The “SCOTUS-Care” Travesty

As I discuss over at City Journal, this week’s Supreme Court decision in King v.Burwell is good news for the Obama administration and terrible news for the rule of law. By a margin of 6-to-3, the Court upheld an IRS rule that supposedly implements the Affordable Care Act—Obamacare—by extending health-insurance tax credits to taxpayers in states that have no health insurance exchange of their own, but rather rely on the federal healthcare.gov exchange. The problem with this rule, as the plaintiffs in King pointed out, is that it flatly contradicts the ACA. The statute clearly limits tax credits to taxpayers who use state insurance exchanges, not the federal one. A majority of the Court, therefore, simply rewrote the ACA to make it consistent with the administration’s preferred rule. That’s not the way things are supposed to work in a system in which “all legislative power” is vested in the legislative branch (Constitution, Article I).

The stakes in King were high: 36 states use the federal exchange, and without Obamacare’s tax subsidies, a large number of low-income citizens would be exempted from the law’s individual mandate. The result, according to some critics, was that the individual health-insurance markets in those states would fall into an economic “death spiral” of falling participation and rising premiums. That was a risk that Congress deliberately took.

Obamacare provides two different mechanisms for establishing a health- insurance exchange. A state can establish an exchange under Section 1311 of the Act. And in states that “fail” to establish an exchange, the secretary of Health and Human Services must establish an exchange under Section 1321. When discussing eligibility for those all-important tax credits, the ACA says that they are available only to taxpayers who enroll in a qualified health plan “through an Exchange established by the State.”

Why did Congress limit tax credits in that way? To pressure states into creating their own exchanges (constitutionally, the federal government cannot force states to create health-care exchanges). At the time of the law’s passage, its congressional backers assumed that each state would buckle under and create its own exchange. Of course, that’s not how things ended up. Enter the IRS, which expanded tax credits to all exchanges in order to guarantee the viability of the Obamacare project.

The court’s majority opinion, written by Chief Justice John Roberts, has a surreal, through-the-looking glass quality about it. The phrase “an Exchange established by the State under Section 1311,” he says, is “ambiguous.” Actually, the phrase is crystal clear, including the word “state” which the ACA defines as “each of the 50 States and the District of Columbia.” If anything is unambiguous about Obamacare, it’s that tax credits are available only to those who purchase insurance through an exchange established by one of the 50 states or the District of Columbia.

No matter: the finding of “ambiguity” gives the Court license to interpret the law, rather than simply applying it. In the name of interpreting the supposedly ambiguous language, Roberts looks to the overall purpose of Obamacare which, he decides, is the avoidance of the dreaded “death spiral.” His opinion is peppered with references to “death spirals”—one could almost make a drinking game out of it—and Congress’s desire to avoid them. The specific words enacted by Congress are of little importance, we’re told, if those words threaten “to create the very ‘death spirals’”— drink!— “that Congress designed the Act to avoid.” And so, in order to effectuate the law’s higher purpose, the Court decrees that “an Exchange established by the State under Section 1311” includes “an Exchange established by the Secretary of HHS under Section 1321.” Curiouser and curiouser, as Alice said.

The Supreme Court’s decision, and its reasoning, strikes a double blow against the rule of law. First, it ratifies the executive branch’s unconstitutional usurpation of legislative power. When an administrative agency unilaterally rewrites the terms of a statute, it violates Article II’s command that the executive must “faithfully execute” the laws passed by Congress. Compounding the problem, the Court engages in its own power grab—declaring that neither Congress nor the IRS deserve any particular interpretive deference. Rather, “it is . . . our task to determine the correct reading” of the statute—notwithstanding Congress’s plain language. The result in King will embolden President Obama, and future presidents, to ignore the letter of the law when it contradicts their evolving view of the law’s spirit.

Alas, the Supreme Court’s handling of Obamacare is a stark illustration of what results when the judicial and executive branches collude to rewrite the laws passed by the legislative branch. In the first major Obamacare decision, NFIB v. Sebelius, the Court rewrote the Act’s “penalty” clause to make it into a “tax,” thus saving the law from constitutional attack. And now the phrase “established by the State” has been effectively excised from the text.

The result of all this judicial activism is that a law that was sold to the public as creating a system of state-based exchanges with no new taxes has been turned into a system dominated by a federal exchange and enforced via taxes. In dissent, Justice Scalia—joined by Justices Thomas and Alito—rightly accuses the majority of ignoring the rule of law; “that ours is a government of laws and not of men.” Given the judicial makeover of the ACA, Scalia suggests that “we should start calling this law SCOTUSCare.”

