CLINTON v. CITY OF NEW YORK
This case consolidates two separate challenges to the constitutionality of two cancellations, made by President William J. Clinton, under the Line Item Veto Act ("Act"). In the first, the City of New York, two hospital associations, a hospital, and two health care unions, challenged the President's cancellation of a provision in the Balanced Budget Act of 1997 which relinquished the Federal Government's ability to recoup nearly $2.6 billion in taxes levied against Medicaid providers by the State of New York. In the second, the Snake River farmer's cooperative and one of its individual members challenged the President's cancellation of a provision of the Taxpayer Relief Act of 1997. The provision permitted some food refiners and processors to defer recognition of their capital gains in exchange for selling their stock to eligible farmers' cooperatives. After a district court held the Act unconstitutional, the Supreme Court granted certiorari on expedited appeal.
Did the President's ability to selectively cancel individual portions of bills, under the Line Item Veto Act, violate the Presentment Clause of Article I?
Legal provision: Article 1, Section 7, Paragraph 2: Separation of Powers
Yes. In a 6-to-3 decision the Court first established that both the City of New York, and its affiliates, and the farmers' cooperative suffered sufficiently immediate and concrete injuries to sustain their standing to challenge the President's actions. The Court then explained that under the Presentment Clause, legislation that passes both Houses of Congress must either be entirely approved (i.e. signed) or rejected (i.e. vetoed) by the President. The Court held that by canceling only selected portions of the bills at issue, under authority granted him by the Act, the President in effect "amended" the laws before him. Such discretion, the Court concluded, violated the "finely wrought" legislative procedures of Article I as envisioned by the Framers.
Argument of Seth P. Waxman
Chief Justice Rehnquist: We'll hear argument now in Number 97-1374, William J. Clinton v. The City of New York.
Mr. Waxman: Mr. Chief Justice, and may it please the Court:
Constitutional principles of separation of powers govern both the standing and merits issues of the case.
With respect to standing, this Court recognized last term in Raines v. Byrd that the Article III inquiry is especially rigorous when plaintiffs challenge the allocation of constitutional power, yet here, in the New York case, the State, which is not even a party, has not been denied a single dollar in medicaid reimbursement and the Secretary of HHS has not even determined that it should.
In Snake River, the plaintiffs include no entity whose taxes could possibly be affected by the challenged cancellation and they have not shown that the cancellation interfered with any transaction from which they likely would have benefited.
On the merits, the President's cancellations violated neither Article I nor the separation of powers.
The Presentment Clause was fully satisfied when the President signed the Balanced Budget and Taxpayer Relief Acts making them laws.
When the President subsequently cancelled sections 4722(c) and 968, he was not returning portions of the presented bills while signing other portions into law.
He was implementing a limited discretionary authority to execute the law as it had been enacted by Congress.
Cancellations under the Line Item Veto Act do not prevent Congress from making whatever laws it wants.
Congress could readily have exempted sections 4722 (c) and 968 from the President's authority.
It chose not to do so and, indeed, it identified section 968 in the Taxpayer Relief Act as an item subject to cancellation.
Justice Kennedy: Is this more constitutionally defensible than what we might call a pure line item veto in which he--
Mr. Waxman: It is.
Justice Kennedy: --In which he can veto the minute that... before the bill ever becomes law, and is the reason for that because for a moment in time, at least, there's a little law?
Mr. Waxman: No.
Justice Kennedy: Or a big law?
Mr. Waxman: No.
The critical reason is the point I just identified, which is in a true line item veto, which everybody understands is unconstitutional, the Congress does not retain control to determine which spending or tax items the President can't cancel.
If the President has the authority... and this is critical.
If the President has the authority to cancel a provision before it becomes a law, under the Presentment Clause he can cancel a designated tax or spending item and then sign the law and Congress has thereby deprived itself of the opportunity to create the law.
Here, the President signs the law and it becomes a law under the Presentment Clause, and when he does so, if the law contains a designated cancellable item, Congress has made a law telling the President that, subject to certain determinations and certain considerations, and certain certifications, you have a single, binary choice.
You can either spend the money as provided, or you can spend it for deficit reduction by putting that money into a lockbox, and in that manner the President is executing the law that Congress has enacted, not vetoing an item or repealing a provision that Congress has enacted.
It's no different, I sus... I suggest, for Article I purposes, than if, instead of enacting the Line Item Veto Act, Congress had simply decided to put in as section 1 of every spending and taxing bill that it enacts what is now section 961 of the Line Item Veto Act.
It says, we have the following spending and taxing provisions, but subject to these articulable principles and these constraints, the President may decide, if he signs this law, not to do certain things.
Justice Kennedy: Well, so far as the locked box is concerned, this bill is the same as a line item veto.
I mean, it's in a locked box that's going to contribute to reducing the deficit.
So that's not a distinction between the two.
Mr. Waxman: Well, I think the... I think it's... the lockbox feature of this, which is the feature that gives the President a single binary choice, tends to make this much less of a delegation problem under separation of powers than might otherwise exist, because in contradistinction to cases in which the Court has upheld, for example, delegation of authority to the FCC or the SEC to essentially create an entire code of conduct for the securities industry, the Line Item Veto Act is not... and in this respect I think it's unique and uniquely constrained.
It's not self-executing.
The President can't do anything with his cancellation authority unless Congress subsequently passes an act that has a cancellable item in it and does not provide that the President's authority will not be subject to cancellation.
It's almost the... a mirror image of the Impoundment Control Act.
Justice Kennedy: But that's... that also sounds to me the same as what we might call the pure line item veto.
Mr. Waxman: Well, the--
Justice Kennedy: A single, simple binary choice.
Sign it or X it out.
Mr. Waxman: --The problem... the constitutional deficiency in the line item veto, the... a pure, a true item veto, is that it violates the Presentment Clause, which provides, among other things, that the bill that the President signs making it a law has to be the bill that each... a majority of each House of Congress enacted, and if the President can excise a provision before he signs the law, that's violated and, as this Court has indicated--
Justice Scalia: But Mr. Waxman, you wouldn't... General Waxman, you wouldn't say that that's remedied if, by the simple fact that it only applies to later laws where Congress says he can do that.
