Today I particpated in another debate over the constitutionality of the Affordable Care Act’s individual mandate. At the invitation of the Milwaukee Chapters of the Federalist Society and the American Constitution Society, I debated Robert Levy of the Cato Institute over luncheon at the Milwaukee Athletic Club. My thanks to our hosts, to Mr. Levy, and to the audience. Below are my prepared remarks. My previous post on the consitutionality of the individual mandate can be viewed here.
In December 1783, George Washington gave a toast at a dinner celebrating the formal dissolution of the Revolutionary Army. He did not use his toast to offer a tribute to individual liberty. Nor did he sing the praises of limited government. Instead, his toast was a simple expression of what he hoped the future would bring to our new nation. He raised his glass and he said: “Competent powers to Congress for general purposes.”
We must never forget that our Constitution is a document that was intended to create competent powers for Congress for general purposes.
Much of what Mr. Levy cites in oppostion to the individual mandate is based upon abstract principles. However, when we interpret the Constitution, we do not begin with abstract theories of political philosophy, and then attempt to shoehorn those theories into the text.
Instead, when we interpret the Constitution, we begin by looking to the text itself.
The power to “regulate,” which is the power delegated to Congress under the Commerce Clause, is the power to prescribe the rules by which commerce is governed. The word “regulate” means “to direct” or “to command.” Therefore, the plain meaning of the word “regulate” in the text includes a grant to Congress of the power to require action.
Next we look to precedent.
Chief Justice John Marshall set the guiding principles of Commerce Clause jurisprudence when he wrote, in Gibbons v. Ogden (1824), that once the Court satisfies itself that the regulation of interstate commerce is involved, the power of Congress is plenary. When John Marshall said “plenary,” he meant that it was not for the Court to impose a limit on the means that Congress chooses in the exercise of its delegated power.
Following Justice Marshall, the Supreme Court has long stated that so long as the law in question does not contravene an independent constitutional provision, the only question appropriate for judicial review is whether the subject matter of the regulation is interstate commerce. Chief Justice Harlan Fisk Stone said in 1941, in United States v. Darby, “Whatever their motive and purpose, regulations of commerce which do not infringe some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause.”
Does the individual mandate infringe on a constitutionally protected right? No. So really the main question that concerns us today is whether the individual mandate is a regulation of interstate commerce. It is.
The Affordable Care Act deals with real, quantifiable externalities in the national market for health insurance. The decision of some persons to forgo the purchase of commercial insurance leads to unreimbursed costs being passed along to consumers across state lines. The current amount of uncompensated emergency room care has been estimated to add $1,000 per year to the average family’s premium. Because the Affordable Care Act mandates that insurance companies offer coverage to those with pre-existing medical conditions, the total dollar amount of cost-shifting from the uninsured to the insured would increase significantly if the individual mandate were not imposed.
Congress can clearly regulate the purchase of health insurance once you arrive at the emergency room, as a transaction with a substantial effect on interstate commerce in the aggregate. Can Congress mandate the purchase of insurance in advance of your emergency room visit, in reasonable anticipation of a virtually inevitable future transaction?
We know that Congress can regulate potential future actions under the Commerce Clause. It is well settled that Congress can prohibit future activity under the Clause. Does it make a difference if, instead of prohibiting future acts, Congress mandates that future acts take place?
The case of Wickard v. Filburn (1942) is the closest precedent to the individual mandate. The law upheld in Wickard forced farmers to enter the market and purchase wheat that they might otherwise prefer to grow themselves.
The decision to forego health insurance is similar to the decision of the farmers to forego the wheat market. In both cases, Congress is requiring the consumer to participate in the national market. The only difference is that the farmer wants the wheat now while the health care consumer wants to delay their purchase as long as possible. If the offensive nature of the individual mandate simply reduces to a question of timing, then one has to question why such a distinction should make a difference.
It is true that there was a time at the end of the Nineteenth Century when the Supreme Court adopted rules under the Commerce Clause that sought to enforce formalistic distinctions. The Court limited Congress to the regulation of activities with a “direct” connection to commerce, as opposed to “indirect,” or permitted Congress to regulate “sales” but denied Congress the power to regulate “manufacturing.”
During this period, the Court was engaged in a quixotic effort to define an intrastate zone of commerce subject to exclusive state control, while simultaneously marking the boundary of an interstate zone of commerce subject to primarily federal control. The premise behind this misguided effort was that the Constitution embodied a system of dual federalism, whereby the 10th Amendment prescribed limits on the scope of the powers delegated to Congress. Similarly, under the line of cases exemplified by Lochner v. New York (1905), the Supreme Court was engaged in a parallel effort to distinguish between the regulation of private economic choices, which were protected as part of the liberty preserved under the Due Process Clause, from matters of public concern which were found to be appropriate subjects for government regulation.
Both of these efforts were doomed to fail. The American economy was rapidly growing and changing, and commerce became too intertwined and all pervasive to be capable of sorting into separate and well defined little boxes.
