"Don't Ask, Don't Tell" may in certain situations be an appropriate response, but not to violations of the United States Constitution, particularly by those sworn to uphold it.
Prior to the Civil War, no one -- least of all the framers of the Constitution -- would have doubted Daniel Webster's 1836 statement on the Senate floor:
Most unquestionably there is no legal tender, and there can be no legal tender, in this country, under the authority of this Government or any other, but gold and silver, either the coinage of our own mints, or foreign coins, at rates regulated by Congress. This is a constitutional principle, perfectly plain, and of the very highest importance. The States are expressly prohibited from making any thing but gold and silver a tender in payment of debts; ... [A]s Congress has no power granted to it, in this respect, but to coin money, and to regulate the value of foreign coins, it clearly has no power to substitute paper, or any thing else, for coin, as a tender in payment of debts, and in discharge of contracts. ... The legal tender, therefore, the constitutional standard of value, is established, and cannot be overthrown. To overthrow it, would shake the whole system.
In response to the financial pressures of the Civil War, the federal government issued paper legal tender notes printed on just one side in green ink: the "greenbacks." Reversing itself after a change in its composition, the Supreme Court in 1870 in the Legal Tender Cases upheld by one vote the constitutionality of the greenbacks, but expressly rejected the notion that Congress could make paper money a standard of value or that the greenbacks were anything other than a promise to pay gold dollars at some future though unspecified date.
In 1935 the monetary changes wrought by the New Deal came before the Supreme Court in the Gold Clause Cases. Addressing the devaluation of the dollar from $20.67 to $35 per ounce of gold, the Court noted that the dollar retained its value both in silver and in purchasing power, and then by a single vote allowed the government to evade making payments at the old parity to its bondholders because dollars at the new parity had substantially the same buying power as before.
Forty years ago, on August 15, 1971, President Nixon closed the gold window, severing the link between the U.S. dollar and gold that had existed since ratification of the Constitution in 1789, not to mention unilaterally terminating the post-war international monetary system agreed to at Bretton Woods in 1946. How did the Supreme Court decided the Fiat Money Cases that must then surely have come before it? Sorry, no such cases exist. They do not exist because unlimited fiat money with no credible link to gold or silver cannot be justified or excused under any plausible reading of the Constitution.
Faced with the indefensible, the Supreme Court -- indeed the entire American legal establishment from the best law schools to the highest levels of government -- adopted with respect to the monetary principles of the Constitution a policy akin to "Don't Ask, Don't Tell." The few cases that were brought challenging the constitutionality of the Nixon dollar met generally with peremptory dismissal at the trial level, citing without analysis the Legal Tender Cases and/or the Gold Clause Cases, followed by per curiam affirmance on appeal and denial of certiorari at the Supreme Court.
Many of you are familiar with the case Chris Powell describes as Howe v. All the Money in the World, or more accurately, versus All the Fiat Money in the World, also known as the Gold Price Fixing Case. Although the trial judge dismissed the price fixing claim for lack of antitrust standing, his opinion contained a reasonably neutral and detailed summary of the alleged facts regarding official efforts to suppress gold prices in an attempt to bolster the fiat dollar. Wide exposure of these allegations on the Internet coupled with the technical legal grounds for dismissing them left many with the conviction that the allegations were largely true. So the case could be judged in baseball lingo a sacrifice fly in that it advanced public understanding of the continued monetary importance of gold.
Two earlier monetary cases in which I participated could only be called strikes. The more recent involved an agreement by a city -- a state instrumentality -- to reimburse a developer for the costs of a road and utilities constructed and paid for in 1966, but only if and when the city exercised its right to allow others to use them, which it did not do until 1987. See Walter W. Fischer v. City of Dover, N.H. In 1966, of course, the dollar was still defined by law and international treaty with reference to gold; by 1987 not only had the paper dollar depreciated substantially in purchasing power, but also the United States had resumed issuing gold and silver legal tender coins.
Citing the prohibition against the states making any thing but gold or silver a legal tender, the developer demanded payment in the new gold or silver legal tender coins at their declared face value. The Supreme Court of New Hampshire rejected this demand, and the Supreme Court of the United States denied certiorari, declining yet another opportunity to address the constitutional issues presented by a continuously depreciating fiat dollar.
