Magazine | July 30, 2012, Issue

The Line That Held

(Darren Gygi)
Why the Commerce Clause ruling matters

The Supreme Court’s ruling in NFIB v. Sebelius was disheartening, especially after overturning the mandate seemed within reach. But despair is unwarranted. The negative consequences of the ruling for constitutional law are actually quite limited, and there is much in it upon which to build.

The constitutional battle was largely a defensive one. The primary challenge to the individual mandate was an effort to prevent further expansion of Congress’s already-inflated authority under the Commerce Clause. From the New Deal to 1995, Congress exercised its commerce power without meaningful restraint. Only during the later years of the Rehnquist Court did the justices finally say “Enough,” in United States v. Lopez (1995) and Morrison v. United States (2000). Yet even these decisions did not prevent the Court from upholding the federal government’s authority to prohibit simple possession of medical marijuana apart from commercial activity, in Gonzales v. Raich (2005).

With the individual mandate, Congress tried to stretch beyond its well-established authority to regulate “commerce,” or even commercial “activity,” and control an individual’s decision to abstain from commerce or commercial activity. Prior Commerce Clause cases had hinged on whether Congress had the authority to regulate a given “class of activity,” such as growing wheat (yes) or possessing a gun near a school (no). But regulating inactivity was something Congress had never done before.

Since a mandate to make purchases from a private company was unprecedented, the case did not require the Court to revisit its earlier Commerce Clause decisions. The challenge was a rear-guard action, not a frontal assault on existing doctrine. Nevertheless, the stakes were high. The federal government’s theory of the Commerce Clause, if adopted by the Court, would have dealt a serious new blow to the principle that the federal government has limited and enumerated powers. In ruling that the mandate was unconstitutional, the Eleventh Circuit had concluded that the government’s Commerce Clause theory would “obliterat[e] the boundaries inherent in the system of enumerated congressional powers.” A majority of the Supreme Court endorsed this view. Chief Justice Roberts wrote that the government’s position “would open a new and potentially vast domain to congressional authority,” warning that it would “fundamentally chang[e] the relation between the citizen and the Federal Government.”

The conservative dissenters agreed with the chief justice on this point, observing that the Commerce Clause justification for the mandate “threatens [our constitutional order] because it gives such an expansive meaning to the Commerce Clause that all private conduct (including failure to act) becomes subject to federal control, effectively destroying the Constitution’s division of governmental powers.”

A majority of the Court also rejected the claim that the Necessary and Proper Clause could be used to accomplish what the commerce power alone could not. The Constitution vests Congress with the power “to make all Laws which shall be necessary and proper for carrying into Execution” its other powers, such as the power to regulate interstate commerce. The government argued that the mandate was necessary to offset the effects of the law’s other insurance reforms, but neither the chief justice nor the conservative dissenters could accept this view.

Some now worry that the majority opinion closed one door only to open another — that, in upholding the mandate’s penalty as a tax, Chief Justice Roberts provided Congress with a new and equally dangerous power. But Roberts did not identify a previously undiscovered power; rather, he shoehorned the mandate into a power Congress already had. Although the mandate was not drafted as a tax, he argued, it functions as one. Congress already imposes higher taxes on those who fail to act as the government wants, largely by granting credits and deductions to those who act as desired. For example, Americans pay more in taxes if they don’t pay mortgage interest or give to charity.

#page#But don’t take just our word for it. If Roberts’s opinion had recognized a new federal power, the conservative dissenters would have pointed this out. But they didn’t, and their silence on this point is deafening. The dissenters were unconvinced that the particular mandate Congress enacted constituted a tax, but they didn’t deny that a mandate of this sort could be structured in such a way as to fall within Congress’s power to tax: “The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so.”

The dissenters recognized that Congress could have employed any number of means to achieve its regulatory goal of reducing insurance premiums and helping insurers remain in business: “For instance, those who did not purchase insurance could be subjected to a surcharge when they do enter the health insurance system. Or they could be denied afull income tax credit given to those who do purchase the insurance.” A “surcharge” is of course a polite term for a tax. We agree with the dissenters that, in enacting Obamacare, Congress did not actually avail itself of its broad authority to tax, and we believe it should be forced to exercise the tax power openly and directly.

More significant than Roberts’s resort to the tax power was the Court’s embrace of justiciable limits on Congress’s so-called spending power — that is, its ability to impose conditions on the receipt of federal funds. In striking down Congress’s attempt to coerce states to accept a dramatic expansion of Medicaid, the Court restrained the spending power for the first time in over 60 years. In South Dakota v. Dole (1987), the Court had articulated limits on the conditions Congress could place on a state’s receipt of federal funds, but then failed to enforce them, and only one federal appellate court had ever found these limits meaningful. In NFIB v. Sebelius, however, seven justices rejected the notion that Congress has free rein to impose conditions on federal funds. Given how often Congress seeks to use the spending power, the Court’s decision may open a new front in the war to reinvigorate constitutional federalism, and occasion a reexamination of statutes from No Child Left Behind to the Clean Air Act.

As the dust settles, we may begin to see that the legal consequences of the Court’s decision are both more limited and more significant than they may have first appeared. The power to tax is strong, but nothing in the Court’s opinion fundamentally expands its inherent dangers. The Commerce Clause has been stretched beyond anything that the Founders would recognize, but this was not the case to snap it back into shape. It was, however, a case in which to hold the line, and the line was held. And finally, the Court’s spending-power holding creates important new opportunities for challenging federal encroachments.

The post–New Deal remnants of our original constitutional order were very much at stake in this case, and although the mandate survived, at least for today those remnants still remain.

– Mr. Adler, an NRO contributing editor, is the Johan Verheij Memorial Professor and director of the Center for Business Law and Regulation at the Case Western Reserve University School of Law. Mr. Stewart is an attorney and a co-author of the Heritage Foundation’s legal memo “Why the Personal Mandate to Buy Health Insurance Is Unprecedented and Unconstitutional.”

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