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Can Government Be Limited?

Friday, April 20, 2012

Under current law, it is difficult for the Supreme Court to uphold the healthcare mandate so as to prevent free riding while also preventing its use to extract subsidies. Therein lies the rub.

During the oral argument in the Supreme Court over ObamaCare, it was clear that five Justices were not happy with the possibility that no legal principle imposes a limit on government power under the Commerce Clause.

Post mortems were critical of Solicitor General Don Verrilli for failing to articulate a rationale that would persuade the Justices that Congress can compel people to buy healthcare insurance and at the same time to reassure them that some other compulsions by Congress would be a bridge too far, but the criticism is unfair. No one in Verrilli’s camp has developed a limiting principle. Further, Verrilli was handicapped by a need to remain totally in the realm of the abstract. He could not identify specific mandates that would exceed congressional power because his statist-oriented significant others might, after all, want to impose them at some future date. So when Scalia asked whether the government could force someone to buy broccoli, Verrilli dodged. Similarly, at Justice Kagan’s confirmation hearing, she evaded an answer to the question whether the government could force people to buy fruits and vegetables.

The real position of Verrilli’s client, which is activist government as embodied by President Obama, is that there are no limits.

Had either Verrilli or Kagan given an honest response, each would have said that there is no principle that allows the individual healthcare mandate but draws the line at forcing broccoli down our throats, and that they regard this as a good thing. They happily anticipate the day when the government will mandate a healthy diet, though they tend to gloss over the reality that the definition of the term will depend on which group of food producers donated the most to the winner of the latest presidential campaign.

For those who are less worshipful of the state, the legal question is more difficult. The individual mandate presents two questions of limits.

Had either Verrilli or Kagan given an honest response, each would have said that there is no principle that allows the individual healthcare mandate but draws the line at forcing broccoli down our throats.

The first is whether the government can compel an individual to insure against his own misfortune. The argument in favor was summarized by Verrilli, and given at length in the government’s brief. In a nutshell, it is that society has a norm that dictates that people will be given care in emergencies, and this norm is imposed on the medical system by law, so the person who foregoes health insurance is counting on the compassion of the rest of us to bail him out if necessary. If we were willing to let him die in the gutter, no mandate would be necessary.

The same point is made by Professor Einer Elhauge, cited elsewhere in The American by Lee Harris, and it is a reasonable argument in favor of the mandate. When Verrilli made it, Scalia suggested that the answer is to remove the requirement of treatment, but even we advocates of limited government must concede that Congress cannot be forced to ignore the humane mores of society, and that the argument for government action is pretty good here. Also, a mandate to avoid free riding contains a built-in limit, in that the analogies to the compulsory treatment requirement are rare. As constitutional dilemmas go, this one is not impressive.

The second issue presented by the mandate is whether Congress, after it forces an individual to enter the system, can then use him as a cash cow to subsidize those who present greater risks and who also happen to vote in large numbers, such as the elderly. As was also noted during the argument, ObamaCare provisions such as guaranteed issue and community ratings depend on subsidies from the young and other low-risk groups that can rationally decide to forego purchasing expensive insurance coverage that is priced to subsidize the sick and the politically powerful (such as law students who want subsidies for their recreational sex).

This question is far deeper, because it goes to the heart of contemporary American government. In a 2011 decision upholding ObamaCare, Judge Laurence Silberman of the D.C. Circuit said:

The right to be free from federal regulation ... yields to the imperative that Congress be free to forge national solutions to national problems, no matter how local–or seemingly passive–their individual origins.

But neither Congress nor the states are much in the business of solving national problems any more. Most of their activities use a supposed national problem as a jurisdictional hook to justify dictating that one faction of society subsidize another, sometimes directly and sometimes through regulation. In this perspective, identifying the quantum of interstate commerce necessary to justify congressional action has all the substantive weight of the custom of singing the national anthem before a sporting contest.

As John Hindraker of Powerline put it:

What is the central purpose of government? That question might be tricky to answer in theory, but here in the U.S., the practical answer is easy: the principal function of our national government is to transfer wealth from the young and the middle-aged to the elderly. . . . .   Am I the only person who finds this bizarre? No political philosopher has ever argued that the central purpose of government is to transfer wealth to the elderly. No politician, to my knowledge, has ever run for office on such a platform.

The elderly may be major beneficiaries, but the basic issue is much larger, because transfers to the politically connected at lesser levels dominate both the budget and regulatory systems. What were the great auto and financial industry bailouts if not massive subsidies to favored groups? What is Harmon v. Kimmel, the New York rent control law now up for possible Supreme Court review, if not a systematic transfer from owners to renters? What about green energy and high-speed rail? Or, at the local level, the transfers to millionaire players and billionaire owners embodied in public stadiums, or the crony capitalism of redevelopment scams? Or the takings from landowners by wetlands or endangered species regulations? Or the various National Labor Relations Board assaults on Boeing’s mobility?

ObamaCare provisions such as guaranteed issue and community ratings depend on subsidies from the young and other low-risk groups that can rationally decide to forego purchasing expensive insurance coverage.

Both the free-riding and subsidy issues came up in the ObamaCare oral argument. Justice Ginsburg saw the danger to her cause if the subsidy issue came into focus, so she analogized ObamaCare to a generational compact in which the young pay now and collect later. She cited Social Security. Her point was that the Court had already decided this basic issue, so move along —nothing to see here. No one mentioned that Social Security was sold, but not run, as a savings system, that no young person now believes that the generational bargain will be kept, and that the government has always been careful to argue that these generational compacts are revocable at will and thus not worth the paper on which they are not written.

