"The conservation of oils in the ground within such territory by governmental control of mere production, or the taking of oil out of the ground, is a question for the States so far as such control may constitutionally be exerted under our form of government." As the taking of oil from the ground is as much an act of mining as the taking of coal, all that is said with respect to the authority of the Federal Government to regulate petroleum production within the States is in principle, equally applicable to bituminous coal production. It may be said, as is indicated in this bill, that one who engages in interstate commerce thereby submits all his relations to the regulation of Congress because that may be a convenient means of exercising the commerce power. Such was precisely the contention of the Government in endeavoring to sustain the first employers' liability act. In a unanimous opinion, the Supreme Court, in that case, thus recited and answered the argument of the Government (Employers' Liability Cases, 207, U. S. 463): "It remains only to consider the contention which we have previously quoted, that the act is constitutional, although it embraces subjects not within the power of Congress to regulate commerce, because one who engages in interstate commerce, thereby submits all his business concerns to the regulating power of Congress. To state the proposition is to refute it. It assumes that because one engaged in interstate commerce he thereby endows Congress with power not delegated to it by the Constitution, in other words, with the right to legislate concerning matters of purely State concern. It rests upon the conception that the Constitution destroyed that freedom of commerce which it was its purpose to preserve, since it treats the right to engage in interstate commerce as a privilege which cannot be availed of except upon such conditions as Congress may prescribe, even although the conditions would be otherwise beyond the power of Congress. It is apparent that if the contention were well founded it would extend the power of Congress to every conceivable subject, however inherently local, would obliterate all the limitations of power imposed by the Constitution; and would destroy the authority of the States as to all conceivable matters which from the beginning have been, and must continue to be, under their control so long as the Constitution endures." But, it may be said, the Supreme Court declared, in the Schechter case, that the power of Congress to regulate interstate commerce extends to the protection of that commerce from injury: "It matters not that the injury may be due to the conduct of those engaged in intrastate operations.' That is true, for it is at once the right and duty of the National Government to remove any obstruction from the pathway of commerce, whether it be physical or economic, whether it is a mob, monopoly, or a sand bank. The error which is made in pressing this argument is that it conceives that the right to remove or forbid combinations or conduct which directly and substantially obstruct the movement of commerce, includes the right to regulate the private conduct of those who create the obstruction. Thus, while Congress may forbid the making of a contract the purpose and effect of which is to prevent competition in the product of the contracting manufacturers, it does not follow that Congress may regulate the process of manufacture in the commodities which are the subject matter of the contract. So, too, when a labor combination undertook to say that no goods could be sold in commerce unless produced under conditions demanded by the labor combination, as in the case of Loewe v. Lawler, what was forbidden was the right of the private combination to write the rule of commercial intercourse. It did not mean Congress was authorized to regulate labor organizations or employment relations in the production of the goods which were the subject matter of the boycott. Furthermore, while it is true that a great number of acts of individuals, as well as of the States, affect commerce, may, indeed, encourage, promote, or retard it, it is only those acts which directly and substantially affect it which are within the area of commercial control: "If the commerce clause were construed to reach all enterprises and transactions which could be said to have an indirect effect upon interstate commerce, the Federal authority would embrace practically all the activities of the people and the authority of the State over its domestic concerns would exist only by the sufferance of the Federal Government" (Schechter Poultry Corporation v. United States, Opinion, May 27, 1935, p. 22). When any kind of a combination, whether of individuals, corporations, or labor organizations, is formed for the purpose of directly restraining commerce, the power to reach and prohibit their acts is clear. But where such intent is absent the fact that the combination interferes with or even prevents production does not bring it within the commerce power. Thus, in the Industrial Association v. U. S. (268 U. S. 64), the Supreme Court was examining an alleged combination which was found to operate wholly within the city of San Francisco, and it said: "The alleged comspiracy and the acts here complained of, spent their intended and direct force upon a local situation-for building is as essentially local as mining, manufacturing, or growing crops-and if, by resulting diminution of the commercial demand, interstate trade was curtailed either generally or in specific instances, that was a fortuitous consequence so remote and indirect as plainly to cause it to fall outside the reach of the Sherman Act." In the mining of coal, as in the manufacture of commodities, the acts of production must be completed before there can be commerce in the article produced. The writing of the rule of intercourse essential to the carriage of commerce is within the exclusive and plenary power of Congress. The regulation of production and the incidents thereof is not commerce and cannot be made such by declaration. 