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Easterbrook: If States Want Federalism, They Must Respect the Rules of Corporate Competition

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by Publius
Posted November 15, 2012, 11:34 AM

Following Randy Barnett’s presentation at FedSoc’s 2012 National Lawyers Convention, Chief Judge Frank Easterbrook of the Seventh Circuit Court of Appeals said he wished to discuss the federalism limits in the Constitution rather than the Supreme Court’s interpretation of those limits. He spoke of how the Founders understood such limits, and the large social changes that have occurred since the Constitution was written, such as the far greater amount of interstate commerce. The judge’s role, however, is to look to the original meaning of the text, not to the anticipated consequences (or lack thereof).

The chief judge specifically focused on the important limits regarding the regulation of corporations and securities, which is commonly neglected in discussions of federalism. The domain in which states can beneficially compete has been greatly restricted by national legislation, such as Sarbanes-Oxley, that make rules for all corporations engaging in interstate commerce.  (He noted the irony that Enron’s corporate practices, which were the cause of the Sarbanes-Oxley Act, would have in fact met every requirement of it.) Such corporate competition is more important than healthcare competition; state should be able to regulate insurance policies just like corporate charters.  The McCarran-Ferguson Act, which exempts the business of insurance from most federal regulation, was intended to accomplish this, but the states themselves have blocked that competition. The moral of all of this is that if states want federalism, they must respect the rules of competition.

Categories: Federalist Society

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