The United States Supreme Court heard another important case Wednesday, April 22, Horne v. Department of Agriculture.  Under a 1937 New Deal era Marketing Order scheme, the Federal government gets to confiscate outright whatever percentage of a raisin crop is deemed necessary to keep raisin prices high, or high enough.  Henry Horne, a raisin grower refused to turn over his crop and then refused to pay a nearly $700, 000 fine roughly equal to the value of the 47% of his crop the Department wanted.  His case went to the Ninth Circuit where he lost, then in 2013 to the Supreme Court, which remanded it back to the Ninth Circuit to determine whether a taking had occurred.  The Ninth Circuit said there had been no taking under the Fifth Amendment and so no compensation was required.  That court reasoned that since raisins are personal property and not real property, no taking had occurred.  Horne appealed again and his case was argued before the court.

I have read (and will listen later) that the justices were quite skeptical of the Department’s Marketing Program.  And there are good reasons, economically and legally, to be skeptical.  The program made no sense in 1937 during the New Deal.  Obviously when one limits the supply of a good, the price goes up, given a constant demand.  But why did FDR and others want prices to go up in a Depression, when millions of people were unemployed or underemployed?  Well, there was a reason, though bad.  It was thought that if the government could prop up prices, then wages would increase and families would begin to spend money again.  But the other side of the coin is that if prices increase people cannot buy as much and so demand declines.  This means trouble for businesses.  At any rate, the Depression passes, but the Raisin Board did not go away.  At this point it was patently absurd to keep the Board and its scheme.  But wait, some raisin growers would be benefited by the propped up prices, at the expense of course of consumers.  Never mind the consumers, the raisin scheme made for pretty good cronyism.  And it kept alive the jobs of some Agriculture Department employees too.  Nevertheless, the scheme is pure rent-seeking.  It survives because both politicians/officials and some raisin farmers have managed to form a sort of coalition of mutual benefit.

As to the legal issues, they are not terribly complicated.  Is personal property covered by the Takings Clause?  If it is not, then the case ends there.  But if it is, the question remains, whether the confiscation of the raisins under the marketing scheme is a taking.  Or does it fall under the umbrella of many other Federal schemes that do result in a loss of profit or income, but are not considered a taking .  In this case, however, we do see a direct physical confiscation.  It would be difficult to maintain that this was not a taking in the usual sense of Takings cases.  These kinds of cases ought to disturb people.  A purely rent-seeking crony scheme is allowed to continue just because the Federal government wants to keep prices high.  Consumers lose.  In this case, the farmer also lost.  The Fifth Amendment Takings Clause was designed for this very type of problem.  Yet courts have allowed it to continue.  Let us hope the latest decision will deal at least this blatant injustice once and for all.