Judge Brett Kavanaugh’s Strange Political Prediction—And Other Recent ACA-Litigation Events

Well, as you all probably know by now, there have been two major developments in the courts within the last two weeks on the litigation challenging the constitutionality of the Patient Protection and Affordable Care Act (the ACA, a.k.a., “Obamacare). On November 8, a three-judge panel of the federal appeals court for Washington, D.C. issued its ruling in a case challenging the constitutionality of the so-called individual mandate requiring everyone who can afford healthcare insurance to purchase it, upon penalty of payment of a regulatory fee. That, of course, is the issue that has gotten almost all of the news media attention, thanks to loud Tea Party/Republican-pol/rightwing-talk-show-personalities cries that the mandate unconstitutionally violates individual liberty and therefore is beyond Congress’s authority under the Constitution’s Commerce Clause.

The Commerce Clause gives Congress the power to regulate interstate commerce and, under Supreme Court precedent, pretty much anything that affects interstate commerce. It is the “enumerated power” under which the ACA was enacted. As opposed to, say, the taxing “enumerated” power.

In several earlier AB posts, including one about the oral argument in late September in the appeal that was decided by last week’s ruling, I said that the right-wing’s conflation of the limits of Congress’s authority under the Commerce Clause and the separate issue of the Constitution’s various limitations on government power to infringe upon individual liberty, including in the Fifth Amendment’s Due Process Clause limiting the federal government’s powers to infringe upon individuals’ rights, is a sophism, as a matter of law and as a matter of logic. I also said that the Due Process argument is fatuous; the federal government clearly has the authority under the taxing power to compel the purchase of medical insurance or retirement savings, and does so for Medicare and Social Security, and a mandate under the Commerce power infringes no more on individual liberty than a mandate under the taxing power.

I made these points originally in an AB post in late June, a few days before Sixth Circuit Court of Appeals Judge Jeffrey Sutton, a highly-regarded conservative Reagan appointee prominent Federalist Society member who early in his career served for a year as a law clerk to Justice Scalia, eloquently deconstructed that conflation in his 2-1 majority opinion upholding the constitutionality of individual mandate. I reiterated the points in an AB post about the Sutton opinion (which I sillily titled “Judge Sutton Channels … Me??”). And I summarized them in a post in early October in which I discussed the oral argument in the appeal that was decided on November 8.

The Sixth Circuit opinion was the first appellate ruling on an ACA case. The dissenter in that opinion is not an appellate judge but instead a trial-level judge sitting on that appellate panel “by designation ” of that court’s chief judge via a statute that allows this, and whose dissenting opinion was breathtakingly lightweight.

In August, an Eleventh Circuit panel consisting of a Clinton appointee to the Court of Appeals who had been appointed as a trial-level judge by Reagan, another Clinton appointee, and a George H. W. Bush appointee, issued a 2-1 opinion ruling the individual-mandate provision unconstitutional but upholding the remainder of the ACA, saying that the remainder was “severable” from the individual-mandate provision—that is, that the remainder of the Act could stand on its own and that therefore the loss of the mandate provision did not dissolve the remainder of the statute. The opinion was written by the Reagan appointee, Joel Dubina and joined by Clinton appointee Frank Hull. Neither judge is considered a star legal analyst, and the opinion didn’t disappoint. It was a rote adoption of the the-individual-mandate-unconstitutionally-infringes-on-liberty-because-it-penalizes-inaction-and-therefore-Congress-exceded-its-Commerce-Clause-authority. The opinion doesn’t explain how a supposed unconstitutional infringement of liberty amounts to a per se exceeding of Congress’s Commerce power, the opinion doesn’t explain. Alchemy? The dissent by Judge Stanley Marcus is scathing. (More about this case below.)

The panel in the Washington, D.C. case, the one decided on November 8, like the panel in the Sixth Circuit case, was comprised of two conservative Republican appointees and a Democratic appointee. Both Republican appointees, Lawrence Silberman and Brett Kavanaugh, the latter a former law clerk for Judge Kennedy, are high-profile stalwart conservatives and both are intellectual leaders of the “movement” right, albeit from slightly different conservative-legal-movement eras. Silberman is a Reagan appointee, Kavanaugh a George W. Bush appointee. In any event, they are not just rightwing but also considered intelligent, if not necessarily by me.

In my post last month about the oral argument in that case, I wrote:

Sutton’s analysis exposes the constitutional challenges to the individual mandate for what they are: a series of ideological clichés masquerading as legal argument. As I wrote in AB shortly after the Sutton opinion was released, his analysis is so fine, so precise, that ultimately the Supreme Court’s opinion will echo it. So I was not among those who were surprised that the administration is pushing for a Supreme Court ruling on the constitutionality or the statute before the 2012 election. But all the judges thus far who have voted to invalidate the individual-mandate provision as unconstitutional are, in my opinion, intellectual lightweights, and so I’d wondered whether the Sutton analysis itself could be persuasively deconstructed by a judge or justice who is not.

The answer appears to be no. Last week, a panel of yet federal appellate court, this one the one for Washington, D.C., heard arguments in yet another case challenging the constitutionality of the mandate as beyond Congress’s Commerce-regulation authority because it infringes upon the liberty of individuals to remain self-insured, it requires the purchase of a “product” from a private party, and, well, um, the scope of the statute is really sweeping. I mean, what’s next, asked one of the two stalwart rightwing-intellectual-heavyweight members of the panel? Congress mandating the purchase of GM cars by the wealthy in order to prevent the collapse of that company during the next economic downturn, upon pain of payment of a penalty for failure to do so? (I hope so. Then, when David Koch has a heart attack in his Maserati and the ambulance attendants verify through the Secretary of State’s offices in his various home states that there is no GM car registered in his name, the attendants dump his gasping-for-breath body in the road, where he’s run over by a Cadillac SUV.)

