Outrageous Forced Contracts Could Become Legal If Obamacare Mandate Is Upheld

March 29, 2012 • Commentary
This article appeared in Forbes on March 29, 2012.

During Supreme Court presentations about what kind of precedent the Obamacare mandate might set, if it’s upheld, there was some banter to the effect that maybe we might all be forced to eat broccoli.

Some observers might have come away with the impression that it’s hard to think of a really bad mandate.

Well, there have been plenty of bad mandates. There’s a long, troubling history that we need to keep in mind as we consider the issues.

The Obamacare mandate involves forced contracts, which is a blazing contradiction since for hundreds of years a “contract” has meant a mutual agreement. As the Institute for Justice argued in their brief about the Obamacare mandate, if a contract isn’t voluntary, it can’t be valid.

Mandates always restrict freedom.

For example, on April 5, 1933, President Franklin Delano Roosevelt issued Executive Order 6102 that mandated Americans to surrender their gold coins, gold bullion and gold certificates to the government by May 1, 1933. Gold, of course, is the ultimate store of value, because it’s beautiful, it’s scarce, and it doesn’t corrode, break or burn. For thousands of years, gold has served as the most reliable hedge against inflation and monetary crises. Not many years before FDR’s executive order, Europe had been the scene of devastating inflations, so it was prudent for people to diversify their assets with some gold. Yet FDR’s executive order provided that anyone who continued to have gold could be hit with fines up to $10,000 and/​or imprisoned for up to 10 years.

On February 19, 1942, amidst war hysteria, FDR issued Executive Order 9066 mandating that some 110,000 peaceful Japanese Americans be hustled away from the Pacific Coast and into places like the urine‐​soaked Santa Anita racetrack stables until these people could be moved to Spartan “War Relocation Camps.” Nothing like this happened to the 6 million Italian Americans, even after Mussolini declared war against the United States. The mandate against Japanese Americans was upheld by FDR’s Supreme Court two years later. In 1988, Congress passed, and President Ronald Reagan signed legislation apologizing for the regrettable internment policy that was based on “race prejudice, war hysteria and a failure of political leadership.”

On August 15, 1971, President Richard Nixon issued Executive Order 11615, mandating price controls, rent controls, wage and salary controls. By forcing people to do their business at below‐​market prices, Nixon’s controls encouraged consumers to buy more, while encouraging producers to supply less. Consequently, the controls caused shortages that led to rationing and daily inconvenience. Nixon’s other controls had the same kinds of perverse consequences. Yet none of the controls stopped inflation. In 1974, the New York Times reported, “People have become increasingly suspicious and angry, insecure, devious and often violent…because of a lack of gasoline. More and more tanks are dry, lines are growing longer each day, gasoline sources are growing fewer, civility seems to have vanished, tempers are short.” Who wants to go there again?

Many of the most obnoxious forced contracts involve labor.

In ancient Egypt, the pharaohs’ most hated tax was the corvée — forced labor that had to be provided on demand for, among other things, quarrying stone and building pyramids. The Egyptian corvée wasn’t abolished until 1889. Meanwhile, it existed in ancient Rome, China and Japan. In medieval Europe, the corvée became a feudal obligation for peasants, and many worked without pay on a king’s roads. In France during the 18th century, the corvée inflamed grievances against Louis XVI, contributing to the French Revolution.

After the U.S. Civil War, many blacks didn’t want to work for former masters who had tormented them. But The Union army, occupying the South, pressured former slaves to sign annual contracts with plantation owners, and blacks were forbidden to leave plantations without the owners’ permission — the same policy as under slavery. Blacks found to be loitering, changing jobs or riding the rails were arrested as vagrants, then forced to perform unpaid labor. How could the Union, that had abolished slavery, do this to blacks? Historian Eric Foner said that “As Northern investors understood the term, ‘free labor’ meant working for wages on plantations, but to blacks it meant farming their own land.”

During the 1930s, Nazis began barring Jews from professions and ordering Germans not to do business with Jews. By December 1938, there were substantial numbers of unemployed Jews, and the regime issued a decree that ordered these people to register for forced labor. The hardest, most disgusting tasks were reserved from them, like road work, rubbish removal, toilet cleaning and sewage plants.

The Soviet Union condemned tens of millions of people to forced labor in their vast gulag. Probably the most brutal working conditions were in the frozen Kolyma River gold mining region, the Russian Far East, where the average annual death rate was about 30 percent.

