August 12, 2011

What the Eleventh Circuit says about commerce

By What the Eleventh Circuit says about commerce

Author: Timothy Sandefur

The mammoth opinion from the Eleventh Circuit today holds that the Individual Mandate portion of Obamacare is unconstitutional because it exceeds Congress’ powers under the Commerce Clause and the Necessary and Proper Clause. It also addresses many other issues, but this is the one everyone’s focused on for now. So let’s break it down.

The court begins by reviewing the many precedents interpreting the Commerce Clause case. Although it acknowledges that the Supreme Court has broadened this power a lot since the 1930s,

the Court has often reiterated that the power therein granted remains “subject to outer limits.” When Congress oversteps those outer limits, the Constitution requires judicial engagement, not judicial abdication.

This is exactly right. Sadly, courts have often taken a rubber-stamp approach to questions like this, under the so-called “rational basis” test. Under that test—which, admittedly, four justices adopted in the important Raich case—courts often simply defer to Congress, refusing to take seriously their role as a co-equal branch of government. The Eleventh Circuit decision makes clear that while the court will accord a proper level of deference, it will not give up its independent duty to say what the law is.

In determining if a congressional action is within the limits of the Commerce Clause, we must look not only to the action itself but also its implications for our constitutional structure. While these structural limitations are often discussed in terms of federalism, their ultimate goal is the protection of individual liberty….

Federalism protects state autonomy, but not as an end in itself; as the Court made clear in the recent Bond decision, federalism is a crucial mechanism for protecting freedom.

The court goes on to address the activity/inactivity distinction—that is, the argument that Congress can only regulate activities that people have chosen to undertake, but cannot regulate a person who is not acting or not engaging in commerce. Just as the Sixth Circuit did in its recent decision in the Thomas More case, the Eleventh Circuit justices are a little skeptical of this argument:

Whereas the parties and many commentators have focused on this distinction between activity and inactivity, we find it useful only to a point. Beginning with the plain language of the text, the Commerce Clause gives Congress the power to “regulate Commerce.” The power to regulate commerce, of course, presupposes that something exists to regulate…. As our extensive discussion of the Supreme Court’s precedent reveals, Commerce Clause cases run the gamut of possible regulation. But the diverse fact patterns of Wickard, South-Eastern Underwriters, Heart of Atlanta Motel, Lopez, Morrison, and Raich share at least one commonality: they all involved attempts by Congress to regulate preexisting, freely chosen classes of activities. Nevertheless, we are not persuaded that the formalistic dichotomy of activity and inactivity provides a workable or persuasive enough answer in this case. Although the Supreme Court’s Commerce Clause cases frequently speak in activity-laden terms, the Court has never expressly held that activity is a precondition for Congress’s ability to regulate commerce—perhaps, in part, because it has never been faced with the type of regulation at issue here….

Thus while the activity/inactivity distinction is important, it is not a “semantic or formalistic category.” Instead, it is meant to “provide courts with meaningful, judicially administrable limiting principles by which to assess Congress’s exercise of its Commerce Clause power.” And because the “economic mandate” involved here is “so unprecedented,” it’s really not possible to find a precedent that controls. Thus the question is

whether the federal government can issue a mandate that Americans purchase and maintain health insurance from a private company for the entirety of their lives. These types of purchasing decisions are legion. Every day, Americans decide what products to buy, where to invest or save, and how to pay for future contingencies such as their retirement, their children’s education, and their health care. The government contends that embedded in the Commerce Clause is the power to override these ordinary decisions and redirect those funds to other purposes. Under this theory, because Americans have money to spend and must inevitably make decisions on where to spend it, the Commerce Clause gives Congress the power to direct and compel an individual’s spending in order to further its overarching regulatory goals, such as reducing the number of uninsureds and the amount of uncompensated health care.

