June 29, 2012

What Was Roberts Thinking?

The Chief Justice was neither an umpire nor a statesman. Only a lawyer.

The dust has hardly settled on the Supreme Court’s decision over the Affordable Care Act (National Federation of Independent Business v. Sebelius, i.e. NFIB). It will take some time to pull together all the discordant threads in Chief Justice Robert’s decision, which will continue to puzzle, bemuse, please, and outrage for months and years to come. He did well on his treatment of the Medicaid extension. But on the crucial issue of the individual mandate and the taxing power, he sounds like a lawyer who is too clever by half.  The point here is ironic, for without question, the Chief Justice came to his decision by self-consciously marching to the beat of two drummers: judge and statesman.

The Roberts Tango: Statesman or Umpire?

He takes on the role of the umpire judge because he claims to be a lawyer, and not a social planner, so that his decisions have to do with questions of entitlement and government power, not with wisdom and politics. It may be that Supreme Court justices are not, as Roberts has sometimes said, just umpires who call balls and strikes. But the reason that this model of strict interpretation has long had a strong appeal to the Chief Justice is that it affords him a way to resist the charge that he has led the Court in the usurpation of the functions of the democratic branches of government, by making policy as he sees fit.

 Epstein  
 Illustration by Barbara Kelley

Accordingly, he is keenly aware of his statesman’s role as the Chief Justice of the United States Supreme Court. He has two obvious role models to look to. The first is Chief Justice Charles Evans Hughes who, in NLRB v. Jones & Laughlin Steel Corp., essentially switched course at the eleventh hour to sustain the constitutionality of the National Labor Relations Act under a reading of the Commerce Clause that increased the size of the federal government one-hundred fold (or more). The second model is Chief Justice Earl Warren, who led a unanimous court in holding that segregated institutions had “no place” under the equal protection clause in the decision for Brown v. Board of Education.

There are two obvious differences between these two notable cases. Jones & Laughlin was decided by a 5–4 majority, and it upheld a novel exercise of Congressional power by allowing regulation of all manufacturing activity that previously lay outside the scope of the federal government. The outcome was widely championed by the liberal intelligentsia as the “switch in time that saved nine.” They were thrilled to win by one vote, to say the least. In contrast, in Brown, the Court unanimously struck down established Southern practices of segregation and anticipated a blizzard of opposition. Earl Warren was intent on getting unanimity to legitimate his decision.

Roberts clearly located NFIB in the tradition of Jones & Laughlin not Brown, and thus was willing to run with the 5–4 decision. There is no question that he thinks of himself as the statesman in this case. But it is an open question whether he can also be the lawyer. On this point, it looks as though he can do only one, not both, which means that he will be subject to constant attack for playing fast and loose with the law. Sometimes, the need to play umpire is inconsistent with the need to mend relationships with the coordinate branches of government. That tension is evident in every portion of the Chief Justice’s dense decision.

At the outset of the opinion, he asks whether the Court can hear the case itself. The Anti-Injunction Act provides that the Court does not have the power to enjoin a tax until that tax is collected. In dealing with this particular issue, the Chief Justice took the position that Congress could define the term “tax” exactly for the purposes of setting limits on the federal power. In this particular case, Congress chose the word “penalty” to describe the nature of the mandate, and that verbal ploy was regarded by the Chief Justice as reason enough to say that the Court could indeed entertain the challenge to the statute prior to the time of collection. So far it looks as though the umpire-in-chief is calling balls and strikes. Congress is forced to live by the choices that it makes.

But not for long. The Chief Justice then goes on to say that what matters for the purposes of the Constitution is not what Congress said, but what it did. The ACA imposed a "Requirement to maintain minimum essential coverage." The ACA stipulates, as Roberts quoted, that every "applicable individual shall . . . ensure that the individual . . . is covered under minimum essential coverage," and further, that "if . . . an applicable individual . . . fails to meet the requirement of subsection (a) . . . there is hereby imposed . . . a penalty." We know his motivation. Once he rejected the Commerce Clause arguments, he had to find refuge in the power of Congress to lay and collect taxes.

The Mandate: A Penalty or Tax?

The Chief Justice looks more like a batter seeking to execute a suicide squeeze than an umpire calling balls and strikes. At this point, labels no longer matter. What matters is whether Congress imposed a tax or imposed a penalty. In answering that question, the Chief Justice ignores the wide range of institutional safeguards that are required before taxes could be imposed.

