The Volokh Conspiracy

With the Supreme Court probably voting on the constitutionality of Obamacare (a term the President proudly embraces) on Friday, the health control law’s academic friends are diligently attempting to do what the entire United States Department of Justice could not do after two years of litigation: articulate plausible limiting principles for the individual mandate. Over at Balkinization, Neil Siegel offers Five Limiting Principles. They are:

1. The Necessary and Proper Clause. “Unlike other purchase mandates, including every hypothetical at oral argument on Tuesday, the minimum coverage provision prevents the unraveling of a market that Congress has clear authority to regulate.” This is no limitation at all. Under modern doctrine, Congress has the authority to regulate almost every market. If Congress enacts regulations that are extremely harmful to that market, such as imposing price controls (a/k/a “community rating”) or requiring sellers to sell products at far below cost to some customers (e.g., “guaranteed issue”) then the market will probably “unravel” (that is, the companies will lose so much money that they go out of business). So to prevent the companies from being destroyed, Congress forces other consumers to buy products from those companies at vastly excessive prices (e.g., $5,000 for an individual policy for a health 35-year-old whose actuarial expenditures for health care of all sorts during a year is $845).

So Siegel’s argument is really an anti-limiting principle: if Congress imposes ruinous price controls on  a market, to help favored consumers, then Congress can try to save the market’s producers by mandating that disfavored consumers buy overpriced products from those producers.

2. The Commerce Clause. “The minimum coverage provision addresses economic problems, not merely social problems that do not involve markets.” This is true, and is, as Siegel points out, a distinction from Lopez (carrying guns) and Morrison (gender-related violence). However, it’s pretty clear under long-established doctrine that the Commerce power can be used to address “social problems that do not involve markets.” E.g., Caminetti v. United States, 242 U.S. 470 (1917) (Congress can use the interstate commerce power to criminalize interstate travel by people intending to engage in non-commercial extra-marital sex); Champion v. Ames, 188 U.S. 321 (1903) (“What clause can be cited which, in any degree, countenances the suggestion that one may, of right, carry or cause to be carried from one state to another that which will harm the public morals?”). Personally, I thought that Chief Justice Fuller’s dissent in Champion had the better argument, but Champion and its progeny are well-established precedents, so proposed limiting principle number two does not work, unless we overrule a century of precedent.

Besides that, #2 does not work for the same reason that #1 does not work. If Congress forced food producers to sell products to some consumers at far below cost, then Congress could (for economic, not social/moral motives) force other consumers to buy overpriced food, so that the producers do not go bankrupt. Imagine that instead of the Food Stamp program (general tax revenue given to 1/6 of the U.S. population to help them buy food), Congress forced grocery stores to sell food to poor people at far below cost. And instead of raising taxes in order to give money to the grocery stores to make up for their losses on the coerced sales, Congress instead forced other consumers to spend thousands of dollars on food from those same stores, which would be sold to those consumers at far above its free market price.

If there’s a limiting principle, the only one seems to be that in order to mandate the purchase of a product, Congress must also inflict some other harm on the producers of the product, which the coerced purchases will ameliorate.

3. “Collective action failures and interstate externalities impede the ability of the states to guarantee access to health insurance, prevent adverse selection, and prevent cost shifting by acting on their own. Insurers operate in multiple states and have fled from states that guarantee access to states that do not.” This is really a policy argument for Obamacare. Hypothesizing that it’s a good policy argument, it’s not a limiting principle. That the advocates of Obamacare think that the policy arguments for their mandate is better than the policy arguments for other mandates does not provide courts with a limiting principle of law.

Moreover, the policy argument is wrong. It’s true that some insurance companies stop operating in states where the law forces them to sell insurance to legislatively-favored purchasers at far below the actuarial cost of the insurance, with the  legislature failing to compensate the companies for the enormous resulting losses. If you make it difficult for companies to operate profitably in your state, then they will eventually stop operating in your state. It’s not a collective action problem; it’s just a problem of several states enacting laws that prevent companies from covering their costs. Any state with guaranteed issue and other price controls can solve the problem immediately by simply using tax revenues pay compensation for the subsidy which the state law forces the insurance companies to provide to certain consumers.

