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The Supreme Court and Obamacare
by Laurence M. Vance, October 11, 2011
The new term of the Supreme Court has just begun. All eyes are on the court, as it is expected to hear for the first time a case against Obamacare.
The Patient Protection and Affordable Care Act (PPACA), more popularly known as Obamacare, passed the Senate on Christmas Eve of 2009, passed the House on March 21, 2010, and was signed into law by President Obama on March 23, 2010. It was one of the most controversial and partisan pieces of legislation in history, with no Republican in either house of Congress voting in favor of the 2407-page bill (H.R. 3590 [PDF
The onerous provisions of the PPACA include an expansion of Medicaid eligibility, the prohibition of annual and lifetime coverage caps, the elimination of co-payments and deductibles for selected health-insurance benefits, guaranteed issue of insurance policies without regard to preexisting conditions, federal subsidies for the purchase of health insurance, employer mandates, more arcane insurance regulations, an increase in the Medicare tax on the "rich," and a tax on indoor tanning services. Perhaps the most egregious part of Obamacare is the "individual mandate" that every American not covered by Medicaid, Medicare, or health insurance must purchase health insurance or pay a penalty.
Within hours of the passage of Obamacare, the attorney general of Florida, Bill McCollum, and the attorneys general of twelve other states (Alabama, Colorado, Idaho, Louisiana, Michigan, Nebraska, Pennsylvania, South Carolina, South Dakota, Texas, Utah, and Washington), filed suit in the U.S. District Court for the Northern District of Florida against the U.S. Departments of Health and Human Services, Treasury, and Labor, and their respective department secretaries, Kathleen Sebelius, Timothy Geithner, and Hilda L. Solis, challenging the constitutionality of the individual mandate.
The lawsuit was later joined by the attorneys general of thirteen other states (Alaska, Arizona, Georgia, Indiana, Iowa, Kansas, Maine, Mississippi, Nevada, North Dakota, Ohio, Wisconsin, and Wyoming), the National Federation of Independent Business, and two individuals, Mary Brown and Kaj Ahlburg.
On January 31, 2011, Judge Roger Vinson of the U.S. District Court in Pensacola struck down the Obamacare mandate, declaring, "The individual mandate is outside Congress' Commerce Clause power, and it cannot be otherwise authorized by an assertion of power under the Necessary and Proper Clause. It is not Constitutional" (PDF
- The defendants' argument that people without health insurance are actively engaged in interstate commerce based on the purported "unique" features of the much broader health care market is neither factually convincing nor legally supportable.
- Because I find both the "uniqueness" and "economic decision" arguments unpersuasive, I conclude that the individual mandate seeks to regulate economic inactivity, which is the very opposite of economic activity. And because activity is required under the Commerce Clause, the individual mandate exceeds Congress' commerce power, as it is understood, defined, and applied in the existing Supreme Court case law.
- Because I find both the "uniqueness" and "economic decision" arguments unpersuasive, I conclude that the individual mandate seeks to regulate economic inactivity, which is the very opposite of economic activity. And because activity is required under the Commerce Clause, the individual mandate exceeds Congress' commerce power, as it is understood, defined, and applied in the existing Supreme Court case law.
The judge then ruled on March 3 that he would honor the Obama administration's request that his ruling be stayed while the United States Court of Appeals for the Eleventh Circuit, in Atlanta, reviewed the case. He also expressed interest in the Supreme Court hearing the case because "the sooner this issue is finally decided by the Supreme Court, the better off the entire nation will be."
After an official appeal by the government on March 8, the Atlanta appellate court, by a 2–1 vote on August 12, affirmed the judgment of Judge Vinson in a 207-page opinion that the individual mandate was unconstitutional, but rejected his argument that the mandate was not severable from the rest of the PPACA, thus rendering the rest of Obamacare "legally operative" (PDF
On September 28, the state plaintiffs (PDF
But Florida et al. v. Department of Health and Human Services et al. is not the only lawsuit against Obamacare. Since the PPACA was passed, there have been twenty-five other court challenges to the new health care law.