I followed those paragraphs with this one:

A sigh of relief was in order—although I had to wait until I stopped smiling like a Cheshire cat. That judge, Brett Kavanaugh (a former law clerk to Justice Kennedy, circa 1993), reportedly commented earlier to the plaintiffs’ lawyer that maybe the courts shouldn’t interfere with what could be the beginning of the mass privatization of the social safety net. More likely, I think, it will prompt, finally, a single-payer healthcare-insurance system—Medicare for all—in order to cut out the spiraling costs of a private, multi-carrier, for-profit system whose premiums reflect, in part the investment losses of those private companies. But don’t tell Judge Kavanaugh until after that appeal is over.

Um, oops. Actually, it was Silberman, not Kavanaugh, who suggested that if the individual mandate in the ACA is constitutional, then a mandate requiring the purchase of a GM car might be, too. It was, however, Kavanaugh who predicted, mouth watering, that if the ACA’s mandate is upheld, it might usher in a mass privatization of the social safety net.

When the panel decided the case, it was Silberman who wrote the opinion—for himself and the Democratic appointee, liberal Clinton appointee Harry Edwards, upholding the individual mandate and echoing the basics of Judge Sutton’s opinion: that the Commerce Clause gives Congress the authority to regulate that which affects an interstate market, as the healthcare market clearly is; that the decision to not purchase healthcare insurance is not inactivity but instead clearly market activity because (unlike the proverbial decisions whether to purchase broccoli, or a GM vehicle) virtually everyone will need healthcare at some point, and will receive it whether or not the person is insured or can afford to pay the medical bills out-of-pocket; that the infringement-of-individual-liberty objection is not a Commerce Clause issue but instead a Due Process issue; and that the individual-mandate provision does not unconstitutionally infringe upon individual liberty.

Silberman’s opinion adopts Sutton’s reasoning in all respects. Most interesting, I think—partly, I guess, because by now I feel like I have a proprietary interest in it—is his conclusion that:

Appellants’ view that an individual cannot be subject to Commerce Clause regulation absent voluntary, affirmative acts that enter him or her into, or affect, the interstate market expresses a concern for individual liberty that seems more redolent of Due Process Clause arguments. But it has no foundation in the Commerce Clause.

Kavanaugh dissented. But not on “liberty” grounds. And not even on Commerce Clause grounds. Instead, he said a court ruling now is premature, for two reasons., one (he said) compelled by statute, the other (he said) in deference to “the bedrock principle of judicial restraint that courts avoid prematurely or unnecessarily deciding constitutional questions.”

“Unnecessarily” being the interesting part of this.

The statutory reason is his interpretation of a federal court-jurisdiction statute called the Anti-Injunction Act and of the legal nature of the mandate provision. The Anti-Injunction Act removes the “jurisdiction,” i.e., legal authority, of the courts to even consider the challenge to the individual-mandate provision and its penalty for failure to purchase insurance until after the effective date of that provision in 2014 and the penalty is assessed against someone who then sues for reimbursement, contesting the provision’s constitutionality. The issue depends on whether the penalty is a tax, since the Anti-Injunction Act applies only to taxes. In August, a panel of the Fourth Circuit Court of Appeals ruled, 2-1, that the mandate is a tax and that the Act therefore removed the courts’ jurisdiction to consider the constitutionality of the mandate provision until 2015, when the first penalties would be assessed by the I.R.S. Kavanaugh bought the argument; Silberman and Edwards didn’t.

The “unnecessarily” reason has subparts, but the main ones are that Congress may repeal the ACA, or parts of it, before the individual-mandate provision becomes effective, and, more to the point (or at least more to my point), that Congress may instead simply change the wording of the mandate provision slightly so that the penalty is clearly a tax. Which, he says, clearly would be constitutional.

He doesn’t say that it would be clearly within Congress’s taxing power. He says, flatly, that it would be clearly constitutional. He says, in other words, that the infringement on liberty does not itself violate the Constitution—whether the mandate is an exercise of Congress’s power to regulate interstate commerce or instead an exercise of Congress’s power to tax.

That Kavanaugh has an ideological ulterior motive which advertised at oral argument and reiterates with more elaboration in his dissenting opinion— his expectation that if the ACA’s mandate is upheld, it could herald an era of mass privatization of the social safety net, happily marrying tea party types and rightwing interests in having government create a market serving private business interests—does not matter. Nor does it matter that Kavanaugh is delusional—unless, of course, it really is likely that there is, say, a private-food-assistance lobby similar in number to the insurance-industry lobby that, like the insurance-industry lobby did in fighting single-payer healthcare insurance proposals (and even the so-called public option in a version of Obamacare) , will emerge like locusts to have Congress enact a law mandating that everyone who can afford to do so must purchase food stamps each year, redeemable when and if necessary. Or that the AARP will agitate for privatization of Social Security, maybe in order to prevent the government from funding massive otherwise-unfunded wars and massive tax cuts for the wealthy largely by tapping the ostensible Social Security trust fund.

No, what matters is that Kavanaugh said what he said, irrespective of his motive. Kavanaugh got it right. The individual-mandate provision does not violate the Constitution’s limitations on government infringement of individual liberty. And Sutton and Silberman, neither of whom appears to share Kavanaugh’s peculiar delusion and ulterior motive, but also neither of whom voted for Obama or any member of Congress who voted for his “care,” have enunciated so finely why this is so and why, also, the mandate provision is within Congress’s Commerce Clause authority, that a 5-4 Supreme Court ruling to the contrary would be a transparent act of ideology. It’s not, of course, that the majority doesn’t do this, regularly; they do. It’s that this time they would be eating not only Obama and Care, but also Kavanaugh, Sutton and Silberman.

