be in judges’ (or Congress’s) financial interest. This is an important insight, but it is not a drawback to the information theory, which posits that judges will rationally trade off legal, political, and economic goals to achieve the optimal level of safety and security. Courts will impose a financial squeeze on the elected branches and thus risk future budget reductions because they seek to avoid excessive levels of defense and are not confident that either Congress or the president will succeed in reducing spending on their own accord. The legal academic Lee Anne Fennell and many others have explored individual behaviors that are inconsistent with one’s own stated desires,15 but the information theory shows that judges do not exercise bad judgment when they choose either to augment or pinch the fisc: They are merely acting to assure the nation consumes the ideal level of defense. In sum, the legal, political, and economic models have similarities to and differences from the information theory of jurisprudence. More importantly, all the models offer insight into the judicial decision-making pro­ cess, and each advances our understanding of the votes and outcomes that

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emerge in the cases and controversies that show up on the Court’s docket. The next section briefly investigates the normative implications of this book’s theory and empirical findings.

Are Macro-Level National Issues a Legitimate Concern for Judicial Decision Makers in Micro-Level Controversies? Perhaps the most obvious question that arises from this study is whether the Court should consider the interests of the nation as a whole (whether in the context of foreign policy, macroeconomics, or some other area) when casting votes and reaching outcomes in individual cases and controversies. After all, many scholars have argued that the Court’s primary function is to protect the interests of the individuals and minorities against those of oppressive majorities. The legal and political analyst Francine Sanders Romero, for example, has noted that the framers devised both the appointments process and life tenure to enable the justices to protect individual rights and liberties to a far greater extent than would be possible by the election-minded legislative and executive branches.16 Arguably, the very purpose of the Court is to privilege the interests of individual litigants over those of the nation as a whole. Yet to ignore the preferences of the majority in the decisionmaking process is also fraught with difficulty. As the constitutional theorist Alexander Bickel noted nearly fifty years ago in his well-known book, The Least Dangerous Branch, the Supreme Court is a countermajoritarian institution that can thwart and single-handedly undo the will of the people.17 Bickel noted that the Court could emerge as an autocratic body in a nation established on the democratic principles and committed to majoritarian politics. From a normative perspective, then, the judicial failure to account for widespread interests is as problematic as accounting for them. The problem of judicial review has captured the attention of generations of Court scholars, and many have addressed the issue in the same contexts investigated in this study. Jurists and legal scholars, including Chief Justices Hughes and Rehnquist, Judge Posner, Eric Posner, Adrian Vermeule, and John Yoo,18 have all argued that the rule of law must be interpreted in a manner that assures the survival of the nation when threatened from outside aggressors; the Constitution, in short, cannot be viewed “as a suicide pact” that systematically privileges the rights and interests of individuals over those of the nation as a whole. To be sure, scholars such as Mark Tushnet and others have criticized this argument, arguing that wartime is an especially important time to protect individual rights given the elected branch’s inclination to trample them in times of crisis.19 The important point

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for our purposes is that a strong case can be made for a judicial decisionmaking process that accounts for foreign policy emergencies, one that seeks to find the appropriate trade-off between safety and security, on the one hand, and individual rights and liberties, on the other, given the nature of the emergency at hand. The more difficult problem lies with the question of how deep into the Court’s docket should foreign policy concerns go? Authors and commentators generally have in mind the cases and controversies that involve specific strategies adopted by Congress and the president, actions viewed by the elected branches as necessary to fend off the foreign threats, when supporting the idea that the justices should take account of wartime activities in issuing its decisions. These cases have included the choice to restrict speech deemed dangerous to the nation’s interests in World War I, to intern Japanese American citizens in World War II, to seize steel mills in the Korean War, and to limit habeas corpus rights in the Iraq/Afghanistan Wars. The litigants in all these contexts showed up in Court fully understanding that the justices were in a position to, and most likely would, decide the case while taking judicial notice of the existing emergency conditions. The theory and evidence presented in this study, however, go substantially further: They suggest that the justices can and will use cases unrelated to a specific war or crisis to advance the nation’s ability to expend resources on defense-related goals. This may be a rational move on the part of the Court, but is it proper and fair to the specific individuals who are involved in the cases? At first cut, the answer to this question may seem unambiguously no. After all, in addition to raising legal questions unconnected to the crisis, the litigation, due to the inevitable time delays associated with pursuing cases up the judicial hierarchy, is likely to have been commenced well before the crisis exploded onto the national agenda. This means, in turn, that while the parties most likely planned for and expected a neutral (that is to say, peacetime) form of judicial review, they nonetheless were subjected to an unforeseen bias in the courtroom. Stating the point most directly: Rightly or wrongly, federal courts are widely believed to sacrifice individual rights for the greater social good in war-related cases, but not as a matter of course or in nonemergency situations. As a normative matter, the argument for sacrificing the interests of some individuals, but not others, for the purpose of advancing the nation’s interest in safety and security is far from transparent. First, while it is true that the litigants challenging wartime laws often face an unfriendly judiciary, they certainly did not choose to be disadvantaged by the laws in the first place. Indeed, the very point of petitioning for judicial review is to obtain protec-

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tion from an overreaching majority by the justices, who, as noted above, are widely believed to function as the guardians of individual rights and liberties. In short, perhaps it is an unrealistic hope, but it is certainly possible that litigants in the war-related cases have more of a reason to expect a neutral decision-making process than those in other types of disputes. The latter group generally does not raise the problem of unfair majoritarian practices but only interpretive questions involving widely accepted statutes and laws. If this is true, the lack of neutrality in the cases unrelated to the war may not pose an equity problem for a normative perspective to the same extent as the lack of neutrality in the war-related group of cases. Second, a judicial strategy that seeks to advance the government’s military goals in all types of cases and controversies, and not just in the small subset of the disputes that involve a specific wartime policy, works to assure a more evenhanded approach with respect to individual sacrifice in times of emergency. While the concept of fairness and equality is widely debated, a broad distribution of the costs of public goods to those who benefit and have the ability to pay is commonly perceived to be an equitable method for distributing burdens. Thus it might be argued that the individuals litigating legal issues unrelated to the war have no more of an entitlement to an unbiased judiciary, and perhaps less of one, than individuals suffering harm at the hands of Congress and the president. Third, as a descriptive matter, the justices routinely subjugate individual litigant’s interests to majority preferences even outside the context of a national emergency. Restrictions on the right to litigate, for example, have long been justified on the grounds that lenient standing rules would trigger massive numbers of court filings, thereby overburdening the federal dockets and leading the system to grind to a halt. Many cases may appear to be meritorious and worthy of the Court’s attention, but the national implications of allowing the cases to go forward are sufficiently problematic to lead the justices to limit individual rights for the good of the whole. As the legal scholar Toby Stern has noted, “For nearly two hundred years, judges in the United States have expressed a desire to avoid opening the ‘floodgates of litigation’ upon the court system” and have consequently interpreted both the laws and the Constitution in a manner to avoid the serious problems that would emerge with overtaxed dockets and overworked judges.20 In fact, virtually every judicial decision is rendered with an eye on its subsequent societal effects given the strong role that stare decisis plays in the decision-making process. Justices understand that the individual decisions they render carry strong precedential effects and, for this reason, routinely consider the effects of each decision on future actors, courts, and decision

174 / Conclusion

makers. Put differently, the judicial decision-making calculus incorporates broad social, economic, and policy concerns as a matter of course. Indeed, when the Court fails to give sufficient consideration to a decision’s subsequent consequences, it is subject to strenuous criticism. To given just one example, Chief Justice Roberts recently dissented in Caperton v. A. T. Massey Coal Co.,21 a case in which the majority held a state court judge should have recused himself in the lower court proceedings given the obvious conflicts of interest that existed. In his dissent, Justice Roberts suggested that even if the Caperton majority got it right, the Court’s outcome imposed costs that far exceeded the benefits. In his words, there are cases where a “probability of bias” should lead the prudent judge to step aside, but the judge fails to do so. Maybe this is one of them. But I believe that opening the door to recusal claims . . . will itself bring our judicial system into undeserved disrepute, and diminish the confidence of the American people in the fairness and integrity of the courts.22

In Justice Robert’s view, the majority opinion created too many uncertainties for future litigants and asked too much of individual judges faced with recusal motions and thus should have come out the other way—notwithstanding the fact the outcome seemed appropriate for those involved in the specific case before the Court. The justices, in short, routinely look beyond individual litigants and endeavor to account for the future consequences of their decisions, whether these consequences are associated with the success of wartime strategies, the efficient administration of justice, or perceptions of fairness. Moreover, many legal, political, and economic theorists, such as William Landes and Richard Posner, have suggested that strong utilitarian arguments exist for considering the broad implications of judicial decisions and not simply the narrow interests of the litigants themselves: Only in this way will judges be able to maximize social welfare. To be sure, theorists such as Robin West have lucidly noted that legal analysts do not universally accept the idea that a good judicial decision is one that maximizes well-being, and even those who agree with this moral premise debate precisely how the Court should go about implementing utilitarian values.23 The important point is that the present study identifies behavior on the part of the justices, which scholars can either applaud or critique depending on their normative views of judicial decision making. Finally, it is worthwhile to note that if one believes, with the utilitarians, that the Court should work to maximize utility, then the justices are well

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positioned to take on this role. If the elected branches fail to implement the majority’s preferences, as they are apt to do, voters will have the opportunity to remove them from office. But this electoral connection is not always sufficient to effectuate the public’s preferences. First, it is an option available only in election years, and, second, even when it can be exercised voters are limited to retaining or removing an elected official. The justices, by contrast, are in a position to continually respond to the failures of the elected branches of government, and are able to assess and respond to Congress and the president on multiple dimensions. The Court, for example, is theoretically able to support the government with respect to the latter’s economic policy choices, while concurrently adopting an anti-government position with respect to its military, health, and crime policies. This multidimensional response is made possible due to the range of legal issues that show up on the Court’s dockets, each of which could theoretically generate distinct substantive judicial responses depending on extant conditions. Voters may believe that the policymakers have succeeded in some realms but not others, but as voters they are not in a position to convey this nuance. Ultimately, the questions of whether the Court should—or usefully can—shape the policies that emerge from the elected branches of government, in the context of economics, defense, or any other policy area, must be subject to more rigorous consideration. That instrumentally rational justices in fact use their Article III decision-making powers in furtherance of a national policymaking role, however, is apparent from both the theory and the data presented above.

