The Constitution and its moral warnings.

• Author: Arkes, Hadley

The recent meltdown in our financial institutions, to say nothing of our portfolios and 401(k)s, seemed to confirm the view of Thomas Reid, Justice James Wilson, and others that we are not skeptics by nature. (1) David Hume might have raised metaphysical doubts that we could speak with surety about "causation," but when the financial crisis set in, the common sense assumption of ordinary folk was that someone had caused these things to happen. President Obama has been convinced, of course, that the gravest problems in our national life are always caused by someone else. He affects to be blissfully unaware that he and his party contributed to the recent crisis as they sought to ward off any attempt on the part of the Bush Administration to rein in Fannie Mae, with its policy of spreading subprime mortgages throughout the land. There is no want of theories about whom or what to blame, and yet it is striking that the Constitution has emerged from this crisis unscathed, in the sense that no one blames the Constitution. Whatever the Federal Reserve did in keeping interest rates low and sustaining the bubble in housing, whatever the Democrats did in giving a free rein to Fannie Mae to encourage people to take on mort gages they could not afford, whatever mistakes Secretary Hank Paulson and Chairman Ben Bernanke made in arranging the bailouts and enlarging the powers of the federal government in the crisis, none of this was evidently enjoined or determined by the Constitution. And yet this crisis arguably has been amplified in its dimensions and its tragic effects precisely because men and women in high public office were no longer attentive to the moral cautions that members of the political class used to see vividly.

These cautions had been seen more sharply when the political class took the provisions of the Constitution more seriously. There seemed to be a keener sense, in an earlier time, of the deep moral principles that lie behind certain provisions of the Constitution. Justice Holmes thought that the modern legal project could be advanced "if every word of moral significance could be banished from the law altogether." (2) The measure of his triumph is that several generations of lawyers have come to make a facile distinction between the things that are moral and those that are "legal." When they managed to screen from their own sight the moral meanings contained in the Constitution, it is arguable that they were schooled over the years not to notice the moral cautions that the Constitution persistently cast up for people exercising the powers of law.

Richard Epstein has argued that we cannot diminish the extended effects of the crisis by dismissing the simple and venerable idea of the "Obligation of Contracts" as something instantly to be flicked aside in a moment of trouble. (3) Pension funds and ordinary folk bought bonds in Chrysler, and yet found their claims thrust aside in the political management of the crisis, rather than taking their place in line under the laws of bankruptcy administered by a federal judge. (4)

The first generation of jurists in the Framing era had a clearer sense of the connection between law and moral judgment, for they seemed to understand the moral groundwork that stood beneath the provisions of the Constitution and the statutes that were consistent with the Constitution. Nowhere has the discrepancy between that earlier generation and our own been as striking, and as portentous, to our political life as in the understanding of the Contracts Clause. (5) Hobbes famously remarked that contracts are "but words and breath, have no force to oblige, contain, constrain, or protect any man, but what [they have] from the public sword" (6)--from the coercive power that is necessary to enforce a contract. In this reckoning, an unenforceable contract is no contract at all. Hobbes, of course, preceded the American Framers, and yet his understanding is closer to the changes produced in our own time since the New Deal. For once Hobbes's understanding is in place, it is a short step to the conclusion that the power of law is a necessary component in anything that would be taken seriously as a contract. And so, if the people exercising political power think that an injury to the common good could be averted by altering the terms of a private contract, the authority to make those changes is simply built into the responsibilities they bear in the exercise of that public power. That was essentially the understanding that Chief Justice Hughes drew upon when he sought to explain, in Home Building & Loan Ass'n v. Blaisdell, (7) why the legislature of Minnesota might have been justified, in the exigencies of the Depression, in averting the foreclosure of farms by declaring a moratorium on foreclosures. Cicero, much earlier, caught the moral sense of the problem when he commented on schemes to solve the enduring tension between debtors and creditors in this way: What is the meaning, he asked, of an "abolition of debts, except that you buy a farm with my money; that you have the farm, and I have not my money?" (8)

That understanding can be countered only by an understanding of what there is in the idea of a contract that is not dependent on the conventions of the law. In the early jurisprudence of the republic, that understanding was expressed with uncommon clarity by Chief Justice John Marshall in Ogden v. Saunders. (9) Daniel Webster, in his brief on the case, set forth the problem as clearly as Chief Justice Marshall would later explain the matter. (10) Webster framed the problem with stringent clarity upon which it is hard to improve:

If the contract be lawful, the party is bound to perform it. But bound by what? What is it that binds him? And this leads to what we regard as a principal fallacy in the argument on the other side. That argument supposes, and insists, that the whole obligation of a contract has its origin in the municipal law. This position we controvert. We do not say that it is that obligation which springs from conscience merely; but we deny that it is only such as springs from the particular law of the place where the contract is made. It must be a lawful contract, doubtless; that is, permitted and...