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The Judicial Power of the Purse
How Courts Fund National Defense in Times of Crisis
By NANCY STAUDT
The University of Chicago Press
Copyright © 2011 The university of Chicago
All right reserved.
ISBN: 978-0-226-77112-0
Contents
List of Tables /....................viii
List of Figures /....................ix
Acknowledgments /....................xi
INTRODUCTION....................1
ONE / Federal Judges' Budgetary Powers /....................19
TWO / Pulling the Purse Strings: an Information Theory of Crisis Jurisprudence /....................51
THREE / Mobilizing Judicial Resources: The Information Theory in action /....................75
FOUR / The Judicial understanding of Costly Foreign Policy Events /....................109
FIVE / The Next Stop: The Information Theory in the Domestic Context /....................131
CONCLUSION....................157
Notes /....................177
Case Index /....................191
Subject Index /....................193
Chapter One
Federal Judges' Budgetary Powers On its face, the U.S. Constitution is clear: Congress holds the power of the purse. Article I specifically provides that only members of Congress have the "power to lay and collect taxes, duties, imposts and excises ... to borrow money ... to coin money," and permits expenditures only on authorization by the House and Senate. The federal judiciary, by contrast, has no formal budgetary power; its sole constitutional authority lies in Article III of the Constitution, which allows judges to render decisions in "cases" and "controversies" but affords no other power. Notwithstanding Article III's narrow language, and perhaps unrecognized by the framers themselves, an unmistakable judicial power of the purse lies hidden in the U.S. Constitution.
To understand the nature of this power, consider the thousands of lawsuits that show up in court every year in which private parties seek monetary payouts from the federal government in contexts as varied as taxation, tort, contract, and intellectual property. Court decisions that favor the government in these cases operate to protect the national budget whereas those that go against the government's interests work to deplete it. The idea that judicial decisions can and do affect the size of the federal fiscal pie is so transparent, most litigators involved in the courtroom proceedings view it as an "obvious implication" of judges' Article III decision-making power. In the words of former U.S. attorney general Edwin Meese, "the judiciary can and often does exercise power over the nation's purse." More to the point, the cases on the federal docket often have unavoidable monetary stakes for the parties involved, and for this reason judges cannot avoid their budgetary roles—even if they wished to do so.
Scholars and commentators have virtually ignored federal judges' ability to exert influence over the federal budget, but all three branches of government understand this power well. Members of Congress are keenly aware of judges' propensity to encroach on their budgetary prerogative and, as a result, have established agencies and committees to monitor judicial fiscal activity with the goal of estimating—and often undoing—court-induced costs to the government's coffers. Similarly, the executive branch appreciates the judicial power of the purse: Presidents frequently incorporate requests for additional appropriations in their annual budget proposals to account for court decisions that increase the cost of federally funded programs operated and maintained by the agencies. Indeed, the Department of Justice, which houses the federal government's legal team and is located within the executive branch, publishes annual reports that generally include estimates of the monies saved through the judicial decision-making process. neither the executive nor the legislative branch believes the money controlled by the judicial fiscal hand is inconsequential, and these views are not wrong: When the size of the judicial purse is examined as a proportion of gross domestic product (GDP) or federal receipts and outlays, it is apparent that judges are well positioned to have more than a minor effect on the nation's budget. Finally, the judiciary itself regularly notes the reality of its implicit judicial fiscal powers. Law clerk memoranda, as well as litigants' court filings, routinely incorporate explicit references to the budgetary costs (and benefits) of deciding a case involving the U.S. government, and just as often, judges explicitly justify their decisions and outcomes on fiscal considerations.