Notes

Introduction

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

11.

12.

13.

14.

324 U.S. 331 (1945). Id. at 334. 338 U.S. 451 (1950). It appears that Justice Douglas was conflicted because he took no part in either the consideration of the issues or the decision of the case. 338 U.S. at 454. Id. at 455. Id. at 453. Lichter v. United States, 334 U.S. 742, 758 n.5 (1948) (quoting extensively from President Roosevelt’s Message to Congress, 88 Cong. Rec. 32, 33–34 (1942)). 334 U.S. 742, 754 (1948). Putnam v. Comm’r, 352 U.S. 82, 91 n.16 (1956) (citing Hearings before the H. Comm. on Ways & Means on Revenue Revision of 1942, 77th Cong. 1 (1942)) (emphasis added). To name just a few: Steven A. Bank, Kirk J. Stark & Joseph J. Thorndike, War and Taxes (2008); Anthony S. Campagna, U.S. National Economic Policy, 1917–1985 (1987); Eliot Janeway, The Economics of Crisis: War, Politics, and the Dollar (1968). Edwin S. Corwin, Total War and the Constitution (1947); Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government 3 (1987); H. Struve Hensel & Richard G. McClung, Profit Limitation Controls Prior to the Present War, 10 Law & Contemp. Probs. 187 (1943–44). Gerald E. Frug, The Judicial Power of the Purse, 126 U. Pa. L. Rev. 715 (1978); see also John Fliter, Another Look at the Judicial Power of the Purse: Courts, Corrections, and State Budgets in the 1980s, 30 Law & Soc’y Rev. 399 (1996); Jeffrey D. Straussman, Courts and Public Purse Strings: Have Portraits of Budgeting Missed Something?, 46 Pub. Admin. Rev. 345 (1986). Bert A. Rockman, Presidents, Opinion, and Institutional Leadership, in The New Politics of American Foreign Policy 59 (David Deese ed., 1994); David W. Rohde, Partisan Leadership and Congressional Assertiveness in Foreign and Defense Policy, in The New Politics of American Foreign Policy 76, 100 n.1 (David Deese ed., 1994).

178 / Notes to Pages 5–19 15. Aaron Wildavsky, The Two Presidencies, in Perspectives on the Presidency 383 (Aaron Wildavsky ed., 1975). 16. Eric A. Posner & Adrian Vermeule, Terror in the Balance: Security, Liberty, and the Courts (2007). 17. Barry Friedman, The Will of the People: How Public Opinion Has Influenced the Supreme Court and Shaped the Meaning of the Constitution (2009). 18. Robert S. Erikson, Michael B. MacKuen & James A. Stimson, The Macro Polity (2002). 19. Lee Epstein, Daniel E. Ho, Gary King & Jeffrey A. Segal, The Supreme Court during Crisis: How War Affects Only Non-war Cases, 80 N.Y.U. L. Rev. 1 (2005); Richard Posner, Not a Suicide Attack (2006); Posner & Vermeule, supra note 16; Bruce Ackerman, Before the Next Attack: Preserving Civil Liberties in the Age of Terrorism (2006); The Constitution in Wartime (Mark Tushnet ed., 2005); William H. Rehnquist, All the Laws but One: Civil Liberties in Wartime (1998). 20. Tom S. Clark, Judicial Decision Making during Wartime, 3 J. Empirical Legal Stud. 397 (2006). 21. The empirical component of this study uses three databases. One was created by the author and is available at https://sites.google.com/site/taxationcourtdata/the-data/. The data is also accessible through http://www.law.northwestern.edu/faculty/profiles/ NancyStaudt (under Judicial Purse Power Data Sets). The other two are publicly available databases: the Harold J. Spaeth Supreme Court dataset, available at http:// supremecourtdatabase.org, and the Donald R. Songer, Ashlyn K. Kuersten, and Susan B. Haire Appeals Court database, http://www.cas.sc.edu/poli/juri/appct.htm. 22. 321 U.S. 414 (1944). 23. Id. at 461–62. 24. Edward S. Corwin, Total War and the Constitution 177–78 (1947). Foreign crises, of course, encompass shooting wars but also situations that have not officially been declared as such, including the conflicts in Korea, Vietnam, and the Gulf region. Congress has not declared war since World War II, and thus this study includes military events that have not involved congressional declarations of war—although the events have prompted Congress to issue resolutions supporting the president’s military endeavors on many occasions. 25. John J. Mearsheimer, The Tragedy of Great Power Politics (2001); Hans Morgenthau, Politics Among Nations: The Struggle for Power and Peace (1948); Kenneth N. Waltz, Theory of International Politics (1979). 26. Wildavsky, supra note 15. 27. William G. Howell & Jon C. Pevehouse, While Dangers Gather: Congressional Checks on Presidential War Powers (2007); Rohde, supra note 14, at 76; John T. Tierney, Congressional Activism in Foreign Policy: Its Varied Forms and Stimuli, in The New Politics of American Foreign Policy 102 (David Deese ed., 1994). 28. John E. Mueller, War, Presidents and Public Opinion (1973). 29. Bank, Stark & Thorndike, supra note 11, at xiv. Chap t e r o n e

1. 2.

Interview with Theodore Olson, former U.S. Solicitor General, in Chicago, Ill. (Oct. 23, 2009). Telephone interview with Edwin Meese, former U.S. Attorney General (Dec. 10, 2009).

Notes to Pages 21–28 / 179 3. 4. 5. 6. 7.

8.

9. 10.

11.

12. 13. 14. 15. 16. 17.

18. 19.

20. 21.

22. 23.

Sandra Day O’Connor, Public Trust as a Dimension of Equal Justice: Some Suggestions to Increase Public Trust, 36 Ct. Rev. 10, 13 (1999). Gregory A. Caldeira & James L. Gibson, The Etiology of Public Support for the Supreme Court, 36 Am. J. Pol. Sci. 635 (1992). 328 U.S. 680 (1946). 29 U.S.C. § 251(a)(8) (2006). Nancy C. Staudt, Rene Lindstadt & Jason O’Connor, Judicial Decisions as Legislation: Congressional Oversight of Supreme Court Tax Cases, 1954–2005, 82 N.Y.U. L. Rev. 1340 (2007). Cong. Budget Off., Balancing the Federal Budget and Limiting Federal Spending: Constitutional and Statutory Approaches (Sept. 1982), available at http://www .cbo.gov/ftpdocs/51xx/doc5125/doc28-entire.pdf. OfficeMax, Inc. v. United States, 428 F.3d 583 (6th Cir. 2005), reh’g denied, No. 044009, 2006 U.S. App. LEXIS 8294 (6th Cir. Mar. 30, 2006). Nat’l R.R. Passenger Corp. v. United States, 431 F.3d 374 (D.C. Cir. 2005); Hewlett Packard Co. v. United States, No. C-04-03832, 2005 U.S. Dist. LEXIS 19972 (N.D. Cal. 2005); Am. Online, Inc. v. United States, 64 Fed. Cl. 571 (2005); Honeywell Int’l, Inc. v. United States, 64 Fed. Cl. 188 (2005). Cong. Budget Off., The Budget and Economic Outlook: Fiscal Years 2003–2012 (Jan. 2002), available at http://www.cbo.gov/ftpdocs/32xx/doc3277/entirereport. pdf. NextWave Pers. Comm’ns, Inc. v. FCC, 254 F.3d 130 (D.C. Cir. 2001), aff’d, 537 U.S. 293 (2003). 518 U.S. 839 (1996); interview with Edward Kleinbard, former Chief of Staff of U.S. Congress’s Joint Committee on Taxation, in Washington, D.C. (Mar. 20, 2009). Cong. Budget Off., The Budget and Economic Outlook: An Update 12 (Aug. 1996), available at http://www.cbo.gov/ftpdocs/0xx/doc1/eb08-96.pdf. Congressional Budget Office (various cites), suggesting all major legislative reforms lead to litigation. 493 U.S. 521 (1990). Cong. Budget Off., Analysis of the President’s Budgetary Proposals for Fiscal Year 1992 (Mar. 1991), available at http://www.cbo.gov/ftpdocs/96xx/ doc9667/1991_03_analysisofpres.pdf. 430 U.S. 199 (1977). Cong. Budget Off., Background Paper, Financing Social Security: Issues for the Short and Long Term (July 1977), available at http://www.cbo.gov/ftpdocs/101xx/ doc10137/77doc565.pdf. Cong. Budget Off., Cost Estimate of S. 1145, Patent Reform Act of 2007 (Feb. 15, 2008), available at http://www.cbo.gov/ftpdocs/89xx/doc8981/S1145.pdf. Cong. Budget Off., Cost Estimate of H.R. 1815, National Defense Authorization Act for Fiscal Year 2006 (Jan. 18, 2008), available at http://www.cbo.gov/ftpdocs/ 70xx/doc7024/hr1815pgo.pdf. Cong. Budget Off., Cost Estimate of S. 113 (Sept. 12, 2005). One obvious question arises given the CBO’s estimates of court-induced expenditures: How does the government ultimately pay the costs associated with court rulings? As noted above in the context of SSI, often the president seeks additional legislative appropriations to enable agencies to pay for the costs brought about by the judicial hand. But often the costs are tied to damages associated with a government

180 / Notes to Pages 28–34

24. 25. 26. 27. 28.

29. 30. 31.

32. 33.