Hard cases, according to the cliché, make bad law. But the current Supreme Court has reached a new jurisprudential milestone: it can make bad law out of cases that ought to be easy.

Bracing for King v. Burwell

By the end of this week, we’ll have a Supreme Court decision on King v. Burwell, the latest “challenge to Obamacare,” as the headlines put it.

The first thing you need to know is that the headlines are all wrong.  King v. Burwell  is not a “challenge” to Obamacare — the plaintiffs do not seek to overturn a single sentence of the Affordable Care Act.  Rather the plaintiffs are challenging an IRS rule that is blatantly unfaithful to the ACA (but happens to be politically expedient for the administration).

Quick background:  One section of the ACA says that States shall establish “Exchanges” to regulate the health insurance market within their borders (section 1311).  Another section says, for states that “fail” to establish Exchanges, the Secretary of HHS can establish a federal Exchange (section 1321).  And then in another section, ACA says that low-income citizens can be eligible for tax credits if they purchase health insurance “through an Exchange established by the State” (section 36B).

The whole point of this structure was to pressure the states into establishing exchanges.  States that failed to establish exchanges would face the wrath of the voters who didn’t get their subsidies.  The administration and its congressional allies assumed that the states would knuckle under and create exchanges.  In the end 36 states did not set up exchanges.

Having failed to coerce the states, the administration lost all interest in actually implementing the coercive measures, and so the IRS rewrote the statute by rule, saying that tax credits are now available for anyone who buys insurance through the federal exchange.

King v. Burwell seeks to strike down the IRS rule and force the administration to live by the political bargain struck by Congress.

As the decision nears, speculation is mounting that Justice Kennedy might provide the swing vote in favor of the administration out of “federalism” concerns.  In other words, Kennedy is worried that if the IRS enforced that statute as it is actually written, it would be unduly coercive on the states.  That concern surfaced only briefly during oral argument, but if Kennedy — or any other justice — votes for the administration out of respect for federalism, there is something seriously wrong with his analysis.

First, the idea that you should interpret a statute so as to avoid constitutional problems is legitimate only when the statute is ambiguous — the idea is that you resolve ambiguities in a way that is consistent with the Constitution.  But here there is no ambiguity.  Tax credits are available only through an exchange “established by the State.”

Second, the coercion is exactly what Congress intended — and only because the Pelosi forces couldn’t get away with something even more coercive, i.e., creating only a federal exchange and forcing each state to sign up for it.  Instead they had to settle for a system of voluntary state cooperation, but with plenty of federal carrots and sticks to achieve state cooperation.  Keep in mind that this is the same legislation that threatened to withhold each state’s entire Medicaid funding if they failed to expand Medicaid eligibility (a condition that was struck down in NFIB v. Sebelius — against the wishes of Justices Ginsburg and Sotomayor).

The task before the Supreme Court is to apply the text as written.  Once the Court confirms the meaning of the text, some other litigant can challenge the statutory provision as unconstitutionally coercive on the states.  That will be Justice Kennedy’s opportunity to show concern for federalism.

Hamilton Was Asking For It

The Treasury Department’s announcement that it will eventually replace — or at least demote — Alexander Hamilton as the face of the ten dollar bill fits right in to the Obama Administration’s craven “identity politics” strategy, presumably intended to shore up Democratic support among key constituencies. As if the switcheroo wasn’t sufficiently poll-driven to begin with, the clincher of course is that Hamilton will be replaced by a woman to be selected… by popular demand.

But I cannot feel too sorry for Hamilton. The Department of the Treasury is, after all, the House that Hamilton built. No individual is so responsible for consolidating national power over economic affairs as Hamilton. He managed to have the central government assume the states’ debts and then establish a Bank of the United States, despite the utter lack of any constitutional authorization for the federal government to get into the banking business (as James Madison and many others pointed out at the time). He did not manage to wipe out state currency in his lifetime, but his political heirs — the Republicans and erstwhile Whigs who emerged victorious from the Civil War — did so with national currency legislation that taxed state legal tender out of existence. This aspect of Hamilton’s legacy is well documented in Thomas DiLorenzo’s book: Hamilton’s Curse.

Absent the centralizing legacy of Hamilton, we might still have 50 competing state currencies and no one person could dictate what image Americans see on their money. Instead, we have given the central government a monopoly on circulating currency, as Hamilton would no doubt have wished.

Mr. Hamilton, you were an admirable man in many respects, but the Leviathan you helped to create has turned against you!

See the full post — and comments — over at Ricochet!

Review of A LESS PERFECT UNION

From Booklist:
A Less Perfect Union: The Case for States’ Rights.
 
