Liberty, Prudence, Imperfection, and Law

“Debasing Precedent: The ‘Living Constitution’ and the Legal Tender Cases,” By Bruce Frohnen

One of the stories proponents of the so-called Living Constitution often trot out at debates with originalists is that of the Legal Tender Cases. In these cases the Supreme Court overturned an 1870 decision in Hepburn v. Griswold[1] holding that Congress did not have the power to issue paper money not backed by specie (gold or silver). The Court in that case held that the power to coin money, specifically granted to Congress in the Constitution, does not include the power to issue a credit currency. Moreover, the Court held, the federal government’s claim that it was necessary and proper to issue these credit notes as a means of carrying on (and paying for) the Civil War was incorrect. Forcing people to accept such notes, not just from the government itself (as, for example, when selling goods for use by the army) but in general and from all comers went beyond the necessity of the time; it also inappropriately burdened private contracts, especially when applied to contracts entered into before the legislation was passed.

These credit notes—in essence promises by the federal government to pay, not guaranteed by a right to claim gold or silver—are, of course, the only currency we now have. And the claim made by living constitutionalists, and accepted all too generally, is that the Hepburn decision could not stand if the United States was ever to become a modern nation with a modern economy. Some even go so far as to note that the power granted to Congress by the Constitution is merely to “coin” money, such that paper notes themselves would be unconstitutional under a literal reading of the text.

The implication of such arguments is clear: only a foolish troglodyte would hold to an original understanding of the text of the Constitution because it would undermine the very way we now live. This is, of course, nonsense. It is effective nonsense because it seems to put anyone who takes the Constitution seriously in the position of putting text over necessity. In reality, however, we are dealing here only with matters of convenience. At least as important, had it not been overturned by a later Court in the Legal Tender Cases, Hepburn would have provided an opportunity for government and people to reason together on how best to approach changes in the circumstances under which their Constitution should continue to govern. It was unfortunate that the cases overturning Hepburn short-circuited this consideration because they helped form the habit among those in the federal government of treating the Constitution as an irritant getting in the way of progress and, among justices of the Supreme Court, of not only enabling but positively taking over that unconstitutional practice.

First, on the point of necessity. The only real necessity of the Civil War was for the federal government to pay for its troops and more general functions during a time when it had insufficient funds (precious metals on hand) to do so. Given the necessity of conducting a war, the Supreme Court acknowledged that the federal government had the right to offer to potential suppliers something less than traditional legal tender, instead proffering essentially notes of credit like those offered by the Confederacy. There was a risk attached to taking such notes, as those who sold to the Confederacy found out to their great hardship when their government ceased to exist. This meant that public confidence or its decrease would produce price increases when payment could only be received in such notes. Which brings us to the second “necessity,” namely, that of paying off the debt accrued by the federal government during the Civil War. In our era of trillion dollar debts, our government self-evidently does not treat such considerations with the seriousness they deserve. Things were somewhat better during the 1870s. Nevertheless, there are other and better ways for the government to pay its debts than to debase the currency. To substitute credit notes for species-notes is self-evidently to take money from the people owed by the government, to reduce the value of their notes without any just compensation or due process.

On hearing such arguments, the living constitutionalist will respond with his strongest rhetorical point, that no modern economy can function without credit money and that to deny the power to print paper currency is to demand a return to the era of gold money, deflation, and mere bartering for the vast majority who cannot afford reactionary money. This also is nonsense. To begin with, the Court in Hepburn only required that paper currency be backed by gold, not be made out of it. As to the literal reference to “coin” as opposed to “paper” that, too, could be addressed without national collapse. Coins can be made in many shapes, sizes, and values. There is no technological reason why we might not have hundred or even thousand dollar coins. We consider the idea outlandish for the simple reason that our monetary institutions and practices have been shaped by its opposite (though digital commerce is making the distinction much less important).

It is true that such coins would be inconvenient for their users—liable to loss or theft. All this means, however, is that it would make sense to make a technical amendment to the Constitution allowing for the printing of paper money. For that matter, of course, an amendment allowing for credit notes also would be possible. The real problem living constitutionalists have with coinage is the same problem they have with all constitutional provisions—the necessity of obeying or amending the Constitution gets in the way of their doing whatever they happen to want to do as quickly and easily as possible.

We have had several “technical” amendments to our Constitution—particularly in regard to that odd officer, the vice president. Thomas Jefferson found that the original provisions regarding the Electoral College allowed his vice presidential candidate to almost become president and, being a scoundrel, that candidate tried to manipulate the rules to achieve that end. The response was a constitutional amendment. Likewise, concerns over presidential succession and maintenance of governance during times of presidential incapacity required changes to the original Constitution. The republic did not fall because these changes had to be made through constitutional means. Rather, the republic was strengthened by the process and by recognition of its legitimacy.

The same process might have been followed in regard to the currency, providing both citizens and governors with the opportunity to reason together on whether coins or specie-backed paper money were sufficient, or the nation’s growing commercial economy required a switch to credit notes.

The final charge living constitutionalists make through use of the Legal Tender Cases is that the Constitution is too difficult to change, making usurpations like those cases utterly necessary for the survival of the republic. In addition to pointing at the vice presidential amendments, one should consider here the case of Prohibition. Is it really true that our Constitution is too difficult to change? That foolish and damaging amendment, making a national policy out of such a local concern and enshrining it in the Constitution, has been credited with bringing to America the kind of organized crime we had not had before, and from which we suffer to this day. Perhaps a few years of inconvenience while the people sort out what they really want in their Constitution is not such a bad idea after all. The real question is whether we shall be ruled by the Constitution we have made, and have the power to remake if necessary, or whether we shall be ruled by elites issuing decrees from above and beyond the law.

 

Bruce P. Frohnen is Professor of Law at The Ohio Northern University Pettit College of Law.

 

Endnotes:

[1] 75 U.S. 603 (1870).

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