Obamacare is a particularly weak case in which to argue that the federal government is riding the rescue of the states to solve a collective action problem. For the first time in American history, a majority of the States are suing to ask that a federal law be declared unconstitutional. These states are taking collective action to stop the federal government from imposing a problem on them.

4. The Tax Power. “[T]he minimum coverage provision respects the limits on the tax power. The difference between a tax and a penalty is the difference between the minimum coverage provision and a required payment of say, $10,000 that has a scienter requirement and increases with each month that an individual remains uninsured. Unlike the minimum coverage provision, such an exaction would be so coercive that it would raise little or no revenue. It would thus be beyond the scope of the tax power.”

Let’s put aside the fact that, however ingenious the progressive professoriate’s  tax arguments have been, the chances that the individual mandate is going to be upheld under the tax power appear to be at most 1% greater than the chance the Buddy Roemer will be the next President of the United States.

Presuming that Siegel’s tax justification for the individual mandate is valid, it is an anti-limiting principle. Congress can indeed mandate eating hamburgers, smoking, not smoking, not eating hamburgers, or anything else Congress wants to mandate, as long as Congress sets the “tax” at level that will raise a moderate amount of revenue, does not include a scienter requirement, and does not make the “tax” increase each month that the individual refuses to do what Congress mandates.

5. Liberty. “The minimum coverage provision does not violate any individual rights, including bodily integrity and substantive due process more generally. These rights would be violated by a mandate to eat broccoli or exercise a certain amount.” Pointing to the existence of the Bill of Rights is not an example of a limiting principle for an enumerated federal power. The Constitution does not say that Congress may do whatever it wishes as long as the Bill of Rights protections of Liberty are not violated. Ordering New York State to take title to low-level radioactive waste generated within the state (New York v. United States) did not violate any person’s substantive due process rights, but the order was nonetheless unconstitutional because it exceeded Congress’s powers. The federal Gun-Free School Zones Act did not, as applied, violate the Second Amendment rights of Alfonso Lopez, who was carrying the gun to deliver it to a criminal gang. Yet the Act still exceeded Congress’s commerce power. A limiting principle must limit the exercise of the power itself, not merely point out that the Bill of Rights protects some islands of Liberty which the infinitely vast sea of federal power might not cover.

Finally, I certainly agree with Professor Siegel that the Fifth Amendment’s liberty guarantee (and its 14th Amendment analogue for the states) should be interpreted to say that no American government can order people to consume a certain amount of healthy food, or to exercise. But there is no major case that is on point for this. The argument for a new unenumerated right “not to eat the minimum quantity of nutritious food which government scientists have  determined is essential for good health” is something that would have to be built almost entirely by extrapolation from cases that have nothing to do with food. I hope that courts would accept the argument; but if the political culture ever moved far enough so that a nutrition mandate could pass a legislature, I’m not as certain as Prof. Siegel that courts would overturn the mandate. The odds of winning a case against a nutrition mandate will be better if the judges who decide that case have not grown up in a nation where a federal health control mandate is the law of the land.

One further comment, while I’m thinking of Chris Caldwell.  He is, after all, a reminder that there are journalists who are much smarter, intellectual, and certainly better read than most academics, including me.  We had lunch recently, while he was working on his euro-zone essay.  I was then ordering books for my spring law and economics class, and he saw the copy of that elegant collection of essays by Ronald Coase, The Firm, the Market, and the Law.

It was a telling detail that Christopher remarked on how much he admired Coase’s essays on the reasons why there are firms and institutions.  Not “The Problem of Social Cost,” but the essays seeking to set out the conditions under which the endless succession of market transactions cannot do what an institution, hierarchically organized and top down in its authority and ordering, is able to do.

