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It's the Spending Clause, stupid!

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James Copland

In my estimation, the most significant part of yesterday's Obamacare ruling was not its handling of the individual mandate but its limitation on Congress's power to coerce states through federal funding--a holding that will become critical as the health-care law is implemented and in many other cases in the future.

To uphold the ACA's "individual mandate" and its private-insurance reforms, the Chief Justice somewhat brazenly rewrote a regulatory penalty as a tax - a reading his opinion itself admitted was not the most common-sense reading of the statutory language. The Chief's reading was hardly a model of statutory construction, but it was motivated by the conservative doctrine of "constitutional avoidance": the principle, first embraced by Chief Justice Marshall in the 1833 case Ex parte Randolph, that given the "delicacy" of the courts overturning the acts of coordinate branches (and the difficulty of amending the constitution), "a just respect for the legislature requires, that the obligation of its laws should not be unnecessarily and wantonly assailed" through the judiciary's application of the constitutional power of judicial review.

The Chief Justice was very likely motivated by institutional concerns, as outlined persuasively by Charles Krauthammer. As Krauthammer notes, as Chief Justice, Roberts wears "dual hats," and in his role as "custodian of the court" he is "acutely aware that the judiciary's arrogation of power has eroded the esteem in which it was once held." Krauthammer is right that most of this arrogation occurred during the liberal era of Earl Warren and William Brennan, but also that the Court's decision in Bush v. Gore to halt the recount in Florida in a presidential election--however necessary to avoid a constitutional crisis being engendered by an irresponsible Florida judiciary--substantially eroded the Court's public perception, particularly given that case's 5-4 ideological split. The president had already shown an unhealthy willingness to demagogue the Court over its Citizens United decision and had signaled an intention to do the same should the Court overturn his administration's signature legislative accomplishment on constitutional grounds. Roberts was almost certainly haunted by the specter of Schechter Poultry, in which the Court in 1935 overturned the National Industrial Recovery Act (a signature of Roosevelt's New Deal, however misguided), and proceeded to provoke a showdown with the president that culminated in FDR's threat to "pack the Court" with new appointees.

Thus, the Chief Justice turned to perhaps disingenuous statutory construction to uphold the law in question. In the process, however, he labored to lay out some conservative markers that set boundaries on Congressional power and signal that the federal government is not one of unlimited powers under the constitution. To be sure, the taxing power is broad, but as Ted Frank suggested, that was already the law of the land before yesterday. (As I noted in my instant reaction to the case over at NRO, "Congress already can and does penalize us for acting or not acting in hosts of areas, including such sacred realms as getting married or having children.") But Nadine Strossen is right (in her analysis if not its normative framing): when you look at this decision in terms of constitutional interpretation, rather than statutory construction, you see a Court sketching out definitive limits on the application of Congressional power through the Commerce Clause, Necessary and Proper Clause, and Spending Clause.

Indeed, like Jay Cost, I see echoes of Chief Justice Marshall in Roberts's gambit here. In Marbury v. Madison, Marshall gave Jefferson what he wanted (he refused to order that Jefferson issue mandates to the remaining Federalist judges appointed under the Judiciary Act of 1801) even as he laid down the principle of judicial review. That decision paved the way for Fletcher v. Peck--when the Court assumed the power of judicial review over states--as well as the Court's broader readings of the Commerce Clause (Gibbons v. Ogden) and Necessary and Proper Clause (McCullough v. Maryland) that were to come. While yesterday's rulings didn't get us all the way back to Gibbons and McCullough, they clearly insisted that there's an outer bound to what Congress can do under those grants of power.

More significant still is the Court's decision to place limits on Congress's ability to coerce states to act through conditional use of the federal spending power. The 1987 case South Dakota v. Dole left a gaping hole that ran through the 1990s federalism decisions that kept Congress from applying the Commerce Clause to non-economic activity (Lopez and Morrison), kept Congress from applying the Commerce Clause to create private rights of action against states (Seminole Tribe and Alden), and prohibited Congress from "commandeering" states to act according to federal dictate (New York and Printz): what's the functional point of prohibiting Congress from "commandeering the states" if they can effectively coerce/induce the states to conform to Congress's will through the virtually untrammeled grants of federal money? While Dole suggested that there was a theoretical limit to Congress's ability to influence states through the Spending Clause--in which "inducement" became "coercion"--neither the Supreme Court nor lower courts had ever found an occasion to do so.

Until yesterday. Richard Epstein noted the importance of the Spending Clause question, but most other analysts ignored it, as did the lower courts, in keeping with post-Dole jurisprudence. But if it's not "plainly coercive" to condition state receipt of Medicaid funds on state compliance with Congressional dictates--noting that Medicaid is second only to education spending in most state budgets--then when would it ever be? In the minds of Justices Ginsburg and Sotomayor, the answer is essentially never, but the real constitutional problem under the Spending Clause is laid bare by the fact that the conservatives on the Court were joined in this part of the case by Justice Kagan, President Obama's former solicitor general, and Justice Breyer, Senator Ted Kennedy's former staffer.

Yes, the Court permitted Congress to condition the Medicaid expansions on state compliance--thus making this holding an outer bound rather than a major check on Congressional influence over the states through the Spending Clause. But expect more litigation in the future. At a minimum, Congress will have to check itself when it invokes the Spending Clause.

And although Obamacare survives, the ability for states to opt out of the Medicaid provisions is the greatest prospect for reining in the statute's excesses if it isn't repealed. As my colleagues Avik Roy and Paul Howard noted in our panel discussion of the decision last night (around minute 33- of the videotaped program), there is the real prospect that some states could shift costs onto the federal government by opting out, so that even if most states won't do so (and they won't), the threat of exit could increase state bargaining power to negotiate waivers of some of the new law's most overreaching provisions.

At a minimum, through this decision, the Court holds onto the premise that the federal government (at least outside the taxing power) is one of limited, enumerated powers--and in the process reifies and amplifies its 1990s federalism decisions. From a constitutional law standpoint, there's something in there for conservatives to cheer.

To be sure, it's only the outer bounds that come into play in such constitutional judgments--because constitutional law is largely about boundary limits (which is why it's a bit odd that so many legal thinkers focus on it so obsessively--at the expense of the nitty-gritty questions of civil litigation, criminal prosecution, and corporate governance that we primarily concern ourselves with at the Center for Legal Policy, where real outcomes are at play). As Alex Bickel understood, in a democratic republic, elected majorities will ultimately get their way; and we're unlikely to see a return to the era in which the Progressive and New Deal courts turned back the tide of popular opinion. (We may or may not one day be able to get rid of Wickard v. Filburn, but we won't get rid of Helvering v. Davis or bring back Panama Refining v. Ryan and Schechter Poultry, and therein lie the heart of the welfare and regulatory state.) Elections matter--and that's where the fate of Obamacare will ultimately rest.

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