Besides the Florida case, there are two other cases where the individual mandate of Obamacare was declared unconstitutional. In Virginia v. Sebelius, the U.S. District Court for the Eastern District of Virginia struck down the individual-mandate provision of the law on December 13, 2010. Said Judge Henry Hudson, "Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market."
But the government appealed the decision in the 4th circuit court of appeals, in Richmond, which ruled unanimously on September 8, 2011, that the district-court judgment be vacated and the case remanded back to that court to be dismissed "for lack of subject-matter jurisdiction," because the plaintiff lacks standing.
In Goudy-Bachman v. Department of Health and Human Services, the U.S. District Court for the Middle District of Pennsylvania ruled on September 13, 2011, that the individual mandate is unconstitutional. Judge Christopher Connor wrote that allowing the individual mandate to stand "would effectively sanction Congress's exercise of police power under the auspices of the Commerce Clause, jeopardizing the integrity of our dual sovereignty structure."
In six other cases, the constitutionality of Obamacare was upheld. Three of them were also heard at the appeals court level. In Liberty University v. Geithner, the U.S. District Court for the Western District of Virginia dismissed the case on November 30, 2010. On appeal, the fourth circuit court of appeals, by a vote of 2–1 on September 8, 2011, vacated the judgment of the district court and remanded the case back to that court to be dismissed "for lack of subject-matter jurisdiction" because the individual mandate is a tax that cannot be challenged in court until it is collected, which will not be until 2014.
In Thomas More Law Center v. Obama, the U.S. District Court for the Eastern District of Michigan dismissed the case on October 7, 2010. On appeal, the sixth circuit court of appeals ruled, by a vote of 2–1 on June 29, 2011, that Congress has a "rational basis" to impose the individual mandate, and the court upheld the constitutionality of the PPACA.
In Seven-Sky & American Center for Law and Justice v. Holder, the U.S. District Court for the District of Columbia dismissed the case on February 22, 2011.
The decision of the D.C. circuit court of appeals is pending.
Nine other cases were dismissed by district courts for lack of standing or procedural problems. One of these cases, New Jersey Physicians v. Obama, was also heard by the third circuit court of appeals, which upheld the district court ruling. Two of the nine cases, Baldwin & Pacific Justice Institute v. Sebelius and Kinder v. Geithner, are pending at the appeals-court level.
Eight cases are still pending at the district-court level.
All these cases basically come down to the question of the "individual mandate" versus the "commerce clause." In general, liberal judges appointed by Democratic presidents view the mandate as constitutional, while conservative judges appointed by Republican presidents view the mandate as unconstitutional. Both groups err, but in different respects.
The commerce clause is the most abused part of the Constitution. It has been used by the federal government to increase its power over the states and their citizens and to decrease the power of the states and their citizens. It has been used to force farmers to destroy crops and pay a fine for growing "too much" wheat (Wickard v. Filburn). It has also been used to criminalize marijuana for medical use even where states approve its use (Gonzales v. Raich). All the commerce clause says is that Congress has the power "to regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."
During the health-care debates back in 2009, then-Speaker of the House Nancy Pelosi was asked by CNS News where the Constitution authorizes Congress to order Americans to purchase health insurance. Her response was simply, "Are you serious? Are you serious?" She answered no further, and took another question. Her press secretary then said that asking Pelosi where the Constitution authorized Congress to mandate that individual Americans buy health insurance was not a "serious question."
Pelosi's office has issued a statement on the " Constitutionality of Health Insurance Reform" in which she does answer the question:
The Constitution gives Congress broad power to regulate activities that have an effect on interstate commerce. Congress has used this authority to regulate many aspects of American life, from labor relations to education to health care to agricultural production. Since virtually every aspect of the health care system has an effect on interstate commerce, the power of Congress to regulate health care is essentially unlimited.
In the early history of the American republic, as Judge Vinson points out in his decision striking down Obamacare, "The word 'commerce' was understood to encompass trade, and the intercourse, traffic, or exchange of goods; in short, 'the activities of buying and selling that come after production and before the goods come to rest'" (PDF
Nowhere, as Judge Vinson further points out, "in Madison's notes on the Constitutional Convention and in The Federalist" is the term "commerce" "ever used to refer unambiguously to activity beyond trade or exchange." Any member of the federal judiciary should be familiar with this.
