Paul L. Caron

Thursday, March 12, 2009

Staudt Presents Funding Wars: The Hidden Role of the American Judiciary Today at Indiana

Nancy Staudt (Northwestern) presents Funding Wars: The Hidden Role of the Supreme Court, in her forthcoming book, How the Law Funds Wars: The Hidden Role of the American Judiciary. at Indiana today as part of its Tax Policy Coloquium Series hosted by Leandra Lederman.  Here is the Conclusion:

Federal Court dockets are filled with economic disputes that implicate the national budget. This reality suggests that courts are in a position to assist the federal government in its revenue raising activities in times of need. The crisis and signaling theory posits that judges will in fact use their power to redirect private monies to the federal government in times of foreign crises; to identify the crises in which the elected branches of the government need funding assistance, courts will look to signals that credibly suggest the nation is in the midst of a crises and a funding emergency is on hand. These signals could include formal declarations of war, congressional wartime resolutions, troop deployments, federal defense spending, and even popular opinion on the wartime activities.

In this essay, I find that decision-making in the U.S. Supreme Court in the context of taxation suggests national crisis indeed do affect the justices in a manner that is consistent with theory. In the pre-1953 era, the judicial propensity to decide cases in favor of the government increased to notable levels in both WWI and WWII, but not the Korean War, suggesting that formal war declarations serve as more trustworthy signals of crisis activity in need of a funding boost from the Court. In the post-1953 era, the Court relied more heavily on defense spending patterns than on the other available signals, such as troop deployment and congressional resolutions. Surprisingly, however, the justices also seemed to account for the popularity of the war—the Vietnam War had a negative effect on the federal government’s win rate while the War on Terror has had positive effect on the Court’s propensity to issue pro-government decisions. These findings are robust to various specifications and methods.

As noted at the outset, however, these findings are still somewhat preliminary. The crisis and signaling theory posits that courts and all levels of the judicial hierarchy will adopt a pro-government position in crisis periods and in a wide range of legal contexts. Accordingly, quite a bit of more work must be undertaken before broad conclusions about the judiciary’s role in funding national emergencies are justified. I plan to investigate the decision-making in the Supreme Court in additional economically important cases, and then extent the study to appellate and (hopefully) district courts. Only then will I be able to understand fully how crises and signals affect federal judges and legal outcomes.

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