3. If Congress may not directly regulate the production of bituminous coal under the commerce power, may it do so indirectly by the taxing power to compel acceptance under penalty of the regulation imposed, although, on the face of the bill, it is evident that the purpose of the tax levied is not to produce revenue but compel under penalty the acceptance of the regulation? The pending bill, section 3, imposes "upon the sale or other disposal of all bituminous coal produced within the United States a tax of 25 per centum on the sale price or fair market value of such coal at the mine", etc. The section carriers a proviso to the effect that any bituminous producer who files with the Commission his acceptance of the code provided, and acts in compliance therewith, "shall be entitled to a drawback equivalent to 99 percent of the amount of such tax." Is this a valid exercise of the taxing power or is it the imposition of a penalty to compel the acceptance of an otherwise invalid regulation'? * "A tax is understood to be a charge, a pecuniary burden for the support of government * * that is, taxation which compels one to pay for the support of the Government from his own gains and of his own profits" (U. S. v. B. & O. Railroad, 17 Wall, 322). 'The use of the word 'tax' in imposing a financial burden does not prove conclusively that the burden imposed is a tax" (U. S. v. One Ford Coupe Automobile, 272 U. S. 321). Congress, in enacting a revenue measure, may adopt reasonable and appropriate penalties for its enforcement, nor is it objectionable that the tax should likewise achieve some other incidental object, as, for example, in the regulation of the sale of narcotics to assure both the collection of the tax and its sale only to the persons permitted its use. But where, upon the face of the statute, it is apparent that the purpose of the act is not to raise revenue or that the levy of the tax is merely incidental to the regulation, or the tax is employed indirectly for the purpose of compelling obedience to a course of conduct which Congress may not directly require, the court is required to look through the revenue disguise to the primary purpose of the legislation. This point is clarified by the decision of the Supreme Court in the so-called Child Labor Tax case (Bailey v. Drexel Furniture Co., 259 U. S. 20) and the case of Hill v. Wallace (259 U. S. 44), with respect to what is described as the first Future Trading Act. In the first case, Congress passed an act imposing a tax of 10 percent in addition to all other taxes on the net profits of any employer employing any persons within certain forbidden ages for more than a certain number of hours, or within certain hours of the day, contrary to the limits fixed in the congressional act. Two years before the Congress had undertaken to prohibit the transportation in interstate commerce of certain commodities during the production of which minors were employed under forbidden working conditions. In Hammer v. Dagenhart (245 U. S. 251) the Supreme Court had held this statute to be a regulation of production and not commerce. Congress, therefore, undertook to make the same act effective through the exercise of the taxing power in the manner above described. The taxing statute was, in its turn, tested. In an 8 to 1 decision written by Mr. Justice Taft, the Court declared: "The law is attacked on the ground that it is a regulation of the employment of child labor in the States-an exclusively State function under the Federal Constitution and within the reservations of the tenth amendent. It is defended on the ground that it is a mere excise tax, levied by the Congress of the United States under its broad power of taxation conferred by paragraph 8, article 1, of the Federal Constitution. We must construe the law and interpret the intent and meaning of Congress from the language of the act. The words are to be given their ordinary meaning unless the context shows that they are differently used. Does this law impose a tax with only that incidental restraint and regulation which a tax must inevitably involve? Or does it regulate by the use of the so-called 'tax' as a penalty? * * * a penalty to coerce people of a State to act as Congress wishes them to act in respect of a matter completely the business of the State government under the Federal Constitution. "Grant the validity of this law and all that Congress would need to do hereafter, in seeking to take over its control any one of the great number of subjects of public interest, jurisdiction of which the States have never parted with, and which are reserved to them by the tenth amendment, would be to enact a detailed measure of complete regulation of the subject and enforce it by a so-called 'tax' upon departures from it. To give such magic to the word tax' would be to break down all constitutional limitation of the powers of Congress and completely wipe out the sovereignty of the State." With a slight modification of language, that decision is appropriately applicable to the pending bill. In 1921 Congress enacted the first Futures Trading Act imposing a levy of 20 cents a bushel on all contracts of grain for future delivery. In the case of Hill v. Wallace (259 U. S. 44), the Court, in a unanimous opinion, held the act invalid, declaring: "The manifest purpose of the tax is to compel boards of trade to comply with regulations, many of which have no relevancy to the tax at all. * * * A reading of the act makes it quite clear that Congress sought to use the taxing power to give validity to the act." The Congress thereafter enacted corrective legislation which was sustained Board of Trade of Chicago v. Olsen (262 U. S. 1). The Upon the face of the pending bill, the tax levied by section 3 is not intended to produce revenue, for it carries within itself the means of its own defeat. citizen who conforms to the conduct required by the Congress in the mining and shipment of bituminous coal is remitted 99 percent of his tax. If Congress were not dubious of its authority under the commerce power, it would compel compliance with the code as a matter of direct regulation; but, manifestly doubting its