A Government By And For People? Or By And For Cronies?

Occupational licensing is supposed to protect consumers against people who would practice a trade without the proper qualifications. In the first Supreme Court case on the question, Dent v. West Virginia (1883), the Court held that government may require people to be trained and educated before taking up the medical profession, because “such regulations” help “secure” the public “against the consequences of ignorance and incapacity as well as of deception and fraud.” But, the Court warned, if states impose licensing requirements that are not aimed at protecting “the general welfare of [the] people,” those restrictions “can operate to deprive one of his right to pursue a lawful vocation.”

But Dent was decided before the advent of “rational-basis scrutiny,” the rule under which courts today typically ignore violations of the right to earn a living. Under today’s law, state governments are given extremely broad power to limit economic freedom in whatever way lawmakers or unelected bureaucrats think best. That raises a crucial question—one on which the federal Courts of Appeals are now divided: may government restrict economic freedom, not to protect the public, but solely to protect the private benefits of a preferred group of people? Does such “mere protectionism” qualify as a “legitimate state interest” under the lenient “rational basis” rule?

Today, PLF and the Cato Institute have asked the Supreme Court to answer that question in a case involving teeth-whiteners: people who help clean teeth by shining a special kind of light on them. Officials in Connecticut ordered a group of teeth-whiteners to cease operations because they were not licensed dentists. Represented by our allies at IJ, a teeth-whitening company called Sensational Smiles sued, arguing that forcing them to spend the money and time needed to get a dentist’s license was irrational—they don’t offer dental services, after all. In this case, the licensing requirement was not being used to protect the public. Instead, it was a form of “mere protectionism” that barred competition against established dentists.

Federal courts are divided over whether such “mere protectionism” is constitutional under the rational basis test. The Fifth, Sixth, and Ninth Circuits in recent years—and the Third, Fourth, and Eighth Circuits in past decades—have all held that however lenient the rational basis test may be, it still requires that the government act in the interests of the public, rather than the private interests of the politically powerful. These holdings were consistent with Supreme Court precedent that held that licensing laws must be “must have a rational connection with [a person’s] fitness or capacity to practice” the trade—rather than being acts of spite or mere preference.

But in 2003, the Tenth Circuit ruled that the government can use its licensing powers for “mere protectionism”—to forbid people from engaging in a business solely as a favor to those the legislature prefers. And in the New Jersey case, the Second Circuit agreed. It ruled against the teeth-whiteners, holding that lawmakers can bar entrepreneurs from a business out of a “simple preference for [other people] over [them].” In other words, the legislature need not even pretend that its restrictions on economic opportunity—or other rights subject to the “rational basis” test—benefit the public. It can simply pick winners and losers however it wants, without constitutional limitation.

That holding contradicts eight centuries of Anglo-American common law, which has held since the days of Magna Carta that however broad the government’s power may be, it has one basic limitation: it must use its powers to serve the general public, not the private interests of the rulers or their cronies. That’s not a very strong limitation—there’s a lot the government can still do that benefits the politically powerful—but it must at least aim at the public benefit, not the private benefit. Even in its most pro-government cases, such as the 2005 eminent domain case, Kelo v. New London, the Supreme Court has held that government must use act in the public interest: “the City would no doubt be forbidden from taking [Kelo’s] land for the purpose of conferring a private benefit on a particular private party,” the Court said there.

The Second Circuit rejected this principle. “Much of what states do is to favor certain groups over others,” the judges declared. “We call this politics.” But as the Supreme Court observed in 1943, “[t]he very purpose of a Bill of Rights was to withdraw certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities…as legal principles…. One’s right to life, liberty, and property, to free speech, a free press, freedom of worship and assembly, and other fundamental rights may not be submitted to vote; they depend on the outcome of no elections.” (Note the reference to “property,” to which the rational basis test applies.)

Of course, the people who will suffer most from the rubber-stamp approach that the Second Circuit took are those who lack the political influence to get the government to do its bidding. These people—including members of minority groups, and unknown entrepreneurs just starting out—must look to the courts to protect their rights, instead. By withdrawing judicial protection for the constitutional rights, the Second Circuit essentially throws them to the mercies of the very legislatures that took their rights away. As Prof. Robert McCloskey put it, the idea that these people can protect themselves through the political process is “a polite fiction,” because “the scattered individuals who are denied access to an occupation by State-enforced barriers are about as impotent a minority as can be imagined.”

Here’s hoping the Supreme Court steps in to protect their rights.

[Cross-posted at PLF’s blog.]