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A Supreme Rebuff for the USDA’s Ruinous Raisin Regime

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The Supreme Court in June finally opened the door for farmers to escape from one of the most dictatorial bureaucratic regimes in the federal government. But it remains to be seen whether farmers will secure freedom and justice or be dragged into another endless array of court battles and appeals.

The latest squabble has its origins in the New Deal. When Franklin Roosevelt became president in 1933, his secretary of the Department of Agriculture (USDA), Henry Wallace, and others urged him to appoint a temporary “farm dictator.” Congress quickly enacted legislation that vested vast power in the secretary and his deputies. Four years later Congress enacted the Agricultural Marketing Agreement Act, which authorized the creation of marketing boards to forcibly boost prices.

Marketing orders were based on the New Deal philosophy of “managed abundance” — prosperity through “universal monopoly and universal scarcity.” Americans quickly realized that it was not in the public interest to give private industry a federal license to conspire to gouge their customers. But such prerogatives have been retained by USDA marketing committees.

The Raisin Administrative Committee, one of the most powerful boards, can confiscate up to half of raisin farmers’ harvest with little or no compensation. The feds perpetually invoke the danger of surpluses to nullify raisin farmers’ property rights. Marvin Horne, a 67-year-old raisin farmer in Fresno, Calif., was fined almost $700,000 for refusing to surrender control of 47 percent of his harvest to the government committee in 2002.

Horne, who has been growing raisins for more than 40 years, has battled the raisin committee for more than a decade. At the start of the clash, he notified the USDA of why he was not submitting:

We are growers that will pack and market our raisins. We reserve our rights under the Constitution of the United States…. The Marketing Order Regulating Raisins has become a tool for grower bankruptcy, poverty, and involuntary servitude. The Marketing Order Regulating Raisins is a complete failure for growers, handlers, and the USDA…. We will not relinquish ownership of our crop. We put forth the money and effort to grow it, not the Raisin Administrative Committee. This is America, not a communist state.

Horne and his lawyers challenged the government because they considered the USDA penalties to be an “unconstitutional taking of private property without just compensation.” They fought all the way to the Supreme Court, which heard arguments on the case in late March. The sordid details of the case seemed to shock the Court’s “liberals.” Many, if not most, justices sounded clueless about how far USDA’s iron fist stretches. Justice Stephen Breyer was dumbfounded by that argument, declaring, “I can’t believe that Congress wanted the taxpayers to pay for a program that’s going to mean they have to pay higher prices as consumers.” Breyer apparently never heard of the USDA’s sugar program, which intentionally inflates prices and costs consumers billions of dollars a year. Actually, the raisin regime is even more perverse — since it intentionally dumps supposed “surplus” raisins on world markets at fire-sale prices. Foreigners often pay much lower prices for California raisins than do Americans.

Justice Elena Kagan suggested that the 1937 Agricultural Marketing Agreement Act, which authorizes the raisin restrictions, could be “the world’s most outdated law.” Though purporting to serve farmers, the act creates endless administrative hoops and legal tripwires for its beneficiaries. Justice Sonia Sotomayor sounded so confused by the case’s administrative and legal tangle that she was in danger of spinning out of her chair.

The Obama administration and the USDA insisted that, even though the government commandeers raisin farmers’ harvest, there was no “taking” because the seizure drives up the price of the remaining raisins. They invoked a federal appeals court ruling that the government need not pay compensation because Horne and his wife “voluntarily choose to send their raisins into the stream of interstate commerce.”

Since farmers chose to sell their crop in interstate commerce, the government claimed that it was entitled to nearly unlimited sway over the harvest. But since when did state lines nullify property rights? The fact that a business’s products are sold beyond its own neighborhood should not automatically turn the producer into bureaucratic cannon fodder. Or should we presume that the USDA is like a medieval robber baron, entitled to seize half of the produce that passes near his fortified checkpoint? Justice Antonin Scalia aptly described the USDA as offering farmers a choice: “Your raisins or your life.”

Market orders

Though federal agricultural boards are empowered to coercively impose “orderly marketing,” the USDA has never defined what that term means. When asked what orderly marketing was, USDA Assistant Secretary for Marketing C.W. McMillan admitted in 1986, “I have no idea what that is. I have never heard anyone define orderly marketing.” In practice, the term “orderly markets” has come to mean simply markets controlled by government officials and boards.

Marketing orders are intended to produce higher prices. In 1984 the USDA’s chief judicial officer, Donald Campbell, declared that the secretary of agriculture’s “statutory duty is to protect the interests of the producers…. The essential purpose of the [Agricultural Marketing] Act is to raise producer prices. If a marketing order can double producer prices in a particular year … that is exactly what Congress had in mind when it passed the Act.”