34. 35.

breach of contract or some other act that is not linked to the mission of a specific agency. Prior to 1956, private parties seeking monetary recoveries required specific congressional action in these contexts. After that time, however, Congress enacted a permanent, indefinite appropriation called the judgment fund. See U.S. Dep’t of Treas., The Judgment Fund: Statutory and Legal Overview (Sept. 2008), available at http://www.fms.treas.gov/judgefund/seminars/JF-Statutory-Legal-Overview.pdf. The fund provides a mechanism that allows prompt payouts, thereby reducing the assessment of interest against the United States that was compounded atop the recovery itself and accrued between the time when the entitlement emerged and the award was paid. The existence of the fund confirms that Congress recognizes the huge budgetary costs associated with judicial decision making. Legislators may prefer to appropriate government monies passing through the judgment fund to a range of other policies and programs, but court rulings require the money to be paid over to the prevailing litigants. J. Comm. on Taxation, The Telephone Excise Tax Repeal Act of 2005: Analysis of S1321 (June 28, 2006). 531 U.S. 206 (2001). J. Comm. on Taxation, General Explanation of Tax Legislation Enacted in 1998 (Nov. 1998), available at http://www.jct.gov/s-6-98.pdf. Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029. J. Comm. on Taxation, Estimated Revenue Effects of the Amendment in the Nature of a Substitute to H.R. 4872, the “Reconciliation Act of 2010,” as Amended, in Combination with the Revenue Effects of H.R. 3590, the “Patient Protection and Affordable Care Act (PPACA)” as Passed by the Senate and Scheduled for Consideration by the House Comm. on Rules on March 20, 2010 (Mar. 20, 2010), available at http://www.jct.gov/publications.html?func=startdown&id=3672. About the Office, U.S. Dep’t of Just., http://www.justice.gov/ag/about-oag.html (last visited July 25, 2010). U.S. Dep’t of Just., 1990 Annual Report of the Attorney General of the United States, at 111 (1990). U.S. Dep’t of Just., FY 2002 Performance and Accountability Report, at 122 (Mar. 2003), available at http://www.justice.gov/archive/ag/annualreports/pr2002/ TableofContents.htm. U.S. Dep’t of Just., FY 2003 Performance and Accountability Report, at I-25, available at http://www.justice.gov/archive/ag/annualreports/ar2003/index.htm. U.S. Dep’t of Just., FY 2008 Performance and Accountability Report, at II-21 to II-22 (Nov. 2008), available at http://www.justice.gov/ag/annualreports/pr2008/ 2008par.pdf. U.S. Dep’t of Just., 1998 Annual Accountability Report U.S. Dep’t of Just., at 72, available at http://www.justice.gov/archive/ag/annualreports/ar98/ar98./pdf. The reports do not directly indicate the amounts awarded through court judgments but rather the amounts awarded to the government through court judgments along with the percentage of claimed monies won by the taxpayer. Together this information allows for a calculation of the total amounts awarded by court decisions. In 1961, for example, the government won $705 million in court judgments, and the taxpayers obtained 26 percent of the amounts they sought in court—indicating that the government obtained the remaining 74 percent. This means the total awarded by the courts was roughly $953 million ($705/.74).

Notes to Pages 36–51 / 181 36. U.S. Dep’t of Just., Attorney General Report for Fiscal Year 1941, at 68 (Jan. 1942). 37. U.S. Dep’t of Just., Attorney General Report for Fiscal Year 1971, at 135. 38. 130 F.3d 501 (1st Cir. 1997). 39. U.S. Dep’t of Just., Fiscal Year 1998 Annual Accountability Report, available at http://www.justice.gov/archive/ag/annualreports/ar98/ar98.pdf. 40. U.S. Dep’t of Just., Attorney General Report for Fiscal Year 1984, at 128. 41. U.S. Dep’t of Just., Attorney General Report for Fiscal Year 1976, at 89. 42. 332 U.S. 301 (1947). 43. Id. at 314–15 (emphasis added). 44. Helvering v. Stockholms Enskilda Bank, 293 U.S. 84, 89 (1934). 45. Angelus Milling Co. v. Comm’r, 325 U.S. 293, 297 (1945). 46. Helvering v. Stuart, 317 U.S. 154, 167 (1942). 47. Am. Auto. Ass’n v. United States, 367 U.S. 687, 695 (1961). 48. 424 U.S. 319 (1976). 49. Id. at 347. 50. FDIC v. Meyer, 510 U.S. 471, 486 (1994). 51. Unexcelled Chem. Corp. v. United States, 345 U.S. 59, 62 n.1 (1953). 52. 546 U.S. 142 (2005). 53. Am. Mut. Life Ins. Co. v. United States, 516 U.S. 930 (1995) (No. 95-105). 54. 381 U.S. 233 (1965). 55. Government’s Petition of Certiorari, United States v. Atlas Life Ins. Co., 379 U.S. 988 (1965) (No. 489). 56. 255 F.3d 1357 (Fed. Cir. 2001). 57. Appellee’s Petition for Rehearing En Banc at 5, Rite Aid Corp. v. United States, 2002 U.S. Claims LEXIS 223 (Fed. Cl. 2002) (No. 00-5098). 58. Reply Brief for the Petitioner at 4, Bob Jones Univ. v. United States, 461 U.S. 574 (1983) (No. 81-3). 59. Reply Brief for Petitioner at 17, John R. Sand & Gravel Co. v. United States, 522 U.S. 130 (2008) (No. 06-1164). 60. Reply Brief for Petitioner at 16, Lockhart v. United States, 546 U.S. 142 (2005) (No. 04-881). 61. Id. 62. Brief Amici Curiae of Allmerica Financial Corp., et al. at 10, Am. Mut. Life Ins. v. United States, 516 U.S. 930 (1995) (No. 95-105). 63. See sources cited in Nancy Staudt, Agenda Setting in Supreme Court Tax Cases: Lessons from the Blackmun Papers, 52 Buff. L. Rev. 889, 911–13 (2005). 64. See id. 65. 397 U.S. 254 (1970). 66. Wheeler v. Montgomery, 397 U.S. 280, 282 (1970) (Burger, C.J., dissenting) (dissent also appears in Goldberg v. Kelly). 67. Mathews, 424 U.S. at 348. 68. Brief for Center of the Administration of Criminal Law as Amicus Curiae Supporting Petitioner, Boyle v. United States, 129 S. Ct. 2337 (2009) (No. 07-1309). 69. Telephone interview with Edwin Meese, former U.S. Attorney General (Dec. 10, 2009). Chap t e r t w o

1.

A large literature exists exploring the definition of foreign crisis. See Michael Brecher & Jonathan Wilkenfeld, A Study of Crisis (2000); James M. Lindsay & Randall B.

182 / Notes to Pages 51–62

2. 3. 4. 5. 6.

7.

8.

9.

10. 11. 12. 13.

14.

15.

16. 17. 18.

Ripley, How Congress Influences Foreign and Defense Policy, Bull. Am. Acad. Arts & Sci., Mar. 1994, at 7. Robert D. Hormats, The Price of Liberty: Paying for America’s Wars xiv (2007). Christopher Layne, The Peace of Illusions: American Grand Strategy from 1940 to the Present 4 (2006). E.g., Hans J. Morgenthau, Politics Among Nations: The Struggle for Power and Peace (1948); Kenneth N. Waltz, Theory of International Politics (1979). John J. Mearsheimer, The Tragedy of Great Power Politics 2 (2001). Eric A. Posner & Adrian Vermeule, Terror in the Balance: Security, Liberty, and the Courts (2007); W. Kip Viscusi & Richard J. Zeckhauser, Recollection Bias and the Combat of Terrorism, 34 J. Legal Stud. 27 (2005). Peter Raven-Hansen & William C. Banks, Pulling the Purse Strings of the Commander in Chief, 80 Va. L. Rev. 833 (1994); Charles Bennett et al., The President’s Power as Commander-in-Chief versus Congress’s War Power and Appropriations Power, 43 U. Miami L. Rev. 17 (1988); John C. Yoo, War and the Constitutional Text, 69 Chi. L. Rev. 1639 (2002). William G. Howell & Jon C. Pevehouse, While Dangers Gather: Congressional Checks on Presidential War Powers 10 (2007); Rui J. P. de Figueiredo Jr., Budget Institutions and Political Insulation: Why States Adopt the Item Veto, 87 J. Pub. Econ. 2677 (2003); Lindsay & Ripley, supra note 1. Alberto Alesina & Guido Tabellini, A Positive Theory of Fiscal Deficits and Government Debt, 57 Rev. Econ. Stud. 403 (1990); Torsten Persson & Lars E.O. Svensson, Why a Stubborn Conservative Would Run a Deficit: Policy with Time-Inconsistent Preferences, 104 Q.J. Econ. 325 (1989). I owe thanks to the participants at the research roundtable held at Northwestern Law School, and especially to Eric Posner, for these ideas. David Laibson, A Cue-Theory of Consumption, 116 Q.J. Econ. 81 (2001). David Suggs & Bruce Dennis Sales, Using Communication Cues to Evaluate Prospective Jurors during the Voir Dire, 20 Ariz. L. Rev. 629 (1978). Larry M. Bartels, Uninformed Votes: Information Effects in Presidential Elections, 40 Am. J. Pol. Sci. 194 (1996); Russell J. Dalton, Paul A. Beck & Robert Huckfeldt, Partisan Cues and the Media: Information Flows in the 1992 Presidential Election, 92 Am. Pol. Sci Rev. 111 (1998); Elizabeth Garrett, Voting with Cues, 37 U. Rich. L. Rev. 1011 (2002); Michael S. Kang, Democratizing Direct Democracy: Restoring Voter Competence through Heuristic Cues and “Disclosure Plus,” 50 UCLA L. Rev. 1141 (2003); Monika L. McDermott, Voting Cues in Low-Information Elections: Candidate Gender as a Social Information Variable in Contemporary United States Elections, 41 Am. J. Pol. Sci. 270 (1997); Herbert F. Weisberg, Evaluating Theories of Congressional Roll-Call Voting, 22 Am. J. Pol. Sci. 554 (1978). Joseph Tanenhaus et al., The Supreme Court’s Certiorari Jurisdiction: Cue Theory, in Judicial Decision-Making (Glendon Schubert ed., 1963); S. Sidney Ulmer, William Hintze & Louis C. Kirklosky, The Decision to Grant or Deny Certiorari: Further Consideration of Cue Theory, 6 Law & Soc’y Rev. 637 (1972). Rex E. Lee, Lawyering for the Government: Politics, Polemics & Principle, 47 Ohio St. L.J. 595 (1986); Kevin T. McGuire, Repeat Players in the Supreme Court: The Role of Experienced Lawyers in Litigation Success, 57 J. Pol. 187 (1995). Fed. R. Evid. art. II. 55 F. Supp. 234 (D. Mo. 1944). United States v. Hamburg-Amerikanische Packetfahrt-Actien Gesellschaft, 239 U.S. 466 (1916).

