Murphy’s (Misguided) Law

As Daniel has just nicely explained, the recent SCOTUS decision (Murphy v. NCAA) striking down federal restrictions of state gambling laws has some really eye-opening potential implications. I just can’t believe the Court really meant to endorse most of those outcomes. Much of Alito’s language is dicta, and I’ll go out on a limb and predict the Court eventually disavows most of Murphy or limits it to its facts. In the meanwhile, though, a lot of peanut-butter sandwiches are going to land butter-side down.

Daniel’s predictions are dramatic, and he undersells them. He points out that many federal provisions limit state authority to tax (about 110, by my count; you can see cites to 85 of them here), and all of these are jeopardized if we take seriously the claim in Murphy that Congress “may not order a state legislature to refrain from enacting a law.” Although you’ve never heard of lots of these federal laws, some have major economic impact. For instance, there are provisions that annually save Fannie and Freddie, the federal mortgage backers, on billions in dollars in state and local taxes. The two entities argued in a series of cases a few years ago that even a relatively modest narrowing of those provisions (allowing states to collect real estate transfer taxes) would potentially destabilize housing markets around the country.

But that’s not nearly all. Direct congressional regulation of states is an important guarantor of an open market. Think of all those tedious cases you read as a 1L about apple-labeling standards and truck-size regulations. Those were the Supreme Court exercising what it calls its “dormant” commerce clause power — the authority to employ Congress’ commerce power to protect the U.S. internal free-trade zone. Crucially, the Court has always said this is not a judicial power, but rather one it is merely borrowing from Congress during periods of congressional inattention.

The commerce power must include the power to prohibit states from acting because otherwise free trade would break down. Economic actors would predictably use their state legislators to impose costs on competitors. Elected officials would predictably pass costs on to neighbors to pay for local benefits. This isn’t just my crazy law-professor theory: Hamilton said it, and Madison too, and dozens of Supreme Court opinions since the founding. And there is nothing in Article III that would give courts the authority to ward off these problems.

Alito’s opinion in Murphy claims that the anti-commandeering principle, derived from the Tenth Amendment, requires his result, but he badly misunderstands the Court’s commandeering doctrine. Remember that the “commandeering” rule in the past has stood for the principle that the federal government cannot conscript state legislative or executive officials to carry out federal commands. Alito does correctly identify the three key principles that Courts have said justify a rule against commandeering. Briefly, those are 1. the dignity of states; 2. voter confusion; and 3. cost internalization.

None of these three prevents Congress from prohibiting state action, at least in the scenario where Congress prohibits states from harming interstate commerce or individuals outside state borders. In that situation, there is no dignity argument: a state’s dignity right surely swings, like Justice Holmes’ famous elbows, no further than the end of another state’s nose. The cost internalization argument is incoherent in an even broader set of cases. It’s supposed to force the federal government to pay for regulating, making federal power limited by the federal willingness to tax. That idea has no clear application to federal rules prohibiting most state action (though no doubt there may be some instances where prohibiting a state from acting does conserve federal resources).

What about confusion? Supposedly, commandeering leaves state votes unsure about whom to blame for state outcomes. Critics have pretty effectively crushed this rationale. For my part, I’ve pointed out that it lacks any empirical grounding — there’s no reason to think voters can’t allocate blame, especially when officials on both sides have every reason to tell them who enacted what. If you accept the confusion argument, though, it becomes even more tenuous for state inaction. Political science tells us voters do blame officials for actually voting against desirable legislation. But there are millions of unsolved problems in the world — Jay-Z alone has ninety-nine. If officials were blamed for every ill uncured, none would ever be reelected. It’s hard to see how a federal prohibition on just one of the many things states could have done but didn’t could affect voter opinions of their elected state officials.

On Twitter, Daniel offers a more refined version of the confusion argument for tax statutes. A federal restriction on one source of state revenue might increase states burdens on other revenues. Isn’t that a confusing redirection of blame? Color me skeptical. Officials who find one revenue source limited have lots of alternatives, including just settling for fewer public services. They deserve credit for whichever outcome they choose. More generally, nearly any federal enactment could make state taxes costlier — federal energy regulation is in effect a tax on energy, making state energy taxes more distortive (remember that two taxes piled atop one another are far more than twice as burdensome than either of the two alone). State voters might blame their local officials for oppressively high utility bills, even though most of the burden is created by federal regulation. Everything is commandeering!

So, at the end of the day, I think the Murphy dicta Daniel focuses on can’t and won’t be law in future cases. It’s too poorly reasoned, and the results are deeply inconsistent with the purpose, structure, and language of the Constitution. I hope lower courts figure that out sooner rather than later…but you know about Murphy’s law of dicta, don’t you?