What is most notable about the Supreme Court’s experiment with formalistic labels, as a means of policing Congress’ power under the Commerce Clause, is how the Court’s reasoning relied upon the recitation of a parade of horribles. So, for example, in the 1895 case of United States v. E.C. Knight & Co., the Court struck down a federal law forbidding any merger of manufacturing companies that resulted in a monopoly, on the grounds that corporate consolidations were not commerce because they were not activities that directly involved the shipment of goods. This opinion said:
If it be held that the term [commerce] includes the regulation of all such manufactures as are intended to be the subject of commercial transactions in the future, it is impossible to deny that it would also include all productive industries that contemplate the same thing. The result would be that Congress would be invested, to the exclusion of the States, with the power to regulate, not only manufactures, but also agriculture, horticulture, stock raising, domestic fisheries, mining – in short, every branch of human industry.
In order to avoid this parade of horribles, the Knight decision rejected the argument that the consolidated companies would, at some later date, send manufactured goods into the stream of commerce. The Court said, in essence, that future commercial activity could not be used to justify the present regulation of intrastate affairs. Sound familiar?
The “inactivity” argument leveled at the individual mandate is nothing more than an attempt to re-introduce formalistic rules designed to limit the scope of Congress’ delegated power.
The problem with this attempt is that a unanimous Supreme Court rejected formalism, and repudiated the experiment with dual federalism, in Wickard v. Filburn.
The most important aspect of the Wickard opinion was its recognition that once Congress has made the factual finding that the effect on interstate commerce justifies federal regulation, the Supreme Court did not have any objective standard upon which it could reject such a finding. As Justice Jackson wrote to his law clerk:
At what point these effects have enough vitality to confer federal jurisdiction and at what point they have passed outside it, we have no standards to determine, and I am not at all sure of our capacity to invent a standard that would have any validity upon the immediate case to which it is applied. In such a state of affairs, the determination of the limit is not a matter of legal principle, but of personal opinion; not one of constitutional law, but one of economic policy.
Wickard creates a presumption that congressional statutes passed pursuant to the Commerce Clause are constitutional, and places the burden upon the party challenging the statute to show that the activity being regulated, in the aggregate, has no substantial effect on interstate commerce.
The more recent cases of Lopez and Morrison do not apply to the individual mandate. United States v. Lopez held that Congress cannot regulate non-economic behavior based on an attenuated link to interstate commerce. An individual’s decision whether to self-insure or whether to purchase commercial insurance clearly falls within the realm of economic behavior.
United States v. Morrison held that Congress may not regulate individual interstate economic behavior if the aggregate impact of this behavior on interstate commerce is negligible. The cost shifting impact of uncompensated medical care is well documented, and hardly negligible.
I note here that there is no quantifiable cost shifting involved when I refuse to eat broccoli or when I decline to purchase a health club membership. If I subsequently get sick, where is the factual basis for asserting that my illness was due to a lack of broccoli as opposed to excessive sodium intake? How does one quantify the percentage of my poor health attributable to a lack of exercise as opposed to a genetic predisposition?
Compare these examples to the situation with uncompensated health care, where the provider gives the uninsured an itemized bill, accounts for the amount of annual uncompensated care on its books, and budgets an increase in prices in order to recapture those costs. I submit that if Congress were to regulate broccoli consumption or health care memberships without any quantifiable factual basis the Supreme Court would have ample authority under the Morrison case to reject such fantasies.
Even if we adopted the formalistic rule that inactivity cannot be commerce, the purchase of health insurance would still be subject to congressional regulation under a separate theory: it would be non-economic activity subject to control as a necessary and proper part of an overall scheme of interstate regulation.
To quote Justice Stone in United States v. Darby: “The power of Congress over interstate commerce is not confined to the regulation of commerce among the states. It extends to those activities intrastate which so affect interstate commerce or the exercise of the power of Congress over it as to make regulation of them appropriate means to the attainment of a legitimate end . . . .” Under this principle Congress can regulate even noneconomic local activity, where that regulation is necessary and proper to a more general regulation of interstate commerce. Justice Scalia said the same thing in 2005 in his concurrence in Gonzales v. Raich, which upheld federal regulation of marijuana grown for personal use.
The Darby case is instructive as well. The Court concluded that Congress had power under the Commerce Clause to impose minimum wage and hour provisions for workers. The Court further held that since the labor conditions of the workers fell within Congress’ Commerce Clause authority, Congress could also require employers to create and keep records that evidenced compliance with those conditions. In other words, employers who were willing to comply with the congressional command could not argue that Congress’ power only reached their actual treatment of workers. Instead, Congress could also require that those employers take the additional action of creating documents that reflect their compliance. Congress could mandate the creation of documents as a necessary and proper means of enforcing its minimum labor conditions.
Therefore, under existing precedent, Congress may impose the individual mandate as either part of interstate commerce itself or else as noneconomic activity necessary to the regulation of interstate commerce.
Is there no limiting principle that defines the outer boundary of Congress’ power under the Commerce Clause?