I mean, I don't see how that argument carries any water at all.
Mr. Waxman: --Well--
Justice Scalia: Your argument that, after all, he cannot exercise this function on any legislation, but only later legislation where Congress chooses to let him exercise it.
You wouldn't say that that would make an invalid line item veto provision good, would you?
Mr. Waxman: --I... if... there are two bases for a constitutional challenge to this authority.
One is under Article I and whether... and asks the question whether, in fact, the operation of this statute violates the formal requirements of the Presentment Clause or, in effect, effects a repeal.
The other large issue is whether this represents a violation of the separation of powers as applied to Congress through the "non-delegation doctrine", and we--
Justice Scalia: Right, but what I'm suggesting is, I don't see how the fact that it only applies to later legislation where Congress lets it apply has any bearing upon either of those questions.
Mr. Waxman: --Well, if it... it has a bearing on the Article I issue.
I don't think that the timing of this relates to the scope or breadth of the delegation except... I take that back.
I think it relates to both.
What Congress... by making this bill... this act forward-looking, what it basically is saying, Congress has reserved for itself the right, in every subsequent spending or taxing bill that has a cancellable provision, to decide, at the time that it passes those bills, whether it will or will not allow the President to exercise that authority.
Justice Scalia: That's fine, but once it decides that it will, you have the same problem, that the... I mean, you may argue that it's no problem on other grounds, but I don't see how it becomes--
Mr. Waxman: --Well--
Justice Scalia: --no problem simply because Congress has said the President can do it.
Mr. Waxman: --There are many historical examples where Congress has given the President authority to, if you will, repeal the effect of a prior enacted statute, but--
Justice Souter: Yes, but not to repeal the statute, and I mean, that's the difference.
Mr. Waxman: --Well--
Justice Souter: The examples that you give are sort of the kind of fact-finding examples in which, if the President finds a given fact to be the case, then a consequence follows and he must declare that consequence and implement it, but that's not what we've got here.
Mr. Waxman: --Well, I... with all due respect, Justice Souter, this is not a repeal of a provision.
Repeals of provisions of acts, or acts themselves, have got to follow the Presentment Clause.
There's no question--
Justice Souter: Well, but I mean, that's the... you say it's not, but that's one of the questions.
Mr. Waxman: --I... let me try and explain why it--
Justice Ginsburg: Well, is the effect is... in effect, is it... it says the law is no longer there.
The law is no longer applicable.
You can call it a different word, but it's the same thing.
Mr. Waxman: --Well, Justice Ginsburg, let me try and respond to these two questions in two ways.
First of all, under the lockbox provisions of 691c, a cancelled provision does retain real, legal budgetary effect.
It removes the amount... that amount of money under Gramm-Rudman-Hollings and the Budget Enforcement Act from Congress' ability to spend that equivalent amount of money.
Under the Budget Enforcement Act, ordinarily, if a particular provision were vetoed, or not... money were not used by the President, Congress has the authority, up to the budget baseline, to enact another provision and spend that money.
A cancellation of a provision in this act requires that that money be devoted to deficit reduction, so first of all it is not true that it has no remaining effect, but even--
Justice Scalia: Well, that's just an effect on Congress' own internal rules.
Mr. Waxman: --No.
Justice Scalia: Is it?
Mr. Waxman: No.
Justice Scalia: Isn't it?
Mr. Waxman: It is not.
The Budget Enforcement Act as amending the Gramm-Rudman-Hollings Act of 1985 are statutes, laws that bind Congress and the President.
They provide mandatory sequestration authority in the President and in Congress in the event that the baseline is exceeded, and what the lockbox provision of the Line Item Veto Act does is to say, if this is not an issue of whether the President wants to implement this provision or not.
The President must implement this provision in accordance with the law that Congress enacted, and that means that you can either spend the money, give effect to this provision to build a new dam in West Virginia, or take the money that would have been spent for that and put it in the deficit lockbox which, under the Budget Enforcement Act, means that you cannot by... enact a compensating piece of legislation to otherwise spend the money.
It reduces the amount of money that Congress and the President can spend.
But even if it didn't have that effect, we think that even without the lockbox provision this act would be constitutional, because there are many examples, and I respectfully submit that they are not all so easily distinguishable, Justice Souter, of instances where Congress has given one of the other two branches the authority to take acts unilaterally that repeal not the provision but the effect of the provision.
I mean, maybe the best example is the Rules Enabling Act, which provides under 28 U.S.C. section 2072b, that the court may promulgate rules for the district courts of procedure and evidence and that any... and that those rules will v. Degas--
Justice Breyer: What's the... I don't want to cut you off because you're giving other examples, but I'd like an example that is the closest you can come to the following, that Congress passes a law that says next year Mr. Smith, Mr. Jones, and 18 other people will not have to pay taxes amounting to $18 million.
And then it says to the President, Mr. President, as you wish, in the national interest you can decide whether Mr. Smith or Mr. Jones or any group of the other 18 will, in fact, pay taxes, up to $10 million.
Now, is there... the standard being, in the national interest.
So he can choose to tax four people, 16 people no people, as he wishes, without a standard but for the national interest.
Mr. Waxman: --Well--
Justice Breyer: Now, what example is there that's the closest, in the past, to the President having that kind of authority to pick and choose whom to tax, whom not to tax, with the standard of the national interest being the only control?
Mr. Waxman: --Justice Breyer, the question that you're raising is raising a question not under Article I but under the delegation doctrine.
Justice Breyer: That's right.
Mr. Waxman: I want to make sure that I understand--
Justice Breyer: That's exactly right.
I'm accepting all your arguments up to that point, hypothetically.
Mr. Waxman: --I'll bank that.
