Posted by: captainfalcon | August 4, 2011

New Ideas and Dead Horse Whipping (the regulate/create distinction)

Here is a set of SCOTUSblog posts by friends and critics of Obamacare. Most rehash the same old ground, but two developments.

1. Abbe Gluck and Gillian Metzger go beyond (a) in their description of how the health insurance market works, and (b) in flagging severability as an under-analyzed issue. For those who just like new infos, I strongly recommend reading this, certainly more than I recommend reading the remainder of my post.

2. Robert Levy adumbrates a new line of attack on Obamacare:

The Commerce Power is expansive. But PPACA’s mandate stretches beyond dictating how a product may be produced, distributed, exchanged, or consumed. The mandate actually compels that a transaction occur – the purchase of health insurance, which cannot legally be acquired across state lines.  Neither an act nor an interstate market exists to be regulated.  Essentially, the PPACA mandate is regulatory bootstrapping. Congress forces someone to engage in commerce so it can regulate the activity under the Commerce Clause. (Emphasis added.)

I think this goes beyond what has become the standard “activity/inactivity” objection to Obamacare’s constitutionality. Typically, the objection is that Obamacare requires people to affirmatively purchase something, and glosses this as the requirement that they go from a state of economic inactivity into a state of economic activity. But, the objection continues, the Commerce Clause has consistently been read to permit regulation only of those who are already engaged in economic activity [buying, selling, producing] – it has never been read to authorize requiring those who aren’t engaged in economic activity to start engaging. [Friends of Obamacare are quick to point out that the doctrinal claim is simply incorrect.]

Levy’s objection, on the other hand, turns on a novel “regulate/create” distinction. It observes that Obamacare makes a market to regulate instead of regulating a preexisting interstate health insurance market. (Unimportantly for the purposes of regulate/create, it also requires people to start engaging in economic activity in the course of creating an interstate health insurance market.) But creating an interstate health insurance market does not amount to regulating one (logically – the argument might run – something can be regulated only if it already exists). Thus, Obamacare (but not specifically the Individual Mandate) goes beyond Congress’s power to regulate interstate commerce.

Regulate/create is an improvement on activity/inactivity because its proponents can freely admit – what the case law plainly supports – that Congress has plenary authority to regulate interstate markets, and the plenary in that authority means it extends to regulating any conduct that is essential to the broader economic regulatory scheme. But, they say, Congress has no authority to create an interstate market, that’s what the part of Obamacare that comprehends the Individual Mandate does, so that part is unconstitutional.

That said, regulate/create is still ill-conceived. It cuts from whole-cloth an equation of regulate commerce and regulate discrete, pre-existing markets within the economy. But there is no reason to decline to characterize Obamacare as regulating the health sector of the economy – health commerce – and thus as falling within the Commerce Power.

Further, it is ironic that a libertarian is advocating regulate/create. After all, the reason no market in interstate health insurance exists is that Congress has heretofore forbid the transactions that would give rise to one. It is creating the market by removing barriers that it erected in the first place! Simultaneously, it is regulating market-risk and promoting market-participation* by the (essential) means of mandating the purchase of health insurance. (In other words, regulate/create disallows what a lover of the free market would like (massive deregulation) and only allows what a libertarian loathes (regulation). It thus seems downright spiteful: We’d rather there be no market than that Congress regulate one!)

The response, I’d assume, is to deny my bifurcated characterization of what Congress is doing, and instead insist that Congress is “creating a market” in the sense that the market Obamacare brings into existence behaves differently – is a different market – from the market that would come into being if Congress only removed legal barriers. The market that would come into being if Congress only removed legal barriers, it might be continued, is not a market created by Congress, but one created by private individuals organizing their own affairs. That market could then be regulated by Congress (presumably into the one that Obamacare creates), but only after private, voluntary transactions have created it.

At this juncture it seems best to ask what’s the point? Even if we accept the false equivalence between regulate commerce and regulate pre-existing markets, why should we require a market to come into existence spontaneously first and then get regulated into the shape it would have been had Congress “created” it. The point of the Commerce Clause is to enable Congress to solve commercial problems (including problems within markets). Why should it have to wait for the problem to manifest first instead of acting preemptively to prevent it? [The rejoinder – that Congress cannot be trusted with the powers vested in it – is at the heart of the attack on Obamacare, but it is not a legitimate move within our constitutional system.]

* Charles Fried’s post on SCOTUSblog points out that language in Wickard v. Filburn seems to authorize the promotion of market participation.

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Responses

  1. […] the police power,[1] which the framers reserved to the States.” [p. 11]. (It is a feather in Bob Levy’s prescience-cap that Clement plumps for this distinction between compelling the creation of markets and regulating […]


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