The fat lady hasn’t sung yet on the constitutionality of the individual mandate, but I think it’s over nonetheless. When the Court decides that issue—and despite the out-of-right-field potential inherent in certain sort-of-breathtaking parts of the Court’s order last Monday agreeing to hear the Eleventh Circuit case—I think the Court will decide that issue, eventually, if not in that case.

For the specifics of that order, and a comprehensive discussion of the five parts to it and the possible implications of one of them, see Simon Lazarus and Dahlia Lithwick’s article in Slate, “The Medicaid Ambush: The Supreme Court's unexpected and astounding reasons for wanting to hear a challenge to Obamacare,” at http://www.slate.com/articles/news_and_politics/jurisprudence/2011/11/the_unexpected_and_astounding_arguments_the_supreme_court_will_hear_on_obamacare_.html.

If the Court rules the ACA unconstitutional because the majority thinks the ACA’s expansion-of-Medicaid provision violates the states’, um, constitutional right to the current federal statutory entitlement (Medicaid in its current form) in order to protect the popularity of the states’ legislators who would vote to forego Medicaid in order to avoid the requirements of Obamacare (see the Slate article), then of course the Court will never have to decide the constitutionality of the individual mandate. I don’t think it will buy the states’ hubristic claim; I think the Court simply wants to hear all challenges from all governments that are suing. This is a court with at least a few members who apparently think that any time a state or local government asks it to hear a case, it should hear the case. But it also is a court whose majority, in deciding cases, regularly privileges the states’ interests over the interests of the federal government and of individuals. Their ideology largely rejects the Fourteenth Amendment and the original Constitution’s Supremacy Clause. So, who knows?

As for what caused Silberman’s change of heart about whether the individual mandate unconstitutionally infringes upon the liberty of individuals to remain uninsured, I have two theories. One is that Kavanaugh read my AB post attributing to him Silberman’s oral argument comment equating the mandate with a theoretical mandate to purchase a GM car, and after explaining to Silberman the difference between the two and insisting that Silberman publicly clarify the distinction or make clear that he, not Kavanaugh, drew the analogy, lest a gasping-for-air David Koch be dumped by an ambulance attendant onto the street and run over by a Cadillac Escalade and that Kavanaugh be blamed, he persuaded Silberman to change his mind about the whole analogy. The other is that Silberman himself gave more thought to whether it would be such a bad thing after all for the government to mandate a GM car in every driveway. After all, that new Chevy Cruze is awfully cute and gets pretty good gas mileage.

The Plot Sickens – The Heart of the ACA Litigation Moves to the Supreme Court. Maybe.

Last week’s big political news concerning the PPACA (a.k.a. “Obamacare”) litigation was the administration’s decision to forego the option of asking the full membership of the Atlanta-based Eleventh Circuit Court of Appeals, the appellate for several southeastern states, to hear and reverse the mid-August opinion by two members of a three-judge panel of that court striking down the individual-mandate provision of the ACA as beyond the constitutionally permissible reach of the Commerce Clause, the “enumerated power” in the Constitution under which Congress enacted the statute.

This surprised some political pundits, but because anyone thought a majority of the members of that most conservative of regional federal appellate courts would disagree with the ruling—except possibly the part holding that the mandate provision was “severable” from the remainder of the Act and that therefore the Act remained intact except for the mandate provision. Instead, they thought that the Obama administration wanted (or, more accurate, should want) to delay a Supreme Court ruling on the constitutionality of the statute, especially the mandate provision, until after the election next fall. And if the full appellate court agreed to dissolve the panel’s opinion and hear the case—a long shot, in my opinion—this would do the trick.

At least, that is, if the Supreme Court denied or postponed consideration of the petition for Supreme Court review of a majority opinion of a three-judge panel of the Cincinnati-based Sixth Circuit Court of Appeals, the appeals court for Michigan, Ohio, Kentucky and Tennesee, in late June, written by conservative Bush appointee Jeffrey Sutton, upholding the constitutionality of the mandate provision. Sutton’s opinion meticulously and eloquently deconstructed the plaintiffs’ arguments—which are the same as those by the individual human plaintiffs in all the other cases challenging the constitutionality of the individual mandate. He famously explained: First, contrary to assertions, the real basis for the plaintiffs’ claim is not that Congress lacks the authority under the Commerce Clause to mandate that everyone who is financial able purchase healthcare insurance in order to help defray the inevitable costs of their own emergency medical care when need arises and care is sought, but rather that this mandate unconstitutionally infringes upon individual liberty to remain self-insured. And, second, the structure of the statutory mandate—that the individual obtain the insurance from a private carrier—no more infringes upon that individual liberty than would the imposition of a tax similar to the Medicare and Social Security tax laws, paid to the government for that purpose. If the claim is a constitutional right, a constitutional liberty interest, in remaining self-insured—and that is the claim—then the infringement on individual liberty comes not from the mandated purchase of the insurance from a private party but instead from the removal of the option to remain self-insured.

And any infringement on individual liberty doesn’t morph into an unconstitutional infringement on liberty simply because the enumerated power under which Congress enacted the statute was the power to regulate interstate commerce (the Commerce Clause) rather than the power to tax in order to provide for the general welfare (the Tax Clause). And constitutional authority conferred through the Commerce Clause doesn’t become un-conferred by the Commerce Clause just because the statute limits individual liberty. Conflating the two separate grounds, neither of which can stand on its own, doesn’t transform a constitutional statute into an unconstitutional one. No alchemy here.

