Thursday, June 28, 2012

The Issue of the Day - Updated

(Update at the end.)

With the Obamacare ruling expected in a few hours, here's my in-before-the-deadline thoughts on the individual mandate. Not being a constitutional lawyer myself, as far as I can tell there are three clauses in the US Constitution that might make the individual mandate constitutional. The first and most easily dismissed is the Commerce Clause; second is the Necessary and Proper Clause; third, with the most relevance, is the Tax and Spending Clause.

The Commerce Clause allows Congress to regulate interstate commerce. If that is taken to mean actual interstate commerce, the Commerce Clause would be completely irrelevant here. Almost every state specifically prohibits its residents from purchasing out-of-state health insurance. There is no interstate health insurance market, and that is a direct, deliberate result of government policy. How then, can Congress regulate interstate commerce that doesn't even exist? Interstate commerce doesn't mean that lots of states have their own intrastate commerce. Interstate commerce has to be between states, which for most states is specifically forbidden when it comes to health insurance. At best, the Commerce Clause might allow a health insurance mandate for the three states (RI, WY, GA) that allow out-of-state insurance. Now, I haven't seen any legal expert even mention what I'm talking about, so maybe there's a really awesome legal argument for why I'm wrong. But until I find out what that is, this just seems like common sense to me.

The Necessary and Proper Clause allows Congress to do things that aren't authorized elsewhere, but that are necessary and proper to do things that are authorized elsewhere. The problem is, you won't find "health insurance" in Congress' enumerated powers. Lots of people say it's included in the Commerce Clause (see above), and I suppose it might be counted under "general welfare." But that seems like a stretch to me. Even if the public health is included in "general welfare," when you get to the point of mandating individual citizens to buy specific products from private parties, you've gone way beyond either public health or general welfare.

Even if health insurance is included under "general welfare," it's not clear to me that the individual mandate is either necessary or proper. I understand that the mandate is necessary to prevent the insurance industry from collapsing under the weight of the rest of Obamacare, but that hardly seems like a proper use of the word necessary. That's like me holding Hank's head under water, and then saying it's necessary for you to go buy scuba gear for Hank so he doesn't drown. Giving Congress extra powers to undo damage caused by exercising their other powers just seems like a bad idea to me-- the phrase perverse incentives comes to mind.

The Tax and Spending Clause allows Congress to basically tax whatever they want, as long as it applies equally throughout the country. If the individual mandate is a tax, I think it would pretty clearly be constitutional via the Tax and Spending Clause. The federal government has all kinds of taxes and credits and deductions for very specific, very personal individual behaviors, like buying a house or having a kid or giving to a list of federally-approved charities. I can't see how these would be allowed but health insurance wouldn't be.

In legal circles, the big debate is whether the mandate actually is a tax (which is allowed) or a penalty (which isn't allowed). What's the real difference? There isn't one. Right now, the law explicitly calls the mandate a "penalty," but every instance of "penalty" could be replaced with "tax" and the meaning would be no different. In fact, Congress did exactly that in the other direction-- early drafts called the mandate a tax, but the final law calls the same mandate a penalty. They do exactly the same thing. So why is one constitutional and the other not? As far as I can tell, because constitutional law is stupid. That link makes it a bit difficult to end on that note, but I really don't have a better explanation. 

Conclusion
I have no idea how the Supreme Court will actually rule in a few hours, nor is this an attempt to guess, or to sort out the legal arguments. This is just my attempt at a common sense approach to the Constitution, which is admittedly something even the Founders never intended. I may be way off-base, but based on my interpretation, the individual mandate cannot be justified under the Commerce Clause or the Necessary and Proper Clause. It probably can be justified under the Tax and Spending Clause, and even if it can't, it could be with a nearly-identical law that does the same thing but explicitly calls it a tax instead of a penalty.

Update
The full text of the ruling (193 pages) is here in PDF form. It looks like the Court agreed with me that the Commerce and Necessary & Proper Clauses do not allow an individual mandate, although for different reasons than mine. I was apparently wrong that the mandate would be unconstitutional if you called it a penalty but constitutional if you called it a tax-- constitutional law is more internally consistent (ie less stupid) than I thought. At the same time, Roberts and the four liberal justices ruled that the mandate is not a tax for purposes of the Anti-Injunction Act (ruling otherwise would have prevented the Court from even considering the case), while it is a tax for purposes of the Tax & Spending Clause. In other words, constitutional law is both more and less internally consistent than I thought. (Decide for yourself how that impacts my own internal consistency.)

I still think the individual mandate is a horrible policy, even if it is constitutional. I sincerely hope we can repeal it in 2013. I'm encouraged that individual mandates are not constitutional under the Commerce or Necessary & Proper Clauses; to be passed, they must now be passed as taxes, which will be more politically difficult. The libertarian in me also hopes that this prompts the nation into taking a good, hard look at our tax code and the wide-ranging tax powers our government has. Maybe it's time for a constitutional amendment restricting Congress' tax power.

5 comments:

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    1. I just recently found out about them. I may not be the most up-to-date person musically...

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  2. Oops, wrong post on that last comment. Good thoughts on the Constitution.

    I don't think Congress has the authority to make us buy things, i.e. engage in commerce we aren't already engaging in because our lack of engagement affects the engagement itself. It seems like a lot of liberals think that's constitutional based on an old court decision that the government can force a farmer not to grow wheat because he is affecting the rest of the market by doing so. Or something like that. But of course, under that logic, everything we buy or not buy affects the market for everything, so there would be nothing Congress can't make us buy... The idea of how the government is limited on that point seemed to be the chief concern of conservative judges during the hearings, and I haven't seen a good limit from the liberals who are convinced it just has to be constitutional. Indeed, they don't seem very concerned about limiting the government at all.

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    1. I see now that I completely missed your point on the Tax clause. Although it looks like there's essentially no limit on Congress's authority now either way, so long as the commerce in question has a tax for not participating. I still think it's different than "buying a house or having a kid..." as those are active things that you do and then get deductions for. Are there deductions or credits or penalties for NOT doing things? (I suppose you could argue that it's equivalent to everyone paying a higher rate and everyone else getting a deduction FOR doing the thing...)

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    2. Consider three possible mandates:
      1) Go buy X, or I'll penalize you $Y.
      2) Go buy X, or I'll tax you $Y.
      3) I'll tax you $Y, unless you go buy X.

      #1 is the way the PPACA is written, #2 is the way the early drafts were written, and #3 is the mortgage tax deduction. In terms of economic effects, all three mandates are identical. It doesn't matter whether you call it a penalty for not doing something or a credit for doing it, your incentives and final tax bill are the same. There's a psychological difference, but not an economic one.

      My understanding when writing this entry was that #1 was unconstitutional while #2 and #3 were constitutional, despite them all being functionally identical. Roberts' argument seems to be that because they are functionally identical, if any is constitutional, they all are.

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