But it should be noted that enforcement through the courts is not the only possible redress under this prohibition, which is worded in a manner that grants to the states an affirmative power to make gold or silver a legal tender within their borders. Today increasing concern over the future of the dollar has prompted several states to move in this direction.
The older case, like the Gold Price Fixing Case, pitted me against a similar group of powerful defendants: the United States, the Federal Reserve Board, the Federal Open Market Committee, and the Secretary of the Treasury, at the time James Baker. Taking a leaf from von Mises, who regarded sound money as "an instrument for the protection of civil liberties," I asserted that the monetary provisions of the Constitution mean to guarantee to every citizen a right to the use and benefits of lawful money, that is, money legally and credibly defined with reference to gold or silver.
Brought in 1985, this case sought to engage the attention of the Reagan administration, which although elected on a platform calling for a return to the gold standard ultimately settled for the ineffective U.S. Gold Commission. See Report of the U.S. Gold Commission, Volumes I & II. To the surprise of many including the defendants' attorneys, the trial judge at the hearing on their motion to dismiss took an active and apparently sympathetic interest in my case, particularly the argument that secular depreciation in the purchasing power of unlimited fiat money undermined Article III, section 1, of the Constitution providing that federal judges shall "receive for their services, a Compensation, which shall not be diminished during their continuance in office."
But sympathetic though he was, the judge dismissed the case in a brief opinion applying the accepted formula of unexplained reliance on the Legal Tender Cases and the Gold Clause Cases, thus preparing it for quiet burial in an unmarked grave on appeal. To try to avoid this fate, I solicited supporting amicus briefs for my petition to the Supreme Court from three of Harvard Law School's most prominent constitutional scholars.
Two had served as Solicitor General of the United States, the government's chief counsel before the Supreme Court; one had been famously fired as Watergate special prosecutor; another was the former longtime dean of the school; and the third for many years was widely regarded as Harvard's candidate for the Supreme Court. Gracious replies from each, but no help.
None suggested that I had misread the Constitution or misconstrued the intent of the framers. Rather, in essence their collective view was that there was no possibility the Supreme Court would take the case, that the matter was too political, and anyway, what was so special about money linked to gold? As one put it: "J. M. Keynes said somewhere that the only reason for the gold standard was as a safeguard lest all the managers of the currency should suddenly go mad at once." Not surprisingly, my petition for certiorari was denied.
So here we are, with American debt and deficits running completely out of control and its banking system on life support from the Federal Reserve. Daniel Webster was right; unlimited fiat money has shaken the American constitutional system to its very foundations. The Constitution established a republic, a democratic form of government in which the powers of the majority and of the government itself are constrained by assorted means, among them a bill of rights, an independent judiciary, the separation of powers, various checks and balances, a reservation of non-delegated powers to the states or to the people, and not least the discipline of gold or silver.
That discipline seeks to restrain the natural spendthrift tendencies of all democracies, preserve equity among successive generations, and in a federal union like the United States, maintain economic and fiscal balance between the federal government and those of the states, provinces or regions. While a number of state constitutions require balanced budgets, the federal Constitution does not precisely because its framers assumed that sound constitutional money would force reasonably balanced budgets over time.
Candidate Obama argued persuasively that change would not come to Washington except through new players, but his economic team has featured the same old Keynesians responsible for creating the current economic mess in the first place. Unwilling to break from their orthodoxies, President Obama has continued down the path of saving the biggest banks, making us all slaves to this privileged elite, while at the same time trying to preserve an unaffordable welfare/warfare state.
It is long past time for real change; for a new team to include a few economists from the Austrian school; and for a new plan to deal with the nation's debt and deficits -- a plan to repair the nation's money and its credit just as adoption of the Constitution did back in 1787, when the phrase "Not worth a Continental" remained fresh in living memory.
Historically the courts have been almost as loathe to interfere in questions pertaining to war and peace or to management of the armed forces as to monetary affairs. But as the recent repeal of "Don't Ask, Don't Tell" in the military shows, this reluctance can be overcome when the president himself leads the effort to vindicate constitutional principles. Then the courts can become his powerful ally, and the threat of judicial intervention on the president's side can push Congress into supportive action.
