When Louisiana  passed a law prohibiting junk dealers from engaging in cash transaction, it sounded like another absurd effort by some backwater that would swiftly be laughed away by calmer heads.  And indeed that may still happen, but the assumption that this law was unconstitutional (and certainly unAmerican, Bobby Jindal) may be mistaken, according to Eugene Volokh.

A reader asks whether this is consistent with the federal legal tender statute, 31 U.S.C. § 5103, “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues.” I’m not an expert on this area of law, but I do know that a district court recently upheld a similar law, in Genesee Scrap & Tin Baling Co. v. City of Rochester (W.D.N.Y. 2008). An excerpt from the court’s reasoning:

What Congress has sought to do, then, is establish and maintain a uniform national currency, an aim which is incompatible with a system in which individual states can issue their own currency, or declare things other than federally-issued money to constitute legal tender. The Ordinance at issue here does no such thing, however. It merely provides that payment for junk must be in the form of a check, which in turn is payable in United States currency. Accordingly, it is neither unconstitutional nor inconsistent with § 5103.

What immediately stands out is how Judge David Larimer, with the use of the word “merely” in lieu of anything remotely resembling a rationale, ignores the legal implications of his ruling.  Of course, that doesn’t mean the ordinance there, or Louisiana law here, is unconstitutional, but rather than this decision provides no persuasive basis to suggest otherwise.

There was once a time in America when legal tender, currency and coin, was considered a pretty normal way of transacting business.  If someone wanted something, we reached into our pocket and took out some metal or paper and paid for it.  The person on the other side was secure in knowing that the transaction was completed, and everyone shook hands and walked away happy.

War on currency was a collateral component of the war on drugs, where the underground economy involved huge amounts of currency that were taken in by drug dealers and, to have any useful purpose, had to be spent or invested somewhere.  Having a room stuffed with currency did no one any good; it’s utility was buying expensive things, from cars to buildings to diamond tiaras, if that was your thing.

The government shut that down with its emphasis on outing and prosecuting money laundering, requiring transactions in amounts of currency of $10,000 to be reported, and criminalizing efforts to avoid the reporting requirement, known in the trade as smurfing.  Cash became a problem.  People who possessed large amounts of cash were presumably criminals, and seizures of currency far below the $10,000 limit became the norm, with the person from whom the cash was seized expected to explain its possession to the satisfaction of the government.

Credit cards, debit cards, with all their fancy swiping tricks and metallic colors, because the common substitute.  For many, walking about with more than $20 in their pockets became an oddity. Why carry cash with all the wonderful means of transacting business available.  So what if the banks charged extra for the pleasure, first to merchants and now to consumers.

There were some for whom this didn’t work well, but they weren’t favored people.  Immigrants, whether documented or not, tended not to trust banks or lived hand to mouth, and held their cash close.  People in certain retail businesses, where small bills commonly exchanged hands, tended to carry around wads.  Business with small margins, who couldn’t afford to lose the 4 points the credit card companies demanded, or take the risk that a check would bounce, preferred currency.

But these presented problems to a government that wanted the ability to track the flow of money, to and from, that was admirably documented for them by banks and kept available should they need the information later.  Bank records told a story, where you went, what you earned, what you bought and what you weren’t telling them.  All laid out neatly in monthly statements. 

While I’m certainly no expert on the constitutionality of legal tender any more than Eugene is, it strikes me that an attribute of legal tender, as established §5103, and in light of Article 1, Section 10 of the Constitution, is the ability to use it at will, in payment or satisfaction of a transaction.  Without this element, it has no viability as legal tender, and the notion of legal tender fails.  It would seem that this is the aspect that nags everyone upon hearing of laws limited the use of cash.  But it’s cash?  What’s the point of cash if we can’t use it?

The point is that the government wants you to spend, even spend more than you have, but just do so in a way that provides clear and available record so that it can get its hands on it if needed.  While this Louisiana flavor may be some swamp people thing to deal with finding copper in the belly of ‘gators, don’t suppose some variation won’t be coming to an antique store near you in near future.  And don’t be surprised when your claims of innocence are challenged by an inexplicable debit of $2793 on your bank statement.

Notice the guy in front of you at the deli put his $2 cup of coffee on his debit card with a mere swipe?  Did you really think this technology was developed for his convenience?