Notes to Pages 62–69 / 183 19. Id. at 475. 20. A large and important extant literature explores when and why national decision makers choose to act or remain silent on foreign policy issues. Both normative and positive scholars, such as Matthew Baum, John Hart Ely, James Fearon, Benjamin Fordham, Jide Nzelibe, and John Yoo, have noted that Congress and the president do or should pursue their wartime activities in a manner that advances their own and their constituents’ preferences. The information theory does not seek to engage this literature, but investigates how and why rational courts will undertake to affect the size of the public fisc and thus defense levels, given the combined actions of the elected branches of government. Matthew Baum, Soft News Goes to War: Public Opinion and American Foreign Policy in the New Media Age (2003); John Hart Ely, War and Responsibility (1993); James D. Fearon, Domestic Political Audiences and the Escalation of International Disputes, 88 Am. Pol. Sci. Rev. 577 (1994); Benjamin Fordham, The Politics of Threat Perception and the Use of Force: A Political Economy Model of U.S. Uses of Force 1949–1994, 42 Int’l Stud. Q. 567 (1998); Jide Nzelibe, A Positive Theory of the War-Powers Constitution, 91 Iowa L. Rev. 993 (2006); John Yoo, The Continuation of Politics by Other Means: The Original Understanding of War Powers, 84 Cal. L. Rev. 167 (1996). 21. When Congress favors increased preparation and readiness but the president opposes such action, it is possible that Congress is responding to the demands of the military industrial complex rather than legitimate foreign policy issues. Devoting unnecessary resources to artificial foreign threats is a concern that various policymakers have raised, including President Eisenhower, who suggested in 1961 that Congress may be too responsive to the defense industry’s lobbying efforts, needlessly spending federal revenue in the process. Dwight D. Eisenhower, Military Industrial Complex Speech, Public Papers of the Presidents, Dwight D. Eisenhower, 1960, at 1035–40, available at http://www.h-net.org/~hst306/documents/indust.html. These are actions that judges may or may not support, but they are not ones that the information theory suggests will spark a reaction. The theory argues that judges will use their powers to advance the nation’s safety and security interests, not promote good governance in the elected branches generally. 22. Steven A. Bank, Kirk J. Stark & Joseph J. Thorndike, War and Taxes 53–54 (2008). 23. William G. Howell & Jon C. Pevehouse, While Dangers Gather: Congressional Checks on Presidential War Powers 53–113 (2007). 24. Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government 123–59, 196–236 (1987). 25. George Bush & Brent Scowcroft, A World Transformed (1998); Dwight D. Eisenhower, Mandate for Change 1953–1956 (1963); Jeffrey W. Helsing, Johnson’s War/Johnson’s Great Society: The Guns and Butter Trap (2000); Michael J. Hogan, A Cross of Iron: Harry S Truman and the Origins of the National Security State, 1945–1954 (1998). 26. Mark E. Brandon, War and the American Constitutional Order, in The Constitution in Wartime 11 (Mark Tushnet ed., 2005). 27. Telephone interview with Edwin Meese, former U.S. Attorney General (Dec. 10, 2009). 28. Barry Friedman, however, has recently made a powerful case that the Court must attend to popular opinion to some degree to maintain its legitimacy. Barry Friedman, The Will of the People: How Public Opinion Has Influenced the Supreme Court and Shaped the Meaning of the Constitution (2009).

184 / Notes to Pages 70–87 29. 343 U.S. 579 (1952). 30. Id. at 637. 31. In his investigation of the Bush administration’s legal performance during the war on terror, the legal and constitutional scholar John McGinnis argues the president made a serious strategic error when he failed to obtain Congress’s endorsement of his wartime policies. First, McGinnis notes that, rightly or wrongly, federal courts seem to believe that the executive does not have the appropriate incentives to make the necessary trade-offs between defense and other goods, and for this reason judges give “substantial deference to Congress’s weighing of the costs and benefits of various [wartime] procedures.” Second, “as a matter of realpolitik the Court is much more reluctant to disturb the judgment endorsed by Congress as well as the president. Such action would fly much more clearly in the face of popular will.” In short, the information theory of crisis jurisprudence, like McGinnis and Justice Jackson, accept as a positive matter that cues—especially those from Congress—play an important role in the judicial decision-making process when courts are faced with the choice of supporting or undermining military policies. The information theory, in short, accords to a large extent with the stated views of scholars and members of the judiciary. John McGinnis, Executive Power in the War on Terror, 147 Pol’y Rev. 63 (2008). Chap t e r t h r e e

1.

Telephone interview with Edwin Meese, former U.S. Attorney General (Dec. 10, 2009). 2. The Appeals Court Database, http://www.cas.sc.edu/poli/juri/appct.htm. It does not include information on certiorari petitions but offers a random sample of tax cases between 1925–2002. 3. The datasets used in this study were collected by the author and various other scholars, including Harold J. Spaeth and Donald R. Songer, Ashlyn K. Kuersten, and Susan B. Haire. The author’s data is available at https://sites.google.com/site/taxation courtdata/the-data/; the Supreme Court Database is available at http://supreme ­courtdatabase.org; and the Appeals Court Database is available at http://www.cas .sc.edu/poli/juri/appct.htm. 4. Tom S. Clark, Judicial Decision Making During Wartime, 3 J. Empirical Legal Stud. 397 (2006); Lee Epstein, Daniel E. Ho, Gary King & Jeffrey A. Segal, The Supreme Court during Crisis: How War Affects Only Non-war Cases, 80 N.Y.U. L. Rev. 1 (2005). 5. Steven A. Bank, Kirk J. Stark & Joseph J. Thorndike, War and Taxes (2008). 6. The 1964 Gulf of Tonkin resolution is similar to the congressional declaration issued in 1955, the Formosa resolution, supporting President Eisenhower’s use of force to deter an invasion of Taiwan by the Republic of China. 7. Robert D. Hormats, The Price of Liberty: Paying for America’s Wars from the Revolution to the War on Terror (2007). 8. Bank, Stark & Thorndike, supra note 5. 9. See figure I.1 in the introduction. 10. Nancy C. Staudt, Lee Epstein & Peter J. Wiedenbeck, The Ideological Component of Judging in the Taxation Context, 84 Wash. U. L. Rev. 1797 (2006). 11. See M. S. Cepeda, Ray Boston, John T. Farrar & Brian L. Strom, Comparison of Logistic Regression Versus Propensity Score When the Number of Events Are Low and There Are Multiple Confounders, 158 Am. J. Epidemiology 280 (2003); Ralph B. D’Agostino Jr., Propensity Score Methods for Bias Reduction in the Comparison of Treatment to Nonran-

Notes to Pages 88–114 / 185

12. 13. 14. 15.

16. 17. 18. 19. 20. 21.

domized Control Groups, 17 Stat. Med. 2265 (1998); Stefano M. Iacus, Gary King & Giuseppe Porro, Causal Inference without Balance Checking: Coarsened Exacting Matching, 30 Stata J. 524 (2009) (open source software available at http://gking.harvard .edu/cem/); Paul R. Rosenbaum & Donald B. Rubin, Reducing Bias in Observational Studies Using Subclassification on the Propensity Score, 79 J. Am. Stat. Ass’n 516 (1984); Donald B. Rubin, Estimating Causal Effects from Large Datasets Using Propensity Scores, 127 Annals Internal Med. 757 (1997). U.S. Dep’t of Just., Annual Report of the Attorney General of the United States Report: Fiscal Years 1941–1942, at 1, 6. Brief for Respondent at 51, Lynch v. Alworth-Stephens Co., 294 F. 190 (8th Cir. 1924) (No. 6219) (emphasis added). U.S. Dep’t of Just., Annual Report of the Attorney General of the United States Report: Fiscal Years 1943–1946, at 53. Columns 3 and 4 indicate a 1 and 5 percent increase in the probability of a progovernment vote for every 1 percent increase in defense expenditures (measured as a percent of the federal budget). Thus, a 17 percent increase in defense spending leads to a 17 to 85 percent increase in the likelihood of a pro-government vote. See discussion in chapter 1. Clark, supra note 4; Epstein, Ho, King & Segal, supra note 4. Supreme Court Database, supra note 3. Phone interview with Edwin Meese, former U.S. Attorney General (Dec. 10, 2009). Geoffrey R. Stone, Perilous Times: Free Speech in Wartime from the Sedition Act of 1798 to the War on Terrorism 4 (2004). Nancy Staudt & Yilei He, The Macroeconomic Court: Rhetoric and Implications of New Deal Decision-Making, 15 Nw. J. L. & Soc. Pol’y 87 (2010). Chap t e r f o u r

1. 2. 3. 4. 5.

6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

Ernest A. Young & Erin C. Blondel, Does the Supreme Court Follow the Economic Returns? A Response to a Macrotheory of the Court, 58 Duke L.J. 1759 (2009). 184 U.S. 608 (1901). Id. at 620. Loan Ass’n v. Topeka, 87 U.S. 655, 663 (1875) (determining the tax was not for such purposes and thus was not constitutional). Steven A. Bank, Kirk J. Stark & Joseph J. Thorndike, War and Taxes (2008); John Morton Blum, From the Morgenthau Diaries: Year of War 1941–1945 (1959); Robert Higgs, Crisis and Leviathan: Critical Episodes in the Growth of American Government (1987). 256 U.S. 377 (1921). Id. at 387. Id. at 386–87. While the outcome was unanimous, Justice Harlan concurred, without opinion, in the result. Id. at 395. 352 U.S. 306 (1957). Id. While the outcome was unanimous, Justice Harlan concurred, arguing the existing legal authority barred the action altogether. Id. at 308. Id. at 310. 348 U.S. 254 (1955). Id. at 261–62. Justices Reed and Douglas dissented without opinion. 334 U.S. 249 (1948). Id. at 251–52, 256.