Sutton’s analysis exposes the constitutional challenges to the individual mandate for what they are: a series of ideological clichés masquerading as legal argument. As I wrote in AB shortly after the Sutton opinion was released, his analysis is so fine, so precise, that ultimately the Supreme Court’s opinion will echo it. So I was not among those who were surprised that the administration is pushing for a Supreme Court ruling on the constitutionality or the statute before the 2012 election. But all the judges thus far who have voted to invalidate the individual-mandate provision as unconstitutional are, in my opinion, intellectual lightweights, and so I’d wondered whether the Sutton analysis itself could be persuasively deconstructed by a judge or justice who is not.

The answer appears to be no. Last week, a panel of yet federal appellate court, this one the one for Washington, D.C., heard arguments in yet another case challenging the constitutionality of the mandate as beyond Congress’s Commerce-regulation authority because it infringes upon the liberty of individuals to remain self-insured, it requires the purchase of a “product” from a private party, and, well, um, the scope of the statute is really sweeping. I mean, what’s next, asked one of the two stalwart rightwing-intellectual-heavyweight members of the panel? Congress mandating the purchase of GM cars by the wealthy in order to prevent the collapse of that company during the next economic downturn, upon pain of payment of a penalty for failure to do so? (I hope so. Then, when David Koch has a heart attack in his Maserati and the ambulance attendance verify through the Secretary of State’s offices in his various home states that there is no GM car registered in his name, the attendants dump his gasping-for-breath body in the road, where he’s run over by a Cadillac SUV.)

A sigh of relief was in order—although I had to wait until I stopped smiling like a Cheshire cat. That judge, Brett Kavanaugh (a former law clerk to Justice Kennedy, circa 1993), reportedly commented earlier to the plaintiffs’ lawyer that maybe the courts shouldn’t interfere with what could be the beginning of the mass privatization of the social safety net. More likely, I think, it will prompt, finally, a single-payer healthcare-insurance system—Medicare for all—in order to cut out the spiraling costs of a private, multi-carrier, for-profit system whose premiums reflect, in part the investment losses of those private companies. But don’t tell Judge Kavanaugh until after that appeal is over.

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Much as the administration and its many litigation opponents—which include 26 states, which are challenging another part of the statute—want a quick Supreme Court adjudication of the constitutionality of the statute, there is some possibility that the Supreme Court will hold that it lacks “subject-matter jurisdiction”—i.e., legal authority—to consider the challenges at least to the mandate provision until sometime in 2015, when the mandate provision becomes effective and the IRS collects the penalty. This is pretty esoteric procedural stuff, and it was the subject of an earlier AB post of mine last spring in which I said I thought that outcome in the Supreme Court was unlikely. But in early September a 2-1 majority of the Richmond, VA-based Fourth Circuit Court of Appeals, the appellate court for the Carolinas, West Virginia and a couple of mid-Atlantic states, along with Virginia, last month ruled exactly that. The issue concerns a federal “jurisdictional” statute called the Anti-Injunction Act (the AIA), and the Supreme Court’s interpretation of that statute in two opinions issued on the same day, concerning the current statute’s predecessor, in 1922.

Sutton and his two colleagues rejected the argument. And the dissenter in the Fourth Circuit case, Andre Davis, dismantled his colleagues’ analysis as absurd. I agree with Davis. But as law prof. Brad Joondeph, who writes a blog devoted entirely to the ACA litigation, and who is featured prominently in AB posts of mine from last June, wrote recently, the language of the AIA, and the Supreme Court’s earlier opinions interpreting it, may not matter here.

What might? If a majority of justices, for various reasons, want to punt on the issue of the constitutionality of the ACA until after—comfortably after—next year’s elections. I don’t think they will. But I’m probably wrong.

Texas, the jobs engine? Or Texas, the jobs-laundering engine?

An op-ed piece last weekend in the LA Times, called “Texas, the jobs engine?”, by Rick Wartzman, executive director of the Drucker Institute at Claremont Graduate University, begins:

For the last few weeks, I've been unable to get a startling statistic out of my head: Since the recession officially ended, Texas has created more than 4 of every 10 new jobs in America.

That's right, Texas: the reddest of red states, home to gun lovers and school textbooks that openly question whether the Founding Fathers intended for the separation of church and state. I am no ideologue. Still, whenever I get political, I tend to tilt reflexively to the left, making the jobs figure a bit disconcerting at first.

But there's no escaping it. The number is real. Which means that if you care about putting people back to work at a time when nearly 14 million in this country are unemployed, maybe Texas has something to teach us.

Wartzman goes on to say that according to the Dallas Fed, Texas, which he says accounts for about 8% of the nation’s economy, generated 43% of the net new jobs in the U.S. from June 2009 through May 2011. He then notes that aspects of Texas’s boom cannot be optionally replicated in other states. The booming energy industry and the high export demand for commodities such as beef and cotton.

He then cites some longstanding government policies—both conservative and liberal ones. Conservative: Low tax rates, the downside of which, he notes, is a smaller safety net, and “right-to-work” laws, resulting in Texas’s tying Mississippi as the states with the biggest percentage of workers paid at or below the minimum wage. Liberal: Strict lending guidelines enacted in the wake of the S&L crisis of the 1980s that require Texas financial institutions “to keep larger capital reserves and take on fewer problem mortgages than were seen elsewhere in the country,” and which spared the state from the real estate boom and bust that hit most of the rest of the country. And beginning 25 years ago, the state began significantly increasing its education funding and therefore the quality of its workforce.