Obamacare is unconstitutional because health care and health insurance are not commerce, are not interstate commerce, and are not relevant to the commerce clause.
According to Madison -- the father of the Constitution -- the commerce clause
- grew out of the abuse of the power by the importing States in taxing the non-importing, and was intended as a negative and preventive provision against injustice among the States themselves, rather than as a power to be used for the positive purposes of the General Government.
- First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e., those activities that substantially affect interstate commerce.
When the Supreme Court decides to rule on the constitutionality of Obamacare, it will have to decide two questions: whether the individual mandate is constitutional, and whether it is severable from the rest of the health care law.
There is something far more important, however, that the Supreme Court will not be deciding: whether Congress has the authority to legislate concerning health care in the first place.
Nancy Pelosi's aforementioned " Constitutionality of Health Insurance Reform" says
- Reform opponents continue to spread myths about components of America's Affordable Health Choices Act, including the nonsensical claim that the federal government has no constitutionally valid role in reforming our health care system apparently ignoring the validity of Medicare and other popular federal health reforms.
- For the reasons stated, I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate. That is not to say, of course, that Congress is without power to address the problems and inequities in our health care system. The health care market is more than one sixth of the national economy, and without doubt Congress has the power to reform and regulate this market. That has not been disputed in this case. The principal dispute has been about how Congress chose to exercise that power here. (PDF
)
- We conclude that the individual mandate contained in the Act exceeds Congress's enumerated commerce power. This conclusion is limited in scope. The power that Congress has wielded via the Commerce Clause for the life of this country remains undiminished. Congress may regulate commercial actors. It may forbid certain commercial activity. It may enact hundreds of new laws and federally-funded programs, as it has elected to do in this massive 975-page Act. But what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die. (PDF
) - As demonstrated at length throughout our opinion, Congress has broad power to deal with the problems of the uninsured, and it wielded that power pervasively in this comprehensive and sweeping Act. As to the individual mandate provision, however, Congress exceeded its enumerated commerce power.
The Constitution nowhere authorizes the federal government to provide a health-care safety net, a prescription drug plan, vaccinations, medical treatment, or health insurance subsidies.
The Constitution nowhere authorizes the federal government to ensure that everyone has access to affordable health care or insurance, to eliminate co-payments and deductibles, or to guarantee issue of insurance policies without regard to preexisting conditions.
The Constitution nowhere authorizes the federal government to fund clinical trials, laboratories, community health centers, medical research, or family planning.
The Constitution nowhere authorizes the federal government to mandate medical licensing or force hospitals to treat anyone regardless of their ability to pay.
The Constitution nowhere authorizes the federal government to have programs like Medicare, Medicaid, SCHIP, or HIV/AIDS prevention initiatives.
The Constitution nowhere authorizes the federal government to have agencies like the National Institutes of Health, the FDA, or the Department of Health and Human Services.
The Constitution nowhere authorizes the federal government to regulate hospitals, nursing homes, the health-insurance industry, pharmaceutical companies, organ sales or donations, medical devices, medical schools, physicians, dentists, nurses, midwives, psychiatrists, psychologists, pharmacists, or practitioners of holistic, chiropractic, homeopathic, nutritional, or other forms of alternative medicine.
Libertarians, of course, also recognize that not only are these things unconstitutional, they are beyond the purpose and scope of a government limited to the protection of life, liberty, and property.
The Supreme Court may overturn the individual mandate or the whole of Obamacare, but neither of those actions will restore a free market in health care.
http://www.fff.org/comment/com1110i.asp
A Nobel for Thomas Sargent
What the latest Nobel winner has to say about economics, Paul Krugman, and Obama's stimulus
Ira Stoll | October 10, 2011
No matter how skeptical one is of the authority of "experts," it's hard to avoid paying at least some attention to the people who award the Nobel prize—especially when they give one to someone who tends to support some things one tended to believe already.
So it is in the case of Thomas Sargent, the New York University professor who was announced Monday as a winner of the Nobel in economics. Aninterview of Professor Sargent by the Minneapolis Fed in August 2010 summed up some of his contributions succinctly: "Policymakers can't manipulate the economy by systematically 'tricking' people with policy surprises. Central banks, for example, can't permanently lower unemployment by easing monetary policy, as Sargent demonstrated with Neil Wallace, because people will (rationally) anticipate higher future inflation and will (strategically) insist on higher wages for their labor and higher interest rates for their capital."