direct power, it undertakes to assure through the tax the compliance it could not otherwise require. "The difference between a tax and a penalty is sometimes difficult to define, and yet the consequences of the distinction in the required method of their collection often are important. Where the sovereign enacting the law has power to impose both tax and penalty, the difference between revenue production and mere regulation may be immaterial; but not so when one soverign can impose a tax only, and the power of regulation rests in another. Taxes are occasionally imposed in the discretion of the legislature on proper subjects with the primary motive of obtaining revenue from them, and with the incidental motive of discouraging them by making their continuance onerous. They do not lose their character as taxes because of the incidental motive. But there comes a time in the extension of the penalizing features of the so-called 'tax' when it loses its character as such and becomes a mere penalty, with the chracteristics of regulation and punishment. Such is the case in the law before us." (Child Labor Tax case, 259 U. S. 38). The present Chief Justice of the United States published, in 1927, before his return to the bench, a volume entitled "The Supreme Court of the United States." Therein, Mr. Hughes discussed the Child Labor Tax case, and, explaining the principles to which we have referred, he concludes: "Such was the case then before the Court. When the imposition is found to be a penalty, the Court must ascertain the authority of Congress to impose it as a feature, not of a tax law, but of a regulation of the subject with respect to which the penalty is imposed." 4. Part III of the pending bill proposes a detailed regulation of employment relations in the mining of bituminous coal. Such regulation is not a valid exercise of the commerce power nor would it be if the industry were held to be affected with the public interest as that term is legally defined. The regulation of local employment relations in production and manufacture is not subject to regulation by Congress under the commerce power. This principle of law is so well established as to require little discussion. The attempt is made here as elsewhere to create such relation between the mining of coal and the subsequent commerce in it as to justify the employment regulation attempted. No one ventures to assert a direct congressional control over local employment relations in acts of production. It is sought at times to do it indirectly through the use of an acknowledged authority. The right of Congress to regulate employment relations in or upon an instrumentality of interstate commerce is not here at issue. In contemplation of law, a railroad employee, whether in train service or the president of a railroad company engaged in the operation of an interstate train, is as much an instrumentality of commerce as the cars or locomotive. But a mine or a factory is not such instrumentality and persons employed in the production or repair of locomotives or ships which may become instrumentalities of commerce, or in the production of commodities which may be subsequently the subject of transportation in commerce or of transactions therein, are neither instrumentalities of commerce nor themselves engaged in such commerce. On this principle the authorities are clear and numerous. The State of Idaho levied a license tax on the manufacture of electricity for sale. A Utah corporation contested the tax on the ground that it was a burden on interstate commerce, since it operated on the transfer of a natural energy from its source across State lines. The Supreme Court pointed out that the tax was levied on the transformation of the mechanical energy of falling water into electric energy. "This process of manufacture," said the Court, "despite its hidden character is no less real than the conversion of wheat into flour at the mill." The subsequent commerce between the States in the electrical energy thus created is a "physical thing", and "to that situation we must apply as controlling the general rule that commerce does not begin until manufacture is finished and hence the commerce clause of the Constitution does not prevent the State from exercising exclusive control over the manufacture" (Utah Power & Light Co. v. Pfost, 286 U. S. 180-181). In the Employers' Liability cases, Congress had enacted a statute fixing the liability of common carriers engaged in interstate commerce to their employees. In the instant case it was held that the act embraced subjects both within and without the commerce power and the two were so interblended as to be incapable of separation, and the statute was held invalid. The Government, to support the measure, argued that -Congress possessed the authority to regulate the business of the carrier not directly concerned with interstate commerce, as well as its interstate business, since the carrier, by becoming an instrumentality of interstate commerce, had subjected its complete business to congressional control. Under the preceding topic we have quoted the reply of the Supreme Court repudiating that argument. By subsequent legislation, Congress corrected the defects of the Employers' Liability Act. In 1915 a railroad company was sued under this act on the ground that the plaintiff was injured while mining coal intended for interstate commerce. The Court disposed of this contention, declaring: "The averments of the complaint as to the manner of the receiving of the injury by plaintiff showed conclusively that it did not occur in interstate commerce. The mere fact that the coal might be or was intended to be used in the conduct of interstate commerce after the same was mined and transported did not make the injury one received by the plaintiff while he was engaged in interstate commerce. The injury happening when plaintiff was preparing to mine the coal was not an injury happening in interstate commerce, and the defendant was not then carrying on interstate commerce, facts essential to recovery under the Employers' Liability Act" (Delaware, Lackawanna & Western