186 / Notes to Pages 114–121 16. 322 U.S. 174 (1944). Justices Black and Douglas concurred in the result, without opinion. 17. Id. at 190. 18. 352 U.S. 202 (1957). Justices Frankfurter, Burton, and Harlan dissented from the majority opinion on the grounds that the government had already provided its military servicemen with cheap life insurance options and the law in no way mandated additional insurance upon their return from abroad. Also, in United States v. Interstate Commerce Commission, 337 U.S. 426 (1949), the Court considered railroad charges imposed on shipping services to government-owned piers, which the Interstate Commerce Commission had upheld. A lower court found the issue was nonjusticiable, but a unanimous Supreme Court reversed, mandating a hearing on the merits and thereby giving the government a chance to eliminate unwanted wartime costs. 19. 352 U.S. at 209 & n.16. 20. 344 U.S. 149 (1952). 21. Id. at 151, 153. 22. Id. at 154. 23. Lichter v. United States, 334 U.S. 742, 758 n.5 (1948) (quoting extensively from President Roosevelt’s Message to Congress, 88 Cong. Rec. 32, 33–34 (1942)). 24. Putnam v. Comm’r, 352 U.S. 82, 93 n.16 (1956) (citing Hearings before H. Comm. on Ways & Means on Revenue Revision of 1942, 77th Cong. 1 (1942)). 25. President Roosevelt, State of the Union Message to Congress (Jan. 11, 1944), available at http://www.fdrlibrary.marist.edu/archives/address_text.html. 26. 315 U.S. 289 (1942). 27. Id. at 305. 28. 334 U.S. 742 (1948). 29. Id. at 754. 30. Brief for Appellant at 40, Henkels v. Sutherland, 271 U.S. 298 (1926) (No. 318). 31. Id. 32. Brief on Behalf of Appellant at 77, United States v. Chem. Found., 272 U.S. 1 (1925) (No. 127) (quoting 56 Cong. Rec. 3319 (1925)). 33. Petition for Writ of Certiorari to the Court of Claims at 10, United States v. Dickerson, 310 U.S. 554 (1940) (No. 705). 34. Brief for Petitioner at 22, Edwards v. Douglas, 269 U.S. 204 (1925) (No. 129). 35. Brief of George E. Holmes, Randolph Paul, and Donald Havens, as Amici Curiae at 2–3, Edwards v. Douglas, 269 U.S. 204 (1925) (No. 129). 36. Brief for the United States at 64, Fidelity & Deposit Co. of Md. v. United States, 259 U.S. 296 (1922) (No. 207). 37. 271 U.S. 1 (1926). 38. Brief for Respondent at 10, Keith v. Johnson, 271 U.S. 1 (1926) (No. 295). 39. Respondent’s Brief at 51, Lynch v. Alworth-Stephens Co., 267 U.S. 364 (1925) (No. 278). 40. 297 U.S. 288 (1936). 41. Id. at 327–38. 42. Clinton Rossiter, The Supreme Court and the Commander in Chief xii (1976); Michael S. Sherry, Preparing for the Next War: American Plans for Postwar Defense, 1941–45 (1977). 43. 367 U.S. 303 (1961). 44. Id. 45. Brief for Petitioner, Jarecki v. Searle, 367 U.S. 303 (1961) (No. 151).

Notes to Pages 121–135 / 187 46. 47. 48. 49. 50. 51. 52. 53. 54. 55.

56. 57. 58. 59. 60. 61. 62. 63. 64.

65. 66.

67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77.

347 U.S. 535 (1954). Id. at 540. Id. at 549. 343 U.S. 579 (1952). Id. at 589. Blum, supra note 6. 460 U.S. 190 (1983). 516 U.S. 417 (1996). Reply Brief of Petitioners, Hercules, Inc. v. United States, 516 U.S. 417 (1996) (No. 94-818). Berk v. Laird, 429 F.2d 302 (2d Cir. 1970); Holtzman v. Schlesinger, 361 F. Supp. 553 (E.D.N.Y.), rev’d, 484 F.2d 1307 (2d Cir.), stay upheld, 414 U.S. 1304 (1973); Orlando v. Laird, 317 F. Supp. 1013 (E.D.N.Y. 1970). 341 U.S. 948 (1951). Id. at 948; see also McArthur v. Clifford, 393 U.S. 1002 (1968). Id. Da Costa v. Laird, 405 U.S. 979, 979 (1972). 453 U.S. 654 (1981). Id. at 673. 493 U.S. 52 (1989). Appellees’ Motion to Dismiss or Affirm, United States v. Sperry Corp., 493 U.S. 52 (1989) (No. 88-952). Pub. L. No. 107-243, 116 Stat. 1498 (2002); The 9/11 Commission Report: Final Report of the National Commission on Terrorist Attacks upon the United States (2004), available at http://www.gpoaccess.gov/911/pdf/fullreport.pdf. 129 S. Ct. 2183 (2009). Id. at 2188 (citing Memorandum to the House of Representatives Returning without Approval the “National Defense Authorization Act for Fiscal Year 2008,” 43 Weekly Comp. Pres. Doc. 1641 (Dec. 28, 2007)). Appellee Brief, Iraq v. Beaty, 129 S. Ct. 2183 (2009) (Nos. 07-1090, 08-539). 129 S. Ct. at 2187. Id. at 2193–94. 128 S. Ct. 2783 (2008). Amicus Brief, District of Columbia v. Heller, 128 S. Ct. 2783 (2008). Id. 547 U.S. 47 (2006). Brief of Amicus Curiae the American Legion in Support of Petitioners at 27, Rumsfeld v. F. for Acad. & Institutional Rights, 547 U.S. 47 (2006) (No. 04-1152). 128 S. Ct. 2229 (2008). Id. at 2261. Id. at 2294. Chap t e r fiv e

1.

2. 3.

Andrew Abel, Ben Bernanke & Dean Croushore, Macroeconomics (2008); Raymond M. Duch & Randolph T. Stevenson, The Economic Vote: How Political and Economic Institutions Condition Election Results (2008). Abel, Bernanke & Croushore, supra note 1. The U.S. economy has grown tremendously over the course of the last century, but as the macroeconomists widely note, even prosperous economies are periodically

188 / Notes to Pages 136–143

4.

5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

15.

16.

17. 18. 19. 20. 21.

interrupted by episodes of declining production and income and rising unemployment. Sometimes these episodes are prolonged, severe, and harsh, and the downturn becomes a “depression,” but the downturns can also be relatively short and considerably less brutal, in which case the periods in which aggregate economic activity falls is a “contraction” or a “recession.” Irrespective of the nature and extent of the downturn, they are almost invariably followed by a resumption of economic growth. In the words of Abel et al., this repeated sequence of economic expansion giving way to temporary decline followed by recovery, is known as the “business cycle.” Abel, Bernanke & Croushore, supra note 1. Roger L. Faith, Donald R. Leavens & Robert D. Tollison, Antitrust Pork Barrel, 25 J.L. & Econ. 329 (1982); Barry R. Weingast, Kenneth A. Shepsle & Christopher Johnsen, The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics, 89 J. Pol. Econ. 642 (1981). Allan Drazen, Political Economy in Macroeconomics 444 (2000). Id. 284 U.S. 248 (1932). Id. at 260 (quoting Interstate Commerce Comm’n, 45th Annual Report (Dec. 1, 1931), H.R. Doc. No. 72-30, at 114 (1931)). 301 U.S. 292 (1937). Id. at 301. 301 U.S. 619 (1937). Id. at 641. Nancy Staudt & Yilei He, The Macroeconomic Court: Rhetoric and Implications of New Deal Decision-Making, 15 Nw. J.L. & Soc. Pol’y 87 (2010). Ray C. Fair, The Effect of Economic Events on Votes for President, 60 Rev. Econ. & Stat. 159 (1978); Michael S. Lewis-Beck & Tom W. Rice, Forecasting Elections (1992); Raymond M. Duch & Randolph T. Stevenson, The Economic Vote: How Political and Economic Institutions Condition Election Results (2008). See James E. Campbell, Editor’s Introduction: Forecasting the 2008 National Election, P.S.: Pol. Sci. & Pol., Oct. 2008; Robert S. Erikson & Christopher Wlezien, Leading Economic Indicators, the Polls, and the Presidential Vote, P.S.: Pol. Sci. & Pol., Oct. 2008; Helmut Norpath, On the Razor’s Edge: The Forecast of the Primary Model, P.S.: Pol. Sci. & Pol., Oct. 2008. An important component of the debate is whether voters simply punish and reward politicians for economic conditions or whether they seek to select the politicians that are most capable of producing positive economic outcomes. In either context, voters appear to adopt the belief that inept politicians should be punished and avoided and effective politicians should be rewarded and retained. For a thoughtful discussion of the extant literature, see Duch & Stevenson, supra note 14. The literature, however, does not assume voters are completely ignorant of economic matters—in fact, just the opposite. See id. The database, constructed by the author, is available at https://sites.google.com/site/ taxationcourtdata/the-data/. Abel, Bernanke & Croushore, supra note 1; Farrokh K. Landgana, Macroeconomic Policy: Demystifying Monetary and Fiscal Policy (2d ed. 2009). Steven A. Bank, Kirk J. Stark & Joseph J. Thorndike, War and Taxes (2008); John F. Witte, The Politics and Development of the Federal Income Tax (1985). William Edward Leuchtenburg, The Supreme Court Reborn: The Constitutional Revolution in the Age of Roosevelt (1995).