Like Christopher, I find that the fundamental intellectual problem of democracies today is less the value and legitimacy of the market and the price mechanism, but instead the problem of ‘coherent institutions’ in the sense that Coase sought to draw out in his essays on the industrial firm.  I realize that this sounds strange, given that I quite share the view of many that the current administration’s policies are deeply anti-market.  The anti-market behaviors, however, have not done much to undermine the sense of its legitimacy or its relationship to fundamental freedom of choice (the individual mandate notwithstanding).  Whether I am right or wrong about that, I persist in thinking that the more fundamental problem is  instead how one achieves coherence in a complicated democracy for certain matters for which one needs institutions that can achieves the long term stability and settlement in order to engage in long run and strategic behavior.

At this particular moment in time, curiously, the intellectual problem is not how to justify the price mechanism, but how to justify what Hayek, for one, saw as the problem of organic institutions and their functioning, the problem that is also important to his libertarian vision, the formation of institutions that can sustain liberty.

And note that the rule of New Class experts, seeking what Telos used to call “the wholly-administered society,” is not a function of greater coherence.  It is actually what happens when institutions of ordered liberty falter, and create gaps that the mandarin-experts, replacing democratic legitimacy with technocratic claims of expertise, rush to fill in governance.  In that sense, coherence within institutions, in the libertarian and democratic sense, is that which protects against the alternative claims of technocratic, expert – but let’s be real, today merely credentialled – legitimacy that arise when the former lags.  I believe that what I have said here is quite consistent with, and indeed required by, Hayek’s political economy.

“Coherence” is a big problem for the United States at this moment, let alone Europe.  China has coherence, at this moment, but only of a kind that Thomas Friedman could admire.  The task, rather, is how to achieve coherence, “ordered liberty” to use the constitutionalist phrase, in a democracy.  Because it is quite certain that less coherence does not automatically equal more democracy, and that more coherence automatically equals less democracy.

News services report that President Obama, speaking to the Indian Parliament, has endorsed India receiving a permanent seat on the UN Security Council. The AP story adds that this was the biggest applause line in the speech, fully consonant with the rise of Indian nationalism within India, and its rapidly increasing sense of importance in the broader world. What of this nationalism? And the rise of national pride of place among the newly rising great powers, not just India?

I continue to find mystifying the Western academic international law world’s infatuation with the ideals of the diminishing importance of states and membership in states. Particularly when that mostly seems to refer not to a universal aspiration, but only to the inability of the leading Western-states-in-decline to persuade themselves to exercise the coherence that makes states socially useful – and that largely through the cultural and class predilections of the elite political classes of those societies. When are we going to see proper analytic attention to the Globalized New Class as a phenomenon? In any event, the rising new powers understand that states are about coherence, and that the constant struggle of most states, most of the time, is to remain coherent and prevent “disaggregation” of the state into internal groups of power and “public choice” struggles for primacy and the resources of politics to economic ends.

Disaggregation is attractive to many Western intellectuals, I’d suggest, however, because our species-being, so to speak, has gradually come to be purely contractual free agency. We gave up on any kind of “fiduciary professional” model of the intellectual when we discovered that we could leverage our knowledge skills, at least until China and India caught up, across a needy global economy. It required freeing ourselves from the strictures of local communities; but the opportunities for globally marketizing our professional expertise being very large, we have moved a long, long way from RH Tawney’s post-war British model of the professional as community leader through expertise.

That’s not how we academics pronounce the disaggregation of the state. Our favored trope is to declare disaggregation of the state as an enabler of individual freedom. We mean by that, of course, particularly market freedom of the academic free agency market (best of both worlds: free agent competition as academics and tenure). The coherence of states is seen by us as an inhibition to individual freedom in some cosmopolitan, fully-marketized, free-agent status for every individual in the world.

Disaggregation, in corporate law terms, represents a peculiar kind of management-led leveraged buyout of the state by its leading expert elites, who then see the opportunity to break up its cohering power centers, in order to free up the value of political power in their hands, and for their benefit. To the polity as a whole, the whole of an ordered state power in service to ordered liberty is greater than the sum of the parts; to Globalized New Class elites, break-up frees up value for them in parts – for a while. Until the commons are over-fished and the available political power dissipated and monetized. Christopher Lasch had it right when he called it the “revolt of the elites.”