In the eyes of all three branches of government, then, judges have fiscal power. They are able to force government payouts through court decisions, just as Congress is able to adopt spending policies that effectuate identical budgetary consequences in the sense that both deplete the size of the fisc. Similarly, judges are able to mandate that private parties render monies to the government, just as Congress is able to adopt taxation or taking laws that operate to increase the level of the nation's economic resources. The judicial power of the purse is, of course, distinct from, and certainly less extensive than, the taxing and spending powers that the framers awarded to Congress in Article I, Section 8, of the Constitution. The most important difference is that members of Congress are empowered to implement virtually unlimited forms of revenue-raising and spending measures; judges' role in the budgetary process, by contrast, is restricted to the cases and controversies that show up on their dockets. Put differently, if litigants fail to file lawsuits in federal court or settle them outside the courtroom context, judges will be in no position either to increase or decrease federal revenues or expenditures. Notwithstanding these institutional limitations, the federal courts' financial powers are surprisingly far-reaching.
Before investigating the judicial power of the purse, it is worthwhile to comment on the nature of the inquiry as well as the available data. First, the methodological approach adopted in this chapter is largely inductive: The evidence is comprised of statements obtained through interviews of members of the legislative, executive, and judicial branches of government, and from a variety of published reports, opinions, and analyses. Unfortunately, no branch of government provides a complete picture of judges' budgetary power, and for this reason, empirical conclusions must be gleaned from a collection of largely qualitative evidence. Moreover, it is impossible to know whether the qualitative claims that do emerge in analyzing judges' roles as fiscal agents reflect reality or are constructed for alternative purposes. Do courts note the fiscal consequences of their decisions to justify outcomes? Do presidents exaggerate the costs of judicial decisions in budget proposals to obtain increased levels of congressional appropriations? Do legislators underscore judicial fiscal power to gain traction in legal reform efforts that work to undermine judicial control over national resources? These concerns and drawbacks are important to consider, but the sum of the evidence nonetheless leads to the inexorable conclusion that judges have very real budgetary powers.
Second, the discussion investigates the judicial power of the purse from an empirical viewpoint (through the lens of what judges have actually accomplished vis-à-vis the budget) rather than a theoretical perspective and for this reason may not account for the full extent of judges' power. Put differently, the evidence will indicate that judges' fiscal authority has lower and upper bounds, but in fact this power may be far greater than suggested by the data. Theoretically, judges could systematically refuse to enforce any revenue raising laws, thereby denying the government access to any and all resources, or, alternatively, judges could favor the government at every turn, effectively putting no limits on the government's ability to raise revenue. Various factors, however, limit judges' budgetary authority. The parties could avoid the courts altogether, or they could refuse to adhere to court decisions perceived to be illegitimate. Justice O'Connor noted that "[w]e don't have standing armies to enforce opinions," and this reality imposes limits on the judicial power of the purse. At the same time, as the political science scholars Gregory Caldeira and James Gibson have noted, the American federal court system has enjoyed substantial levels of public confidence, and thus its decisions are not systematically disregarded and ignored but are respected as legitimate law. This widespread respect implies that judges cannot—and will not—veer too much from accepted practices to retain the veneer of neutrality. In short, it is possible that the data presented below reflects not only the empirical bounds, but also the theoretical bounds of judicial power.
Three Views of the Judicial Power of the Purse
each branch of government has a unique perspective on the judicial power of the purse, but all agree that judges cannot help but affect the size of the budget. The frameworks adopted by each branch of government for purposes of identifying the power diverge, but they all lead to a single conclusion—judges have more than a modicum of control over the federal fiscal pie. The legislative branch conducts systematic surveys of court decisions and estimates their far-reaching budgetary effects by accounting for precedential value (the reality that cases govern similarly situated parties who are not directly involved) and for this reason will aid in establishing the upper bound value of the judicial power of the purse. The executive branch, by contrast, tends to emphasize the monies directly implicated in individual court decisions without regard for precedential value and thus offers a useful lower bound value of the judicial power of the purse. The evidence emanating from the judicial branch sheds light on the nature and extent of federal judges' own knowledge of their purse powers but cannot be relied on for purposes of identifying either the upper or lower bound of that power. As discussed further, the evidence demonstrates that judges are not unknowing and uninformed cogs in the wheel of the national budgetary process—they are fully aware of their fiscal powers and their ability to loosen and tighten the fisc.
