Wednesday, March 17, 2021

Are the American Rescue Plan Act's Debt Cancellation Payments to "Socially Disadvantaged" Farmers and Ranchers Unconstitutional?

 by Michael C. Dorf

My latest Verdict column considers and rebuts the main critiques that Republicans have offered to justify their opposition to the $1.9 trillion American Rescue Plan Act of 2021 (American Rescue). I argue that while everyone can find something objectionable in a large omnibus measure, the overall arguments are misguided. The law is needed despite the stock market boom, because of the uneven distribution of the recovery; it is unlikely to cause runaway inflation; most of the money does indeed target pandemic-related problems, but there is in any event, no obligation for Congress to address only one problem in any law; and although there will undoubtedly be some waste, fraud, and abuse, effective implementation of various safeguards can keep those to tolerable limits.

In this column, I want to consider one of the Republican objections to some specific provisions that I do not discuss in the Verdict column: its reliance on racial and ethnic categories for distributing some aid to framers and ranchers. Before doing so, I should clarify the question I'm asking in the title of this column. In asking whether the provisions are unconstitutional, I do not mean to ask whether they are unconstitutional under the all-things-considered-best reading of the U.S. Constitution (in particular, the so-called equal protection component of the Fifth Amendment's Due Process Clause). If it were up to me, I would implement the Constitution's equal protection guarantees in a way that gives legislatures substantial leeway to use racial and ethnic classifications to remedy what the Supreme Court has sometimes dismissively called "societal discrimination" (and what might better be termed "centuries of systemic racism"). Put differently, I agree with my co-blogger, Prof Segall, in what he wrote in his excellent two-part series criticizing the Court's affirmative action jurisprudence (Part 1 here; Part 2 here). However, for today's column, I am asking more of a doctrinal than a normative question: If faced with a challenge to the relevant provisions, how will our quite conservative judiciary apply the current precedents?

Before diving in, I shall add one further preliminary: I worried a little about writing the following for fear of providing conservative lawyers a roadmap for challenging what I regard as valid and socially beneficial legislation. I overcame that worry because I believe that my analysis below would be sufficiently obvious to any number of competent conservative attorneys that I am not giving anyone ideas. Indeed, although much of the public discussion of the provisions (both pro and con) has addressed the question whether they count as reparations, already Pennsylvania Senator Pat Toomey has asserted that they are unconstitutional.

Are they? For those interested in the bottom line: There is a path to upholding the key provisions under existing precedent, but I cannot predict with certainty that the current judges and justices of the federal judiciary will follow that path. Now onto the analysis.

Section 1005 of American Rescue provides whatever money is needed to cancel federal and federally-guaranteed debt of socially disadvantaged farmers and ranchers. Section 1006 appropriates up to just over a billion dollars for  various forms of outreach, mediation, loans, and other activities for the benefit of socially disadvantaged farmers and ranchers, with a small percentage earmarked for institutions and programs specifically identified with African Americans, Native Americans, Native Alaskans, Native Hawaiians, and Hispanic Americans. Both provisions rely on a pre-existing statutory definition that states: "The term 'socially disadvantaged group' means a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities."

I could not find any reported cases of constitutional challenges to the term, but that is not really surprising. As used in prior law, the decades-old designation of membership in a socially disadvantaged group was not used to distribute benefits but for record keeping and related purposes to enable individual minority farmers and ranchers to bring their own claims to the effect that the federal government was discriminating against them in its loan programs. Even then, Congress amended the law in 1996 to impose an obligation on the Secretary of Agriculture to ensure that the target participation rates would be implemented consistently with Adarand Constructors v. Pena, the 1996 SCOTUS case that held that all racial classifications in federal law would be subject to the same strict-scrutiny standard that the Court already applied in cases involving state laws.

The use of the classification of socially disadvantaged groups in American Rescue goes further, however. Rather than operating as an anti-discrimination principle, it is what we would conventionally call an affirmative action program. Members of the disadvantaged groups defined by so-called suspect classifications are eligible for benefits based simply on group membership, without having to prove that they themselves were victims of individual discrimination. Is that permissible?