R. R. Co. v. Yurkonis, 238 U. S. 439) (1915). In each of the following cases plaintiffs were asserting a right of recovery for injuries alleged to be received in commerce because the work they were doing, an act of production or service, was upon a machine or a commodity intended for commerce. In each case the court held that such acts were not a part of commerce nor could be made a part thereof: Shanks v. Delaware, Lackawanna & Western Railroad Co. (239 U. S. 556). In the celebrated case of Hammer v. Dagenhart (247 U. S. 251), the statement is frequently made that the division of the Court leaves doubt as to whether the commerce power would not be sustained with respect to the regulation of production within a State. It cannot be too clearly emphasized that the division of the Court in that case was only with respect to whether or not Congress possessed the authority to exclude any commodity, whatever its nature, from commerce. The Court was unanimous in the view that Congress could not directly control any form of production within the State. Mr. Justice Holmes, writing the dissent and referring to the power to exclude any article whatever from commerce, said: "The objection urged against the power is that the States have exclusive con trol over their methods of production and that Congress cannot meddle with them, and, taking the proposition in the sense of direct intermeddling, I agree to it and suppose that no one denies it" (Hammer v. Dagenhart, 247 U. S. 277). This view doubtless explains the unity of the Court in the subsequent decision in the Child Labor case (259 U. S. 20), where the attempt was made to regulate employment relations of minors in manufacture, as is proposed in the pending bill. In the case of the Schechter Poultry Corporation v. U. S., recently decided, the Court points out that the code requirements with respect to hours and wages for the defendant were "imposed in order to govern the details of defendants' management of their local business. The persons employed in slaughtering and selling in local trade are not employed in interstate commerce. Their hours and wages have no direct relation to interstate commerce." Is not this equally true of a mining operation? It is argued here, as it was argued there, that commerce is affected by operating cost of the local production, to which the court responded in terms equally applicable to the situation here presented: "The argument of the Government proves too much. If the Federal Government may determine the wages and hours of employees in the internal commerce of a State, because of their relation to cost and prices and their indirect effect upon interstate commerce, it would seem that a similar control might be exerted over other elements of cost, also affecting prices, such as the number of employees, rents, advertising, methods of doing business, etc. All the processes of production and distribution that enter into cost could likewise be controlled. If the cost of doing an intrastate business is in itself the permitted object of Federal control, the extent of the regulation of cost would be a question of discretion and not of power." The view thus expressed by the court, in its latest pronouncement, follows its repeated declarations that agriculture, construction, manufacture, and mining are not commerce but production and the relation of employer and employee engaged in such acts of local production are exclusively within the police authority of the State and not the commerce power of Congress. Where a combination or conspiracy is formed by farmers, miners, manufacturers, building contractors, or laborers, whether by themselves or in collusion with one.another, to prevent, or burden, or destroy commerce, or eliminate competition therein, it is the combination which directly obstructs cr itself undertakes to write the rule of commerce which is reached and controlled or prohibited by the Congress. It is the acts of obstruction and not the acts of production which come within the reach of the commerce power. That is the doctrine of the Debs' case (158 U. S.) and the distinction between the first and second Coronado Coal cases (United Mine Workers v. Coronado Coal Co., 259 U. S. 344; 268 U. S. 295). That is the distinction between the direct and indirect effects upon interstate commerce recognized in the application of the Antitrust Acts. That is the distinction, for example, between a local strike which may restrict or prevent production but only indirectly affects commerce (United Mine Workers v. Herkert, 265 U. S. 457), and a Nation-wide secondary boycott, as in Loewe v. Lawler (208 U. S.), which undertakes to prevent third parties and strangers from having commerce with the subject of attack by combination, except under such rules of interstate business as are written by the combination and not by the Congress. Those and many other cases which might be recited to repletion, emphasize the proposition that Congress, under the commerce power, does not possess the authority to regulate local acts of mining or manufacture or the employment relations arising therein, because the commodities produced may become the subject of interstate commerce or because labor disputes between the parties engaged in acts of production may indirectly affect the volume of such production. Unless the fundamental distinction is maintained between the direct and indirect effects of local transactions upon intercourse between the States, our constitutional system would be transformed into a single centralized authority. "If", says the unanimous opinion of the Supreme Court in the Poultry case, "the commerce clause were construed to reach all enterprises and transactions which could be said to have an indirect effect upon interstate commerce, the Federal authority would embrace practically all the activities the people and the authority of the State over its domestic concerns would exist only by sufferance of the Federal Government." 5. The state of the law and the character of the problem suggest that the most constructive approach to the elimination of unfair and oppressive methods of |