Notes to Pages 144–171 / 189 22. Abel, Bernanke & Croushore, supra note 1. 23. The economic data was obtained from the Federal Reserve Bank of St. Louis, Federal Reserve Economic Data (FRED), available at http://research.stlouisfed.org/fred2/. 24. Jack Johnston & John DiNardo, Econometric Methods (1997). 25. 290 U.S. 398 (1934). 26. Id. at 423 (quoting Blaisdell v. Home Building & Loan Ass’n, 249 N.W. 334, 340 (Minn. Ct. App. 1933) (Olsen, J., concurring)). 27. Id. at 471. 28. Andrew D. Martin, Congressional Decision Making and the Separation of Powers, 95 Am. Pol. Sci. Rev. 361 (2001). Conclusion

1. 2. 3. 4. 5.

6. 7. 8. 9.

10. 11. 12. 13. 14.

15. 16.

17.

Christopher Layne, The Peace of Illusions: American Grand Strategy from 1940 to the Present 15 (2006). Mark Souva & David Rohde, Elite Opinion Differences and Partisanship on Congressional Foreign Policy, 1975–1996, 60 Pol. Res. Q. 113 (2007). Eric A. Posner & Adrian Vermeule, Terror in the Balance: Security, Liberty, and the Courts (2007). Mark Tushnet, Introduction, in The Constitution in Wartime: Beyond Alarmism and Complacency 1 (Mark Tushnet ed., 2005). 323 U.S. 214 (1944) (case involving internment of persons of Japanese descent during World War II); 553 U.S. 723 (2008) (case involving habeas corpus rights of individuals held in detention during Iraq and Afghanistan Wars). See Nancy Staudt, Modeling Standing, 79 N.Y.U. L. Rev. 612 (2004) (investigated the legal and political models of decision making). Frank B. Cross, Decision making in the U.S. Courts of Appeals (2007). Jeffrey A. Segal & Harold J. Spaeth, The Supreme Court and the Attitudinal Model Revisited (2002). Lee Epstein & Jack Knight, The Choices Justices Make (1998); Stephanos Bibas, Emerson H. Tiller & Max M. Schanzenbach, Policing Politics at Sentencing, 103 Nw. L. Rev. 1371 (2009); Tonja Jacobi & Emerson H. Tiller, Legal Doctrine and Political Control, 23 J. L. Econ. & Org. 326 (2007); Stefanie Lindquist, Susan B. Haire & Donald R. Songer, Supreme Court Auditing of the US Courts of Appeals: An Organizational Perspective, 17 J. Pub Admin. Research & Theory 607 (2007). Eugenia Froedge Toma, Congressional Influence and the Supreme Court: The Budget as a Signaling Device, 20 J. Legal Stud. 131, 134 (1991). Id. I thank Bill Landes and Emerson Tiller for this insight. Stephen J. Choi, G. Mitu Gulati & Eric A. Posner, Are Judges Overpaid? A Skeptical Response to the Judicial Salary Debate, 1 J. Legal Analysis 47 (2009). Daniel Klerman, Jurisdictional Competition and the Evolution of Common Law, 74 U. Chi. L. Rev. 1179 (2007); James E. Pfander, Judicial Compensation and the Definition of Judicial Power in the Early Republic, 107 Mich. L. Rev. 1 (2008). Lee Anne Fennell, Death, Taxes, and Cognition, 81 N.C. L. Rev. 567 (2003). Francine Sanders Romero, The Supreme Court and the Protection of Minority Rights: An Empirical Examination of Racial Discrimination Cases, 34 Law & Soc’y Rev. 291 (2000). Alexander M. Bickel, The Least Dangerous Branch: The Supreme Court at the Bar of Politics (2d ed. 1986).

190 / Notes to Pages 171–174 18. Eric A. Posner & Adrian Vermeule, Terror in the Balance: Security, Liberty, and the Courts (2007); Richard A. Posner, Not a Suicide Pact: The Constitution in a Time of National Emergency (2006); William H. Rehnquist, All the Laws but One: Civil Liberties in Wartime (1998); John Yoo, The Powers of War and Peace: The Constitution and Foreign Affairs after 9/11 (2005); Charles Evan Hughes, War Powers under the Constitution, 42 A.B.A. Rep. 232, 247 (1917). 19. See Tushnet, supra note 4. 20. Toby J. Stern, Federal Judges and Fearing the “Floodgates of Litigation,” 6 U. Pa. J. Const. L. Rev. 377, 377 (2001); see also Richard A. Posner, The Federal Courts: Challenge and Reforms 315 (1999). 21. 129 S. Ct. 2252 (2009). 22. Id. at 2274. 23. Robin West, Narrative, Authority, and Law: Law, Meaning, and Violence (1993).

Case Index

Allen v. Grand Central Aircraft Co., 347 U.S. 535 (1954), 121, 122 American Mutual Life Insurance Co. v. United States, 519 U.S. 930 (1995) (No. 95-105), 41 Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), 22–23, 40 Ashwander v. Tennessee Valley Authority, 297 U.S. 288 (1936), 118 Atchison, Topeka & Santa Fe Railway Co. v. United States, 284 U.S. 248 (1932), 136–37

Gitlitz v. Commissioner, 531 U.S. 206 (2001), 29, 36, 44, 45–46, 48 Goldberg v. Kelly, 397 U.S. 254 (1970), 43

Boumediene v. Bush, 128 S. Ct. 2229 (2008), 128–29, 163 Boyle v. United States, 129 S. Ct. 2337 (2009) (No. 07-1309), 43

Jarecki v. Searle, 367 U.S. 303 (1961), 120, 122, 160, 163

Califano v. Goldfarb, 430 U.S. 199 (1977), 27–28 Caperton v. A. T. Massey Coal Co., 129 S. Ct. 2252 (2009), 174 Colonial American Life Insurance Co. v. Commissioner, 42 Commissioner v. Court Holding Co., 324 U.S. 331 (1945), 1, 2, 3 Commissioner v. Indianapolis Power & Light Co., 42 Dames & Moore v. Regan, 453 U.S. 654 (1981), 124–25 District of Columbia v. Heller, 128 S. Ct. 2783 (2008), 127–28

Helvering v. Davis, 301 U.S. 619 (1937), 137–38 Hercules, Inc. v. United States, 516 U.S. 417 (1996), 123 Holmes v. United States, 341 U.S. 948 (1951), 123–24 Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398 (1934), 152–53

Keith v. Johnson, 271 U.S. 1 (1926), 117 Kennedy v. Silas Mason Co., 334 U.S. 249 (1948), 113–14 Korematsu v. United States, 323 U.S. 214 (1944), 163 LaBelle Iron Works v. United States, 256 U.S. 377 (1921), 112 Lenroot v. Interstate Bakeries Corp., 55 F. Supp. 234 (D. Mo. 1944), 62 Lockhart v. United States, 546 U.S. 142 (2005), 40–41 Lockheed Aircraft Corp. v. United States, 460 U.S. 190 (1983), 122–23 Mathews v. Eldridge, 424 U.S. 319 (1976), 39, 43

192 / Case Index NextWave Pers. Comm’ns, Inc. v. FCC, 254 F.3d 130 (D.C. Cir. 2001), aff ’d, 537 U.S. 293 (2003), 26 OfficeMax, Inc. v. United States, 428 F.3d 583 (6th Cir. 2005), reh’g denied, No. 04-4009, 2006 U.S. App. LEXIS 8294 (6th Cir. Mar. 30, 2006), 24, 44 Ohio Bell Telephone Co. v. Public Utilities Commission of Ohio, 301 U.S. 292 (1937), 137 Patton v. Brady, 184 U.S. 608 (1901), 110 Republic of Iraq v. Beaty, 129 S. Ct. 2183 (2009), 126–27 Rite Aid Corp. v. United States, 255 F.3d 1357 (Fed. Cir. 2001), 41 Rumsfeld v. Forum for Academic & Institutional Rights, 547 U.S. 47 (2006), 128 Sullivan v. Zebley, 493 U.S. 521 (1990), 27, 31, 33 United States v. Allen-Bradley Co., 352 U.S. 306 (1957), 112–13 United States v. Atlas Life Insurance Co., 381 U.S. 233 (1965), 41 United States v. Bethlehem Steel Corp., 315 U.S. 289 (1942), 116 United States v. Caltex, 344 U.S. 149 (1952), 114–15

United States v. Centennial Savings Bank, 42 United States v. County of Alleghany, 322 U.S. 174 (1944), 114 United States v. Cumberland Public Service Co., 338 U.S. 451 (1950), 1–2, 3 United States v. Dickerson, 310 U.S. 554 (1940) (No. 705), 116–17 United States v. Goodyear, 42 United States v. Hamburg-Amerikanische Packetfahrt-Actien Gesellschaft, 239 U.S. 466 (1916), 62 United States v. Hill, 42 United States v. Koppers Co., 348 U.S. 254 (1955), 113 United States v. Lichter, 334 U.S. 742 (1948), 116, 160, 163 United States v. Plesha, 352 U.S. 202 (1957), 114 United States v. Sperry Corp., 493 U.S. 52 (1989), 125–26 United States v. Standard Oil Co., 332 U.S. 301 (1947), 37–39 United States v. Winstar Corp., 518 U.S. 839 (1996), 26–27 Unum Corp. v. United States, 130 F.3d 501 (1st Cir. 1987), 36 Yakus v. United States, 321 U.S. 414 (1944), 10 Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), 70, 71, 121–22, 124, 160, 163, 166

s ubj e ct I n d e x

Abel, Andrew, 135, 188n3 Ackerman, Bruce, 7 Afghanistan War. See Iraq and Afghanistan Wars Agent Orange lawsuits, 123 Alesina, Alberto, 54 amicus curiae briefs, 39, 127–28 antitrust lawsuits, 32, 33, 62, 132 appellate courts, 8; and defense spending, 98; and foreign policy crises, 76, 80, 98–101; and information theory of crisis jurisprudence, 16, 79–80; judges with prior military experience, 86; political preferences of, 86–87; and Supreme Court, 98, 99; tax opinions, 48, 78–86; upper and lower bounds of judicial power, 46; in wartime, 102 Article I, 19, 20, 22; Section 8, 132 Article II, 63–64; Section 3, 132 Article III, 19, 23, 37, 51, 59, 131, 132, 154, 157, 175 Ashcroft, John, 31–32 attorney general, 36; reports on taxation, 44–45; role of, 31–32 Bank, Steven, 12, 65 bank bailouts, 26–27 banking regulations, 3 bankruptcy, and economic policy, 132 Baum, Matthew, 183n20 Beck, James, 117 Bernanke, Ben, 135 Bickel, Alexander, 171 Black, Hugo, 1, 121–22 Brandon, Mark, 66–67