When socialists came to power in Great Britain after World War II, they enforced suffocating economic controls and nationalized coal, steel, electricity, gas and other sectors of the economy, which led to prolonged economic stagnation. Prime Minister Clement Atlee introduced forced labor. By the end of 1947, University of Manchester economist John Jewkes reported, “No man between the ages of 18 and 50 years and no woman between the ages of 18 and 40 years could change his or her occupation at will. Every such change had to be registered at the Employment Exchange, and the Minister of Labor had the power to direct workers changing their jobs to the employment he considered best in the national interest.”

Many readers will be surprised to learn that the United States has had what amounts to a corvée. It was upheld by the Supreme Court during the progressive era in Butler v. Perry 240 U.S. 328 (1916). The case involved a challenge to a Florida law that provided, in part: “Every able‐​bodied male person over the age of twenty‐​one years, and under the age of forty‐​five years, residing in said county for thirty days or more…shall be required to work on the roads and bridges of the several counties for six days of not less than ten hours each in each year when summoned so to do.” No‐​shows, the law went on to say, “shall be fined or imprisoned in the county jail for not longer than thirty days.”

In addition to the corvée, the U.S., like many countries, has had military conscription. Although currently young men between 18 and 30 are required to register with the Selective Service System, nobody has been conscripted since 1973. Conscription is another form of involuntary servitude. It enables top brass to obtain however many soldiers they need without having to offer market‐​rate compensation. Before 1973, conscripts were asked not only to risk their lives but also to do it for a pittance. They were penalized for their service, which was shameful. In effect, they were subjected to a conscript tax that was equal to the difference between what they could earn in the private sector and the below‐​market pay they received as GIs. During the Vietnam War, heavyweight boxing champion Muhammed Ali faced a conscript tax in the millions of dollars.

If a war really benefits the general population, then the general population should pay the full cost of it, including the cost of offering compensation that’s high enough to attract as many volunteers as might be needed. When there’s strong public support for a war — such as a defense of our homeland — there are bound to be plenty of volunteers. When there isn’t much public support for a war, fewer people volunteer, and the cost of attracting more goes up, which should prompt politicians to reconsider what they’re doing. In any case, highly‐​motivated volunteers have worked better in the military as in every other area of life, and one might add that traditionally officers have been volunteers. Moreover, it hasn’t made sense to spend time and money training poorly‐​motivated conscripts how to use high‐​tech weapons, when they would have served their two‐​year hitch before doing much with the training.

By providing the military with abundant cheap labor, conscription has made it easier for generals to squander human lives. This was quite clear during World War I, for example, when generals on all sides ordered millions of soldiers to charge out of their trenches toward sudden death. The generals were criminally slow to realize that soldiers in cloth uniforms were no match for machine guns.

One of the most notorious generals was Douglas Haig. For example, during the battle of the Somme, July 1, 1916, over 25,000 British soldiers were seriously wounded and almost 20,000 were killed on that first day of fighting that gained almost nothing. According to historian James L. Stokesbury, this was three times more battlefield deaths than Britain had suffered in 22 years of fighting France from the time of its Revolution till the end of the Napoleonic Wars. Altogether, there were some 2 million British casualties under this general’s command, and he became known as “Butcher Haig.”

Many mandates, intended to solve problems, end up making things worse.

In 2008, Argentina’s financially‐​challenged President Cristina Fernández de Kirchner mandated that $30 billion of privately‐​owned pensions be seized to help pay for government deficits. Of course, this didn’t solve Argentina’s problems. The main effect was to remind investors that they shouldn’t throw good money after bad in Argentina.

On April 8, 1952, President Harry Truman signed Executive Order 10340, directing his Secretary of Commerce Charles Sawyer to seize and operate a reported 88 U.S. steel mills. Truman’s aim was to prevent a strike that would shut down the mills, making it more difficult to produce materials for the Korean War. Biographer David McCullough reported, “the outcry was instantaneous and scathing. Truman was called a Caesar, a Hitler, a bully and lawbreaker. Truman had brought on a constitutional crisis.” Steel executives sought a court injunction to block the seizure, and it was appealed to the Supreme Court. In Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 937 (1952), the justices ruled that Truman’s seizure was unconstitutional.

It turned out that Truman seemed to think seizing other people’s property was a convenient way to solve problems. Historian Robert Higgs explained that between April 1945 and August 1946, “Truman had seized 28 other industrial properties — sometimes entire industries such as the railroads and meatpackers — in labor disputes. He probably did not worry about getting away with another seizure.” Because of Truman’s arrogance as well as his miscalculations during the Korean War, he became so unpopular that he decided not to run for re‐​election in 1952.

