Thursday, June 28, 2012

My 2 Cents on the Supreme Court and Obamacare

I think the court did the right thing. And pretty much what I expected.

They overturned the mandate under the commerce clause. Hoorray! There is some limit to the commerce clause!  I think they had to do this. If they upheld the whole thing, they would have said there is no limit whatsoever to Federal power.

They upheld the mandate as a tax. Swallow hard, free-market friends.

If the Federal government has the power to adjust your taxes based on whether you buy an electric car, cover your roof with solar panels, use 1 btu of petroleum to create 1 btu of corn ethanol, take out a mortgage on your mansion, hire a nanny to take care of your kids, and all the other silly things it does in the tax code, it surely has the power to adjust your taxes based on whether you buy health insurance.

Roberts: "The Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness."

Yes, the administration didn't call it a tax. But for the court to overturn this whole law,  one of the Administration's proudest accomplishments, based on that technicality would have been petty and political. They did the right thing to look at the big picture.

I think our country needs a lot more Supreme Court decisions that say "we think this is a really stupid policy, but alas, it is constitutional."  (And, "we think this is a great policy, but alas it oversteps the constitution.")

As I said before, the mandate was never the weakest part of this law as a matter of economics.  It's the rest of the perfectly constitutional thousands of pages, and the perfectly constitutional thousands more arbitrary regulatory decisions that are the problem. Relying on the court to throw out the bathwater on the basis of the mandate was always a stretch.

We should not rely on the court to determine economic policy or write laws. That's what Congress and Administration are for. If you don't like the health care law, try to find someone of either party with the courage to say just how he or she will repeal and replace, and vote.

This will be healthy for both parties. Defenders can't say how wonderful it would all have been except that the nasty polticized court threw it out. They will have to own Obamacare as it falls apart at the seams. Opponents will have to work to repeal, and explain what they will replace with.

Yes, it would be nice if the constitution forbade silly economic policy, and it would be nice if it forbade arbitrary discretionary regulation.  For that you need to overturn a century's worth of precedents. Nobody even asked the court to do that in this case. (Time to start!)

Disclaimer: This is based just on news reports. I haven't read the decision yet, and will comment more when I do. There are lots of other issues.

Update: Two more cents here in a follow-up post.  "Tax" and "Mandate" really are very different in important ways. 

25 comments:

  1. Well, the power of the state is practically unlimited despite cute historical documents. What else is new?

    I can't be imprisoned for not buying insurance, but I can be taxed for not doing so and I can be imprisoned for not paying the tax. Or my property can be expropriated. Forgive this serf for not feeling all that comforted by the commerce clause limits.

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    1. Actually, if I remember correctly, there is no criminal sanction for refusing to pay the penalty. Sure, if you're expecting a refund from the IRS, they can subtract any penalty from that, but if you fail to write them a check, there is actually no punishment (no additional financial penalty or criminal sanction).

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    2. Sam, there is a criminal sanction and a financial penalty for not paying a tax. The supreme court just ruled this mandate a tax. If it is a tax, then why would you expect no consequences for non-payment?

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    3. The Act explicitly forbids the IRS from going after deadbeats - no garnishing of wages, no liens, no criminal penalties.

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    4. Thank you, Daniel. I am aware of that. However, that was when this thing was a penalty. Now that Roberts has waved his wand and transformed it into a tax, can't the IRS argue that it carries the same consequences for non-payment as any other tax by virtue of being a tax?

      Also, I don't know if you happen to know this, but I wonder if there are no consequences for non-payment how was the government planning to collect the penalty when it was a penalty?

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  2. Sorry prof, I do not see it.
    You say the mandate is a tax. Why? In the examples you mention, the Feds do get more or less of something (money), they give tax credits or impose levies, depending on the cases you mention.
    But where exactly is the comparison with the mandate?
    And - with your argument, is conscription a tax? [Conscription being a mandate to serve your country in the military.]
    Thus, ANY mandate could be a tax then, just any. Even silly mandates, like compelling me to recite aloud Obama's books every morning in a French Quarter corner in New Orleans.
    I do agree with you that the Constitution does not prohibit silly econ policy. I do disagree with you on your "arbitrary discretionary regulation" assertion. It is not clear to me that the HUGE federal behemoth is really explicitly permitted under the Constitution. I know that is a whole discussion for another day.

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    1. As I am so not a lawyer, this question might seem silly. However, I do feel compelled to ask it.

      Isn't the constitution a document that narrowly defines the government's power and leaves the rest to the states and to individuals? It doesn't explicitly prevent the government from concocting silly economic policy so much as it doesn't enumerate it as a power and that should act as prevention.

