The Obamacare Ruling – A Libertarian Call to Rise

By On June 30, 2012 · 26 Comments · In Current Events, Libertarianism

OK, so the Supreme Court largely upheld Obamacare. Most libertarians are unsurprised. Some more pragmatic libertarians are terribly disappointed by the ruling, but a minority – and I’m one of them – has emphasized the silver lining. Specifically, Roberts and the dissenters all held that the mandate was unconstitutional under the commerce clause, potentially moving commerce clause jurisprudence in a libertarian direction. Yes, Roberts found a loophole to maintain the Supreme Court’s political legitimacy in the eyes of the public, but he said the commerce clause has teeth again. Here’s Randy Barnett (who libertarians should be celebrating as a hero for his leadership on this issue):

In his majority opinion, Chief Justice John Roberts accepted all of our arguments about why the individual insurance mandate exceeded the Commerce Clause: “The individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause,” he wrote. “That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it.”

The majority also accepted our argument about the Necessary and Proper Clause. “Even if the individual mandate is ‘necessary’ to the Act’s insurance reforms,” it wrote, “such an expansion of federal power is not a ‘proper’ means for making those reforms effective.”

Finally, for the first time since the New Deal, the Supreme Court invalidated a law because it improperly coerced the states, and thereby exceeded Congress’s spending power.

In other words, Roberts threw some red meat to the social democratic left and slipped in some libertarian jurisprudence. Only a tid-bit, but he signaled that the New Deal-era excise of economic liberty from the constitution could come to an end.

I also agree with Oracle Will Wilkinson:

Mr Chait and his partisan allies clearly dislike the way in which Mr Roberts avoided the “crisis” of their collective tantrum, but the great relief that has now washed over them will be enough to keep them from attacking with full force the “bizarre and implausibly narrow reading” of the commerce clause which Mr Roberts just embedded more firmly in constitutional law.

Just think how the social democratic left is reacting. They’re not enraged, just a little worried, because Roberts gave them a hedon bath to cool them off.

Now libertarians are used to nay-saying. It’s how we cope with the fact that we consistently fail to affect policy. Let’s face it. We’re losers. And so when government does anything, our tendency is to complain, wail and predict disaster.

But I’m not having any of that depressing crap today.

Remember just how bad commerce clause legislation has been. As most of you know, from the late 19th century until 1937, commerce clause jurisprudence protected an extensive regime of economic liberty. But things took a sharply statist turn thereafter. Since then, the Supreme Court has basically abandoned the protection of economic liberty. In other words, things suck for economic freedom from a constitutional perspective.

In 1995, in the Lopez decision, Clarence Thomas indicated in his concurrence that the pre-New Deal commerce clause jurisprudence should stand (basically). He was lambasted as a nut by the legal establishment. But yesterday five Supreme Court justices, including the Chief Justice, clearly and forcefully said that the ACA cannot be justified on commerce clause grounds. Here we have it in print, and set as precedent, that the commerce clause doesn’t permit the Congress have its complete way with us economically. Had the mandate imposed genuine legal penalties, like jail time, it would have been ruled unconstitutional.

I know this is only a glimmer of hope, at least for today. But I’m going to ask the libertarian movement to take a different attitude. Here’s why.

Roberts and the conservatives have effectively said to the friends of economic freedom that commerce clause jurisprudence is now in open dispute. No longer will arguments for a narrow reading of the commerce clause be openly scoffed at. An entire new legal world is open to us like it wasn’t before. It is now within the realm of feasible political possibility to reestablish thick economic liberties as constitutional rights, which all libertarians think would be a massive move towards justice.

The Supreme Court didn’t do that job for us. But it did say that it might play along if we take the lead. A major branch of the U.S. government has effectively opened the door for a much bolder and hopeful libertarian movement.  Libertarian legal groups like the Institute for Justice can start to search for ways to allow the court to quietly do what most of them seem open to doing. Libertarian academics can defend market democratic institutions with much more daring and legitimacy than they could have two days ago. And the libertarian movement has been given an opportunity to grow in influence and power.

If you libertarians are down in the dumps about the decision, if you’re angry with other libertarians looking for an upside, get over yourself. How odd for you to expect the Supreme Court to hand you your rights on a silver platter. Join with those of us who love freedom enough to hope that a new era of economic law could be ours if we take the lead. We have to fight for justice, to elevate economic liberty to the status of civil, religious and political freedom. That fight has just gotten easier.

