Its going to be illuminating to see whether the government appeals the big ruling on judges pay that was handed down last week at Washington. The case is called Beer v. United States. The Sun has written about it here and the editor of the Sun here. The plaintiffs are Judge Peter Beer and a rainbow coalition of some of the most distinguished judges on the federal bench. They have just won a ruling that prohibits Congress from suspending a system of automatic pay increases designed to protect their honors from inflation.

The United States Court of Appeals for the Federal Circuit, sitting en banc, handed down the ruling on Friday. The ruling hasnt received much coverage in the press, though  at least in our view  its one of the most important cases of our time. The reason is that it has to do not only with the question of need for Congress to keep its promises and the need to attract a first class judiciary but also the question of constitutional money.

The judges turn out to be a special case because it is unconstitutional ever to diminish their pay. This is American bedrock that was laid down by the Founders because of the British tyrant George III. The king made judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries, as Americas revolutionaries put it in the Declaration of Independence. So it was written into the United States Constitution that the compensation of judges shall not be diminished during their Continuance in Office.

In Beer, the judges sued under that clause after Congress suspended automatic pay increases it had established to protect their honors from inflation. What the appeals court just ruled is that Congress, in suspending the automatic pay increases, diminished the judges pay, particularly because when Congress legislated the automatic pay increases, it also established limits on the outside income judges are permitted to earn.

More broadly, at least by our lights, the ruling says, in effect, that the legal tender laws dont apply to judges salaries. That is, the court is suggesting that, at least in the case of judges, 100,000 dollar bills will not suffice in 2012 for a contract to pay $100,000 that was entered into in, say, 2000. The Appeals Court packed its opinion with some prime language from the founding era.

[N] othing can contribute more to the independence of the judges than a fixed provision for their support, the Court quoted Alexander Hamilton as writing in 79 Federalist. It noted that at the constitutional convention at Philadelphia, where the Founders sat that summer in 1787, James Madison urged that variations in the value of money could be guarded agst. by taking for a standard wheat or some other thing of permanent value.

Madisons wheat gambit was rejected, the court noted, and Founders did not tie judges pay to any commodity. Quoth the United States Court of Appeals for the Federal Circuit: The framers instead acknowledged that fluctuations in the value of money, and in the state of society, rendered a fixed rate of compensation [for judges] in the Constitution inadmissible. It was quoting 79 Federalist again. It noted that the constitutional convention voiced concerns to protect judicial compensation against economic fluctuation.

It turns out, though, that the historical record is clear what the Founders thought dollars were. They used the word dollars twice in the Constitution. By a dollar they meant 371 and ¼ grains of pure silver or a 15th as many grains of gold. Thats the way Congress defined a dollar in law under the Articles of Confederation and the way Congress defined it in law in the first Coinage Act of the constitutional era.

The idea that a dollar could be worth a different number of grains of silver or gold at the end of a contract than it meant at the beginning of a contract would have horrified George Washington and nearly all of the other Founders (Benjamin Franklin, a printer, had a vested interest in paper money). So would the idea that the dollar would be permitted to decline over a decade to but a sixth of the number of grains of gold at which it was valued at the start of a decade. That is what has just happened in America.

The court deciding Beer didnt get into legal tender per se. But the legal tender question is the elephant in the courtroom, so to speak. If a dollar cant be diminished for judges  that is, if the legal tender laws are not good enough for judges  why should they be good enough for the rest of us? If they are not good enough for the contract between the government and judges, why should they be good enough for contracts between private parties?

Or, to put it another way, the rest of us folk might as well be amici as the courts start to grapple with constitutional money. The diminishment of their salaries has driven the federal judges nearly to distraction, and understandably so, precisely because they are honest men and women. The chief justices  most recently Chief Justices Roberts and Rehnquist  have been warning about it for decades. The Great Scalia issued an impassioned warning about the problem here in New York just the other day.

We dont know whether the Supreme Court will be asked to hear an appeal of Beer. If it is asked, it may decline. But if the nine are asked to take a final look at the case, the question for them to start thinking about is less the promises of Congress  although breaking such a promise is enough of a diminishment for us  and more about the meaning of money. The fact is that Americans are just as upset about the harm being done to them by fiat money as the judges are.