From the beginning, John Marshall insisted that the only limiting principle on Congress’ exercise of this delegated power is the political process. In defining the scope of Congress’ power in Gibbons v. Ogden (1824), Marshall said that “[t]he wisdom and discretion of Congress, their identity with the people, and the influence which their constituents possess at elections are . . . the sole restraints . . . to secure them from its abuse.”
In the almost two centuries since the Gibbons case, the members of the Supreme Court have returned often to the idea that once interstate commerce is affected, the political process itself comprises the sole limit on Congress’ lawmaking authority.
In 1922, Chief Justice Taft, in the case of Stafford v. Wallace said: “This court will certainly not substitute its judgment for that of Congress in such a matter unless the relation of the subject to interstate commerce and its effect upon it are clearly non-existent.”
Later, writing to his law clerk about the breadth of the decision in Wickard v. Filburn, Justice Jackson said: “Federal power can, of course, discredit itself by attempting more than is just or can break down attempting more than it has capacity to organize or administer. Its excesses and irresponsibilities it must answer for at the polls.”
Much of the objection to the individual mandate revolves around the concept of coercion. Does the individual mandate transgress some line as an invasion of individual liberty? Opponents of the individual mandate like to focus on the fact that it requires persons to take an action that they do not wish to take.
The same argument was made in opposition to the Civil Rights Act of 1964, which prohibits discrimination in privately owned hotels and restaurants. Testifying before Congress, James J. Kilpatrick stated his view that that law went beyond the scope of the Commerce Clause:
Here the Congress proposes to impose a requirement to serve . . . Here Clancy’s Grill and Mrs. Murphy’s Hat Shoppe are equated with AT&T. The neighborhood drug store is treated as the gas company. It must serve. Within the realm of Section 202, the owner has no option, no right of choice.
Senator Norris Cotton of New Hampshire questioned whether under the Commerce Clause Congress could pass a law requiring restaurants to have fish available on Fridays or to have kosher food available at all times. The response of Dean Erwin Griswold of the Harvard Law School to these complaints was simple: the only question was the constitutionality of the present bill; there was no need to defend every conceivable bill Congress might take up in the future.
The bootstrapping argument is similarly unconvincing. The argument is that by mandating a commercial transaction, Congress is creating the circumstance that gives it the power to regulate the transaction. There is nothing unusual or pernicious about a branch of the federal government defining the scope of its own power. The Supreme Court did so in Marbury v. Madison. The Executive Branch does so quite often in the realm of national security.
In plain vanilla Commerce Clause cases, Congress is engaging in a form of jurisdictional self-definition whenever it finds facts sufficient to support a substantial effect on interstate commerce. The Court kept congressional fact-finding within reasonable bounds in the Morrison case, and I have no doubt that the Court could require Congress to point to actual and quantifiable cost-shifting across state lines should Congress decide at some future date to mandate the purchase of health club memberships. Simply shouting the word “bootstrapping” adds nothing of significance to the debate over Congress’ power.
Some opponents object to the means chosen by Congress in the Affordable Care Act, and argue that Congress should accomplish its objectives by imposing a tax instead. Arguments over the wisdom of the method chosen by Congress should be directed at that body, and not to the Supreme Court.
A straightforward application of the relevant precedent leads to the conclusion that the individual mandate falls within the scope of the Commerce Clause, as that Clause has been interpreted by the Supreme Court throughout its history — with the exception of one interregnum that the Court repudiated over 70 years ago. Mr. Levy’s objections to the individual mandate begin with the premise that the mandate fails the test of the Commerce Clause as it is currently understood, but upon further examination it appears that his true objection is that he is philosophically opposed to the current test itself.
The Supreme Court faces a choice. It can evaluate the constitutionality of the individual mandate under our current understanding of the text and the precedent. Or it can reject the assumptions that underlie our current Commerce Clause jurisprudence and chart a new course. Any decision of the Court that reverses the fundamental understanding of the Commerce Clause as expressed in Wickard and Gibbons, and that leaves a zone of commerce subject to state regulation alone — or even worse subject to no regulation at all — would be a deliberate break with past precedent. Beyond the creation of needless uncertainty, there is the very real risk that the Supreme Court would leave us with a Congress without competent powers for general purposes.
In preparing my remarks, I consulted the following sources:
George Washington’s toast is reported in Ron Chernow, WASHINGTON: A LIFE (2010).
The quotations from Justice Jackson’s memos to his clerk, and much useful commentary, can be found in Paul R. Benson, THE SUPREME COURT AND THE COMMERCE CLAUSE, 1937-1970 (1970).
A useful analysis of the Supreme Court’s detour into formalism is contained in Barry Cushman, Formalism and Realism in Commerce Clause Jurisprudence, 67 U. CHI. L. REV. 1089 (2000).
A response to the bootstrapping arguments deployed against the Affordable Care Act is made by Joseph Blocher in What We Fret About When We Fret About Bootstrapping, 75 LAW AND CONT. PROB. 145 (2012), also available on SSRN.
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