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  • Neera Badhwar

    Many good points, Kevin. But along w. the welcome narrow reading of the commerce clause we got the crazily expansive reading of Congress’s taxing power. The right hand giveth what the left taketh away. Has liberty been enhanced? I don’t know.

    • adrianratnapala

      Is it such an expansion of the tax power? I’m no lawyer, but as I see it, Roberts has said at most, the following:

      a) That in order to encourage X, it is OK to have a tax tightly packaged with an exemption for people who do X.

      b) That the meaning of the law can be construed in whatever way makes it pass constitutional muster, even if it is thought that Congress understood the law differently.

      Are either of these ideas new? Are they even controversial? I don’t know.

      I hope that in spite of (b), this increases transparency by giving legislators an incentive to call their regulations taxes. Lots of regulations are indirect taxes, but in my Utopia, any law compelling provision of an economic good would be structured as a tax-and-spend job.

      • Marcus Vitruvius

        I think the new part– unless I am gravely misunderstanding the issue– is that under A), Congress can effectively tax specific types of inactivity. I was not aware that they had that authority, so to me it sounds quite new. And it is a very small step from, “I will tax you for not-X” to “I will compel you to X.”

        And if it is new, then it does seem that shutting down the Commerce clause at the expense of opening up the exact same powers under the taxing authority gains the citizenry absolutely nothing.

        Indeed, if the political “silver lining” that tax authorities cannot be filibustered, and that this can therefore be repealed by fewer Senators, then as a practical matter we may have lost even more– that silver lining would seem to cut both ways and allow such a measure to *pass* without filibuster as well.

        • http://aaronmclin.blogspot.com/ Aaron

          ”
          And it is a very small step from, ‘I will tax you for not-X’ to ‘I will compel you to X.’”

          No – it’s not. As a matter of fact, that’s a pretty huge step. What I don’t get with the Libertarian whine-fest (I’ll bring the bread and cheese), is why this criticism is never leveled at other Congressional tax incentives. When Congress says “Tax Break for Job Creation!” everyone says “Yay!” I have yet to hear, “It is a very small step from ‘I will tax you for not hiring people’ to ‘I will compel you to give people employment.’” And I defy you come up with a substantive difference between “This tax does not apply if you do X,” and “This tax applies if you do not do X.”

          When Congress creates what are effectively loopholes in the current tax structure, people start looking for ways to permanently wedge those holes open, even when it means that we need to borrow money to meet our current commitments or present the appearance (or even the reality) of gross unfairness. But when Congress creates a tax with a gigantic loophole built-in, suddenly it’s coercion.

          The fact that you don’t want to do whatever it is that will grant you access to the loophole does not mean you are being coerced, any more than the fact that I am being coerced into increasing my charitable giving by the fact that I miss out on tax breaks by not doing so.

          This wedding to ideology at the expense of logic has become tiresome.

          • Marcus

            As someone who does not own a home no matter how much the government wants me to invest in real estate, nor have children no matter how much the government wants me to procreate I’ve been getting the short end of the stick on that particular transfer of wealth for decades, and complaining about it for just about as long.

            And I am even denied the last laugh now that Congress wishes to force me into another such scheme– tax refund bribes not being sufficient to overcome my better judgement, they resort to punishments… and *that* is the difference. Bribes and punishments are both coercive, but that does not mean they are morally equivalent.

          • http://aaronmclin.blogspot.com/ Aaron

            I’m sorry, but I do not consider subjective
            moral
             distinctions to be substantive
            . The fact that a baked-in loophole outrages you marginally more than an after-the-fact loophole is, honestly, unimportant in the grand scheme of things. And in Constitutional law, for that matter.

            And that’s really the point here. According to the Roberts’ court, one should call a bowl a bowl. If there is any outrage against Congress and the legislative process, it is that Roberts denied that Congress can fundamentally change what something IS through the application of a particular LABEL. (When he rules that an 8th cup of tomato paste isn’t the same as a half-cup of vegetables, the man will be my hero.)

            Personally, I would have liked to see the Roberts’ court declare the ACA unconstitutional, because in doing so, they likely would have brought down every other tax loophole in the IRS code. But I’m not willing to go to law school and become a judge so I can sit on the bench, so I’ll leave that to the pros.

          • Sean II

            What libertarians have you met who didn’t complain in the general case about how the tax code is used to coerce behavior? What libertarians can you cite who are in favor of using the taxing power to encourage certain activities and reward certain industries?