What is more, continued erosion in the purchasing power of judicial salaries has again made them a hot issue, opening the door to sympathetic consideration by the courts of sound money arguments based on the judicial compensation clause. Indeed, Chief Justice Roberts himself has argued that inadequate cost-of-living increases are threatening the very independence of the judicial branch.
What should the president do?
First, declare that in his view the Constitution requires money credibly linked to gold or silver, and that absent a constitutional amendment authorizing a central bank and granting it authority to issue a wholly fiat legal tender, the national monetary system must be brought into compliance with the language, intent and wisdom of its framers. Put the blame for the nation's debt, deficits and ebbing economic vitality where it belongs: an addiction to unlimited fiat money. Explain that as with drug or alcohol addiction, the cure will not be easy, painless or quick, but the longer delayed, the worse the prognosis.
Second, commit his administration to working with Congress to develop and put in place "with all deliberate speed" a new monetary system meeting constitutional requirements. The precise details of the new system and the mechanics of its link to gold or silver are less important than making the commitment to restore constitutional money and starting the debate on how to do it. Indeed, rumblings in favor of a return to gold are already beginning to be heard.
Third, declare that his administration will not support a balanced budget amendment or any other amendment designed to excuse or perpetuate the failed monetary system currently administered by the Federal Reserve. Andrew Jackson brought down Nicholas Biddle's bank, and the president can bring down Ben Bernanke's.
As the president himself observed a couple of weeks ago: "At some point, I think if you want to be a leader, then you got to lead." It is a measure of FDR's leadership that he was reviled on Wall Street and branded a traitor to his class. President Obama should aim as high. The restoration of constitutional money would both reform Wall Street more completely than Dodd-Frank ever can and downsize the federal government beyond the worst fears of the president's base.
Ironically, the final bill for the Civil War -- the malignant constitutional precedent set by the Legal Tender Cases -- is coming due on the watch of America's first black president, whose election in 2008 fulfilled more fully than many thought possible the promise of the Civil War amendments: the Fourteenth extending equal protection of the laws and the Fifteenth voting rights to all citizens. No one owes more to the Constitution that he has sworn to uphold than President Obama, and today, win or lose in 2012, the stars have aligned to give him an opportunity to satisfy that debt by restoring the constitutional standard of value, exiting the paper road to financial and economic ruin, and retaking the golden path to a bright and prosperous future for what Lincoln called "the last best hope of earth."
1. Speech on the Specie Circular, IV Webster's Works (9th ed., Little, Brown, 1856), pp. 270-271, quoted in part by Justice Field in his dissent in Juilliard v. Greenman, 110 U.S. 421, 454-455 (1884). In Juilliard the Supreme Court held that the validity of the greenbacks did not depend on their being a war measure, arguing (110 U.S. at 447):
The power, as incident to the power of borrowing money and issuing bills or notes of the government for money borrowed, of impressing upon those bills or notes the quality of being a legal tender for the payment of private debts, was a power universally understood to belong to sovereignty, in Europe and America, at the time of the framing and adoption of the Constitution of the United States.
Daniel Webster's historical star has fallen in the past century, but in the last half of the nineteenth century he was by far the most quoted person in Congressional debates. Indeed, from his Second Reply to Hayne in 1830 until his death in 1852, he was in the words of Stephen Vincent Benet's famous short story, "the biggest man in the country." In 1900, when 97 electors cast ballots for the Hall of Fame about to be opened in New York, Washington received 97 votes, Lincoln and Webster tied for second with 96 votes each, Franklin received 94 and Jefferson 91.
By the time of Lincoln's assassination, Webster's prophesy, made on the Senate floor in his last grand performance on the seventh of March, 1850, had proved all too true. "Secession! Peaceable secession!" he had thundered, "Sir, your eyes and mine are never destined to see that miracle. ... [D]isruption of the Union... must produce war, and such a war as I will not describe, in its twofold character."