More broadly, anyone who thinks these transfers are designed “to solve national problems” needs a good shaking, perhaps by exposure to the reality that whenever the government claims to be on a problem-solving mission, it sows salt. Blogger Monty Pelerin listed some of the disaster areas and named the phenomenon “Kevorkian Economics,” in allusion to the politicians’ instinct for shutting down the organ systems of the body politic.

Healthcare itself is a good example—much of the system’s dysfunction is caused by government interventions, often at the behest of a healthcare provider, that have eliminated all market discipline while promoting a sense of unlimited entitlement. The government’s brief in the ObamaCare case provides documentation of how completely the government can distort a system as it lurches to respond to the demands of the politically influential, with each distortion used as the rationale for even more intervention to compensate the more powerful of the outraged victims of last year’s initiative.

The two issues of free riding and exploitation are conceptually distinct but practically entwined. Under current law, it is difficult for the Court to uphold the mandate so as to prevent free riding while simultaneously preventing its use to extract subsidies. Once the individual enters a system, the courts grant total deference to the regulators, as long as Congress articulates some chain of connection between the regulated conduct and interstate commerce. Congress also gets to make up its own reality to create the chain, since courts will not re-examine the justificatory facts.

So the real comparison here is not whether the government can require you to eat broccoli—it is whether the government can force you to buy a car so as to help Detroit, or force someone to buy a house so that he can then subsidize renters. If the mandate is upheld, then the answer to these questions is “yes.” Indeed, it is easy to draft the laws: “Whereas the auto industry is crucial to the well-being of the nation ... you must buy a car” and “Homelessness is a serious problem, so anyone who has more than $X must buy a house, and thereafter must rent it out at a rate set by the government.”

If the issue is framed so as to distinguish between forced participation to avoid free riding and forced participation to become a source of subsidies for others, then the interests of the various sides become more complicated.

Those devoted to limited government should prefer that the Court uphold the requirement that people insure themselves, but with the caveat that the requirement must be limited to coverage of their actual health risks and not contain subsidies for the elderly, or the already sick, or for birth control for law students, or for hair implants, or for any of the other special interests that see ObamaCare as a gravy train. If the government wants to subsidize these people, it should do it out of the general revenue.

This would be the worst outcome from the standpoint of the statists, of course, which is why the government kept falling back on the free rider issue, simply assuming that if it has the power to prevent free riding then it has the power to engage in exploitation as well. The last thing the statists want is for the Court to recognize the distinction.

For the Supreme Court to reach a conclusion that allowed Congress to prevent free-riding but disallowed the subsidy would indeed be earthshaking. It would be a challenge to the subsidy basis of contemporary government, and would be seized upon and fed back into many other areas.

What were the great auto and financial industry bailouts if not massive subsidies to favored groups?

The statists can probably sleep soundly, because the Court is very unlikely to get from its existing Commerce Clause jurisprudence to such a nuanced outcome. The current view is that once Congress provides an adequately tuneful rendition of the national anthem that interstate commerce is affected, its substantive decisions are not reviewable. It is free to redistribute as it pleases.

On the other hand, some of the Justices are groping toward a new framework.

Justice Scalia wants to rest congressional power over activities that “affect commerce” but are not themselves part of interstate commerce on the Necessary and Proper Clause rather than on the Commerce Clause itself. Justice Kennedy, regarded as the probable swing vote on ObamaCare, seems to be thinking along similar lines.

Usually, this distinction is blurred, and it may seem like logic chopping, but for those accustomed to the rarified air of constitutional jurisprudence, it is important. Focusing on the Necessary and Proper Clause opens up possibilities for conceding the existence of congressional power over an activity while also subjecting the substance of the activity to more intensive review.

For example, the Court could rule that Congress can impose the mandate to prevent free-riding, but that the Takings Clause of the Fifth Amendment renders improper a requirement that the young and healthy be forced to fund Congress’s charitable impulses toward the already-sick. In knocking down such a forced-charity requirement in Eastern Enterprises (1998), the Court said:

That Congress sought a legislative remedy ... is understandable; ... When, however, that solution singles out certain employers to bear a burden that is substantial in amount, based on the employers’ conduct far in the past, and unrelated to any commitment that the employers made or to any injury they caused, the governmental action implicates fundamental principles of fairness underlying the Takings Clause.

Eastern Enterprises looks pretty much on-point to me. So who knows where this is going.

The one certainty is that if the Court unconditionally upholds the mandate in ObamaCare, then there are indeed no limits on Congress, and we all better stock up on broccoli, as well as all other items that the politically well-connected might want to force us to purchase.

If the Court goes the other way, it will be only a step toward responsible government. But, as they say, a journey of a thousand miles begins with a single step.

James V. DeLong is the author of Ending Big SIS (the Special Interest State) and Renewing the American Republic, which will appear as an e-book in May.

FURTHER READING: DeLong also writes “Does the Constitution Make You a Cash Cow?” “Washington’s Seizure of Sunk Capital,” and “Washington’s Seizure of Sunk Capital: Part II.” Joseph Antos says “The Individual Mandate Won't Save ObamaCare.” Michael S. Greve describes “The Triumph of Constitutional Argument.” J.D. Kleinke contributes “Watchful Waiting: ObamaCare's Day in Court.”

Image by Rob Green / Bergman Group

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