After the passage of the National Labor Relations Act (1935), union bosses had an easier time organizing violent strikes. These intimidated corporate executives into signing costly union contracts. But union contracts made the companies high‐​cost suppliers in markets with more and more price competition. Steel producers, auto manufacturers and other unionized companies found themselves increasingly priced out of world markets.

The Teamsters, one of the most violent unions, could extort contracts from trucking companies as long as federal regulations made it difficult if not impossible for lower‐​cost operators — mainly non‐​union truckers — to enter the market. But during the late 1970s, there was political support for deregulation. The Interstate Commerce Commission began dismantling its barriers to entry, and Congress passed the Motor Carrier Act of 1980. This eliminated most restrictions on the issuance of licenses for new trucking companies. The number of them doubled from about 20,000 in 1980 to 40,000 in 1990. Deregulation made it easier for non‐​union truckers to work in the trucking industry. Trucking rates came down more than 25 percent. Some 200 unionized trucking companies went out of business in the years following deregulation. The number of drivers covered by Teamsters contracts plunged about 60 percent, while total trucking employment increased in the United States.

Eminent domain is a type of forced contract that’s frequently abused. A private owner is forced to sell property, supposedly for a public purpose like building a road that will serve everyone. But in many cases, a government agency hands private property over to another private entity that proposes building something bigger than what’s currently on the property, and typically the claim that it will generate more tax revenue for the local government as well as make a profit for the developer. But eminent domain isn’t supposed to involve seizing one person’s property and giving it to somebody else.

In 1998, Pfizer, the big pharmaceutical company, built a manufacturing plant near New London, Connecticut, and officials decided that the town would collect more tax revenue if something like an upscale hotel, rather than single‐​family homes, were in the Fort Trumbull neighborhood. The town’s power of eminent domain was used to condemn homes there, so that a private developer could make money with a new project. The result was a bitter legal battle that was appealed to the Supreme Court.

The decision in Kelo v. New London, 545 U.S. 469 (2005) went against the homeowners whose property was seized, but there was some justice. New London’s outrageous assault on private property rights backfired badly. The town spent $80 million, and the land was cleared, but nothing was ever built. After Pfizer’s temporary 80 percent property tax break expired, it left New London with its 1,400 jobs and moved to Groton. New London was worse off than before town officials began seizing people’s property. Meanwhile, the case provoked national controversy. Citizen activists around the country blocked 44 cases of eminent domain abuse. Eight state supreme courts and 43 state legislatures acted to provide better protection for property rights.

So, there’s plenty of experience to suggest that if the Obamacare mandate is upheld, we could find ourselves entering a strange new world where the word “contract” — traditionally meaning mutual agreement — comes to signify all sorts of things people don’t want to do.

For example, Institute for Justice attorneys Steve Simpson and Elizabeth Price Foley noted, Obamacare could set a precedent for a mandate requiring large companies to provide lifetime employment comparable to what has been available in Japan, in European welfare states, in the communist world and in governments almost everywhere.

Labor union bosses, disappointed that President Obama couldn’t ram his card‐​check bill through Congress, would be delighted if he issued an executive order mandating that all Americans join a union. With a flick of the president’s pen, some enforcement action and perhaps a little violence, America could emulate the 5 most highly unionized nations — communist China (90%), Tajikistan (90%), Iceland (88%), Georgia (80%) and Moldova (80%).

Since government health officials have been telling parents what they must pack for lunch and suggesting regulations to restrict or mandate various ingredients, there could be mandates related to diet, exercise and fitness.

Or perhaps mandates forcing everybody to pay for services needed by a few. For instance, a mandate requiring that every homeowner buy the same costly flood insurance that’s essential for a resident of the flood‐​prone Mississippi Delta or North Carolina’s “Hurricane Alley.”

Government could mandate Americans to make deposits in or buy bonds or shares issued by financial institutions like Citibank or Goldman Sachs if, because of the next financial crisis, they don’t seem to have enough money.

Would a future president really to mandate any of these things?

Four thoughts:

1. Most of the cases I mentioned took place during a war, a financial crisis or other emergency leading people to accept extreme measures that are unthinkable in easier times.

2. Nobody can predict when the next emergency will occur.

3. There isn’t any reliable way of keeping bad or incompetent people out of power.

4. Once government gains additional power, it’s exceedingly difficult to roll back.

These are major reasons why we should uphold our Constitution with limited and enumerated powers.

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