That interview is also notable for Professor Sargent's icy dismissal of another Nobel laureate in Economics, Paul Krugman of Princeton University and The New York Times opinion page.
[Minneapolis Fed interviewer]: What was Paul Krugman's opinion about those Princeton macro seminar presentations that advocated modern macro?
Sargent: He did not attend the macro seminar at Princeton when I was there.
Interviewer: Oh.
In the same interview, Professor Sargent was also skeptical of President Obama's stimulus:
Interviewer: A January 2009 article quotes you as saying, "The calculations that I have seen supporting the stimulus package are back-of-the-envelope ones that ignore what we have learned in the last 60 years of macroeconomic research." What calculations had you seen?
Sargent: I said something like that to a reporter. I had just read an Obama administration's Council of Economic Advisers document e-mailed to me by my friend John Taylor. I agreed with John that the CEA calculations were surprisingly naive for 2009. They were not informed by what we learned after 1945….In early 2009, President Obama's economic advisers seem to have understated the substantial professional uncertainty and disagreement about the wisdom of implementing a large fiscal stimulus. In early 2009, I recall President Obama as having said that while there was ample disagreement among economists about the appropriate monetary policy and regulatory responses to the financial crisis, there was widespread agreement in favor of a big fiscal stimulus among the vast majority of informed economists. His advisers surely knew that was not an accurate description of the full range of professional opinion. President Obama should have been told that there are respectable reasons for doubting that fiscal stimulus packages promote prosperity, and that there are serious economic researchers who remain unconvinced.
In the same interview, Professor Sargent says, "Europe's generous unemployment compensation system has made an important contribution to sustained high European unemployment….Our models imply that people in Europe, especially older workers, are suffering from long-term unemployment because of the adverse incentives brought about by a generous social safety net when it interacts with these human capital dynamics….if, in the United States, we create a system where unemployment and disability benefits are permanently extended in their generosity and their duration, we will inadvertently put ourselves into the situation that much of Europe has suffered for three decades."
And in the same interview, Professor Sargent speaks of how a gold standard for monetary policy imposed fiscal discipline: "what induced one major Western country after another to run a more-or-less balanced budget in the 19th century and early 20th century before World War I was their decision to adhere to the gold standard."
In a 2007 graduation speech to economics undergraduates at the University of California, Berkeley, Professor Sargent offered "a short list of valuable lessons that our beautiful subject teaches," among them, "Many things that are desirable are not feasible," and, "Everyone responds to incentives, including people you want to help. That is why social safety nets don't always end up working as intended."
In both the Minneapolis Fed interview and his February 2010 Phillips Lecture at the London School of Economics, Professor Sargent gave a respectful summary of a criticism of federal bank deposit insurance: "The deposit insurance allows shareholders to gamble on favorable terms with other peoples' money (the tax payers'), and shareholders want to do this as much as possible. The bank is bound to fail sooner or later, and then the government will have to pay the depositors."
Toward the end of the Phillips Lecture, Professor Sargent also cites Walter Bagehot, who "said that what he called a 'natural' competitive banking system without a 'central' bank would be better…. 'nothing can be more surely established by a larger experience than that a Government which interferes with any trade injures that trade. The best thing undeniably that a Government can do with the Money Market is to let it take care of itself.'"
The best thing undeniably that a government can do with many things is to let them take care of themselves. Now there's a phrase that it'd be nice to see etched into some granite above the entryways of some buildings in Washington.
And if the chance of that actually happening is some elections away, the Nobel committee's decision to give a prize to Professor Sargent may help bring the moment closer.
Ira Stoll is editor of FutureOfCapitalism.com and author of Samuel Adams: A Life.
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- Apple's "Lisa" was the first consumer computer with a graphical user
interface.
- "The Internet? We are not interested in it." – Bill Gates, 1993
On Oct 11, 2:43 pm, Bruce Majors <majors.br...@gmail.com> wrote:
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