The... under the delegation doctrine, the question always is, after... well, at least in this century, whether Congress has supplied an intelligible principle or whether, as... under the test that this Court frequently announces, it is constitutionally significant if Congress clearly delineates the general policy, the public agency that is to implement the policy, and the boundaries of the delegated authority.
Now, in your question you have posited an example in which Congress has given the President no intelligible principle other than the national interest.
I think that raises a much more difficult question than we have here, because an argument could be made that the President is constitutionally required to act in the national interest, but the issue would be, is the principle sufficiently intelligible.
Now, the best cases that we have for the historical precedence for giving the President discretionary authority to cancel limited tax cuts or revenue-generating or nonrevenue-losing provisions would be the cases that are recited in J. W. Hampton and in Skinner, where the President was often authorized to decide whether or not to collect duties or tariffs and several of these temporary provisions were permanent, and I think... you know, it's--
Chief Justice Rehnquist: But those were based on factual determinations that the President was entitled to make under the statute, weren't they?
Mr. Waxman: --They were, and the issue... sometimes the determinations were specifically outlined, as in Field v. Clark, where it was very specific, and sometimes they were very, very general, and the issue then is only whether the President has a sufficiently intelligible principle.
You know, what's interesting about these old cases, and there are many, many of them, is that these were authorities that the President was exercising.
This was discretion he was exercising at a time in our country before we had an income tax and when in general the very large portion of the Federal revenues were raised by tariffs and custom duties.
Justice Kennedy: Well, in Justice Breyer's hypothetical, you and he seemed readily to agree that we can just look at this as a delegation problem.
From the taxpayer's standpoint, this was a law that's been cancelled, and the taxpayer has an expectation the law's not going to be cancelled unless both Houses of Congress agree on it.
Delegation is not just a subset of this larger problem, it seems to me.
Mr. Waxman: No.
Justice Kennedy: I don't think that larger problem goes away with Justice Breyer's hypothetical.
Mr. Waxman: I didn't mean to suggest that it would.
I... there are two different bases for constitutional challenge.
One which I was discussing with Justice Breyer is whether or not there is a delegation of authority that exceeds what Congress may do under the Separation of Powers Clause.
The other constellation of issues relate to Article I, and I respectfully suggest that with respect to these limited tax cuts the Article I problem is even less than with respect to the other provisions, because this is not an example of the President repealing a provision of the law that Congress has enacted.
With respect to the limited tax cuts under section 691f, the Joint Committee on Taxation is required to go through and specify in the actual tax bill which provisions of the bill are limited tax cuts subject to the President's cancellation, so... and that's exactly what was done in this case in the Taxpayer Relief Act.
There is a provision in which the Congress has said, attention, Mr. President, please look at the following provisions.
These are limited tax cuts as to which you will have cancellation authority if you wish it.
Chief Justice Rehnquist: How does that affect a constitutional question?
Mr. Waxman: Well, it... what it demonstrates, Chief Justice Rehnquist, is that what the President is doing is not repealing a provision of a law that Congress has enacted, but executing a discretionary authority that Congress has given him.
Let me give you an example that was helpful to me when I first started thinking about this problem.
If Congress enacted a law... and there is a very precise historical precedence for this.
Congress passed a law that contained 10 different spending items, but they put a provision in that basically said, in legalese, look, Mr. President, we think all 10 of these projects are worthwhile, but we're very concerned about the deficit, and we don't really think that the country ought to be funding more than eight of them.
Use the following factors and pick whichever eight of the 10 you want.
Nobody, I suggest, would suggest that there is an Article I problem there.
Justice Souter: Well, if the factors are not factual, someone would suggest that.
Mr. Waxman: --They--
Justice Souter: If the... if in your example the factors that the Congress specified were straight fact as opposed to normative factors, we'd be back in the old cases that you and I referred to earlier, but if the example is a normative example, as in the public interest, then those cases are not authority, and you have, it seems to me, a very different Article I problem.
Mr. Waxman: --I--
Justice Scalia: Or at least if you make some of those 10 not simply refusal to spend money, but elimination of taxes.
I mean, you could get anything through on the basis of the prior authority the President has always had simply not to expend money which Congress has authorized but not... not compelled him to spend.
But make some of those 10 tax provisions.
Mr. Waxman: --Well, again, this Court in Skinner stated that the standard for separation of powers analysis with respect to tax provisions is no different than it is with respect to spending provisions or any other provision in the Constitution under Article I.--
That is, the same standard of nondelegation applies, and it applies with particular force here because in the tax provision the Line Item Veto Act provides that the Congress will specify for the President in the actual bill that's... taxing bill that's presented to him which items he should... he may or may not cancel.
Now, that may be... that may leave a delegation doctrine issue if you think that he doesn't have sufficient intelligible principles, but it is not a question of the President, by exercising a discretionary choice that Congress gives him in the law that's passed, an Article I problem, unless I'm seriously astray.
Justice Ginsburg: Is there anything like, here's a laundry list of items, Mr. President.
Here's a capital gains treatment for so-and-so, and relief from taxes from so-and-so.
We don't want to take the political heat for making the choice, so you pick.
That sounds to me like legislating.
I mean, whatever legal dressing that you give to it, it's saying to the President, you make this hard choice that we don't want to make.
We're giving out all these plums to everybody and we don't want to take away any of them.
You do it.
Mr. Waxman: And what's troublesome about your example, Justice Ginsburg, relates not to Article I, because the law has been passed and signed by the President, but to the separation of powers.
Congress cannot, we know, delegate its law-making power.
It can't delegate the authority to make the laws, and if it just passes a law that says, here are two things we think are really nice, but we don't really have the money to spend and you just pick whichever one you want, I think the Court would appropriately say, look, the Congress has delegated its law-making function because it has not provided a "intelligible principle" by which the executive can exercise his discretion.
In this case--
Justice Souter: What is the constitutional distinction between what you call law-making and law-repealing?
There isn't any.