Webster argued 170 cases in the Supreme Court, an astonishing number never since matched, winning some of its most famous decisions. But he made his greatest constitutional argument in the Senate. In 1830 in a debate on a resolution concerning public lands, Senator Robert Hayne of South Carolina presented with ability and force the doctrine of nullification developed by John C. Calhoun. Calhoun's theory rested on the notion that the United States under the Constitution consisted of a compact of sovereign states, each retaining for itself the right to determine whether acts of the federal government were constitutional. Webster believed otherwise. He traced the constitutional union of the American people from before the Declaration of Independence, and he viewed the Constitution as the creation of one people, not of the individual states.
"It is, Sir, the people's Constitution," Webster argued in his Second Reply to Hayne, "the people's government; made for the people, made by the people, and answerable to the people." He continued:
The people, then, Sir, erected this government. They gave it a Constitution, and in that Constitution they have enumerated the powers which they bestow on it. They have made it a limited government. They have defined its authority. They have restrained it to the exercise of such powers as are granted; and all others, they declare, are reserved to the States or the people. But, Sir, they have not stopped here. If they had, they would have accomplished but half their work. No definition can be so clear, as to avoid possibility of doubt; no limitation so precise, as to exclude all uncertainty. Who, then, shall construe this grant of the people? Who shall interpret their will, where it may be supposed they have left it doubtful? ...
But, Sir, the people have wisely provided, in the Constitution itself, a proper, suitable mode and tribunal for settling questions of constitutional law. ... How has it accomplished this great and essential end? By declaring, Sir, that "the Constitution, and the laws of the United States made in pursuance thereof, shall be the supreme law of the land, any thing in the constitution or laws of any State to the contrary notwithstanding."
This, Sir, was the first great step. ... But who shall decide this question of interference? To whom lies the last appeal? This, Sir, the Constitution itself decides also, by declaring, "that the judicial power shall extend to all cases arising under the Constitution and laws of the United States." These two provisions cover the whole ground. They are, in truth, the keystone of the arch! With these it is a Constitution; without them it is a Confederacy.
In Lincoln at Gettysburg (Simon & Schuster, 1992), author Gary Wills writes that Lincoln considered the Second Reply to Hayne "the greatest American speech, and he consulted it in composing his House Divided Speech and the First Inaugural. Echoes of it can be found in other Lincoln speeches, including the Gettysburg Address." Wills adds: "It would be hard to find any other text, except the Declaration of Independence, which Lincoln used with such familiarity and respect."
On the seventh of March, 1850, Daniel Webster opened with words that became immortal the moment they were uttered: "Mr. President, -- I wish to speak today, not as a Massachusetts man, nor as a Northern man, but as an American, and a member of the Senate of the United States." That day Webster did not just buy time for the Union to gain in relative strength against the future Confederacy. He stood, as he always had, foursquare for the rule of law and the supremacy of the Constitution.
All the hullabaloo caused by the Seventh of March Speech, which Webster himself entitled "The Constitution and the Union," proceeded from a single point: his insistence that in America there is no higher law than the Constitution, and that all parts of the Constitution -- even a part as offensive as the fugitive slave clause -- must be observed and defended until lawfully amended as the Constitution provides. These were the words that enraged many of his constituents:
Every member of every Northern Legislature is bound by oath, like every other officer in the country, to support the Constitution of the United States; and the article of the Constitution which says to these States that they shall deliver up fugitives from service is as binding in honor and conscience as any other article. No man fulfills his duty in any Legislature who sets himself to find excuses, evasions, escapes from this Constitutional obligation.
As John F. Kennedy later wrote in Profiles in Courage (Cardinal, 1957), on that day Daniel Webster: "abandoned his previous opposition to slavery in the territories, abandoned his constituents' abhorrence of the Fugitive Slave Law,...and abandoned his last chance for the goal that had eluded him for over twenty years -- the Presidency." Years before he had promised the Senate that no man would ever charge him with an "inconsistency between [his] conviction and his vote, between his conscience and his conduct." And so, believing that Henry Clay's proposed compromise measures, including an effective fugitive slave law, were necessary to save the Constitution and the Union, Webster, in Kennedy's words, "preferred to risk his career and his reputation rather than risk the Union." With Webster's support, the Compromise of 1850 passed into law. The ugly spectre of secession retreated for another ten years, giving the northern states time to amass the industrial strength that all but assured their victory when the war came.
