Sex & Startups

Private law offers a unique solution to the problem of long-term fiscal commitment. When Congress enacts a spending program that will take many years to reach fruition, there is a risk of a subsequent Congress or President cutting off funding in the interim. There is no escape from the problem within appropriations law itself. One solution, however, is to entrust private sector allies as vessels of long-term commitment. As a matter of political economy, that solution draws on policy-feedback theory. As a matter of law, the solution rests on a mechanism that Congress already uses but has not recognized its potential: statutory contracts. Statutory contracts are spending statutes that promise to pay if a counterparty performs a specified action. Most tax credits, most farm subsidies, and even Medicare work this way. Because statutory contracts are structured like, and implicate, the same normative interests as other contracts, this Article argues that they should be interpreted according to principles of contract law. Contract law provides remedies for a subsequent government’s breach that public law cannot match. At the same time, not all statutory contracts should be enforceable, just as some executive branch contracts are held unenforceable when they constrain subsequent policy freedom. Even if courts do not adopt the interpretive positions that this Article advances, the increased use of statutory contracting is reshaping the balance of fiscal power within Congress, between the branches, and between the government and its spending recipients. Statutory contracts shift power away from the appropriations committees, provide a central point of access for lobbyists, and reduce fiscal transparency by obligating the government to unknown sums. These factors make statutory contracts particularly susceptible to public choice concerns. And yet, statutory contracts are more procedurally attractive than existing forms of public-private governance where the executive strikes one-off deals with selected firms. Inherent in their nature as unilateral contract offers, statutory contracts are open to any willing counterparty who meets performance requirements. This Article suggests that statutory contracts could thus become the fiscal mechanism of a more open and performance-based industrial policy.