Mr. Waxman: --Between law-making and law--
Justice Souter: In Justice Ginsburg's example an appeal is being effected, and that is law-making.
Mr. Waxman: --If Congress... there is... it is not our contention that a repeal of a law can be effectuated by any means other than those specified in Article I.--
It is our contention, Justice Souter, that when Congress passes a law that contains two spending or taxing or tax cut provisions and says to the President, with whatever principles or not, you may choose which one of these to execute and which one not to, the President is exercising a discretionary authority that Congress has given him, and if they've given him sufficient intelligible principles, it's constitutional.
Now, in the--
Justice Kennedy: Well, of course, that... this case is different, because it says you have... you can either implement both, one, or neither.
Mr. Waxman: --But--
Justice Kennedy: That's what this case is.
Mr. Waxman: --Well, first of all, the Line Item Veto Act applies to three very, very specifically defined provisions relating to spending and revenue that account for a very small portion of the Federal budget deficit, and it provides that before an item will be cancellable it must satisfy each of three criteria, and even if it does, the President must make three different... make certain determinations.
He must take into consideration a number of factors that are specified, and he must identify for the Congress a number of factors in his cancellation message.
Chief Justice Rehnquist: Well, General Waxman, you say it applies only to a very small amount of spending, but if we uphold it here, it could then be extended to a vast amount of spending.
I don't see that's a constitutional distinction.
Mr. Waxman: I think there would be a different question... we might be prepared to defend it, but there would be a different question if the President was given the authority to cancel existing items of direct spending, which would be the equivalent of the repeal of the effect of a prior law.
Here, we're only talking about new spending, discretionary spending and new items of direct spending account for one-third, approximately one-third of the Federal budget.
The discretionary spending part is the same authority that the Presidents have clearly had since the first Congress not to spend the full amount of appropriated funds or to... you know, to act with almost complete discretion under lump sum appropriation authority.
Justice Scalia: This is--
--You equate with spending letting people keep their money, and that is to say, not enforcing a tax?
I mean, I'm not sure that's a proper equation.
Mr. Waxman: Well, I'm not suggesting that there is--
Justice Scalia: Appropriations bills have always been treated differently, and when you extend it from simple appropriations and say the President, even though it's been appropriated, doesn't have to spend it, to... to the fact he can be given the option, you know--
Mr. Waxman: --No, Justice Scalia, I... I was--
Justice Scalia: --It's your choice, enforce the tax or not.
Mr. Waxman: --We're not saying that.
It's not our position that, because the President has had historical discretionary authority, when Congress has given it to him, to decline to spend items or to abolish agencies, or transfer agency functions, therefore there's no difference with taxes.
The point I was making with the Chief Justice was the analogy between discretionary spending and what the law calls new items of direct spending.
With respect to the tax provisions, this ship is prepared to stand on its own bottom, which is, we think that there is independent historical precedent for Congress giving the President the discretionary authority to decline to implement certain revenue provisions upon the application of certain intelligible principles.
Justice Breyer: But throughout on that, on the particular... it's the same point, that I want to get something you almost said, and you stopped--
Mr. Waxman: Thank you.
Justice Breyer: --just before you said it, and that is the reason that the... to uphold the tax provisions, you say, is not to give the President total authority under the Constitution to rule by decree, should Congress want him to do it, because there's an intelligible principle.
Mr. Waxman: Yes.
Justice Breyer: And the intelligible principle, you say, is not just, do what's in the public interest, it is...?
Mr. Waxman: The intelligible principle is that... first of all, in order for there to be a targeted tax cut, there has to be a baseline tax, but the President must determine, number 1, that cancellation will reduce the Federal budget deficit, and this is not, by the way, as the other side contends, an ipso facto claim, because many tax provisions are enacted on the notion and on the budgetary assumption that they will generate additional economic activity and raise taxes, and in that instance the President would not be able to make that determination... raise money and provide more taxes.
Secondly, he must determine that it will not impair any essential Government function, that it will not harm the national interest, and in making those determinations the President is directed to consider the legislative history, the construction and purposes of the law which contains the item to be cancelled, which might relate, in the case of the State--
Justice Stevens: How much time does he have to make these determinations?
Mr. Waxman: --He has 5 days after he signs the bill, which would give him a maximum of 10 days.
Now, in the context of the... in the regime of the Budget Enforcement Act and Gramm-Rudman-Hollings, where OMB and CBO are required to make daily... weekly, if not daily calculations about where we are in terms of the budget baseline and the spending caps, there is a very important purpose to be served by requiring the President to decide yes or no, whether or not a particular item will be cancelled, and then to give the Congress the authority, particularly with respect to annual appropriations bills, to try and file... to enact, consider and enact a disapproval bill.
I mean, the irony of the--
Justice Scalia: General Waxman, would you give... I'm coming back to Justice Breyer's question.
Would you give me something a little more... that I can sink my teeth into?
You've told me what these things that the President cancels cannot be.
They cannot do this, and they cannot do that.
That limits the universe of what he can cancel.
Now, once that universe is limited... they can't be this and they can't be that... what must they be?
Mr. Waxman: --Well, they must--
Justice Scalia: What is the criterion?
I mean, to say you've just limited the universe of possible cancellations--
Mr. Waxman: --Are we talking about tax benefits here?
Justice Scalia: --Anything, the tax benefits or the elimination of spending.
Mr. Waxman: The President... the only--
Justice Scalia: What is the criterion when he selects it?
You've told me what he can't cancel.
Now, how does he decide what he must cancel?
Mr. Waxman: --He must determine, number 1, is this a cancellable item, which in the case of tax provisions, he's helped with by the legislation he's considering.
Justice Scalia: All right.
Mr. Waxman: Because Congress tells him that.
Justice Scalia: That just limits the universe.
Mr. Waxman: Right.
Second of all, he must... he cannot cancel unless he makes the three determinations that I've said.
Justice Scalia: All of which just limit the universe.
Mr. Waxman: Right, and--
Justice Scalia: The universe is limited.