          • http://aaronmclin.blogspot.com/ Aaron

            I’ve met a number of Libertarians who are all for anything that reduces the amount of money that the Federal government collects (especially when it lowers the amount that the government takes from them). They might rather that there was a flat tax rate of 0%, but they take what they can get. But in any event, they don’t complain that selectively lowered taxes are worse than taxes in general.

            Now – you can argue that these people aren’t “true” Libertarians. For my part, when someone says, “I’m a Libertarian,” I take them at their word, refusing to be the gatekeeper of that, or any other label.

          • Sean II

            It’s not a matter of claiming “No True Scotsman”. You said it yourself: most libertarians favor any and all measures designed to lower taxes and deprive the state of revenue. That’s not the same thing as being in favor of using taxes to modify behavior.

            It’s like this: Say I’m in Darfur and I’m trying to limit the harm of genocide there. Some people I manage to rescue, some are killed despite my efforts. But of course you wouldn’t say: “Sean has no problem picking and choosing who lives and dies in Darfur.” You would understand that the limits of my rescue effort were practical, not intentional.

            You see what I mean? The fact that libertarians can only limit some taxes some of the time does not make them supporters of all the others taxes that remain.

  • SimpleMachine88

    …and it can do anything it wants under the taxing power. The government has decided to switch how it justifies telling us to do whatever it wants. Yay!

    Your optimism is rather cute, however. At least they’ve only taken your liberty, not your irrational hope. As for myself, I intend to drink until I forget. I suppose you could say that the glass is full to the dregs.

    • Steve the hyena

      It could always do this. Mortgage interest deduction and insurance deductibility in business are the biggest of these.

      • Counsellor

        Not that it is pertinent, but “deductions” simply allow the producers of income to decide on a particular application of some of that income, without incurring taxation.
        Of course, if one takes the view that all income is produced as a result of the “social organization,” and thus should be allocated be collective action, rather than individual (producer’s) choice, then we need not attend these sessions.

        • Steve the hyena

          Then Obamacare simply raises taxes and allows their deduction. There isn’t a deep conversation lurking here, the whole sentiment is just defective.

          • Counsellor

            No, “penalties” are not “deductible,” unless Congress otherwise provides. There are other taxes within the PPACA that may qualify as “business expense,” or create “credits,” etc.
            But, perhaps you are just speaking to how taxation is constructed.

          • Steve the hyena

            Try reading again, think carefully.

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  • Counsellor

    But, does anyone notice that “coercion” of the collective (the several states) is deemed a Constitutionally unauthorized power of Congress (via the intents of “Federalism”) whilst “coercion” (via “Tax”) of individuals to act has become an authorized power.
    And, is this simply because of the differences in the mechanismms of coercions used?
    In the case of coercion of the states, it is via spending (which has heretofore seemed an almost unlimited and judicailly unregulatable power). In the case of the individuals it is via a form of taxation (direct) which is subject to specific Constitutional constraints (cl4;Art I; Sect 9).
    This is indeed “Upside Down!”

    “Normative Libertarianism is framed by the impacts of the
    functions of governments on Liberty and thus to limit those impacts by limiting
    those functions.”
    R Richard Schweitzer
    s24rrs@aol.com

  • Counsellor

    Not incidentally, that “Federalism” intent is a judicial concept.

  • Steve the hyena

    This misunderstands the fundamental structure of government. A victory against the commerce clause is not a victory for “liberty” it’s a victory for state power.

  • billwald

    Roberts invented a new form of tax. Say, to fix the Social Security problem, Congress passed a new law that all employees had to contribute 5% of gross pay to a company deferred comp program with 5% tax penalty for failing to comply.

    • http://aaronmclin.blogspot.com/ Aaron

      Wait… Let me get this straight. Taxes with provisions built into them to lower or waive the tax if you take some form of action are new?

      • billwald

        That’s the way I see it.

  • http://www.facebook.com/profile.php?id=1287114893 Rick Schaut

    “We have tofight for justice, to elevate economic liberty to the status of civil, religious and political freedom. That fight has just gotten easier.”

    If your notion of “economic liberty” means that there are certain ways in which the government is forestalled from taxing and spending, have you not curtailed my political liberty to petition my government to tax and spend in ways that I believe are most beneficial to the common weal?

  • StreamingLiberty.com

    Why would the statists care what happened to the commerce clause when they now have unlimited power to coerce under the tax clause.

  • http://www.facebook.com/people/Keith-Waters/1286586925 Keith Waters

    Ginsburg said the Commerce Clause declaration was irrelevant to the decision and therefore not binding. Someone correct me if I’m wrong or perhaps cite the part that says I’m right.