But the abolitionists and free soilers in the north never forgave Daniel Webster for what his successor in the Senate, Charles Sumner, labeled: "Mr. Webster's elaborate treason." No politician ever endured more severe criticism from more eloquent constituents. Whittier, Longfellow, Emerson, Horace Mann, William Cullen Bryant and James Russell Lowell denounced him. Webster's all too human flaws and shortcomings were manifest. Now they were embellished and exaggerated in the seamiest tales about Black Dan. Theodore Parker continued the attack from his pulpit even as Webster was laid to rest. "I know of no deed in American history," he cried, "done by a son of New England to which I can compare this, but the act of Benedict Arnold."
2. Legal Tender Cases, 79 U.S. (12 Wall.) 457, 553 (1870):
It is said that there can be no uniform standard of weights without weight, or of measure without length or space, and we are asked how anything can be made a uniform standard of value which has itself no value? This is a question foreign to the subject before us. The legal tender acts do not attempt to make paper a standard of value. We do not rest their validity upon the assertion that their emission is coinage, or any regulation of the value of money; nor do we assert that Congress may make anything which has no value money. What we do assert is the Congress has power to enact that the government's promises to pay money shall be, for the time being, equivalent in value to the representative of value determined by the coinage acts, or to multiples thereof. ... It is, then, a mistake to regard the legal tender acts as either fixing a standard of value or regulating money values, or making that money which has no intrinsic value.
These same points were emphasized in the concurring opinion of Justice Bradley (id. at 560):
This power [to emit legal tender notes] is entirely distinct from that of coining money and regulating the value thereof. It is not only embraced in the power to make all necessary auxiliary laws, but it is incidental to the power of borrowing money. It is often a necessary means of anticipating and realizing promptly the natural resources, when, perhaps, promptness is necessary to the national existence. It is not an attempt to coin money out of a valueless material, like the coinage of leather or ivory or kowrie shells. It is a pledge of the national credit. It is a promise by the government to pay dollars; it is not an attempt to make dollars. The standard of value is not changed.
3. Gold Clause Cases, 294 U.S. 240-381 (1935).
4. Perry v. United States, 294 U.S. 300 (1935). Dealing with gold clauses in U.S. government bonds, the Court stated the fundamental issue (at 350):
There is no question as to the power of the Congress to regulate the value of money, that is, to establish a monetary system and thus to determine the currency of the country. The question is whether the Congress can use that power so as to invalidate the terms of the obligations which the Government has theretofore issued in the exercise of the power to borrow money on the credit of the United States. ... [T]he Government [contends] that when, with adequate authority, the Government borrows money and pledges the credit of the United States, it is free to ignore that pledge and alter the terms of its obligations in case a later Congress finds their fulfillment inconvenient. The Government's contention thus raises a question of far greater importance than the particular claim of the plaintiff. On that reasoning, if the terms of the Government's bond as to the standard of payment can be repudiated, it inevitably follows that the obligation as to the amount to be paid may also be repudiated. The contention necessarily imports that the Congress can disregard the obligations of the Government at its discretion and that, when the Government borrows money, the credit of the United States is an illusory pledge.
The Court held (at 350-351):
We do not so read the Constitution. There is a clear distinction between the power of the Congress to interdict the contracts of private parties when they interfere with the exercise of its constitutional authority, and the power of the Congress to alter or repudiate the substance of its own engagements when it has borrowed money under the authority which the Constitution confers. In authorizing the Congress to borrow money, the Constitution empowers the Congress to fix the amount to be borrowed and the terms of payment. By virtue of the power to borrow money "on the credit of the United States," the Congress is authorized to pledge that credit as an assurance of payment as stipulated, -- as the highest assurance the Government can give, its plighted faith. To say that the Congress may withdraw or ignore that pledge, is to assume that the Constitution contemplates a vain promise, a pledge having no other sanction than the pleasure and convenience of the pledgor. This Court has given no sanction to such a conception of the obligations of our Government. [Emphasis in original.]
But while holding that Congress was without authority to nullify or override gold clauses in U.S. government bonds, the Court in Perry effectively let the government off the hook on its obligation to pay in gold at the previously agreed parity (at 357-358):
Plaintiff has not shown, or attempted to show, that in relation to buying power he has sustained any loss whatever. ... On the contrary, payment to the plaintiff of the amount which he demands would appear to constitute not a recoupment of loss in any proper sense but an unjustified enrichment.