We have the universe.
Mr. Waxman: --That's right, and--
Justice Scalia: Now, how does he make the decision?
What is the criterion that Congress has given him to pick what to cancel?
Mr. Waxman: --May I answer?
He is given in the statute a multitude of factors that he must consider and certify to Congress, and within that realm he has discretion, much less discretion than the FCC, or the SEC, or the ICC have been given.
Argument of Louis R. Cohen
Chief Justice Rehnquist: Thank you, General Waxman.
Mr. Cohen, we'll hear from you.
Mr. Cohen: Thank you, Mr. Chief Justice, and may it please the Court:
I think the problem with the Line Item Veto Act is quite basic.
The legislative power is the power to write Federal statutes in their exact final form.
That power is vested in Congress, nontransferably.
The President's role in the legislative process is limited to approving or returning in whole each bill that's presented to him.
The act gives the President the power to edit tax and spending bills--
Justice O'Connor: Well, technically the President has to sign it, so it goes into effect, so you're really having to deal with what happens after that.
Mr. Cohen: --Yes, but what we have here, Justice O'Connor, is a device of saying, sign the bill first and then you can immediately cancel the parts you don't approve.
The two steps taken together signing and cancelling, together produce a statute that was not passed by either House of Congress.
A post-enactment line item veto is functionally equivalent to a pre-enactment line item veto.
Justice Scalia: They say no.
They say that the statute... the provisions he cancels are not utterly ineffective, that they still have some legislative effect, namely the lockbox effect.
What is your response to the lockbox argument, that those provisions at least have that effect of preventing future appropriations?
Mr. Cohen: My response is that in my case, the Snake River case, where we're talking about cancelling a provision of the Internal Revenue Code, I don't think there is any lockbox effect, but even in the spending--
Justice Scalia: The lockbox applies only in he spending area?
Mr. Cohen: --I think that's right, but even in the spending context a lockbox is simply a congressional declaration that it won't otherwise spend money pursuant to a provision that Congress... that the President has cancelled.
Justice Scalia: That it won't, but it can, can't it?
Mr. Cohen: Well, it can by passing a new law.
Justice Scalia: Well, which the President has to sign.
Mr. Cohen: Which the President has to sign.
Justice Scalia: I mean, it can do anything by passing a new law.
Mr. Cohen: Yes.
I think that's my point, that the President's action here is final, and it takes congressional action to restore the appropriation that the President has cancelled or the tax provision that the President has cancelled.
Several of General Waxman's arguments it seems to me pose the following hypothetical.
He suggests that because Congress is aware, when it passes a later statute, of the earlier Line Item Veto Act, it's no different from putting a cancellation provision in each bill.
I think it is different in certain ways, but I also think that Congress couldn't do that, either.
If Congress were to pass an Internal Revenue Code of 1999 with a special provision saying, the President may cancel any one or more of the provisions of this law if the cancellation would raise tax revenues and not harm the United States, Congress would be abdicating its constitutional responsibility to write tax statutes, and I think the Court would say that as a matter of Article I law the Congress is giving the President something that the Constitution requires it to do.
Justice Scalia: Suppose they add to it, and the cut must be in the public interest, convenience, and necessity.
Mr. Cohen: Well, I said not contrary to the national interest.
I don't think that helps.
Justice Scalia: Oh, you think that's--
Mr. Cohen: No, I think that's the same.
Justice Scalia: --Well, gee, we let the FCC do that.
Why wouldn't we trust the President at least as much as we trust the FCC?
We at least elect the President.
Mr. Cohen: I think what we let the FCC do is regulate in the public interest as defined in a statutory context.
Justice Scalia: There are many judgments that the FCC makes that are really constrained by nothing except public interest, convenience, and necessity, quite a few.
Mr. Cohen: But the public interest itself has a historical and a statutory context.
We know what the FCC's responsibilities are.
We know who it regulates.
But I don't think you need even to get to the question whether this is delegation running riot, because I think you--
Justice Scalia: It isn't running riot.
It's just a little bit.
I think that's what saves the FCC.
Well, it isn't the whole economy.
It's not like... you know, not like what Franklin Roosevelt tried to do with... in the sick chicken case.
Mr. Cohen: --That's right.
Justice Scalia: But... it's very limited.
But this is very limited, too.
It's just a certain number of provisions--
Mr. Cohen: No, it's 70--
Justice Scalia: --of a certain sort.
Mr. Cohen: --It's 79 provisions, 79 tax provisions.
It could be 179 tax provisions.
I don't see the difference between this and passing an entire code in which you say the President can cancel any of the provisions of this code if he determines that doing so would not be contrary to the national interest, which is all that this statute says, and I think what's wrong is that he is, by doing that, producing a truncated statute that Congress didn't pass, a--
Justice O'Connor: Well, does your argument rest on our determining that somehow we look at it all together and decide that the Article I requirements were never met in the first place, or that, okay, it went into effect and it's an unconstitutional repeal?
Mr. Cohen: --Justice O'Connor, I think I win either way.
I think that if you say there's no substantive, intervening event between these two steps, a long-winded President could take both steps literally in the same breadth, if he were alone in the room he could sign them in either order and just report what he's done, that there is no substantive distinction, and that this is a device to get around what General Waxman concedes would be unconstitutional.
But I also think that if you take that first step seriously, as a separate step, we now have an enacted law that the President is unilaterally repealing.
To be sure, Congress has given him the power to repeal it, but the question is whether Congress could constitutionally do that.
Justice Kennedy: Is the locked box provision in all respects constitutional, in your view?
At least it does give the President a choice between two different kinds of laws.
He spends or he locks, and the locking mechanism, according to the Government, has some very substantive, important effect.
It's different than just vetoing.
Mr. Cohen: Well--
Justice Kennedy: Is the Government right about that?
Mr. Cohen: --No.
First of all, as I said before, Justice Kennedy, it has no application to my Snake River case, which particularly relates to the Internal Revenue Code, but second, the lockbox I don't think saves a bill that says, you may declare a particular provision to be without legal force and effect.