Legal scholar Freedman acknowledges the troubled history of states’ rights issues, often tied to resistance to desegregation, but argues against the linkage of the past. He explores the basis of states’ rights guaranteed by the Tenth Amendment, allowing states to exercise all those powers not specifically entrusted to the federal government. Detailing the history of states’ rights from the constitutional convention to current-day politics, Freedman offers a libertarian view that encompasses school vouchers and greater state control over federal dollars allocated for health and welfare. Freedman asserts that adherence to states’ rights could reduce taxes, return criminal justice jurisdiction to the states, and eliminate gridlock on legislation Congress cannot agree on. Citing numerous examples of innovative policies that have come from the states, Freedman argues that local governments are more responsive to citizens’ demands and nimbler than the federal government. Among his proposals: eliminate federal grant programs, cut federal taxes, and let state governments set their own tax and spending priorities. Freedman argues passionately on behalf of checks against excessive federal power.
— Vanessa Bush

States’ Rights: A Cause that Can Unite Right and Left

I wanted to let you know about my new book, coming out June 30th.  In it, I make the case for states’ rights.

I know, I know: “states’ rights” is one of those taboo phrases in today’s politics. If you ask Americans about states’ rights, the reaction you get is typically negative – slavery, Jim Crow, and segregation. And yet, Americans happily embrace notions that are intimately related to states’ rights, such as federalism, community-based politics, responsive politics, home rule, local control, and “think globally, act locally.” In poll after poll, Americans trust their state and local governments far more than they trust Washington.

Why the disconnect? Over the past few decades, especially since the civil rights movement, states’ rights has been unfairly portrayed as a smokescreen for racist repression. It is a convenient way to demonize “small government” conservatives and tar them with the brush of segregation.

 In my book – A LESS PERFECT UNION: The Case for States Rights – I aim to set the record straight. First, I show that states rights is not a vehicle for any particular ideological agenda, including segregation. Rather, states’ rights is the right of every state to exercise all of the powers that have not been specifically entrusted to the federal government. States’ rights is based on a fundamental individual right: the right of every American to enjoy local self-government.

And yet, no political doctrine this side of fascism has been more thoroughly demonized than states’ rights. A July 2013 New York Times essay by Michael C. Dawson, a professor at the University of Chicago, pretty much sums up the ivory tower’s view of states’ rights with his cocksure allegation that “since the nation’s founding, ‘states’ rights’ has been a rallying cry for those who wished to systematically disenfranchise and exploit large segments of their population.”

As I show in my book, states’ rights has been an honorable tradition-a necessary component of constitutional government and a protector of American freedoms from the birth of our nation. In fact, states’ rights has historically been the “rallying cry” for just about every cause progressives hold dear: the abolition of slavery, union rights, workplace safety, social welfare entitlements, and opposition to war.

The first half of the book offers a much-needed (IMHO) history of states’ rights, from the Constitutional Convention through the Civil War, and the New Deal to today. The founders fought hard to keep power in the hands of the states. Although law professors and other alleged experts like to portray the Bill of Rights as a gift from a benevolent federal government, the reality is just the opposite. The Bill of Rights was a charter of states’ rights – demanded by the state ratifying conventions as the price of establishing this “more perfect union.” The concept of states’ rights is most famously captured in the Tenth Amendment:

The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

During the nineteenth century, states’ rights played an important role as a weapon against slavery and against war. Every landmark progressive reform – antitrust law, food and drug regulation, child labor restrictions, etc. – was pioneered by the states. It was often federal power – including federal judicial power – that blocked progressive state reforms. When the federal government got into the reform game, it almost always played catch up, and it almost always relied on state governments to implement federal standards. The same is true, more recently, of environmental protection. The states, for example, enacted wetlands protections decades before the federal government.

The second half of the book makes the case for reviving states’ rights today. I argue that a return to states rights will promote:

  • Liberty (as we move away from the tyranny of 300,000+ federal crimes)
  • Democracy (as we push decisions to more state and local elected leaders, rather than unelected federal bureaucrats)
  • Diversity (as communities can set their own taxing and spending priorities, instead of submitting to one-size-fits-all federal policies)
  • Competence (as decisions are made by local administrators with more accurate information)
  • Peace (as National Guard units become true state militias, rather than additional fodder for overseas wars).

I believe that a return to states’ rights is the only way to check the tyranny of federal overreach, take power out of the hands of the special interests and crony capitalists in Washington, and realize the Founders’ vision of freedom. Although it is not a panacea, states’ rights offers us an achievable goal of setting communities free to address the health, safety, and economic well-being of their citizens without federal coercion and crippling red tape

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