The Obama administration went out of its way to say that it did not plan to impose any taxes, in part because of its no-new taxes pledge, and in part to get a favorable route for the Act through the Congress. That route did not lie through the House of Representatives, where all tax measures must originate. These procedural steps are part of the structural Constitution. Umpires usually try to use consistent definitions because otherwise they are well aware that there is a risk in equivocation: The political actor, meanwhile, can first pick this and then that definition to suit his convenience.

But it gets worse. The basic theory of taxation is that we are all in it together. The point here is that the taxes are generally imposed to create some form of public good, to which all citizens should be required to contribute. We have, unfortunately, relaxed that notion of taxation so that transfer payments from A to B fall within a tortured definition of what counts as the “general welfare of the United States,” where the last four words are constantly ignored today. But a second constraint still remains—namely, that the taxes come from all segments of the population.

The moment we allow a tax targeted just on those people who wish to opt out of the mandate on the ground that they get a raw deal from the government, the power of selective abuse is increased, thereby allowing a majority of the population to impose a so-called tax on whatever subgroup of the population it wishes to tax for the benefit of another. Put otherwise, it is not easy to think of any traditional tax or credit that hits only those who don’t buy healthcare insurance on their own accounts. The extra flexibility is one unfortunate way in which the Chief Justice as statesman clashes with the Chief Justice as umpire.

Playing Fast and Loose With the Necessary and Proper Clause

The Chief Justice also overlawyers his case by his selective use of the elusive Necessary and Proper Clause. Here is the text of the clause in full:

Article I, Clause 18. The Congress shall have Power To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by the Constitution in the Government of the United States, or in any Department or Officer thereof.

In dealing with the individual mandate, the Chief Justice insists that the Necessary and Proper Clause does nothing to bolster the government’s case under the Commerce Clause. In this context, he reads the words “necessary” and “proper” separately and comes to the conclusion that there is no way in which a fundamental power of taxation can be read into a clause whose major function “involved exercises of authority derivative of, and in service to, a granted power.” The sweep of the mandate thus makes it neither “necessary” to the rest of the ACA nor “proper” for achieving Congress’s regulatory objective. The argument is that the Congress cannot use this add-on to transform its own powers.

It is, however, worth noting that the Necessary and Proper Clause also applies to the power of Congress to lay and collect taxes. Only now it gets a rather different interpretation. When the matter comes to the taxing power, the Chief Justice finds it imperative to give “the full measure of deference owed to federal statutes,” without asking whether, as a matter of constitutional interpretation, it is both necessary and proper to do so. Indeed, the slightest measure of concern would indicate that what Congress calls a penalty should be treated as such.

At this point, it looks as though Roberts, though never quite connecting the dots, reads the Necessary and Proper Clause more expansively, as did Chief Justice Marshall in McCulloch v. Maryland, where he famously (and overbroadly) states: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional."

“Necessary and proper” are much tighter requirements than the word “appropriate” is. Nonetheless, on the taxation power, the broader reading is adopted by implication, for the Chief Justice insists that the mandate is a tax because it is “not so high that there is really no choice but to buy health insurance; the payment is not limited to willful violations, as penalties for unlawful acts often are; and the payment is collected solely by the IRS through the normal means of taxation.” Elsewhere, he says that these are taxation measures because they raise revenue, and have, of course, some regulatory impact on the primary conduct.

By his account, every penalty could be treated as a tax.
That cannot suffice, however, as a matter of constitutional interpretation. So long as Congress has only limited powers of taxation, no one should be allowed to use verbal legerdemain to expand those powers by calling a penalty a tax. Here, the so-called indicia of a tax intended to run the distinction don’t quite do the job. The size of the payment cannot be dispositive, for if so, then someone has to find the point at which the constitutional tax becomes an unconstitutional penalty. There are also all sorts of strict liability offenses covered by penalties. Nor should Congress have the power to determine the constitutionality of its own legislation by altering the mechanism for its collection. And finally, all penalties raise revenues, leaving this supposed ground of distinction worthless.

Nothing in this mélange of factors displaces the  inference that when Congress repeatedly used the word “penalty” to describe the mandate, it meant what it said and it said what it meant. The best way to read this mandate is as a fine that is imposed on individuals who choose not do an act that is required as a matter of positive law. It is no wonder that no lower court accepted this ad hoc argument that the mandate could be rescued by christening it as a tax.

Chief Justice Roberts’ case is weak.  As I wrote in the New York Times, historically, the taxing power was read in tandem with the commerce power. The actual words of the spending power are very narrow:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.