Then the pay-off paragraph, so to speak:

At the same time — and this, of course, is the tough part for those on the left to swallow — it is clear that the state's limits on taxes, regulations and lawsuits are contributing to the job machine. "The most important thing I think that's happened to us is tort reform," Fisher, the Dallas Fed president, has said. He added that when John Deere and other companies have decided to hire in Texas, they've been largely driven by steps the state has taken to cap non-economic damages in medical malpractice suits and to make it harder to bring product liability and class-action cases.

Okay. Are these folks claiming that the companies that are hiring in Texas decided to hire because of Texas’s low tax rates and its “tort reform” law? Or are they saying that these companies needed to hire more workers, and chose to expand in Texas rather than in, say, California or Michigan or Ohio, because of Texas’s low taxes and tort reform?

Setting aside for a moment the fact that Texas’s tort laws have no effect on lawsuits for injuries from their products in other states—injured plaintiffs can sue in the state where they purchased and used the product and were injured by it, and it’s that state’s tort laws that apply—and that physicians apparently aren’t flooding the Texas landscape by moving there from other states, what these people actually are saying is that Texas , as the lowest-common-denominator state for pro-business laws, is attracting businesses from other states and is spurring hiring there that otherwise would occur in another state.

Fine. But if the issue regarding job losses and job growth is an aggregate one for the country as a whole, rather than which states lost the most jobs to lower-common-denominator states, then why praise Texas as a national jobs creator? It’s not, at least not as a result of its government policies. The claim to the contrary is like saying that South Dakota and North Carolina “created” all those credit-card-company jobs in recent decades, as if those jobs wouldn’t have been created, albeit disbursed more throughout the country, if those two states hadn’t enacted such credit-card-company-friendly laws.

So when Rick Perry rolls out his presidential primary campaign and starts lauding all those Texas job gains, remember to ask what states those jobs otherwise would be in were it not for Texas’s chamber-of-commerce legislature’s largesse of recent years. I’m sure y’all will.

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UPDATE- July 9: Merrill Goozner has a terrific in-depth deconstruction of the so-called Texas Miracle at TheFiscalTimes, at http://www.thefiscaltimes.com/Articles/2011/07/08/Perrys-Texas-Miracle-Less-Than-Meets-the-Eye.aspx?p=1. It was posted yesterday.

I Beg to Differ (in Part), Mr. Will

In 1994, Bill Clinton proposed increasing homeownership through a “partnership” between government and the private sector, principally orchestrated by Fannie Mae, a “government-sponsored enterprise” (GSE). It became a perfect specimen of what such “partnerships” (e.g., General Motors) usually involve: Profits are private, losses are socialized.
—“Burning Down the House,” George F. Will, Washington Post, today

Will’s column discusses a new book by Getchen Morgenson and housing-finance expert Joshua Rosner that Will says “will introduce you to James A. Johnson, an emblem of the administrative state that liberals admire.” Johnson, for those of you who (like me) don’t instantly recognize the name, headed Fannie Mae during (I guess; Will doesn’t specify the dates) the 1990s and early 2000s. He says the book details how Johnson and a few others, acting under the guise of compassion, used the government’s backing of Fannie and Freddie loans and the public policy of encouraging homeownership, to hugely enrich themselves.

Will writes:

Morgenson and Rosner report that in 1998, when Fannie Mae’s lending hit $1 trillion, its top officials began manipulating the company’s results to generate bonuses for themselves. That year Johnson’s $1.9 million bonus brought his compensation to $21 million. In nine years, Johnson received $100 million.

Fannie Mae’s political machine dispensed campaign contributions, gave jobs to friends and relatives of legislators, hired armies of lobbyists (even paying lobbyists not to lobby against it), paid academics who wrote papers validating the homeownership mania, and spread “charitable” contributions to housing advocates across the congressional map.

But he also suggests, if I understand correctly, that it was Johnson and the other Fannie and Freddie folks,rather than the Wall Street crowd, who instituted the concept of securitized mortgages in their recent, destructive form,* and credit default swaps—and (inferentially) then caused European banks to spur, say, the Irish housing bubble, which, last I heard, was not funded in any part by Fannie and Freddie. And he wrote the quote that opens this post, in which he claims that the government’s bailout—loans, most of which have been repaid—to GM and Chrysler have resulted in merely private profits. Unlike, y’know, the very substantial tax breaks given to oil companies.

The estimates about the number of jobs saved by those bailouts ranges from about 500,000 to (ultimately; i.e., indirectly) 1.5 million. Will is saying, in other words, that the federal government has no legitimate business involving itself so directly in the preservation of, or for that matter, the creation of jobs, because, after all, job preservation and job creation are private, not public, financial gains. The proposition is preposterous and relies upon the sleight of hand that only company and shareholder profits count as “profits”—a conceit that is likely to be seen for what it is, in places like Michigan, Indiana and Ohio. Assuming, of course, that Will is read in such places, or that some other wingnut picks up the argument and runs (literally, may) be with it there.

(Please, please, Paul Krugman. Respond to Will’s bizarre claim. You’re the only one who could do this and who has a wide enough readership for it to matter. We both know that no response to this type of canard will be forthcoming from the White House. Ever. Okay, well, at least until 2017.)

Two or three weeks ago, Newsweek ran a lengthy article by Bill Clinton listing 14 proposals for job creation. (Oh, for the days when the Democrat in the White House had some actual ideas, some energy, and the willingness—the eagerness, in fact!—to discuss his policy proposals, in detail and concertedly, with the public.) One of them concerned one of the Obama administrations (very) few policy ideas: Substantial tax credits and outright loans to green-tech startups, which resulted in an increase in America’s share of worldwide production of batteries for battery-powered cars from 2% to 20% before our dear leader quietly—why raise this issue publicly during negotiations when it’s just so much easier to simply give the Republicans what they want—caved, er, negotiated away this law during last December’s budget white-flag waving, er, compromise. Clinton, of course, suggests that this program should be brought back, immediately, and expanded to other types of industries.