The late Justice Scalia would have said no. He thought (and said in his Adarand concurrence) that government never has a compelling interest in using a racial classification, allowing only that "individuals who have been wronged by unlawful racial discrimination should be made whole."

However, Scalia's view is not the current law. Under current doctrine, government sometimes has a compelling interest in using racial classifications to promote diversity in various contexts. Because that branch of the doctrine directly affects educational institutions, scholars have devoted considerable attention to it. But there is a second ground that the Court has recognized as sufficiently compelling to justify the use of racial classifications. Although Justice Powell's Bakke opinion ruled out remedying societal discrimination as insufficiently weighty, the cases permit the use of racial classifications to remedy an institution's own discrimination.

The key precedent is the 1989 SCOTUS ruling in Richmond v. J.A. Croson Co., which invalidated Richmond's set-aside program for minority contractors. There is much to criticize in that decision, not least the Court's intimation that, as Justice Marshall put it in dissent, "the former capital of the Confederacy" was free of lingering impact of race discrimination. So too, as various scholars noted in response to Croson, the case set up a kind of conflict of interest: in order to use a racial classification, a government entity would need to show that it was remedying the effects of its own discriminatory actions, yet in doing so, it could be establishing a basis for liability or at least bad publicity. On just these grounds, minority students at universities whose affirmative action programs are challenged sometimes seek to intervene or participate as amici: whereas the university will claim diversity as its compelling interest, the students sometimes argue that the university's failure to reckon with its past discriminatory conduct creates a conflict of interest that prevents it from asserting its remedial interest in the case.

Nothwithstanding the foregoing and other legitimate criticisms of Croson and Adarand (which expressly extends the Croson standard to federal actions), the case law pretty clearly leaves open the possibility of remedial race-based affirmative action where an institution seeks to remedy its own discrimination. And despite the likening of the relevant provisions American Rescue to reparations for slavery, Jim Crow, and other instances of what the courts would likely dismiss as "mere" societal discrimination, those provisions in fact target an entity--the lending facilities of the Department of Agriculture--that have a long and shameful record of systematically denying credit or extending credit on unfavorable terms to minority farmers and ranchers. A 2010 article in The Nation details the Department's history in this and other respects.

Thus, Sections 1005 and 1006 of American Rescue should be upheld, even under the unduly restrictive standard the Rehnquist/Roberts Court has applied to remedial programs of race-based affirmative action. That said, I remind readers that I am not making a prediction that the provisions, if challenged, will be upheld.

It would not surprise me if one or more Justices now take the Scalia view that while remedies for specific victims of identified unconstitutional race discrimination are permissible, the Constitution never allows race-based classifications. More immediately, I could imagine some Trump-appointed lower court federal judge finding that the provisions are not sufficiently narrowly tailored and invalid for that reason; one could even imagine such a judge going further to then say that the whole of American Rescue is non-severable and invalid, even ordering the federal government to retrieve the money already doled out, although I think that highly unlikely and even less likely to be sustained on appeal.


  1. Thanks very much for this write up.

    A few unrelated comments:

    1. Regarding the stock market and 401ks, you're of course correct that such growth mostly favors the well off. But even there, it's typically not liquid. A healthy 401k is peace of mind about the future; people don't tap it in real time for purchases. So it's rather ridiculous for people to claim that such growth is inflationary in the near/mid term. (The confidence effect - where people spend more fungible income because of that security - is a flimsy theory. At best it operates selectively).

    2. The fraud claims make me roll my eyes. I don't have the data, but my guess is that tax fraud is the biggest of them all. And no Republican ever mentions the risk of additional fraud when bazillions in cuts at the top are passed. And the top is the breeding ground for the most advanced fraud schemes.

