Privatization, regulation, and freedom of choice—or, Orin Kerr doesn’t get it. Again.

September 20, 2011 | By PACIFIC LEGAL FOUNDATION

Author: Timothy Sandefur

GW law professor Orin Kerr argues in a new post on the Volokh Conspiracy that the Individual Mandate is in a sense more “libertarian” than a single-payer, socialized medicine scheme—and suggests that there’s something disingenuous in calling the Individual Mandate “unprecedented” when the reason it’s a newfangled idea is because it’s something of a step in the right direction, by comparison with the older notions of government bureaucracy simply running everything from the bottom up. The problem with this argument is that it ignores the history and, unsurprisingly, misconceives libertarianism pretty much in every possible way.

A century ago, government actually ran virtually nothing in the sense that we now mean when speak of “running” things. Then, most government functions were carried out by private agents acting with government permission—they received a government charter or commission, but were not staffed by government employees so much as by private actors who undertook public businesses as part of their trade. Printers, for example, scrambled for the opportunity to print official currency or other government documents alongside their standard business of printing books and newspapers. Hospitals, schools, even roads were run in this way—by private investors who operated under a government charter. In his book Roughing It, Mark Twain describes how the Nevada territorial legislature “sat sixty days, and passed private tollroad franchises all the time. When they adjourned it was estimated that every citizen owned about three franchises, and it was believed that unless Congress gave the Territory another degree of longitude there would not be room enough to accommodate the toll-roads. The ends of them were hanging over the boundary line everywhere like a fringe.”

The problem with running things this way was our old pal, rent-seeking. Government contracts and franchises often went to the most politically influential groups, buddies of elected officials—who, in return, supported their favored candidate and otherwise devoted themselves, not to productive effort, but to political investment, excluding rivals, harming competition, and so forth. If Karl Marx and his followers were ever right about anything, it was when they attacked this union of political and economic power as a source of exploitation and class-entrenchment. It was largely in reaction to such abuses that the Populist and Progressive leaders sought to devise a new form of administration and to reform the Civil Service; they hoped (futilely, it turned out) to remedy these rent-seeking problems by erecting a regulatory state administered by expert, non-political agents and hired government employees. Rather than letting out contracts to operate toll roads, the government would run its own road-making companies, and would build the roads itself. Today, we see that this failed to put a stop to rent-seeking abuses, and that it brought in a number of other problems. But it would be hasty and ignorant to assume that the former model was somehow more “libertarian,” or to assume that the Civil Service is somehow less free-market oriented. The two models of government have their pluses and their minuses, but what makes a system free-market oriented or libertarian is its absence of coercion and its respect for the individual’s moral right to make his or her own decisions.

The Individual Mandate compels individuals to do business with politically influential insurance companies, as a way of subsidizing the insurance industry, which, in turn, is forced to insure people with pre-existing conditions. This result is hardly more freedom-oriented than a government-owned, single-payer scheme. In some ways, it is a step backward to the union of public power and private interest that marked the worst aspects of 19th century political economy—a system which systematically exploits workers for the benefit of politically privileged business interests, all through the use of coercion by elites.

America’s founders, of course, were well aware that such a system was a dangerous and immoral force. The Britain against which they rebelled was a rent-seeking society—a government that favored entrenched financial interest groups who routinely used monopoly privileges as tools of political as well as financial power. In his Summary View, for example, Thomas Jefferson complains about British laws that prohibited the colonists from engaging in metalworking in order to benefit the metalworking industries in England. The tea the patriots threw into Boston Harbor was a powerful symbol of the way the monarchy favored elites with political influence by excluding competition; the Tea Act gave the East India Company a monopoly on the tea trade, and Governor Hutchinson was more or less trying to impose a mandate on Massachusetts, requiring them to unload the tea rather than send it back to England in protest.

The Revolutionary generation that adopted the Constitution was very skeptical of the political/economic hybrids that they called “corporations” (a different animal than the private, for-profit corporation which developed in the succeeding decades) or “monopolies.” While they had no perfect solution to the problem of how to provide government services without setting up politically privileged industrial concerns, one thing they did know was that any private industry would, if it could, use government to force people to buy its product—and that is just the sort of government against which they rebelled. “That is not a just government,” wrote Madison, “where arbitrary restrictions, exemptions, and monopolies deny to part of its citizens…[the] free use of their faculties, and free choice of their occupations…. What must be the spirit of legislation where a manufacturer of linen cloth is forbidden to bury his own child in a linen shroud, in order to favour his neighbour who manufactures woolen cloth; where the manufacturer and wearer of woolen cloth are again forbidden the oeconomical use of buttons of that material, in favor of the manufacturer of buttons of other materials!”

The Individual Mandate, like the monopolies to which Madison referred, was devised in part to reward cronies—to get the insurance industry’s lobbying power to support Pres. Obama’s “reform” proposal. What’s more, the Mandate insulates Obamacare from political accountability. Because the actual insurance and care is provided by private industry, elected officials can blame industry leaders when the system fails, and the industry leaders can blame the government when the system fails. Were the system run by the government, inefficient and troubling as that would be, citizens would at least have a general idea whom to blame and how to remedy the situation. Instead, by reaching back to a model that pre-dates even the Progressive era reforms that the administration likes to evoke in its rhetoric, Obamacare manages to achieve something that the Constitution’s founders would have thought utterly deplorable: using government coercion to enrich private industry in the most direct and anti-democratic way conceivable—all while telling the citizens that it’s for their own good. This requires not the audacity of hope, but merely audacity.

In short, it’s true that the Individual Mandate combines private industry with public power, rather than establishing a central, politically accountable government agency to run health care. And that is just why it is constitutionally objectionable—on both libertarian and Progressive principles! Pro-industry is not pro-freedom. The very purpose of a Constitution is to prevent powerful organizations or individuals from using coercion to exploit citizens for their benefit in violation of individual rights. The Individual Mandate violates these principles in a most unprecedented way.

Update: Trevor Burrus further explains how “there is something truly disturbing about the level of constitutional perversion that is occurring here”