Some Links and a Quick Thought on Obamacare’s Economic Activity/Inactivity Distinction

[I’m moving blogs – check out the Next New Deal Rortybomb blog, here is the new rss feed, and here is this post over at the new site. I move over entirely Wednesday, and will cross post until then.]

My vacation started off as the Supreme Court was arguing the constitutionality of the individual mandate.  As friend-of-the-blog Noah Millman explains “the question comes down to the commerce power – whether the activity/inactivity distinction is meaningful at all and, if it is, whether, because everyone is part of the healthcare market, the government can legitimately claim that nobody is actually ‘inactive.’”

As the argument goes the commerce power allows the government to regulate economic activity but not inactivity.  To use the example that floats out there, the government can regulate the broccoli people purchase – subsidizing it with vouchers, taxing it, requiring safety inspections of it, etc.  But it can’t force people to purchase broccoli by ascribing a penalty to those who don’t do it.  The first is economic activity, the second is inactivity.  Even if the two activities net out the same, it doesn’t matter. “Just because the government does have the power to do x, doesn’t mean they have the power to do y, even if y has the same effect as x.”  As Cato put it, “there is a qualitative difference between regulating or prohibiting existing economic activity and mandating that someone engage in such activity.”

The New Republic has a great article up by Harvard law professor Einer Elhauge explaining how many individual mandates were passed by the founders in the first years of the Republic:

In 1790, the very first Congress—which incidentally included 20 framers—passed a law that included a mandate: namely, a requirement that ship owners buy medical insurance for their seamen. This law was then signed by another framer: President George Washington. That’s right, the father of our country had no difficulty imposing a health insurance mandate…In 1792, a Congress with 17 framers passed another statute that required all able-bodied men to buy firearms.

There’s a lot more.

Jack Balkin gives three limiting principles that “that justifies the individual mandate but doesn’t give Congress unlimited power under the Commerce Clause.”  Here’s an interview with Akhil Reed Amir Ezra Klein did that explains some of these issues.

I don’t know if I understand the actual activity/inactivity distinction. My legal realist/marginalist mind always believes there are five people who are party to an economic transaction – the buyer (B), the seller (S), the next best buyer (B’), the next best seller (S’) and the government (G).  If B = B’ and S = S’ you are starting to see the shadow of that beast economists are always talking about – an efficient market.

But what if they are different?  Picture you are B, and you are drowning in a lake and looking to buy a life-preserver from the shore, and I’m S, who will sell it to you for $50,000. If there isn’t a S’ who will do it for the dollar of time it takes to do it around (or if S’ is even more of a jerk than I am and will charge more), and if a government G will enforce the contract instead of voiding it, then you just bought yourself one hell of an expensive life-preserver.

The existence of the next available buyer and seller, even if they don’t buy or sell anything, has a huge impact on how the market functions and the subsequent distributional consequences.  There’s no economic inactivity, no outside the market, even if people aren’t actually buying and selling.  And that’s with generic transactions, not ones with informational dynamics like health care.

But that’s me.  What would a conservative judge make of this argument?  Luckily we have one who upheld Obamacare last November – Lawrence Silberman.  His opinion upholding Obamacare is worth your time.  He argues:

But to tell the truth, those limits are not apparent to us, either because the power to require the entry into commerce is symmetrical with the power to prohibit or condition commercial behavior, or because we have not yet perceived a qualitative limitation. That difficulty is troubling, but not fatal, not least because we are interpreting the scope of a long-established constitutional power, not recognizing a new constitutional right….

It certainly is an encroachment on individual liberty, but it is no more so than a command that restaurants or hotels are obliged to serve all customers regardless of race, that gravely ill individuals cannot use a substance their doctors described as the only effective palliative for excruciating pain, or that a farmer cannot grow enough wheat to support his own family.  The right to be free from federal regulation is not absolute, and yields to the imperative that Congress be free to forge national solutions to national problems, no matter how local–or seemingly passive–their individual origins.

It’s worth noting that when Citizens United came back as a 5-4 decision, the court went all out with an expansive ruling against campaign finance regulations, reworking the entirety of the legal framework, instead of a narrow interpretation relevant to the case at hand.  Will we see a similar move if the court comes back 5-4 against Obamacare?