    3. I know I keep bringing this up, but I'm again intrigued by policing in a community, this time within the context of your blog post. Up to now, I've been pushing notions of a diverse police force unto itself being a compelling need, in line with the educational paradigm. But it seems plausible that the path you mention here could apply, no? I mean, it's not hard to formulate official findings that a police department has discriminated - i.e., the make up of the force is a remedy for the department's "own discrimination."

  2. I appreciate the comments on the police, particularly because it is basically a fundamental part of government as a whole, including involvement in enforcement of the laws. To the extent that police have special powers to infringe on personal spaces (particularly cited in two amendments, including the mostly deemed obsolete 3A), it also has a basic effect on civil liberty.

    As I noted, the 2A also understands that the police (in 1791, there were no modern police forces and its basic function largely the role of the militia) should be a diverse group, made up of "the people."

    I also appreciate of a lesser discussed aspect of the ARPA. The link to a Nation article, e.g., reminds of the Shirley Sherrod case, which received a bit play when President Biden nominated Tom Vilsack for Secretary of the Agriculture. I note the term "small percentage earmarked," which seems relevant.

    For instance, when examining illegitimate public funds to religious education, breadth of funds was often a factor [Prof. Segall in his government service days in part was involved in litigation in that area] The conservative affirmative action cases in education accepted some race conscious programs, but continuously (to a degree some might deem arbitrary) was concerned about form and breadth. So, I think that matters.

    Since the PPACA Cases was based on horribly shoddy law, even accepting modern day Commerce Clause precedent, it is somewhat hard to predict what the courts will do with all of this. But, yes, you would think they should uphold it.

  3. I wish there was a like button. Liking Joe's comments. :)

  4. It's nice to see Toomey showing his true colors (no pun) here. You would think, given that he's retiring from the Senate and apparently not seeking another office anytime soon, he wouldn't feel obligated to toe the reactionary party line anymore. But it seems like he's actually been a red Kool-Aid drinker this whole time. So good riddance to him, and with any luck Ds can snag that spot next year.

    But putting that aside and getting to the substance, I wonder if there is a threshold problem with any challenge to the payments. Mainly, I'm talking about standing. Adarand and Croson both involved contractors and competitive bidding, so it's more or less straightforward that a contractor who loses out on a bid will have standing. Case in point, the standing discussion in Adarand was fairly minimal and AFAICT Croson didn't even discuss it. The AA cases are similar. While it's not quite as straightforward as the bidding (IMHO), it's clear enough that a non-monitory student who isn't admitted has standing, and AFAIK, no significant AA cases have foundered on that issue. But here, as I understand things, it's just the federal gov't making a gratuitous payment to the farmers and ranchers in question. They aren't competing with anyone else to get those payments. So who exactly would have standing to mount a challenge in that case? I guess one might analogize to Trinity Lutheran etc., but still, I see that kind of case as being different because it would involve a state-level program with limited funds that could only accept so many applicants.

    Finally, most folks who frequent this blog probably noticed that a constitutional challenge to ARPA (which, me being a nerd, always brings to mind the Internet) is already ongoing. But it's to a different aspect—the state tax cut provisions.

    (PS: When you call it American Rescue, that sounds like a reality show about first responders ...)

  5. ACA brought forth a cottage industry of sorts of constitutional arguments that still are going on. This legislation might as well. Fun times.

  6. We'll see if Joe's prediction bears out. ACA was obviously permanent legislation affecting the core operation of a very big and important industry, with corresponding effects on pretty much everyone in the nation, whereas ARPA is a temporary spending bill for the most part. Plus the ACA individual "mandate" and commerce clause issues were fairly simple to grasp for the larger populace and the mass media. But the SD v. Dole and 10A issues here are more esoteric and obscure, and don't immediately resonate with someone off the street. There are of course other key differences as well.

    I should also note that, as Prof. S. mentioned in his earlier post, if the SFFA v. Harvard petition is granted, then any eventual decision will certainly affect the landscape for litigation challenging these payments. (Relatedly, I see that Harvard's response was extended until mid-May, because counsel will be tied up with oral argument in a different SCOTUS case [NCAA v. Alston] on the original due date. That's quite a charmed existence!)

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