      A central authority's unlimited power to tax, however, pretty much gives it near limitless power. Anything can be a tax. Just anything.

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    2. Amen to that. I'm disappointed that the pres of CATO institute would say any good words about this. Maybe he is getting a kickback for kicking us in the back.

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    3. Prof. Cochrane's argument makes sense to me. Don't underestimate the power of the democratic process as a constraint. It may not always be pretty, but politicians sure as hell think twice before raising taxes. I wish there were a way to make them think as carefully before giving away tax breaks.

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  3. Sorry. My mistake. I thought you were somehow associated with CATO institute. Sort for the mistake. Oops.

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  4. My problem with the ruling is that the bill was passed in the Senate using the "reconciliation" rule to do an end-around to prevent Republican discussion, amendments or fillibustering.

    They are not allowed to use the reconciliation rule on a tax bill, so Senate Democrats and the President said it's not a tax bill.

    Guess what? The Supreme Court says it was tax bill.

    So the Senate should not have been able to vote on it and completely prevent any Republican participation.

    Does that seem right or fair to you?

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    1. Politicias violating their own rules and being less than truthful to people to pass something... I am shocked, SHOCKED, so shocked - even more than believing that Germany lost to Italy in the UEFA thing.

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    2. As a matter of process, I don't think that's correct. The order of events was:

      1) Senate passed their version of the bill with 60 votes
      2) House passed their version of the bill
      3) Brown is elected in Massachussetts
      4) House passes the senate version of the bill
      5) House passes a set of amendments to the senate bill
      6) Senate passes the house amendments using reconciliation

      Since the mandate was part of the original senate bill and not part of the amendment package, it was not passed using reconciliation.

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  5. JSR,
    there is a reader in Steven Landsburg's blog, ThomasBayes, who wrote this: "...HR 3590 did, in fact, originate in the House. It was introduced as the “Service Members Home Ownership Tax Act of 2009,” and passed the House by a vote of 416-0 on October 8, 2009. The Senate *amended* the bill to make it the PPACA, and the *amended* bill passed the House 219-212...."
    http://www.thebigquestions.com/2012/06/28/post-mortem/#comments
    And this is what I recall, too; the Senate version of the bill was NOT the House bill; they did attach it to a different House bill to make reconcilation work in the Senate.
    But those are details, right?

    By the way, Steven Landsburg, in his blog, mentions that all tax legislation HAS to come out the House of Representatives. It is iffy whether this one was. But - who cares?

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    1. I can't tell if you're being ironic or not, but I honestly don't care much about those details, except to the extent that the de facto 60 vote requirement in the senate irks me. To me the important thing is whether the bill had a majority of votes in both houses, and it clearly did.

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  6. Even if the decision is right from a constitutional standpoint, the practical downside is that ACA will likely never be repealed--and the only provision that is likely to be repealed is the mandate. Combining the mandate with community rating is likely to have negative consequences (unless there is a large degree of 'inertia' as, iirc, Gruber has argued there is in insurance markets).

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  7. *Combining a mandate-less ACA with Community Rating*

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  8. I wish the same standards could be applied to our agriculture industry.

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  9. I say it's socialism, and I say the h311 with it.

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  10. I am glad to see at least one other person interprets this ruling the same way I do. Roberts (and make no mistake, this is his opinion, not that of the others who joined him) writes, "It is not our job to protect the people from the consequences of their political choices." Translation: Congress and the White House are a nest of lying weasels, and that can only be fixed by elections. One can only hope that the consequence of this ruling is that Congress and the Administration can no longer hide behind their lies and people recognize them for what they are. Never again will they be able to say "it's not a tax". I am optimistic this will be a powerful deterrent against future expansion of the welfare state.

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  11. Judge Posner has argued that the mandate certainly should have been upheld under the Commerce Clause, but upholding it as a tax is better than nothing. Moreover, we know that the Founding Fathers supported mandates. One, a requirement that ship owners buy medical insurance for their seamen. George Washington signed that statute. Another required all able bodied men to purchase a gun. If the founding fathers believed that I could be forced to buy a gun why can I not be forced to purchase health insurance?

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    1. The former was simply a regulation of ship owners who have indubitably acted. The latter was an exercise of the power to call forth the militia, a power explicitly justified without reference to the Commerce Clause. Neither was a mandate under the Commerce Clause.

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  12. Can I trade my health insurance in for a musket?

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  13. I think our country needs a lot more Supreme Court decisions that say "we think this is a really stupid policy, but alas, it is constitutional." (And, "we think this is a great policy, but alas it oversteps the constitution.")

    I disagree. The Court should not be making political speeches. SCOTUS risked losing its credibility entirely after Bush v. Gore. Roberts may have just pulled it back from the brink.

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