    • RickDiMare

      Keith, from my reading of the Sebelius decision, I’m afraid the legal system still wants to conceal the real nature of this tax/penalty, and to send us on a wild goose chase. Really, it’s just an incidental regulatory measure under the Commerce Clause, so it doesn’t matter whether they call it a tax or a penalty; they can just dictate what they want us to do (which is what they’re doing).

      Here’s an analysis I recently posted about the case at my Facebook group “Common Wealth Tax:”

      Doc #30: The Tax/Penalty of the Affordable Care Act is Just Another Branch on The New Deal “Tree” By Rick DiMare in Common Wealth Tax

      In the recently decided NFIB v. Sebelius (2012) case (linked below) about the Affordable Care Act (ACA), Justice Ginsberg states: “Since 1937, our precedent has recognized Congress’ large authority to set the Nation’s course in the economic and social realm. See United States v. Darby, 312 U.S. 100 (1941) . . . recognizing that ‘regulations of commerce which do not infringe some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause’ . . . ”

      Justice Ginsberg is quite right that ACA has its roots in 1937, but I’d like to add some detail.

      Here Ginsburg is referring to the Social Security “special income tax” on employee wages that was authorized in Helvering v. Davis (1937). (Another Social Security tax was also authorized on employERs in that case, but that was an excise tax which is not related to our discussion here.)

      To understand how the penalty/tax contained in the ACA relates to 1937, note that Social Security income taxes on wages are INCIDENTAL to the effective operation of a valid Commerce Clause social welfare program. So, in that regard, the ACA tax/penalty (2012) is just another branch on that tree, along with the employee Social Security income tax (1937) and Medicare income tax (1965). (The general federal withholding income tax of 1942 is also a branch on this tree, as far as sharing Commerce Clause Constitutionality with the other three taxes, but general federal withholding is not specially designed to support social welfare programs, but more generally “to pay the debts and provide for the common defense and general welfare.”)

      But getting back to the Sebelius case, it’s also important to understand that the new tax/penalty created here in 2012 is INCIDENTAL to the Commerce Clause program, and necessary to its effective operation. Otherwise, as a stand alone tax/penalty, it may not be Constitutional, as was the ruling in the 1936 U.S. v. Butler case.

      In other words, when Congress operates a valid Commerce Clause based social welfare program, the program will not be allowed to fail because it requires a tax or penalty that might otherwise be unconstitutional.

      But it’s important to understand that this also means that the tax/penalty must somehow be avoidable and the Commerce Clause program voluntarily entered into.

      For example, one can voluntarily enlist in a branch of the military, but after joining, cannot claim certain civilian rights that conflict with the goals of the military.

      Also, it must understood that no Commerce Clause based social program cannot “infringe some constitutional prohibition,” which quote Justice Ginsberg borrowed from U.S. v. Darby (1941).

      Using our example about joining the military, this means government cannot force someone to join the military as a means of blocking civilian rights which the government deems objectionable.

      So, here’s the progression, or Constitutional foundation which justifies Commerce Clause based programs in the United States:

      THE TREE TRUNK: The Social Security “special income tax” from Helvering v. Davis (1937). Note: Social Security began as true trust fund in 1935, but this Helvering case changed it to an income tax incident to a Commerce Clause based general social welfare program which partners with the central bank, and where the participants “voluntarily” submit to the rules and regulations of the program. By “voluntary” here we simply mean there is nobody forcibly making an American taxpayer use the central bank regulated currency. http://en.wikipedia.org/wiki/Helvering_v._Davis

      BRANCH #1: The “victory tax” Revenue Act of 1942. This tax is more commonly known simply as the federal withholding tax: http://en.wikipedia.org/wiki/Revenue_Act_of_1942

      BRANCH #2: The Medicare income tax of 1965, which is the third income tax that normally appears on a taxpayers paycheck. http://en.wikipedia.org/wiki/Medicare_(United_States)

      BRANCH #3: The ACA individual mandate penalty tax of 2012, which only kicks in if the taxpayer makes a certain amount of income and has not purchased health insurance: http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf

      NOTE: Here we’ve confined our discussion to the New Deal “tree” so to speak, but the roots of this tree were actually established in U.S. v. Bankers’ Trust (1935) and U.S. v. Butler (1936), which laid the groundwork for an income tax on users of substitute (non-current-coin) currencies, whether the currencies were foreign or domestic, legal or illegal/counterfeit.