Congress has never exercise such an authority. During World War II, it did not force people to buy war bonds. When it passed the National Flood Insurance Act of 1968, it did not force people who live in flood areas to buy insurance. This is telling because “the power to compel behavior in order to solve important problems” would be very “attractive” to politicians. Yet that power’s never been asserted before, suggesting that it does not exist.  Worse, such a power would have extremely serious constitutional consequences:

From a doctrinal standpoint, we see no way to cabin the government’s theory only to decisions not to purchase health insurance. If an individual’s mere decision not to purchase insurance were subject to Wickard’s aggregation principle, we are unable to conceive of any product whose purchase Congress could not mandate under this line of argument. Although any decision not to purchase a good or service entails commercial consequences, this does not warrant the facile conclusion that Congress may therefore regulate these decisions pursuant to the Commerce Clause. Thus, even assuming that decisions not to buy insurance substantially affect interstate commerce, that fact alone hardly renders them a suitable subject for regulation…. In sum, the individual mandate is breathtaking in its expansive scope. It regulates those who have not entered the health care market at all. It regulates those who have entered the health care market, but have not entered the insurance market (and have no intention of doing so). It is overinclusive in when it regulates: it conflates those who presently consume health care with those who will not consume health care for many years into the future. The government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life. This theory affords no limiting principles in which to confine Congress’s enumerated power.

What about the Administration’s argument (which I blogged about yesterday) that health care is a “unique” market, and that this uniqueness would prevent any other kinds of Economic Mandates? The court rejects that argument, because the alleged factors that make health hare unique are “not limiting principles rooted in any constitutional understanding of the commerce power. Rather, they are ad hoc factors that—fortuitously—happen to apply to the health insurance and health care industries. They speak more to the complexity of the problem being regulated than the regulated decision’s relation to interstate commerce. They are not limiting principles, but limiting circumstances.” There is no genuine distinction between the health care market and other kinds of insurance. “Under the government’s proposed limiting principles, there is no reason why Congress could not similarly compel Americans to insure against any number of unforeseeable but serious risks.”

But, more importantly, this “uniqueness” argument is not a clear, judicially administrable principle. “Were we to adopt the ‘limiting principles’ proffered by the government, courts would sit in judgment over every economic mandate issued by Congress, determining whether the level of participation in the underlying market, the amount of cost-shifting, the unpredictability of need, or the strength of the moral imperative were enough to justify the mandate.” Courts applying the commerce clause should use clear, principled guidelines—not be drawn into a complicated analysis of whether this or that market is “unique” or not.

Worse, if courts were to try such analysis, they would probably defer to Congress on such questions—which would mean that “a future Congress similarly would be able to articulate a unique problem requiring a legislative fix that entailed compelling Americans to purchase a certain product from a private company. The government apparently seeks to set the terms of the limiting principles courts should apply, and then asks that we defer to Congress’s judgment about whether those conditions have been met. The Supreme Court has firmly rejected such calls for judicial abdication in the Commerce Clause realm.”

In addition, the argument that the Mandate only prevents so-called “cost-shifting” is belied by the exemptions to the Mandate: “cost-shifters are largely persons who either (1) are exempted from the mandate, (2) are excepted from the mandate penalty, or (3) are now covered by the Act’s Medicaid expansion. For example, illegal aliens and other nonresidents are cost-shifters…but they are exempted from the individual mandate entirely. Low-income persons are the largest segment of cost-shifters…but they are covered by the Act’s Medicaid expansion or excepted from the mandate penalty. In reality, the primary persons regulated by the individual mandate are not cost-shifters but healthy individuals who forego purchasing insurance.

What’s more, the cost-shifting rationale was actually rejected in both the Lopez and Morrison cases, where the government argued that local criminal activity had consequences on the national economy because they would shift insurance costs to third parties:

In both Lopez and Morrison, the Supreme Court determined that the government’s cost-shifting argument provided too attenuated a link to Congress’s commerce power. Under such a cost-shifting theory, “it is difficult to perceive any limitation on federal power, even in areas such as criminal law enforcement or education where States historically have been sovereign.”(Lopez) For example, we harbor few doubts that an individual’s decisions about “marriage, divorce, and child custody,” if aggregated, would have substantial effects on interstate commerce. Yet, the mere fact of an activity’s substantial effects on interstate commerce does not thereby render that activity an appropriate subject for Congress’s plenary commerce authority. Such a holding would require the Supreme Court to overturn Lopez and Morrison.

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