During a Supreme Court hearing last week, Justice Samuel Alito asked, “Could the government say to a manufacturer of cell phones, ‘You can sell cell phones. However, every fifth one you have to give to us?’”
Although his example was cell phones, Justice Alito was really talking about raisins. The case is Horne v. Department of Agriculture.
Where are we going? To how much the government can legally help the economy.
The Raisin Reserve
Our Bottom Line: John Maynard Keynes
During 1934, with unemployment high and production low, British economist John Maynard Keynes was reported to have crumpled up a pile of towels rather than just one after washing his hands in a U.S. restaurant. His goal he said (if this really happened and no one is sure) was to create more jobs.
More than what businesses could do, Keynes (1883-1946) believed that a contracting economy needed the job creation that government could provide through deficit financing. Government spending would then multiply as it passed from hand to hand. Just pay a worker, he or she spends that income, the recipient then spends it, businesses have to expand and an inflated total (called the multiplier) of spending enters the GDP.
A part of 1930s Keynesian legislation, the Agricultural Marketing Act and the crop reserves that it subsequently created were the government’s attempt to buoy a sluggish economy by increasing farmers’ incomes. Now, perhaps violating the Constitution’s Fifth Amendment. it might be declared unconstitutional.
This Daily Show segment on the raisin reserve is great for huge smiles. (I could not discover a direct youtube link.)