Thus a better way to understand disaggregation of the state is as the mechanism by which those able to take advantage of globalized economic activities free themselves of obligations to the specific states and polities that, through their coherence as expressed through governance and the rule of law, enabled those activities in the first place. What emerges from this free form disaggregation is a class of free global agents who, in classic public choice mechanisms, manage the terms of political disaggregation because, while their affiliations in an economic sense are global, they also manage the political commons. Disaggregation of the state becomes a crucial mechanism by which the Global New Class becomes the oligopoly that results from the “public choice” leveraging of global economic benefit by disaggregating state power. The result, however, is a tragedy of the commons in which the Global New Class internalizes benefits from the dissipating power of the Western states, and externalizes the costs on those who, so to speak, do not live in the blessed jet stream but have to deal with life on earth, within states that are less and less able to provide effective governance.

One might actually define geopolitical decline as being the disaggregation of the state; and geopolitical rise as achieving governance coherence. That’s too extreme, but there is an important element of truth in it. China has coherence of an ugly kind; India, of a largely attractive kind. Thus leaving the question, what does this mean for liberal democracy? Coherence and disaggregation do not track authoritarianism and freedom; far from it. A better way to understand governance and coherence is, instead, to use a framework that Francis Fukuyama discusses in one of the books a few years ago on governance and development. It consists of a two axis model – strong and weak governance, on the one hand, and broad versus narrow, on the other.

Authoritarian states are those which feature strong governance on a broad range of matters, including those that foreclose individual rights and liberty. Ungoverned states are those have weak governance on broad matters. Liberal democracy works best when it is strong governance, but within a relatively narrow range; within the areas that it governs, it is clearly supreme and coherent, but that range of things is both limited – and, importantly, revisable through democratic means. Interestingly, Fukuyama points out, China’s authoritarianism is of a particularly unstable kind – an attempt to have strong governance over a wide range of things, but failing; and yet, with respect to the outside world, and largely through cultural mechanisms, able to operate with authoritarian coherence.

Disaggregation is not that to which India aspires internally or externally. On the contrary, its constant struggle has been to maintain internal coherence and avoid disaggregation, and to make membership count for something. Its external goal is to act coherently in the world and so ratchet up its effective power. This is true of all the rising great powers, for obvious reasons. I tracked the Indian English language press during the 2005 UN reform debates. The fantastic importance attached to it in Indian public opinion was not surprising to those who see India as a strong force in the rise of the New Westphalianism of rising great powers and jostling, competitive multipolarity – states with external coherence in their ambitions joining the club of declining Western states that are disaggregating, and mostly going in for an apparently permanent global nap. Thus, Security Council status was the only issue of any importance within India related to the UN and UN reform. This was also true of other contenders to permanent places on a reformed council – so much so that a worried Kofi Annan had to plead with states to back away from so much focus on the actually-quite-unlikely prospect of Security Council reform (in any deep way) in order not to lose what might be achieved in more realistic matters.

The Obama endorsement is less than meets the eye. It is an endorsement in the context of a larger Security Council reform settlement in which, to start with, permanent membership would likely mean something different from what it means for the P5 now – which is to say, most of the (quasi-) plausible proposals for SC reform, in one version, envision a new group of permanent members who are permanent but lack the veto. That proposal is the most likely to actually work its way through UN reform. But the US is already on the record as favoring a deal that would have included India in that in any case. Among the most likely contenders, there is always the problem that existing members do not want to dilute their club. There is also the problem that every new contender has some reasonably powerful state or group of states that would oppose its elevation: India by Pakistan, the Islamic Conference, and perhaps China; Japan by China; Brazil perhaps less than others, but perhaps not; Germany by, well, everyone contemplating another EU seat on the Council. The US – which, ironically, is so obviously a member as the (still) hegemon that it can actually function in this as a kind of good faith referee among the mob – is primarily concerned about the dilution of effectiveness of the Council, rather than a dilution of its own power and status.

But what might push the Council finally to allow reform to the extent of allowing an additional tier of veto-less permanent members? Well, a perception that the Council might become sufficiently irrelevant in the future, as states essentially “contract around” it through other mechanisms, that it would be prudent to allow certain reforms to forestall greater irrelevance. That seems to me the most likely reason why some form of Council reform would actually take place.