Brennan, William J., 123–24 Brewer, David Josiah, 110–11 Breyer, Stephen, 123 budget theory, 53–57 Burton, Harold Hitz, 116, 121 Bush, George H. W., 81–82, 120, 184n31 Bush, George W., 82, 126 Butler, Pierce, 153 Caldeira, Gregory, 21 Carter, Jimmy, 31, 125 certiorari worthy cases, 87, 89; tax cases, 78; trustworthy cues identifying, 60 child labor laws, 62 child support, court-ordered, 28 Choi, Stephen, 169 civil libertarian view of judicial decision making, 162–63 civil litigation, 32, 33–34, 49, 88–89 civil rights and liberties, 7, 8, 32, 33, 75, 162–63, 171, 172; and information theory, 104–7 Claims and Judgments Trust fund, 28 Clark, Tom, 102 Clinton, Bill, 27, 31, 33 cold war era: defense spending during, 84–85, 120; information theory of crisis jurisprudence, 119–26; judicial strategies during, 76; military action during, 16; Supreme Court litigation during, 93, 96, 97 Congress: Article II powers, 63–64; budgetary powers of, 19–20; economic policymaking, 132–33; and foreign policy crises, 126, 159, 160; and information

194 / Subject Index Congress (cont.) theory of crisis jurisprudence, 9, 15; Joint Committee on Taxation, 28–30, 44; judicial deference to, 5, 69, 75, 76, 162, 163, 169; and judicial power of the purse, 19–20, 22–30, 44; during Korean War, 1–2; political preferences of, 86; and presidential war-making powers, 54; resource constraints, 55–57; taxing and spending powers of, 19, 20, 22, 54; tax policies of, 142–54; during wartime, 1–2, 63, 64–65, 68; wartime declarations, 119, 178n24; wartime financial powers, 121–22; wartime revenue bills, 120 Congressional Budget Office, 23–28, 44, 179n23; Budget and Economic Outlook Reports, 24, 26, 27 conscription into military service, 4, 83 contract litigation, 26–27, 32, 49, 75, 118, 179n23; and information theory, 101, 102–4; and legal model of judicial decision making, 166 Corwin, Edward, 10–11 Court of Claims, 117–18 crisis jurisprudence. See information theory of crisis jurisprudence Cross, Frank, 165 Croushore, Dean, 135 declaration of war, 4, 63–64, 76, 83, 97, 111, 119, 178n24 defense industry lobbying, 183n21 Defense Production Act of 1950, 121, 123 defense spending, 2, 12–15, 51, 83–84, 115, 117, 126; and appellate court cases, 98; in cold war era, 76, 120; and court-ordered child support, 28; and foreign policy crises, 57–59, 84, 106–7; and GDP, 13–14, 48, 92; during Iraq/Afghanistan Wars, 126–27; and Supreme Court cases, 91–92; tax award amounts compared to, 34–36, 46–48; taxes funding, 24–26, 63–65, 64–65, 68; during War on Terror, 126–29 deferential view of judicial decision making, 5, 69, 75, 76, 162, 163, 169 de Figueiredo, Rui, 54 Department of Defense, 84, 159; employment decisions, 65–66

Department of Justice, 75; annual reports, 31–34, 44–45, 88–89; civil litigation, 32–34; and judicial power of the purse, 20, 30 Department of Treasury: Judgment Fund, 180n23 deployment of troops, 4, 5, 9–10, 12, 64, 66, 92, 93, 119–20, 126, 157; army re­ enlistment bonuses, 116–17; during cold war era, 16; costs of, 12–15; president ordering, 62–63, 64–65; and safety and security, 6 depression. See economic crises district courts, 48, 52; upper and lower bounds of judicial power, 46 domestic crises, 14, 15; foreign policy crises compared to, 133; information theory of crisis jurisprudence, 131–55 Douglas, William O., 123–24 Duch, Raymond, 139 economic crises, 10, 16–17, 121; business cycles, 144, 145, 146, 148, 152, 188n3; competent decision making, 133–34, 136–37, 138, 140–41; congressional tax policies, 142–54; consumer sentiment, 145, 148, 149, 151; depressions, 143, 144, 145–46, 148, 149, 152, 153–54, 188n3; empirical findings, 138–39, 143–54; gross domestic product, 144, 145; industrial production, 144–45, 146, 148, 149, 152; information theory of crisis jurisprudence, 131–55; national income, 145; and political gain, 136; recessions, 142, 143, 144, 188n3; typical and atypical periods, 135–36, 143, 144, 148, 151, 153; unemployment, 145; voting behavior, 139–42, 188n16; and World War II, 146 economic model of judicial decision making, 169–70 Eisenhower, Dwight David, 183n21 Ely, John Hart, 183n20 empirical findings, 16, 72–73, 75, 76, 109, 178n21; and appellate court cases, 98– 101; economic crises, 138–39, 143–54; information theory of crisis jurisprudence, 77–86, 109–10, 138–39; of judicial power of the purse, 21–22; robustness testing, 94–96; and Supreme

Subject Index / 195 Court cases, 90–98; in taxation disputes, 90–101 environmental funds, 31 environmental litigation, 32, 34–36, 49, 50 Epstein, Lee, 7, 101–2, 167 Equal Protection Clause: and Social Security laws, 27–28 Erikson, Robert, 7 estate tax, 65 Etzel, John, 37–38 evidence, rules of, 61–62 excess profits taxes, 3, 112, 120–21 excise taxes, 24, 28–29, 110–11, 117 executive branch. See president/executive branch Fair, Ray, 139 Fair Labor Standards Act, 22–23, 40, 113–14 Fearon, James, 183n20 federal appellate courts. See appellate courts Federal Communications Commission, 26 federal judges. See appellate courts; Supreme Court Federal Rules of Evidence, 61–62 Federal Tort Claims Act, 122–23 Fennell, Lee Anne, 170 Fifth Amendment challenges, 112 fiscal cases and controversies, 5, 19, 20, 34–36, 40–43. See also tax litigation Fordham, Benjamin, 183n20 foreign policy crises, 7, 51, 83, 134–35, 172, 183n20; and appellate courts, 76, 80, 98–101; and civil libertarian view of judicial decision making, 163; and Congress, 126; costs of, 12–15; cues indicating, 4–5, 60–70, 76, 80–81, 97, 166, 184n31; and defense spending, 57–59, 84, 106–7; defined, 4; disagreement between branches, 5; domestic crises compared to, 133; and information theory of crisis jurisprudence, 9– 15, 15, 57–59; judicial deference to legislative actions, 5; judicial notice of, 62–63, 71–72, 112–13, 118–19; and judicial power of the purse, 4–5, 6; and legal model of judicial decision making,

165–66; and the Supreme Court, 90–98; and tax litigation, 87–89, 112, 114 Friedman, Barry, 7, 183n28 Frug, Gerald, 3 gaming sites, Indian, 28 Gibson, James, 21 gross domestic product, 20, 45–46, 47, 144; defense spending percentage, 13–14, 48, 92 Guantanamo Bay prisoners, habeas corpus rights of, 128–29, 172 Gulati, Mitu, 169 Gulf of Tonkin Resolution, 13–14, 68, 81, 123–24 Gulf Wars, 83–84, 135; defense spending, 13, 81–82, 85–86; revenue measures following, 82; and Supreme Court cases, 91, 93, 94, 97, 102, 104, 106; troop deployments, 119–20 habeas corpus rights of Guantanamo Bay prisoners, 128–29, 172 Haire, Susan, 78 Hansen-Ravenswood, Peter, 54 Harlan, John M., 123–24 Heckman, James, 89 Higgs, Robert, 65–66 Ho, Daniel, 7, 101–2 Howell, William, 11, 54, 65, 159, 160–61 Hughes, Charles Evans, 118, 152–53, 171 Hussein, Saddam, 127 income surtax, 65 Indian gaming sites, 28 individual rights and liberties. See civil rights and liberties Indonesia, military deployments to, 119, 122 inflation. See economic crises information theory of crisis jurisprudence, 4, 5–6, 8, 15, 52–60, 118, 157, 183n20; and appellate courts, 79–80, 100–101; and civil rights and liberties disputes, 104–7, 162–63; during cold war era, 119–26; and contract litigation, 101, 102–4; cue-triggered responses, 4–5, 60–61, 69, 76, 80–81, 85–86, 97, 133–34; and deferential view, 162, 163; and economic policymaking, 131–55;

196 / Subject Index information theory of crisis jurisprudence (cont.) and economic voting behavior, 139–42; empirical findings, 16, 77–86, 90–101, 109–10, 138–39, 143–54; and foreign policy crises, 9–15, 57–59; and international relations theory, 157, 158–61; and legal model, 165–66; and political model of judicial decision making, 166–68; and political preferences, 94; qualitative evidence, 129–30; robustness testing, 94–96; safety and security concerns, 6, 60–71; and Supreme Court cases, 79–80, 90–98, 100–101; and tort actions, 101, 102–4 international relations theory, 11, 157 internment of Japanese-Americans, 172 Iranian hostage crisis, 11, 124–25 Iraq and Afghanistan Wars, 41, 66, 83–84, 110–11, 126; defense spending, 13, 14, 81–82, 85, 92, 126–27; habeas corpus rights in, 172; revenue measures following, 82; and Supreme Court cases, 91, 92, 93, 102, 104–5 Iraqi government, claims against, 126–27 Jackson, Robert H., 70–71, 165–66, 184n31 Jacobi, Tonja, 167 Johnson, Lyndon Baines, 13–14, 68, 81, 119, 123 Joint Committee on Taxation, 23, 28–30, 44 judicial business cycle, 16–17 judicial notice, 61–62, 71–72, 112–13, 137, 138; of foreign policy crises, 118–19 judicial power of the purse, 3–4, 6–7, 8, 9, 15, 107, 109–10; awareness of consequences, 37–43; congressional monitoring of, 19–20, 22–30, 44; Constitutional basis of, 19, 23, 37; empirical findings, 21–22; and executive branch, 20, 30–37; during foreign policy crises, 4–5, 6; negative and positive actions, 6; promoting safety and security, 52; upper and lower bounds, 43–50 judicial resource constraint, 54 judicial review, 171–73 Kennedy, Anthony M., 128–29 King, Gary, 7, 101–2 Klerman, Daniel, 169–70