Won’t happen, of course. Well, maybe in 2017.

As for Johnson and his ilk, hopefully there’s still time, statute-of-limitations-wise, to prosecute these folks. And hopefully, the Morgenson and Rosner book will cause enough pressure for that to happen. And I agree with Will completely that one of the most despicable aspects of what happened with Fannie and Freddie was the fraudulent claim of compassion. Wonder, though, whether Will would agree with me that the Repubs’ genuine compassion for, say, oil company execs and shareholders is just as unseemly, in its own way. Nah.

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*That sentence was amended on July 4 to add “in their recent, destructive form”, in light of comments to my identical post on Angry Bear indicating that mortgage-backed securities were conceived apparently all the way back in 1968 or so.

Judge Sutton Channels … Me??

Sixth, the anti-commandeering principle of the Tenth Amendment adds nothing new to this case. True, the Tenth Amendment reserves those powers not delegated to the National Government “to the States” and “to the people.” True also, a critical guarantee of individual liberty is structural and judicially enforceable—preserving a horizontal separation of powers among the branches of the National Government, INS v. Chadha, 462 U.S. 919, 957–58 (1983), and a vertical separation of powers between the National Government and the States, New York, 505 U.S. at 181. Odd though it may seem in light of American history, States’ rights sometimes are individual rights. See Bond v. United States, 564 U.S. __, No. 09-1227, slip op. at 9 (June 16, 2011). Doubt it? Go to any federal prison in the country to see how a broad conception of the commerce power has affected individual liberty through the passage of federal gun-possession and drug possession laws and sentencing mandates.

But to the extent plaintiffs mean to argue that the Tenth Amendment contains its own anti-commandeering principle applicable to individuals and to all of Congress’s enumerated powers, that is hard to square with the taxing power, which regularly commandeers individuals—in equally coercive ways—to spend money on things they may not need and to support policies they do not like. And to the extent plaintiffs mean to argue that such a principle captures (or reinstates) limitations on the meaning of “proper[ly]” “regulat[ing]” interstate “commerce,” that takes us back to the points already made about Congress’s delegated power in this area.

* * *

That brings me to the lingering intuition—shared by most Americans, I suspect—that Congress should not be able to compel citizens to buy products they do not want. If Congress can require Americans to buy medical insurance today, what of tomorrow? Could it compel individuals to buy health care itself in the form of an annual check-up or for that matter a health-club membership? Could it require computer companies to sell medical-insurance policies in the open market in order to widen the asset pool available to pay insurance claims? And if Congress can do this in the healthcare field, what of other fields of commerce and other products?

These are good questions, but there are some answers. In most respects, a mandate to purchase health insurance does not parallel these other settings or markets. Regulating how citizens pay for what they already receive (health care), never quite know when they will need, and in the case of severe illnesses or emergencies generally will not be able to afford, has few (if any) parallels in modern life. Not every intrusive law is an unconstitutionally intrusive law. And even the most powerful intuition about the meaning of the Constitution must be matched with a textual and enforceable theory of constitutional limits, and the activity/inactivity dichotomy does not work with respect to health insurance in many settings, if any of them.

The very force of the intuition also helps to undo it, as one is left to wonder why the Commerce Clause does the work of establishing this limitation. Few doubt that Congress could pass an equally coercive law under its taxing power by imposing a healthcare tax on everyone and freeing them from the tax if they purchased health insurance. If Congress may engage in the same type of compelling/conscripting/commandeering of individuals to buy products under the taxing power, is it not strange that only the broadest of congressional powers carves out a limit on this same type of regulation?

Why construe the Constitution, moreover, to place this limitation—that citizens cannot be forced to buy insurance, vegetables, cars and so on—solely in a grant of power to Congress, as opposed to due process limitations on power with respect to all American legislative bodies? Few doubt that the States may require individuals to buy medical insurance, and indeed at least two of them have. See Mass. Gen. Laws 111M § 2; N.J. Stat. Ann. § 26:15-2. The same goes for a related and familiar mandate of the States—that most adults must purchase car insurance. Yet no court has invalidated these kinds of mandates under the Due Process Clause or any other liberty-based guarantee of the Constitution. That means one of two things: either compelled purchases of medical insurance are different from compelled purchases of other goods and services, or the States, even under plaintiffs’ theory of the case, may compel purchases of insurance, vegetables, cars and so on. Sometimes an intuition is just an intuition.
—Sixth Circuit Court of Appeals Judge Jeffrey Sutton, in Thomas More Law Center v. Obama, June 29

Not to pat myself on the back, or anything—OK, yeah, I’m patting myself on the back, or something—but my last two or three posts here turned out to be spot-on. Which sort of surprises me, since I just analyze this stuff as a hobby. It’s gratifying.

But even more gratifying—and, I think, even more important than the rest of that excerpt—is the deconstruction of the claim by the far-right liberty-means-states-rights crowd, led these days by Ginni and Clarence Thomas, about the meaning of the term “liberty,” a word those folks have co-opted as their logo (have they copyrighted it yet?). They treat “liberty” largely not as an end—actual freedom—but instead as a means, as a process. According to them, so that, what matters is not the (literal) loss of, or the restriction of, liberty but rather whether it is the federal government or instead a state or local government that is limiting the freedom. With a few carefully selected exceptions, such as gun-ownership rights, all economic rights (especially property rights), and the free exercise of religion, states are, in their view, entitled to limit individuals’ freedom (or freedoms) at will—all in the name of “liberty.”