The President isn't deciding to spend the money in some other way.
He's simply cancelling--
Justice Kennedy: Well, they say it's now going to have legal effect because it's in the locked box, and that's just a... that's another legal effect.
Mr. Cohen: --It's no--
Justice Kennedy: It's different, say, from simply vetoing.
Mr. Cohen: --Well, it's no different from the legal... I don't think it's any different from the legal effect of cancelling any other appropriation which Congress would therefore have to reappropriate if it wanted particular money spent.
Justice Scalia: Mr. Cohen, are you going to address the jurisdictional issues?
I hate to ask this question, but you know--
Mr. Cohen: Yes.
Justice Scalia: --what's it to you?
None of these provisions directly affect your client at all.
Mr. Cohen: --Yes, they do, and I really think our standing case is quite straightforward.
Congress passed section 968 for the specific purpose of helping farmers buy processing facilities through their cooperatives.
This particular farmer and cooperative, Mr. Cranney and Snake River, were personally working actively to buy such facilities with the anticipated help of section 968.
Justice Scalia: It helped you to buy them by helping the seller to sell them--
Mr. Cohen: Yes.
Justice Scalia: --right?
Mr. Cohen: Yes.
Justice Scalia: But what it did immediately was to help the seller to sell them.
If we had the seller in front of us, who said, I'm denied this tax benefit that I was going to get for selling the facility, I could understand it.
But what if you had a tax break that applied to somebody who was about to buy a car, and the automobile manufacturer comes in, he says, you know, he didn't buy the car because you took away the tax break.
Would he have standing to come before us?
And that's essentially the position that you're in.
Mr. Cohen: I think somebody who had taken sufficiently concrete steps toward... toward--
Unknown Speaker: Buying it?
Mr. Cohen: --Toward buying a car could have standing to challenge the cancellation of a tax provision that changed the price of the car.
Here, the evidence--
Justice Scalia: I won't try to reduce it to the absurd, if--
Mr. Cohen: --Well--
Justice Ginsburg: --Are you relying on Congress' finding that the way to help the farmer's coops is to give this break to the potential seller?
I mean, it was Congress'--
Mr. Cohen: --Congress' finding and the Government's concession that that was the purpose of the statute, which they finally made in their reply brief, plus, the only evidence, and there is evidence in this case, which is Mr. Cranney's declaration, which is that he and Snake River were actively working, that there had been two actual transactions, that one of the actual transactions was more expensive because section 968 was not available, that they were working on another transaction which was premised on the availability of section 968--
Justice Scalia: --I assume it was a transaction that was beneficial to both parties, or they wouldn't have entered into it right?
It was a voluntary deal.
Why isn't the seller here?
I mean, you would think if this beneficial deal were destroyed by the law the seller would have had an objection, too?
Mr. Cohen: --Well, he simply chose not to litigate.
We're not talking just about one transaction.
Cranney's declaration also says there were ample other facilities available.
They... and that Snake River was interested in buying more than one facility... this was--
Justice Scalia: I'm not just--
Mr. Cohen: --an active program that Congress wanted to assist, and the assistance was--
Justice Scalia: --It might seem very reasonable for this case, but I really worry about what kind of standing law we establish if we say that someone who was indirectly benefited by a tax break and which... even if you add, and which indirect benefit was envisioned by Congress.
Congress often envisions all sorts of indirect benefits from a tax break.
It's going to stimulate the economy.
I mean, every... you know, there'll be more sales of hot dogs at the ball park or something.
Can the hot dog vendor bring suit?
Mr. Cohen: --It's got to be sufficiently specific, targeted toward a small group of beneficiaries, with beneficiaries who are actively pursuing it.
It seems to me that we're very much in the position of the plaintiffs in Associated General Contractors, the position of plaintiffs in Bryant v. Yellen, people who are interested in a business opportunity which they are actively pursuing, and an illegal act concretely and significantly, importantly interferes with their pursuit of a valuable business opportunity.
Each case has got to be judged on its own merits on this kind of thing, but I think Judge Hogan's conclusion that it was highly likely that these plaintiffs would have been able to do particular transactions taking advantage of section 968 is amply supported by evidence that the Government never chose to challenge.
Justice Ginsburg: And respect whether that was the raison d'etre for Congress passing in this.
It wasn't the processor, but it was the coop--
Mr. Cohen: Oh, I think that's very clear.
I think that's very clear.
The congressional sponsors said that.
The structure of the act makes that clear.
It singles out... doesn't say the processor can sell to anybody it wants to and he gets the benefit.
It says the processor gets the benefit selling--
Justice Scalia: --But that's not part of the--
Mr. Cohen: --The President agreed to that.
Justice Scalia: --That's not part of the Article III analysis.
We don't ask for purposes of Article III whether you're within the scope of the intended benefit.
Mr. Cohen: I think--
Justice Scalia: --That's discretionary.
Mr. Cohen: --I think you ask for purposes of Article III whether the plaintiff has a sufficiently concrete--
Justice Scalia: Right.
Mr. Cohen: --interest so that--
Justice Scalia: Right.
Mr. Cohen: --he would--
Justice Scalia: It goes to concreteness, which--
Mr. Cohen: --personally benefit in a tangible way--
Justice Scalia: --Right.
Mr. Cohen: --from the court's intervention.
Justice Scalia: And no proximity requirement.
There's no proximity requirement, just an Article III, just concrete injury, no matter how remote.
If you can show that that ripple in the pond affected you, no matter how remote it was--
Mr. Cohen: --No.
Justice Scalia: --you have Article III standing?
Mr. Cohen: No.
I think he has to have... there has to be a realistic possibility, at least, of a transaction.
Here a transaction was highly likely, and there has to be a significant--
Justice Scalia: That doesn't go to remoteness.
That goes to whether you can show that it actually hurt you.
