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The problem with court packing

Summary:
Between March and July 1933, FDR’s policy of devaluing the dollar pushed industrial production up by an incredible 57% in just 4 months. Then FDR’s National Recovery Administration instituted a policy of mandating sharply higher wages. Hourly wage rates rose by roughly 20% in just two months. This immediately ended the robust economic recovery then underway. When the Supreme Court ruled the NIRA to be unconstitutional in May 1935, there had been no growth in industrial production for 22 months. Immediately after the NIRA was declared unconstitutional, industrial production once again took off like a rocket, until this second recovery was derailed by tight money and another wage shock in 1937. You’d think that FDR would have thanked the Supreme Court for rejecting

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Between March and July 1933, FDR’s policy of devaluing the dollar pushed industrial production up by an incredible 57% in just 4 months. Then FDR’s National Recovery Administration instituted a policy of mandating sharply higher wages. Hourly wage rates rose by roughly 20% in just two months. This immediately ended the robust economic recovery then underway.

When the Supreme Court ruled the NIRA to be unconstitutional in May 1935, there had been no growth in industrial production for 22 months. Immediately after the NIRA was declared unconstitutional, industrial production once again took off like a rocket, until this second recovery was derailed by tight money and another wage shock in 1937.

You’d think that FDR would have thanked the Supreme Court for rejecting the disastrous NIRA and triggering a surge in the economy—a boom that allowed FDR to win a huge victory in November 1936. In fact, Roosevelt was so frustrated by the Supreme Court that he tried to enlarge the court at the beginning of his second term. The goal was to add a number of FDR loyalists to the court, effectively reducing America’s political system from three branches to two. You occasionally see similar moves in the modern world, but mostly in authoritarian regimes. BTW, FDR was a fan of Mussolini.

In the 1937, the US still had pretty strong resistance to authoritarianism. Even though the Democrats held an overwhelming 74-17 margin over the GOP in the Senate, there was so much outrage at FDR’s power grab that the proposal was eventually dropped.  America narrowly avoided becoming an authoritarian state.  The checks and balances put in the Constitution held up.

Today I’m seeing renewed calls for court packing.  I suspect that if proponents of this scheme understood more about the 1937 attempt at court packing, as well as the effects of court packing in various banana republics, they would reject this idea.

PS.  It’s important to distinguish between court packing and court enlargement.  With legitimate court enlargement, as with the 22nd amendment to the Constitution limiting the president to two terms, the current occupant of the presidency is exempted.  I don’t have strong views either way on legitimate proposals for court enlargement, but allowing the same president who signed a court enlargement bill to also engage in court packing would be a mistake of epic proportions.  Checks and balances are an essential tool for preventing authoritarianism.

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

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