Sutton was a leading light in the conservative legal movement in the ‘90s. He served as a law clerk to Scalia for a year in the early ‘90s, and was an active member of the rightwing Federalist Society. Bush appointed him to the appellate bench in 2003. But as a judge, he’s played more the role of a skilled legal analyst and actual judge rather than a robot ideologue like, say, Samuel Alito. It was clear from the reports I read about the oral argument in the ACA case on June 1 that he was the swing vote on that panel.

I dearly hope that his opinion will spark, finally, a serious questioning by at least one or two of the federalist/state’s-rights ideologues on the Supreme Court of the logic of their states-have-the-right-to-trample-individual-rights-and-freedoms-in-the-name-of-liberty mantra.

As for the ultimate effect of his opinion on the outcome of the ACA litigation in the Supreme Court, I think that the fineness—the precision and logic—of the opinion will make it harder, as a practical matter, for a majority of justices to disagree with or ignore it.

Postscript regarding Paul Clement

In his May 8 article about Wednesday’s oral argument in the 11th Circuit in the ACA case in which Paul Clement is representing 26 states in challenging the constitutionality of the statute, New York Times reporter Kevin Sack wrote that those states are paying Clement $250,000 to handle the appeal in that court and eventually in the Supreme Court.

That’s a stunning amount, even though the amount each state will pay is relatively small. These are two appeals in a single case that involves, entirely, arguments of law. There is no trial transcript, nor trial-court orders on motions, nor volumes of business records—the things that usually raise appellate legal fees to astronomical heights. And the legal arguments are the standard ones being discussed ad nauseam in legal circles. Clement’s hourly fee on this will turn out to be something close to $1,000, I’d bet.

Maybe lines like, “It boils down to the question of whether the federal government can compel people into commerce to better regulate the individual,” as he told the panel on Wednesday, makes this guy worth his price. But if so, it’s only because the judges will assume that since he’s Paul Clement rather than, say, another lawyer, that line makes sense.

Ah! It’s not about regulating markets, after all! It’s about regulating the individual!

ATLANTA — In perhaps the weightiest of the dozens of challenges to the Obama health care law, a panel of appellate judges grappled Wednesday with the essential quandary of the case: if the federal government can require Americans to buy medical insurance, what constitutional limit would prevent it from mandating all manner of purchases and activities?
—Kevin Sack, New York Times, Jun. 8

In my last post, “Markets and the ACA: Why the Supreme Court Will Uphold the ACA,” I wrote:

[Santa Clara law prof. and ACA-litigation blogger Brad Joondeph is] right (see my post below), but only if, as he says earlier, the market for health insurance is defined so narrowly that health insurance is viewed as a commodity, a product, independent of the product’s purpose and effect. And then, the constitutional issue would not, I think, be whether Congress has the authority under the Commerce Clause, aided by the Necessary and Proper Clause, to regulate the health insurance market, but instead whether this violates some other constitutional limitation. You know: the slippery-slope-to-government-compelled-consumption-of-broccoli argument.

Turns out I was onto something. From reports I’ve read about the oral argument on Wednesday, it looks to me like that appellate panel will decide the case not on the basis of the limits of the Commerce Clause but instead on a more general civil liberties ground. They may cloak it as a Commerce Clause issue—and certainly that is what Paul Clement, the attorney representing the 26 states wants the court to do—but, really, given the questioning and comments from the swing judge on that appellate panel, and therefore the basis on which that panel will decide the case, this would be an improper conflation of Commerce Clause issues and what is known as “substantive due process” issues. And I think, ultimately, it is the substantive due process question on which the Supreme Court will decide the case. This is so even though conservative legal types detest the very concept of substantive due process.

Substantive due process is a doctrine of constitutional law that holds that there are limits, inherent within the Constitution, to the extent to which the government can interfere with basic personal choices, irrespective of how much procedural due process that individual is accorded. It’s a concept completely independent of procedural due process—the right to due process of law before the courts can strip you of life, liberty or property.

Procedural due process is all about the limits of what courts can do. Substantive due process, by contrast, is almost always about the limits of what a legislature can do. The doctrine holds that there are some personal choices that are inviolate under the Constitution. It is the much-ridiculed-by-rightwingers legal principal on which Roe v. Wade was based. Roe v. Wade, for its part, was based on a 1965 Supreme Court case called Giswold v. Connecticut, which created the substantive-due-process right of individuals to make deeply personal decisions for themselves and struck down as an unconstitutional violation of that privacy right a state statute that prohibited the use of contraceptives. And it is the principal on which in an eloquent 2003 opinion, Lawrence v. Texas, by Justice Kennedy, the Court struck down Texas’s anti-sodomy criminal statute.

Rehnquist, Scalia and Thomas dissented in Lawrence on the ground that, in their view, there is no such substantive-due-process right—no privacy right concerning intimate personal decisions—in the Constitution. Scalia and Thomas might change their minds, though, but only about the intimate decision not to buy health insurance, especially because that right is just too similar to the intimate right not to eat broccoli.

The 11th Circuit panel members are Joel Dubina, a conservative Reagan appointee to the district (trial-court level) court and a G.H.W. Bush appointee to the appellate court, whose daughter is a freshman Alabama congresswoman who campaigned on a promise to try to repeal the ACA; Frank (female, despite her name) Hull, a moderate Clinton appointee; and Stanley Marcus, a moderate-to-conservative G.H.W. Bush appointee to the district court and Clinton appointee to the appellate court.