You say you... if you can show that it actually hurt you, no matter how remote from the... from what you're complaining about--
Mr. Cohen: --I think the Court's opinion in Bennett v. Spear makes it clear that you can have a chain of causation and you don't have to have the last link in the chain--
Chief Justice Rehnquist: --Thank you, Mr. Cohen.
Mr. Cohen: --Thank you.
Argument of Charles J. Cooper
Chief Justice Rehnquist: Mr. Cooper, we'll hear from you.
Since we're already on the subject of standing, why don't you start with that for the New York petitioner... the respondents.
Mr. Cooper: Mr. Chief Justice and may it please the Court:
Certainly, Justice O'Connor.
My friend General Waxman says that the plaintiffs in the New York City case have not got standing because they have not been denied a single dollar, and it is true that we haven't been denied a single dollar, but we nonetheless have actual harm and we have a very serious threat of imminent harm.
First, with respect to actual harm, what if section 4722(c) had said that the United States Treasury will indemnify the State of New York, dollar for dollar, for any lost medicaid funds if HCFA doesn't grant the waivers?
Your Honor, losing that insurance policy would clearly be an injury to my clients.
The insurance industry is based upon the notion that that is a valuable commodity, and trillions of dollars exchange hands every year on that reality.
We had something much better than an insurance policy against loss from an adverse decision.
We had a favorable decision, so as a--
Justice Kennedy: I'm wondering, on your indemnity example, it would be at least premature to bring it.
Suppose the chances were 99 percent that the indemnity would never have to be paid, could you then sue... oh, well, we might need this indemnity?
Mr. Cooper: --Your Honor, when I leave this Court I'll get in my car, and the chances are extremely slim that I will run into you, but I won't get into my car without liability insurance, and I've paid a lot of money for that liability insurance, Your Honor.
Here, the chances that they're going to waive... that they're going to deny our waivers are very good.
Justice Kennedy: Oh, but it's different, because your conduct is affected by knowing you have the insurance policy, and that's not true here.
This was an after-the-fact enactment by the Congress, so it's quite a different hypothetical, really.
Mr. Cooper: Well, Your Honor--
Justice Kennedy: It's as if there were already an injury and there might not be a lawsuit.
Mr. Cooper: --No, there was an injury before we received section 47229(c).
The Government said that the medicaid funds belonged to them and under the statute, that was true.
They were the property of the United States.
After the cancellation, as a matter of law, that money belonged to my clients.
Now, once the cancellation has gone into effect, the United States Government again says that as a matter of law, the medicaid laws, the money belongs to them.
Justice Scalia: It belongs to your clients, or does it belong to New York State?
I guess I'm not up on these--
Mr. Cooper: Your Honor, New York State has enacted State laws that pass through that loss.
This burden will land on our shoulders.
Justice Scalia: --Ah, but that's the problem in New York law.
It isn't... in other words, it isn't this statute that prevents the money from getting to your clients.
It's a New York statute, right?
Mr. Cooper: That's true, Your Honor.
Justice Scalia: You're saying that because there is this other thing, res inter alia... inter alius acta, right, something that pertains to somebody else, you won't get the money.
What if you had a wager with somebody that you'd get the money, and that cancellation causes you to lose that wager, would that give you standing to come before us?
Mr. Cooper: Your Honor, I doubt the wager could be enforced--
Justice Scalia: Oh, no, this is in a State that allows... encourages wagering, as a matter of fact.
Mr. Cooper: --Your Honor, we have much more than a wager here.
We have a law of many years standing, or many laws of many years standing in New York State which say that if these waivers are denied, if the taxes themselves are declared impermissible, it follows as a matter of State law that the health care providers must pay... must essentially give that money back.
Justice Souter: So the only contingency on your argument is whether the Secretary is going to act to bail you out, and your point there is, the President in effect has said that she won't, is that it?
Mr. Cooper: Your Honor, that's not the only contingency.
Justice Souter: What's... what else?
Mr. Cooper: Well, Congress could pass--
Justice Souter: Okay, under existing law.
Mr. Cooper: --another law--
Justice Souter: Under existing law.
Mr. Cooper: --Under existing law--
Justice Souter: You know, New York could change it's law, too, but under existing law, there's the one contingency left, right, and you're saying that does not count against us for standing because the President in effect has said that's not going to happen, otherwise I wouldn't be reducing the deficit.
Mr. Cooper: --Your Honor, that's true.
I mean, the President has not allowed the United States Congress to grant these waivers.
It is unlikely in the extreme he's going to allow little old HCFA to grant us these waivers, and Your Honor, the fact that there is another method for New York to achieve complete relief doesn't reduce in any way the value of the method that has already yielded complete success.
Justice Stevens: Mr. Cooper, I don't know why you didn't accept the wager hypothetical.
It seems to me a wager's a lot like a lawsuit, that if you have a lawsuit, a wager pending which you may win or may lose and Congress passes a law and says you lose, it seems to me you're hurt.
Mr. Cooper: Yes, Your Honor.
Justice Stevens: So I think a wager's a very good example, is what I'm suggesting.
Mr. Cooper: And I certainly accept your vast improvement over my answer.
Justice Scalia: Can I ask you one--
--And that's all it takes, just that you're hurt?
Mr. Cooper: Excuse me?
Justice Scalia: If you're hurt, you can sue, right?
Mr. Cooper: If you're injured in fact--
Justice Scalia: Injured in fact.
You're way out at the edge of the pond and a ripple reaches you.
So long as you prove that the ripple reaches you, you can come into court.
Mr. Cooper: --Your Honor--
Justice Scalia: No matter how many intervening actors, New York State, you know, the agricultural coop, whatever.
Mr. Cooper: --Your Honor, I wouldn't be making this argument if I were here to say that New York might pass laws that would then shift this burden onto my shoulders.
That would be speculative.
But New York has passed the laws, Your Honor.
This will happen as a matter of law unless New York repeals its laws, which is no less speculative than if Congress acts now a third law to adjust these rights and interests.
