Just subtract water.

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Prepare for Life After the National Raisin Reserve

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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Today's Supreme Court ruling threatens to gut our strategic national raisin reserve. That sentence raises a lot of questions. Let's take them one by one.

1. Why do we have a raisin reserve? Some possible answers: Without it, our government could be forced to fight future wars without adequate supplies of raisin bread or Christmas fruitcake. Our schoolchildren may be forced to tote boxes of prunes to school to leave unopened in their lunch boxes while they "borrow" half a Twinkie from classmates. At any point, our economy could be brought to its knees by wild swings in the price of raisins.

Actually, no. According to the Washington Post, we created the National Raisin Reserve after World War II. During the war, the American government had been buying lots and lots of delicious, shelf-stable raisins to send overseas with the troops. When the troops came home, they often preferred to eat things that were fresh and juicy, rather than dry and wrinkly. There were only so many oatmeal cookies and applesauce cakes that American housewives could make. Raisin growers found themselves with a production glut as prices plummeted. The answer was the National Raisin Reserve, which kept prices artificially high by holding back some of the raisin crop from the market. This sort of policy was much in favor with the governments of the period, and as it eventually lead to the infamous "wine lakes" and "butter mountains" of the EU Common Agricultural Policy, has been much out of favor with economists for the last few decades.

2. How does the National Raisin Reserve work? The Supreme Court has summarized it far better than I can: "The Agricultural Marketing Agreement Act of 1937 authorizes the Secretary of Agriculture to promulgate 'marketing orders' to help maintain stable markets for particular agricultural products. The marketing order for raisins requires growers in certain years to give a percentage of their crop to the Government, free of charge."

The details are a fascinating welter of bureaucratic jargonese: The growers generally ship their raisins to a "raisin handler," who separates the required percentage (the "reserve raisins") from the raisins that the growers are allowed to keep for their very own ("free-tonnage raisins"), and then packs and sells the free-tonnage raisins on the open market. America's Raisin Committee (yes, we have one, as of course any advanced nation must), then decides what to do with the reserve raisins, which in practice means selling them to some government, donating them to charity, giving them to raisin growers who have voluntarily reduced their output as part of our great national raisin-price-fixing mandate, or selling them for export. If there are any proceeds in excess of subsidies and administrative expenses, what's left over is divided among America's raisin growers.

3. How did this become a federal case? A raisin grower named Marvin Horne of Fresno, California, decided that he had had enough of the National Raisin Reserve, and in the agricultural equivalent of burning his draft card, refused to hand over the raisins. The government, unhappy at the prospect of having to feed our war-battered troops on sesame bagels and regular toast, slapped him with hundreds of thousands of dollars' worth of fines, in addition to demanding the more than 1 million pounds of raisins it says Horne owes . If this were an Oliver Stone movie, Horne would have set his raisins on fire, as a flag softly flapped behind him in the sunset breeze, while Buffalo Springfield played on the soundtrack. In a more prosaic but practical turn, Horne sued on the grounds that the National Raisin Reserve was an unconstitutional taking of his property.

4. What did the Supreme Court say? The Court agreed with Horne. It also seems to have agreed with me that the National Raisin Reserve was a ridiculous program that ought to have been dragged out to the edge of the field and buried many decades ago, but this does not actually feature heavily in the ruling itself, because under our time-honored system of checks and balances, the Congress may be as ridiculous as it likes as long as it does not actually violate the Constitution of the United States.

The court ruled that this was an uncompensated taking under the laws of these United States, and therefore, not allowed. After all, it says right there in the Fifth Amendment: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation." This, they ruled, applied even to the case of taking dried fruit; the government took it, and it did not offer any compensation except for a residual interest in the profits of the Raisin Committee's activity, of which the growers say there often weren't any. It's irrelevant whether this was done to raise the price they got for the rest of their raisins; the government can't take over my living room for a police station on the grounds that the rest of my property's value will increase once they get crime down.

5. What does this mean for public policy? Well, it seems likely that this is the end of the National Raisin Reserve, because I doubt the government will be interested in maintaining a program that actually costs taxpayers' dollars to run, rather than just farmers' raisins. It may also have an impact on the 20 other crops that are subject to market orders, from almonds to spearmint, though it seems safe to bet that these will be litigated, with the government strenuously arguing that the market orders for these crops are nothing like that nasty, unconstitutional, wrinkly old National Raisin Reserve.

More broadly, this is a welcome move to limit the government's generally expansive notions of when it may take your property without payment. However, don't get too excited, because it doesn't do too much to limit eminent domain where compensation is offered, or "regulatory takings" in which government rules make your property practically worthless, but not quite so worthless that it has to pay you for the lost potential uses.

6. You are the only person on the Internet who has written about this case without mentioning the California Raisins. Why is that? Always save the best for last, my friend. Leave 'em wanting more. So here you go. I'm imagining Marvin Horne's raisins singing to him right now.

  1. By my admittedly rough calculation, this is enough raisins to ensure that every American can have at least two slices of Irish soda bread come St. Patrick's Day.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Philip Gray at philipgray@bloomberg.net