5. 31 U.S.C. s. 5112, as amended by the Gold Bullion Coin Act of 1985 and the Liberty Coin Act.
6. See, e.g., Utah and other states push gold as legal tender, prepares for US dollar collapse, International Business Times (May 30, 2011); C. Riley, Utah: Forget dollars. How about gold?, CNN Money (March 29, 2011).
7. Howe v. United States, 632 F.Supp. 700 (D. Mass. 1986), aff'd per curiam, 802 F.2d 440 (CA1 1986), cert. denied, 479 U.S. 1066 (1987).
8. Ludwig von Mises, A Theory of Money and Credit, Ch. 21 (1952):
It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically it belongs in the same class with political constitutions and bills of rights. The demand for constitutional guarantees and for bills of rights was a reaction against arbitrary rule and the nonobservance of old customs by kings. The postulate of sound money was first brought up as a response to the princely practice of debasing the coinage. It was later carefully elaborated and perfected in the age which--through the experience of the American continental currency, the paper money of the French Revolution and the British restriction period--had learned what a government can do to a nation's currency system.
9. Letter to President Reagan, May 7, 1986.
10. Petition for Certiorari in Howe v. United States, supra, note 7.
11. Correspondence soliciting amicus briefs, October-November, 1986.
12. For a list of court cases challenging the policy, including Log Cabin Republicans v. United States et al., currently before the Court of Appeals for the Ninth Circuit, see Don't Ask, Don't Tell, Don't Pursue, Royal Crown Law Library, Stanford University; for a general history of the policy, see Don't ask, don't tell, Wikipedia.
13. For a discussion of recent and still ongoing litigation by certain judges alleging that inadequate COLA adjustments violate the judicial compensation clause, see B.A. Zemil, Federal Judges Try Again for Cost-of-Living Raises, Litigation News (American Bar Association, July 1, 2009). See also R. Barnes, Chief Justice Roberts Tones Down Annual Salary Plea, Seeks Cost-of-Living Increase for Federal Judges, The Washington Post (January 1, 2009); United States Courts, Federal Judicial Pay Increase Fact Sheet.
14. The phrase "with all deliberate speed" was used in the decree ordering desegregation of public schools in Brown v. Board of Education of Topeka, 349 U.S. 294 (1955), implementing the holding in 347 U.S. 483 (1954) that separate publicly supported schools for black and white students were unconstitutional. The genesis of the phrase is discussed in American Treasuries of the Library of Congress (Reason).
15. See, e.g., J. Shelton, Gold Standard or Bust, The Weekly Standard (August 1, 2011); A. Evans-Pritchard, Return of the Gold Standard as world order unravels, The Telegraph (July 14, 2011); P. Dykewicz, Forbes Predicts U.S. Gold Standard Within 5 Years, Human Events (May 11, 2011); R. Zoellick, The G20 Must Look Beyond Bretton Woods II, Financial Times (London) (November 7, 2010) (alternate link).
16. News conference, July 22, 2011.
17. For an interesting comparison of the leadership styles of Franklin D. Roosevelt and President Obama, see Kevin Baker, "Barack Hoover Obama, The best and the brightest blow it again," Harper's (July 2009).
18. A. Lincoln, Annual Message to Congress, December 1, 1862, proposing a plan for "remunerative emancipation" and concluding:
Fellow-citizens, we cannot escape history. We of this Congress and this administration, will be remembered in spite of ourselves. No personal significance, or insignificance, can spare one or another of us. The fiery trial through which we pass, will light us down, in honor or dishonor, to the latest generation. We say we are for the Union. The world will not forget that we say this. We know how to save the Union. The world knows we do know how to save it. We -- even we here -- hold the power, and bear the responsibility. In giving freedom to the slave, we assure freedom to the free -- honorable alike in what we give, and what we preserve. We shall nobly save, or meanly lose, the last best hope of earth. Other means may succeed; this could not fail. The way is plain, peaceful, generous, just -- a way which, if followed, the world will forever applaud, and God must forever bless.