USDA-finagled higher prices usually lead to increased production and drive down consumption, which increases the amount of surplus. Marketing-order supply restrictions tend to make markets progressively more and more unbalanced. The more successful the USDA is in inflating prices, the greater the apparent need for government supply controls. Ed Schuh, the chairman of the agricultural economics department at the University of Minnesota, observed in 1985, “Ultimately it is the instability of government policy and government intervention that cause the instability in commodity markets.”

Supply controls epitomize the USDA’s paranoia toward price fluctuations — typical of any bureaucracy, where stability is the highest value, and risk and uncertainty are supreme evils. With marketing orders the USDA thinks it is better to have high prices every year than a low price one year and a high price the next year. Its preference is contrary to the inherent nature of agriculture, according to records dating back to 8000 B.C.

Federal marketing orders exemplify the quasi-covert nature of much of contemporary government coercion. If the USDA sent armed agents into every grocery store in the country and arrested shoppers who sought to buy too many California raisins, it would be universally denounced as God’s prize idiot. Instead, the government imposes its controls directly on California farms and fruit handlers — and few Americans recognize how their government is thwarting the bounty of the nation’s farms.

It is unclear why the Obama administration feels obliged to defend the raisin regime. Perhaps the administration’s masterminds presume that it is another government program that cannot possibly be as stupid as it looks. Or perhaps the fact that the program is long-established proves that it deserves all the power it has seized. Many “liberals” have remained totally ignorant on USDA supply controls because they have scant curiosity on how government actually uses its power. Because they presume that government is benevolent, they do not need to sweat the specifics of its good deeds. But it is in the grisly details where Americans’ rights and liberties are increasingly shredded.

There is nothing unique about raisins that requires nullifying the constitutional rights of raisin growers. Markets for raisins are volatile — as are the markets for hundreds of other farm products grown in the United States. (In the absence of government, futures markets are capable of smoothing out extreme swings.) The raisin committee’s sweeping powers have failed to prevent vast swings in prices farmers receive. Many California farmers have simply given up, and the acreage devoted to raisin production has decreased by 75,000 acres since 2000. There is no excuse for restricting the supply of one commodity that should not apply to restricting the supply of all commodities. The same market mechanisms that suffice for radishes, raspberries, and rhubarb could serve raisins just fine.

In June the Supreme Court ruled unanimously against the Obama administration and USDA position. In an opinion written by Justice Clarence Thomas, the Court sent the case back to lower federal courts to rule on the constitutionality of the raisin roundup. Thomas wrote that a raisin handler “who refuses to comply with a marketing order and waits for an enforcement action will be liable for significant monetary penalties if his constitutional challenge fails.” He pointed out the injustice of requiring producers to jump through endless bureaucratic hoops before getting a court ruling: “In the case of an administrative enforcement proceeding, when a party raises a constitutional defense to an assessed fine, it would make little sense to require the party to pay the fine in one proceeding and then turn around and sue for recovery of that same money in another proceeding.”

The decision was hailed as a regulatory rollback by Rachel Brand of the U.S. Chamber of Commerce: “This case is about how many hoops individuals or businesses must jump through to stop the government from trampling their property rights. This boils down to the Court preventing regulators from strong-arming businesses with the threat of endless litigation.”

Though it would have been far better if the Supreme Court had directly condemned the USDA takings, at least the Court did not uphold the regulatory regime. The tenor of the justices’ comments in oral arguments serves as a warning to any lower court that might choose to uphold the USDA confiscations.

This article was originally published in the December 2013 edition of Future of Freedom.

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    James Bovard serves as policy adviser to The Future of Freedom Foundation. He has written for the New York Times, The Wall Street Journal, The Washington Post, New Republic, Reader's Digest, Playboy, American Spectator, Investors Business Daily, and many other publications. He is the author of a new e-book memoir, Public Policy Hooligan. His other books include: Attention Deficit Democracy (2006); The Bush Betrayal (2004); Terrorism and Tyranny (2003); Feeling Your Pain (2000); Freedom in Chains (1999); Shakedown (1995); Lost Rights (1994); The Fair Trade Fraud (1991); and The Farm Fiasco (1989). He was the 1995 co-recipient of the Thomas Szasz Award for Civil Liberties work, awarded by the Center for Independent Thought, and the recipient of the 1996 Freedom Fund Award from the Firearms Civil Rights Defense Fund of the National Rifle Association. His book Lost Rights received the Mencken Award as Book of the Year from the Free Press Association. His Terrorism and Tyranny won Laissez Faire Book's Lysander Spooner award for the Best Book on Liberty in 2003. Read his blog. Send him email.