According to one report I read, Marcus early in the hearing said he viewed the central issue in the case—the constitutionality of the individual-mandate provision—as less a Commerce Clause issue than a civil liberties issue: Does the mandate violate the civil liberties of individuals by requiring them to obtain healthcare insurance? That’s a different question, and a broader one, I think, then whether Congress has the authority under the Commerce Clause, aided by the Necessary and Proper Clause, to mandate the purchase of healthcare insurance by those who can afford to buy it. Congress may have that authority under the Commerce Clause, but the legislation still might be unconstitutional if it violates another provision of the Constitution, here presumably the substantive due process right to be compelled to buy something. Presumably, because no one, least of all Clement, used the term “substantive due process right”. But he sure the words “compel,” “liberty” and “individual.” Early and quite often:

“The Commerce Clause only gives Congress the power to regulate, not to compel.” …

“It boils down to the question of whether the federal government can compel people into commerce to better regulate the individual.” …

“In 220 years, Congress never saw fit to use this power, to compel a person to engage in commerce.” …

“The whole reason we do this is to protect individual liberty.” …

When Hull said she believed the decision not to buy insurance involved some “economic activity” that impacts the healthcare market (and that therefore, under the Supreme Court’s interpretation of Commerce Clause powers, Congress has the authority under the Commerce Clause, coupled with the Necessary and Proper Clause, to regulate), Clement reportedly responded that, despite this, Congress has no constitutional authority to force people to act to buy coverage.

Clement attempts to thread a needle.

In 2005, in Gonzales v. Raich, the Court held that under the Commerce Clause, aided by the Necessary and Proper Clause, Congress has the power to prohibit an individual from growing marihuana, not for sale, much less for sale in interstate commerce but instead for his personal use, because this effects the interstate market for marijuana. Only O’Connor and Thomas dissented. The challengers to the constitutionality of the ACA’s individual-mandate provision have focused on the “compel” part; sure, the Congress can prohibit activity something under the Commerce Clause, but it can’t compel activity under the Commerce Clause. But once you acknowledge that the failure to obtain health insurance impacts the interstate market for healthcare by directly impacting who pays the uninsureds’ emergency medical costs, you’ve pretty much conceded—logically, at least—that the Commerce Clause, assisted by the Necessary and Proper Clause, allows Congress to regulate this, irrespective of whether it does this by compelling the purchase of insurance or instead in some other way.

This is true whether the acknowledger is the lawyer for the challengers to the constitutionality of the law or instead the judges hearing the case.

All three of the judges on that panel acknowledged the obvious: that the failure to obtain health insurance impacts the interstate market for healthcare by directly impacting who pays the uninsureds’ emergency medical costs. And Clement didn’t deny it. So much for, “It boils down to the question of whether the federal government can compel people into commerce to better regulate the individual.” It boils down to that only if the federal government isn’t compelling people into commerce also to better regulate the healthcare-coverage market. Most laws, federal as well as state and local ones—including the federal one at issue in Raich—regulate the individual. Whether they better regulate the individual or not.

Clement understands this, of course, but also recognizes the need for a straw to grasp at other than the Commerce Clause one. Thus the civil liberties straw, which the judges themselves offered the statute’s challengers even before Clement (who argued after the federal government’s lawyer, acting solicitor general Neal Katyal, did) began his argument:

Marcus: “If they could compel this, what purchase could they not compel?” …

Dubina: “I can't find any case like this. If we uphold this, are there any limits [on the power of the federal government]? …

Marcus: "I can't find any case [in which the courts upheld the constitutionality of] telling a private person they are compelled to purchase a product in the open market.... Is there anything that suggests Congress can do this?"

Well, no, not precisely. But there are Supreme Court cases that upheld what, for civil liberties purposes, amounts to the same thing. They’re the cases that upheld the constitutionality of the Social Security Act and the Medicare Act by allowing the government to compel contributions to these separate funds, which are not part of the general tax revenue fund (OK, in theory, anyway), for the sole purpose of insuring a retirement income and health insurance for those over age 65. True, the specific “enumerated” Constitutional authority Congress used to enact those laws was the taxing power, not the commerce-regulation power. But that matters only if the commerce-regulation power isn’t broad enough to reach this. If it is—and under Supreme Court precedent, it is, if the failure to have health insurance significantly impacts the healthcare market, which it does—then this distinction is without a difference. You know. A meaningful (or as lawyers say, a material) difference.

In questioning Katyal, the judges were asking for a so-called “limiting principle,” a logical line beyond which federal regulatory authority cannot go. But if the issue is individual liberty, is it really logical to have that line depend on whether the compelled payment is for a product in the open market rather than for a similar product issued by the government? Isn’t the civil liberties issue really what the goal and effect are? That’s certainly the issue in most civil-liberties challenge to the constitutionality of a statute. Why isn’t it, here?

Blowing away the smokescreen erected by the focus on the individual-mandate provision’s use of private insurance—and isn’t it just a smokescreen, really?—why does this infringe on liberty more than the Social Security and Medicare taxes do?

The bottom line, in my opinion, is that the Commerce Clause gives Congress the power to regulate, including the power to compel, without infringing on civil liberties, if what Congress is compelling is what it could compel through its taxing power, without infringing on civil liberties. Congress couldn’t (to use the conservatives’ preferred example) compel Americans, via the tax code, to eat broccoli. Or to buy it. That pretty clearly would violate substantive due process rights, a.k.a. individual liberty rights, even if under the taxing power Congress otherwise would have that authority. But Congress could, for example, extend Medicare to all Americans and amend the Medicare tax law to pay for it, without violating the Constitution’s individual-liberty guarantees.

That’s the limiting principle. At least it should be.