The original intuition was that general welfare of the United States only covered standard public goods, leaving all welfare functions to the state. That position was obviously abandoned.  But in its place, the rule was that the taxation power could never be used as an indirect form of regulation that Congress could not impose directly. That is exactly the argument that Chief Justice Roberts holds for the Commerce Clause, but at no point does he address the connection between the two clauses.

The entire edifice that underlies the ACA on this critical mandate thus rests on a constitutional house of cards. If the legislation fails under the Commerce Clause, there is no reason to resurrect it by engaging in extravagant machinations with the words “tax” and “penalty.” No umpire would accept such a shaky result. No statesman should either.

*****

Editor's note: Please find below a selection of Defining Ideas essays related to the healthcare law.

1. "The Ignored Facts of American Healthcare" by Scott W. Atlas (12/13/2010)

Highly publicized rankings deride the American health care system. But the facts tell another story.

2. "The Disregarded Option of American Healthcare" by Scott W. Atlas (2/6/2011)

We need individual empowerment, not government centralization.

3. "Healthy, Wealthy, and Wise" by John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler (4/27/2011)

Five steps to a better health care system.

4. "Nanny Runs Amok" by Henry Miller (7/13/11)

Social engineering, Obamacare-style.

5. "Obamacare vs. the Commerce Clause" by Richard A. Epstein (8/21/2011)

If Congress can regulate health care, it can regulate everything under the sun.

6. "Obamacare's Other Unconstitutional Provision," by Clint Bolick (12/16/2011)

An agency uncontrollable by Congress, unreviewable by the courts, and virtually unrepealable.

7. "The 'Commerce Clause Mandate'" by James Huffman (1/17/2012)

Obamacare will test the Supreme Court's devotion to individual liberty.

8. "The Car Insurance Model" by Scott W. Atlas (2/2/2012)

We need to hold individuals accountable for reckless, voluntary behaviors that drive up the cost of healthcare.

9. "Obamacare's Bully Mandate" by Richard A. Epstein (2/14/2012)

Can the federal government seize state revenues to pay for Medicaid?

10. "Obamacare: An Unconstitutional Midadventure" by Richard A. Epstein (3/26/2012)

How the individual mandate unravels the core of the healthcare law.

11. "A Taste of Government-Run Healthcare" by Richard A. Epstein (6/26/2012)

The FDA is a bureaucratic behemoth that threatens public health, stifles drug innovation, and keeps costs high.


Richard A. Epstein, Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, Laurence A. Tisch Professor of Law at New York University, and senior lecturer at the University of Chicago, researches and writes on a broad range of constitutional, economic, historical, and philosophical subjects. He has taught administrative law, antitrust law, communications law, constitutional law, corporate law, criminal law, employment discrimination law, environmental law, food and drug law, health law, labor law, Roman law, real estate development and finance, and individual and corporate taxation. His publications cover an equally broad range of topics. His most recent book, published in 2013, is The Classical Liberal Constitution: The Uncertain Quest for Limited Government (2013). He is a past editor of the Journal of Legal Studies (1981–91) and the Journal of Law and Economics (1991–2001).


Letters to the editor

The Mandate Is Indeed a Tax

I agree with Chief Justice Roberts that the Obamacare mandate is a tax and not a penalty. It seems it will function as a deduction to an individual's overall tax liability. If you have insurance, you get the deduction. I also see this ruling as a blessing in disguise that could lead to a dramatic reform, if not repeal, of Medicare and Social Security, or at least a reform to allow individuals to opt out. It would be a long drawn out process I'm sure, but I see a similarity in an employed person's payroll taxes going to pay for Social Security and Medicare for retirees, and a healthy person's Obamacare tax going to subsidize health insurance for the sick. In both of these situations, wealth is being transferred from the young and less wealthy to pay for others. I love Ron Paul but if a more articulate Libertarian, perhaps Rand Paul or Justin Amash, and some respected Republicans such as Tom Coburn and Paul Ryan could explain the inherent immorality and unsustainability of the manner of funding these programs, we could have smaller government, a return to personal reliance and autonomy and a stronger economy. If the repeal of Obamacare included discourse about how its corrosive effects on the tax code, it could set a precedent to deal with Social Security and Medicare.

---Dillon Eliassen


Letters to the editor may be sent to definingideas@stanford.edu. Editors reserve the right to reject or publish (and edit) letters.