Korean War, 11, 66, 110–11, 135; congressional support, 119; defense spending, 13, 80–81, 83, 85, 92; excess profits tax during, 120–21; revenue measures following, 82; revenue surplus during, 120; seizure of private property, 172; and Supreme Court cases, 92, 93, 94, 97, 104–5; Supreme Court cases during, 106; troop deployments, 119–20 Kuersten, Ashlyn, 78 Laibson, David, 60 Landes, William, 174 law clerk–authored memoranda, 42 Layne, Christopher, 51 Least Dangerous Branch, The (Bickel), 171 legal theory of decision making, 110, 165–66 legislative branch. See Congress Lewis-Beck, Michael, 139 Lindquist, Stefanie, 167 Lindsay, James, 54 lobbying by defense industry, 183n21 MacKuen, Michael, 7 marksmanship programs funded by Congress, 127–28 Martin, Andrew, 155 McGinnis, John, 184n31 McGuire, Kevin, 61 McReynolds, James Clark, 153 Mearsheimer, John, 53 Meese, Edwin, 19, 49 military industrial complex, 183n21 military recruiting on college campuses, 128 military spending. See defense spending Miller, Geoffrey, 54 Mills, Ogden, 40 Minnesota Mortgage Moratorium Law, 152–53 Morgenthau, Hans, 52–53 Mueller, John, 11 munitions tax, 65 National Bureau of Economic Research (NBER) Dating Committee, 144, 146, 148 National Defense Authorization Act, 126–27 natural disasters, effect on federal judges, 10, 14 Nixon, Richard M., 81

Subject Index / 197 normative thesis of judicial decision making, 161–64 Nzelibe, Jide, 183n20 O’Connor, Sandra Day, 21, 123 Olson, Theodore, 26 Omnibus Indian Advancement Act, 28 patent infringement, 32; and legal model of judicial decision making, 166 personal preferences of judges, 165 Persson, Torsten, 54 Petraeus, David H., 128 Pevehouse, Jon, 11, 54, 65, 159, 160–61 Pfander, James, 170 policing role of judiciary, 8, 101, 104–6 political model of judicial decision making, 166–68 political preferences, 11, 86–87, 94, 149, 151, 153, 158, 160, 166–68 positive theories of judicial decision making, 164–71 Posner, Eric, 5, 7, 69, 162, 169, 171 Posner, Richard, 7, 174 Powell, Lewis, 122–23 president/executive branch: commander-inchief role, 54, 62–63, 66–68; economic policymaking, 132–33; and foreign policy crises, 80, 159; and information theory of crisis jurisprudence, 9, 15; and judicial power of the purse, 20, 30–37; political preferences of, 86; resource constraints, 55–57; during War on Terror, 126; wartime declarations, 119 price controls, 10 pricing laws, 31 rally events, 11 Reagan, Ronald, 31, 33, 92, 125 realist school of international relations, 11, 158–61 Rehnquist, William, 7, 123, 125 Revenue Act of 1917, 116–17 Rice, Tom, 139 Ripley, Randall, 54 Roberts, John, 174 Rohde, David, 11, 159, 160–61 Romero, Francine Sanders, 171 Roosevelt, Franklin Delano, 2, 34, 115, 122; Court-packing plan, 143, 149 Rutledge, Wiley Blount, 10

safety and security, 8, 161, 163–64, 172; decision-making process, 60–71; fiscal strategies promoting, 53; in information theory of crisis jurisprudence, 4, 5, 6; judicial power of the purse favoring, 52; and military actions, 6; settlement negotiations in government lawsuits, 59–60; wartime aggression advancing, 52–53 savings and loan institutions: capital requirements imposed on, 26–27 Scalia, Antonin, 127 Schanzenbach, Max, 167 securities regulation, 132, 133 Segal, Jeffrey, 7, 101–2, 167 seizure of private property, 3, 66, 70, 116, 121–22, 172; president ordering, 63 selection effect, 87–89, 96–97 self-interest of judges, 169–70 separation of powers models, 155 September 11 attacks, 11, 83, 126, 162 social security laws, 27–28, 137–38, 179n23; procedural safeguards, 39, 43; and student loan defaults, 40–41 Soldiers’ and Sailors’ Civil Relief Act of 1940, 114 Songer, Donald, 78 Souva, Mark, 159, 160–61 Spaeth, Harold, 167 Spanish American War, 24, 110–11 Special Preparedness Fund, 112 stare decisis, role of, 38, 44–45, 173–74 Stark, Kirk, 12, 65 Stern, Toby, 173 Stevenson, Randolph, 139 Stewart, Potter, 123–24 Stimson, James, 7 Stone, Geoffrey, 105 student loan defaults, and welfare benefits, 40–41 Supplemental Security Income program, 27, 31, 179n23 Supreme Court, 8; and appellate courts, 98, 99; civil rights and liberties disputes, 104–7; during Cold War era, 93, 96, 97, 119–26; contract and tort cases, 102–4, 118; defense spending and case litigation, 91–92; and economic policymaking, 132–55; and foreign policy crises, 90–98, 160–61; during Gulf Wars, 91, 93, 94, 97, 102, 104–5, 106; Heckman selection models, 89; and information

198 / Subject Index Supreme Court (cont.) theory of crisis jurisprudence, 16, 79–80, 90–98; during Iraq /Afghanistan Wars, 91, 92, 93, 102, 104–5; judges with prior military experience, 86; during Korean War, 92, 93, 94, 97, 104–5, 106, 120–22; political preferences of, 86–87; Roosevelt’s Court-packing plan, 143, 149; tax opinions, 78–86, 110–11; upper and lower bounds of judicial power, 46; during Vietnam War, 91, 93, 94, 97, 102, 105, 106, 122–24, 122–25; during War on Terror, 126–29; during World War I, 91, 93, 106, 118–19; during World War II, 91, 93, 106, 112–19 Sutherland, George, 153 Svensson, Lars, 54 Tabellini, Guido, 54 Tanenhaus, Joseph, 60 taxation, 132 tax litigation, 32, 33, 34, 75, 133; appellate court opinions, 48; and defense spending, 24–26, 34–36, 46–48; district court opinions, 48; economic substance of transactions, 29–30; empirical findings in, 90–101; evidentiary burden of proof, 29; and foreign policy crises, 87–89, 112, 114; information theory and domestic crises, 142–54; and judicial power of the purse, 22–23, 24–26; dur­ ing Korean War, 1–2; and legal model of judicial decision making, 166; local tax on government activities, 114; Supreme Court cases, 110–11; during World War II, 1 telephone excise tax cases, 24–26 Thorndike, Joseph, 12, 65 Tierney, John, 11 Tiller, Emerson, 167 Toma, Eugenia, 169 tort claims against the government, 32, 37–39, 49, 75, 122–23; and information theory, 101, 102–4; and legal model of judicial decision making, 166 Total War and the Constitution (Corwin), 10–11 transportation regulation, 62, 132, 136–37, 184n31

Truman, Harry, 70, 80, 119, 121 Tushnet, Mark, 7, 162, 171 two presidencies thesis, 5, 158 Ulmer, Sidney, 60 unemployment. See economic crises unemployment insurance laws, 31 University of Michigan, 145 Van Devanter, Willis, 153 Vermeule, Adrian, 5, 7, 69, 162, 171 veterans’ benefits, 36 Vietnam War, 66, 83, 110–11, 122–24, 135; Agent Orange cases, 123; congressional support, 119; constitutionality of, 123–24; defense spending, 13–14, 81, 85, 92; military spending, 24; normative school of thought, 164; revenue mea­ sures following, 82; Supreme Court cases during, 91, 93, 94, 97, 102, 105, 106, 122–24; troop deployments, 119–20 Vinson, Fred M., 114–15 voting behavior, economic, 139–42, 188n16 wage stabilization measures, 121 Waltz, Kenneth, 53 War on Terror, 126–29, 184n31; defense spending, 13 War Production Board, 112, 113 Warren, Earl, 120–21 wartime action, 110–11 wartime price controls, 10 wartime profits tax, 113 wartime revenue bills, 1–2, 65, 76, 82, 83, 97, 110–11, 112, 120–21, 157 wartime spending. See defense spending water’s edge thesis, 158, 159 welfare benefits: procedural safeguards, 43; and student loan defaults, 40–41 West, Robin, 174 White, Byron, 125–26 Wildavsky, Aaron, 5 World War I, 66; defense spending, 13, 80, 85; judicial strategies during, 76; military spending, 12, 24; restriction of speech during, 172; revenue measures following, 82; Supreme Court cases during, 91, 93, 106, 111–12, 118–19;

Subject Index / 199 tax legislation supporting, 65; troop deployments, 119–20 World War II, 66; army reenlistment bo­ nuses, 116–17; defense spending, 12, 13, 24, 80, 83, 85; and economic crises, 146; internment of Japanese-Americans, 172; judicial strategies during, 76;

revenue measures, 1, 82; and Supreme Court cases, 91, 93, 112–19; Supreme Court cases during, 106; troop deployments, 119–20 Yoo, John, 54, 171, 183n20 Young, Ernest, 110