The prepositional phrase “in this economy” has become a part of the American vernacular. The economy has slowed down — unemployment jumped to nearly 10%, the financial industry took a huge hit as investors lost $11.2 trillion between October 2007 and March 2009, and the housing market is still in crisis.
Congress and the Obama administration have taken steps to remedy the situation. Along with implementing an $800 billion stimulus package, the government has orchestrated a bailout for automakers that could soon top $130 billion and has committed over $6 trillion for financial institutions.
While the economics behind the plan to pump government money into private businesses is a hot topic in mainstream news, I am surprised that there has not been a constitutional challenge from companies that did not receive any stimulus money.
I see two constitutional arguments with the policy.
First, Article I, Section 8 of the Constitution allows Congress to tax and spend “for the common defense and General Welfare of the United States.” Some argue that the stimulus package and government bailouts saved thousands of jobs and strengthened the American economy. In this sense, they say, Congress was doing its job in providing for the general welfare of America by keeping particular companies afloat.
One other possible evaluation is through the Due Process Clause of the Fifth Amendment and the Equal Protections Clause of the Fourteenth Amendment. Although the concept of equal protection was originally enacted for former slaves during the reconstruction era, it has since been expanded to apply to bakers, hospital workers, corporations, and others.
Would today’s court believe that the Equal Protections Clause applies to laborers put out of work and bankrupt businesses allowed to go under while others such as General Motors, Chrysler, Bank of America, and AIG were propped up with taxpayer money? Is it constitutional to allow small businesses to suffer because they cannot compete with government-subsidized corporations?
Justices used the theory of economic substantive due process in the New Deal Era, consistently relying on the Fifth and Fourteenth Amendments to strike down instances of government interference with business. There really has not been government intervention in business to the scale of the stimulus since that time.
Currently, the U.S. government holds roughly 80% of the stock in General Motors. Taxpayers have loaned the financial industry billions of dollars. While some banks have already made payments on these loans, there is still a great deal of outstanding debt that I fear may never be repaid.
Bear Stearns and Lehman Brothers were allowed to collapse. Congress denied funding to F-22 fighter jet construction which cost jobs in 44 states. Small businesses have struggled to compete with larger companies who received stimulus money.
Obviously, the government can never save every company or major industry. But how does it choose which ones it will save and which should fail? Is government providing for the “general welfare” when it bails out private entities or are there equal protection issues?
I've never thought about looking at the stimulus through the perspective of the U.S. Constitution, but you bring up good points. It raises a lot more questions about what is wrong with the stimulus package. Great article Jeff.
As the economy gets back on track, people are also doing everything to at least get their lives back especially after the massive foreclosures and layoffs. Since so many people need debt relief these days, a lot of people are getting credit counseling. The demand for credit counseling and credit and debt counselors is increasing, according to the NFCC, or National Foundation of Credit Counselors. The NFCC has also stated concern that financial illiteracy is at an all time high, and especially in the area of mortgage loans, which is what the majority of their clients need help with. Granted, the bank's fine print doesn't help, which some claim is purposefully confusing. An NFCC study revealed that many people didn't know what the interest rates on their cars and homes were.
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