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By now everyone knows that the Supreme Court will take up the watershed case of this century, when it examines the constitutionality of the Patient Protection and Affordable Care Act—the ACA or ObamaCare to both the friends and enemies of the Act. I have coauthored with Mario Loyola of the Texas Public Policy Foundation a brief that sets out our case against the constitutionality of the Act. I have also written elsewhere about the complex historical evolution of the commerce clause.
I am relieved to learn, after all, that the case against the individual mandate is so trivial that three eminent legal authorities, Jeffrey Toobin, Linda Greenhouse and Dahlia Lithwick, found it easy to put me out of my intellectual misery by announcing that the act is manifestly constitutional on the indubitable authority of Wickard v. Filburn, which in their view has become the constitutional pillar of a boundless federal power. Indeed, their collective wisdom is such that the case for the constitutionality of ObamaCare is so self-evident that only dark political motives can account for the willingness to overturn a statute whose impeccable social credentials make it the culmination of a long overdue reform movement.
Let me confess to be one of the unpersuadables. There is of course a powerful correlation between those who praise ObamaCare and embrace its constitutionality. There is none of the typical posturing which says that we’ll leave it to Congress to deal with the wisdom of the laws while we merely determine their constitutionality. However on this question, turnabout is fair play, for we should look at the wisdom of statutes, or their lack thereof, in order to orient ourselves with respect to their constitutionality.
Start with Wickard, which in soothing terms had as its objective the “stabilization” of agricultural markets under the Agricultural Adjustment Acts, by allowing the government to even out prices during good times and bad. All that is a polite way of saying that the government should get into the business of organizing agricultural cartels, which can then reduce output by burning excess crops or forcing land to remain idle in order to reduce supply. At the other end of these cartels lie consumers, who suffer manifestly from the high prices and reduced supply that made it all the harder for them to weather the 1930s depression. Roscoe Filburn was a cartel-breaker because he sought to escape the regulation and increase supply by feeding his own grain to his own cows.
Justice Jackson was right to see this as a peril to the grand scheme that Congress wanted to put in place. But he was wrong to think that Filburn should be treated as a villain instead of a hero. We have a long intellectual tradition, wholly ignored by too many constitutional gurus, that understands the risks of cartelization relative to the virtues of open competition. The antitrust laws treat as a per se offense what in this instance Congress sought to aid and abet on a grand scale—rigging prices in agriculture. Total output goes down, and all the residual uncertainty associated with climate conditions is now forced on the hapless shoulders of consumers. The situation only gets worse when governments stabilize cartels by prolonging their duration by blocking the able outsiders to “cheat” by expanding their own supply.
At this point we can see what has so often been the case, federalism can serve as the protection of liberty by making it more difficult for any government, state or federal, to organize the durable cartels that are so antithetical to overall welfare. Quite simply, without the malevolent interference of the federal government, states and farmers cannot organize their cartels, which is all to the good. All this is not to say that federalism is not a double-edged sword, because there is the serious risk that in network industries (e.g. railroads) states could easily block the creation of a national market by imposing all sorts of burdens on cross-border transactions. It was to guard against those risks that the commerce power (which does not cover manufacture, agriculture or mining) gave the federal government the power to knock down those barriers.
Unfortunately, the Congress is usually more assiduous in creating nationwide cartels, as with the Interstate Commerce Commission, and it has been the courts through their inventive use of the dormant commerce clause that have kept the internal trade routes open against state interference. The situation therefore as it existed before Wickard, and the earlier Supreme Court decision in NLRB v. Jones & Laughlin Steel, that the Supreme Court got just about right from a social perspective, was preferable, not that you would ever know it from the uninformed abuse heaped on the earlier jurisprudence.
Wickard should be rightly regarded as a case conceived in sin, born of the inexcusable Progressive desire to rig markets in ways that hurt socially productive competition. ObamaCare continues in that unworthy tradition. I have spent all too much time working through the economic time-bombs that are buried in this “reform” statute, which bears, for what it is worth, no relationship to any comprehensive health care scheme anywhere else in the world.
In evaluating this jerry-rigged monstrosity, it is critical to note that it has as one of its most undesirable features, a very New Deal quality in that it does everything in its power to avoid the kind of deregulation that offers the only path to increased access by reducing costs. It then imposes a set of impossible restrictions on the ability of private health care insurers to compete in extending coverage.
The history of insurance has always been deeply worried about the risks of adverse selection and moral hazard that come from allowing the insured to get coverage at a constant price as of right without regard to the expected loss that they impose on insurers. The usual rules of insurance, dating back to the early days of marine insurance, required the insured party, who has private information about his or her own condition, to disclose to the insurer all conditions that are material to the decision of whether to insure or how to price the risk in question. The ACA systematically denies that information to insurers, who have no sensible underwriting function to perform. The result is massive strategic behavior, and the mandate is one last-ditch effort to prevent opportunistic behavior by the insured who sign up for coverage when they need it and bail out as of right when they don’t. But don’t think that it will work. The combined effect of the Act is to raise costs of compliance and to reduce the revenues needed to satisfy its gold-plated obligations.
It may well be that we cannot turn the clock back on Wickard and all the harm that it has wrought on the national (and indeed global) economy. But there is no reason to expand its dangerous logic so that it does yet more harm to the overall economy as a whole. What Toobin, Greenhouse, and Lithwick don’t get is that from a social perspective, ObamaCare is unsound to its core. What the constitutional opponents of the statute really want is for the Supreme Court to put some overdue restraint on a system of federal regulation that has already spun out of control. When the proponents of the legislation get down into the bowels of the boat and explain why this legislation makes sense, then, and only then, should we listen to their undying proclamations of its impeccable constitutionality.