Justice Ginsburg: Why didn't the State join this lawsuit, Mr. Cooper?
We don't have the State of New York in here, and that's puzzling.
Mr. Cooper: Your Honor, the record isn't revealing on this, and I have nothing other than rumor and speculation to offer to you on that issue.
Justice Ginsburg: Well, then, don't.
Mr. Cooper: But--
Justice Scalia: It's disappointing though, you know.
We went into a big wind-up last year also, without a pitch, and you would have thought that whoever wanted to bring it back would have gotten somebody who had been immediately affected by this case, and it's astounding that we get two people who are... you know, they're down the line.
Well, there are probably a lot of people who don't want to lose all their profits by paying lawyers.
Mr. Cooper: --Well, that answer definitely has some seriousness to it.
There are a lot of people in the back of the canoe not pulling an oar in this case, Your Honor--
Justice Breyer: Can I ask you one--
Mr. Cooper: --but we're injured, and that's the issue, perhaps downstream, but--
Justice Ginsburg: --With respect to the... another piece of this threshold issue, you have no individuals in this group unless... you have a couple of unions, and they have members, so what is the harm to the unions and their members that would give them standing to be in this assemblage of plaintiffs?
Mr. Cooper: --Their harm is one step farther downstream, I will grant you.
It is that the loss of $2.6 billion in medicaid matching funds is going to have a very real and very serious effect on health care providers in the State of New York and will be visited directly in terms of the employment opportunities of those health care providers which the unions represent.
But I don't have to rely upon my union members, in my opinion, to satisfy the individual requirement of the Line Item Veto Act.
That term is amenable to an interpretation that it would include the other clients that I represent, Justice Ginsburg, and to interpret it the way General Waxman suggests would really be quite absurd.
It would make no sense at all for Congress to want this case in this Court for resolution of this constitutional issue as quickly as possible and then say only natural persons can take that expedited route, and all other persons, municipalities, States, my clients, have to go through a lengthy sojourn through the normal litigation process, including the court of appeals.
Justice Breyer: Can I ask you one question on the merits, if you're finished with the standing?
Mr. Cooper: I certainly am.
I'd love to get to the merits, Your Honor.
Justice Breyer: I've one... the question I have, which is really my only question here, is this.
Assume with me for a second that the Solicitor General... assume... is right that this isn't really a legislative veto statute.
That's the title, but that's not what it's about.
There is a law, a law of the United States.
The budget has been signed.
Then the question is, could Congress delegate to the President the authority... and let's take what I think is the hardest part, the authority to take 100 human beings that have received in 100 provisions 100 tax benefits, all different ones, and the Congress says to the President, Mr. President, those people will not be taxed next year, but we give to you the authority to pick and choose among them and impose certain taxes on them, according to a standard.
Now, I take it what he says is, the standard has to be... it has to be really revenue-raising, it can't harm an essential function, it has to be in the national interest and, Mr. President, you have to read the bill, you have to give your reasons, you have to look through the entire thing carefully, taking into account its history and purposes, and probably a word that might come to mind is, is it pork?
Assuming that they tell the President to do all that in respect to taxes, how is that different than telling the FCC to go look through people in the communications area and give licenses or not, or make other rules and regs or not in respect to "the public interest"?
If you can do the one under the Constitution, why can't you do the other?
Mr. Cooper: Your Honor, we don't tell the FCC that it can rescind a law, that it can render a law of no force and effect.
That's what Congress has told the President he may do.
General Waxman has said that repeals must satisfy the Presentment Clause, and there's no room for General Waxman or anyone else to argue otherwise.
Justice Scalia: What about the lockbox effect?
Do you maintain there is no effect once there is a cancellation?
Is there an effect on what Congress can later enact?
Mr. Cooper: Let me answer this, what different effect would there be if the statute, instead of using the term cancel, and defining it to mean repeal, had said repeal?
There would be no difference in the operation of this statute.
And with respect to the lockbox specifically, Your Honor, that simply makes clear that the President has only a repeal power.
He doesn't have a power of revision.
He can't take that money and do something he would prefer to do with it, and neither can Congress.
But if Congress wants to spend that money again, whether it's in a lockbox or not, what does it have to do?
It has to pass a new law.
And without the lockbox that would be true.
With the lockbox, that is true.
The only difference is, it may well be that they have to add another sentence to the statute that they enacted.
Justice Kennedy: No, but the lockbox puts into effect, as I understand it... correct me if I'm wrong... certain mechanisms under the Budget Deficit Reduction Act.
Mr. Cooper: Yes.
Justice Kennedy: So that here the President is making one of two choices, each of which alter the situation from where it was before the law was enacted in the first place.
Mr. Cooper: --Your Honor, I have to confess I've never met anyone who understood entirely the operation of the lockbox, but it... one thing that simply cannot be escaped or blinked is the fact that when the President cancels a provision, under the act itself, it extinguishes the authority.
It extinguishes the law itself.
That operates on the law, not the money.
This isn't a spending discretion, and the Solicitor General has made a very powerful presentation for the proposition that Congress can give sweeping spending authority to the President and has since the First Congress.
We don't resist that.
Justice Stevens: May I ask you, Mr. Cooper, because I frankly am troubled with this lockbox idea, but is it any different if, after the particular item is put in the lockbox, than if it had never been enacted in the first place and, if so, what is the difference, the particular provision that goes into the lockbox?
Mr. Cooper: Your Honor, I honestly am not entirely sure, but I will grant the Solicitor General that it may well be that that money is treated differently than if it had never--
Justice Scalia: It's counted against what expenditures have been made.
Even if the President ultimately doesn't use it, it's counted, since the law has been passed which authorized it.
Mr. Cooper: --Yes, but I think it's a function of fact that the money came into existence, the authority to spend the money came into existence, which is the only difference between that and a true line item veto, so that reality is what gives rise to the necessity--
Chief Justice Rehnquist: Thank you, Mr. Cooper.
The case is submitted.