‘Obamacare’: A tax that’s good for you

New Haven, CT – The US Supreme Court on Thursday handed down its long-awaited ruling on the Affordable Care Act of 2010, otherwise known as “Obamacare”. To say that it was a stunning announcement understates the degree to which most in the US were expecting the court to strike down the law. But in a dramatic reversal, Chief Justice John Roberts – who was nominated to the bench by President George W Bush and typically sides with the court’s conservative wing – joined the liberals in upholding all of the law, including the controversial “individual mandate”.

The political and legal ramifications of the decision are still being parsed, but in real-world terms, this means that health insurance in the United States will become cheaper over the next decade, and therefore more accessible to those who most need it. The law allows children up the age of 26 to be covered under a parent’s plan; it prevents insurance companies from discriminating against the sick by denying coverage based on so-called pre-existing conditions; it bars companies from charging more for women’s services than for men’s; and it closes a loophole so that senior citizens are able to get prescription drugs more cheaply. Most importantly, it deepens the insurance pool to include as many as 30 million US citizens, drastically lowering the cost of health care, a cost that has outpaced – by double digits – the rate of inflation for more than a decade.

High stakes

President Barack Obama bet his presidency on the constitutionality of the law – this is not hyperbole – and his bid for a second term could have splintered in many wild, unpredictable and destructive directions if the court had struck it down in part or in total. Indeed, Republicans are now using the ruling to renew calls for the law’s repeal, and presidential challenger Mitt Romney is using repeal as a campaign slogan. But in receiving the news, the president and his staff were reportedly dancing at the White House. After the ruling, Obama told TV cameras:

The court “reaffirmed a fundamental principle – that here in America, in the wealthiest nation on earth – no illness or accident should lead to any family’s fundamental ruin.”

Of all the provisions in the law, most were focused on the “individual mandate”, a device first conceived by Republicans and the conservative Heritage Foundation in the 1980s as a means of lowering the cost of health care while maintaining insurance as free enterprise and avoiding the “socialised medicine” that is preferred in Europe.

The Commerce Clause

Central to the court’s decision was its interpretation of the mandate vis-à-vis “the Commerce Clause”, which is the clause in the US constitution that empowers Congress to regulate interstate trade. Congress only has the power to regulate between states. Otherwise, that power, according to the constitution, is left to the states. Central to that question was whether Congress was regulating a market that already existed, which was the government’s view, or one that did not already exist, which was the plaintiff’s view.

The Commerce Clause argument was valid if the market did exist, invalid if it did not. Most legal experts, including Ronald Reagan’s solicitor general Charles Fried, assumed a market already existed – because, after all, everyone needs health care – and that the individual mandate, therefore, was on sound constitutional footing. However, an epic propaganda campaign led by the US Chamber of Commerce, libertarian activists bankrolled by billionaires and health insurance companies – who stand to gain customers but lose millions in the long term – shifted the frame of the debate so that we were no longer talking about “health care”, but instead we were talking about “health insurance”.

This is not just semantics. It made all the difference to five Justices, including Roberts, who viewed Congress as creating a market, which it has no power to do. Roberts said [PDF]:

“Congress already possesses expansive power to regulate what people do. Upholding the Affordable Care Act under the Commerce Clause would give Congress the same license to regulate what people do not do. The Framers … gave Congress the power to regulate commerce, not to compel it. Ignoring that distinction would undermine the principle that the federal government is a government of limited and enumerated powers. The individual mandate thus cannot be sustained under Congress’s power to ‘regulate Commerce’.”

And this is where it gets interesting, and this is why both CNN and Fox News misreported the court’s ruling yesterday morning, sending some viewers, reportedly including the president, into apoplexy: Roberts said he believed the law was not constitutional under the Commerce Clause, but that it was constitutional under taxing power afforded to Congress under the constitution. If you don’t buy health insurance, then, under the mandate, you pay a penalty. But that penalty was never defined. Roberts reasoned that this was like a tax – buy health insurance and don’t pay a tax; don’t buy health insurance and pay a tax. Either way, you can’t avoid a benefit or penalty, and this, he said, was in keeping with the constitution.

This is why CNN and Fox News initially reported that the law had been struck down, because Roberts said that the Commerce Clause argument was invalid. But in the rush to be the first to report the decision, they didn’t see that later in his opinion – on the fourth page – Roberts said the mandate was constitutional, because it’s more like a tax than anything else.

Regulating regulation

And this is where it gets even more interesting, legally speaking. Saying Congress does not have the power to regulate a market that is blindingly already there to anyone paying attention – because, after all, everyone needs health care – Roberts has opened the door to scuttling the federal government’s power to regulate anything. As Tom Scocca in Slate put it:

“This is a substantial rollback of Congress’ regulatory powers, and the chief justice knows it … In 2005, Senator Barack Obama spoke in opposition to Roberts’ nomination, saying he did not trust his political philosophy on tough questions such as “whether the Commerce Clause empowers Congress to speak on those issues of broad national concern that may be only tangentially related to what is easily defined as interstate commerce”. Today, Roberts did what Obama predicted he would do.”

Politically, Republicans are now in the spin zone: They now say that Obama and the Democrats tried to tax US voters without telling them it was a tax, and that it took the highest court in the land to reveal it. There is some merit to the claim. Chief Justice Roberts did say the mandate was like a tax, but there are two ways of looking at this.

One is that this is a distinction without a difference. Either you pay for insurance or you pay a penalty (tax). That’s not the same as the government raising revenues from sales or income taxes. You get something in return that you actually need; you just needed a little encouragement to do it. As Charles Fried, Reagan’s top lawyer, told the Washington Post in March, there is no difference between making you buy something (or pay a penalty) and taxing you and then giving the money back. The only difference is that free-market US capitalists prefer the former, while European democratic socialists preferred the latter.

Payroll taxes work in the same way. That money, proportional to your income, is set aside for when you are old and sick. You get something for that money, but it isn’t just Social Security and Medicare. You get an entitlement. This is how Franklin Roosevelt explained Social Security: “We put those payroll contributions there, so as to give the contributors a legal, moral and political right to collect their pensions … With those taxes in there, no damn politician can ever scrap my social security program.”

Mitt Romney and the Republicans want us to believe taxation is always bad, but it isn’t, and for this reason, we may eventually see that, even if Romney takes the White House and his party takes the Congress in the autumn, there is no going back. Not after Americans come to see that they are paying for the legal, moral and political right to good health.

John Stoehr’s writing has appeared in American Prospect, Reuters, the Guardian, Dissent, the New York Daily News and The Forward. He is a frequent contributor to New Statesman and a columnist for the Mint Press News.

Follow him on Twitter: @johnastoehr