The Legislative Branch: Identifying the Far-Reaching Effects
of Judicial Decisions
Given that Article I of the Constitution awards to Congress the formal power of the purse, it is perhaps unsurprising that the legislative branch spends more time and energy investigating the effects of judicial decisions than any other branch of government. To appreciate the nature and extent of Congress's efforts, consider first that federal court decisions involving fiscal matters routinely show up in legislative debates, hearings, and analyses. Many of these court decisions are unrelated to the nation's war efforts but nonetheless implicate the budget. To give just one example, after the Supreme Court rendered a decision in Anderson v. Mt. Clemens Pottery Co., interpreting federal mandates found in the Fair Labor Standards Act (FLSA) and federal mandates with respect to employee compensation, legislators noted in subsequent hearings and legislation that the decision would cause the "Public Treasury [to] be deprived of large sums of revenues and public finances would be seriously deranged by claims against the Public Treasury...." Legislators' response to Mt. Clemens Pottery was not an isolated event but rather part of a deliberate and systematic focus on the effects of judicial decisions, especially those implicating national budgetary policy. In the context of taxation, arguably one of the most important areas of fiscal policymaking, empirical data indicate that between 1953 and 2005, the Supreme Court issued nearly three hundred decisions interpreting the tax code; legislators, in turn, discussed and commented on more than 50 percent of these cases—by name—in a range of contexts, including proposals to modify, codify, and override the Court's outcomes.
To be sure, legislative discussion and debate tends to be wide-ranging and vague, often incorporating statements that reflect the obvious: "judicial tax decisions can affect the budget," and "courts can rearrange legislative fiscal priorities." Over time, however, legislators have sought to identify the precise quantitative effects of judicial decisions and have established agencies and committees to assist. The two most important bodies contributing to Congress's understanding of the judicial power of the purse are the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). Congress commissioned both groups of policy analysts after a period of budgetary chaos in the early 1970s to investigate and estimate the costs of existing law as well as proposed legal reforms. Their work offers a surprising level of detail about the nature and extent of judicial fiscal power.
THE CONGRESSIONAL BUDGET OF FICE (CBO). To assist Congress with its budgetary decision making, the CBO produces extensive economic and policy analyses, including budget and economic reports, an assessment of the fiscal effects of the presidents' budget proposals, and cost estimate reports for virtually every bill reported out of a congressional committee. Many of these reports and analyses discuss judicial fiscal powers, often noting the reality of "court-induced" costs and highlighting the extent to which federal revenues and outlays "vary due to court rulings." Indeed, the CBO has gone so far as to note that by virtue of their Article III authority, federal judges are able to "gain budgetary powers" and thus are well positioned to reorder and undermine Congress's policy priorities.
Given the considerable effect that judges have over the nation's budget, it is no surprise that the CBO continually monitors judicial decision making. In a public database containing over 2,500 published reports, for example, well over 1,000 mention courts, litigation, or judicial review. Many of these references are linked to an assessment of the monetary effects of court decisions—at every level of the judicial hierarchy—on the national budget. To illustrate the legislative attention given to federal court rulings, consider the CBO's Budget and economic Outlook reports, which include baseline estimates of future revenue and spending against which all new legislative proposals are compared for purposes of understanding their fiscal effect. In constructing the baseline for each new report, the CBO considers legal changes that transpired since the publication of the last baseline; CBO analysts, therefore, must monitor judicial rulings to incorporate them into the new estimate. Numerous reports issued by the CBO since its inception have included a detailed discussion of the effects of specific federal court cases on baseline estimates, suggesting that CBO officials not only systematically monitor the courts but also believe they play an important role in the size of the national budget.
The 2007 Budget and economic report notes that tax revenues were expected to decrease due to a series of lower federal court cases involving the excise tax on telephone services. Congress originally enacted this tax to defray the costs of the Spanish War and subsequently reenacted and broadened it to help fund the costs of World Wars I and II, as well as the Vietnam War. The tax remained on the books since that time and has consistently generated roughly $6 billion in annual revenue.
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