Three quick thoughts on the health care ruling

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Ryan Young
Fellow, Competitive Enterprise Institute
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      Ryan Young

      Ryan Young is the 2009-2010 Warren Brookes Journalism Fellow at the Competitive Enterprise Institute. His writings communicate ideas from economics and classical liberal political theory in layman’s terms. His articles apply the economic way of thinking to issues from airplane baggage restrictions to fiscal stimulus to salary caps in baseball. He has been published in Politico, Investor’s Business Daily, Real Clear Markets, and other outlets. He also writes the popular “Regulation of the Day” feature for Open Market, CEI’s staff blog.

      Ryan holds an M.A. in economics from George Mason University in Fairfax, Virginia, and a B.A. in history from Lawrence University in Appleton, Wisconsin. He was previously Fellow in Regulatory Studies at CEI, and worked in the Cato Institute’s government affairs department.

The Supreme Court has upheld the health care law’s insurance mandate, to the surprise of many. This surprise sparked a few quick thoughts about the Constitution, the Supreme Court’s role in government and newly enriched health insurers.

First, Randy Barnett’s Commerce Clause argument was both vindicated and undermined. The argument goes that if Congress can regulate inactivity as well as activity, it can regulate everything. A broad interpretation of the Commerce Clause essentially gives Congress unlimited power. If they can force you to buy health insurance, they can force you to eat your vegetables, too. This is very few people’s idea of good government.

The court, in line with Barnett’s thinking, ruled that the Commerce Clause does not give Congress the power to force people to buy things. But, clever souls that they are, the justices found a way to avoid striking down a law that Congress passed. They’re quite good at that. The insurance mandate was upheld because it is now considered a tax.

According to the majority opinion, Congress still has virtually unlimited power. It turns out the source of that unlimited power comes from elsewhere — the power to tax. Barnett’s argument applies here, too. Usually, one has to engage in some kind of action to be taxed. You don’t pay income tax unless you earn income. You don’t pay sales tax unless you buy something. You don’t pay property unless you have purchased property, and so on. Now the Supreme Court rules that Congress can tax people simply for being.

My second thought is that today’s decision is a classic example of judicial passivism. The court seems almost eager to defer to the other branches. At her confirmation hearings, Justice Kagan said:

I would go back I think to Oliver Wendell Holmes on this. He was this judge who lived in the early 20th century — hated a lot of the legislation that was being enacted during those years but insisted that if the people wanted it, it was their right to go hang themselves. Now, that’s not always the case but there is substantial deference due to political branches.

The other justices tend to agree. If Congress passes a law, we’ll uphold it. No matter what. We’ve got your back. After all, presidents would not appoint, and the Senate would not confirm, a nominee who would bite the hand that feeds him.

The court badly needs a dose of judicial activism. If Congress or the president overstep their bounds, the court’s job is to tell them no. Its passivity has today given Congress the power to tax people for the simple act of being alive. There’s already a death tax; we now have a life tax as well.

My third thought is about rent-seeking. That’s econ-speak for using government to make an unfair profit. If I’m an insurance company, I’m popping the champagne right now. I may not be too happy about some of the regulatory strings attached to the insurance mandate, but I’m now legally guaranteed business. Woo-hoo. If you don’t want to buy my product, I can get the government to force you to do business with me, on pain of a fine.

Most people think that businesses abhor regulation; the truth is that they often love it. In the past, bigger companies could get government to put up barriers to entry to keep pesky upstarts out of the market. Now they can literally require you to buy their product. Health insurers spent tens of millions of dollars lobbying on the health care bill. They will now reap a return on their Washington investment that puts Berkshire Hathaway to shame.

Between Congress’ newly increased taxation powers, continuing judicial passivity and the rent-seeking frenzy that is about to ensue, the court got this one wrong. May they get it right — and stick up for themselves — in future decisions.

Ryan Young is a fellow in regulatory studies at the Competitive Enterprise Institute.