Sunday, July 1, 2012

The Obamacare Ruling: Good for Billable Hours, Bad for the Rule of Law

Readers of this blog might know that the Obamacare saga was one of the main topics that I covered here when I first started blogging back in 2009.  Lately I've focused more on trade and economic policy because, frankly, that's what drives the pageviews and subscriptions, but I'd like to kick it old school today and discuss Thursday's unexpected Supreme Court ruling upholding the Affordable Care Act - Natl. Federation of Independent Business v. Sebelius.  (And if that's not what most of you readers were expecting, then please feel free to email me for a full refund.)

A lot of virtual ink has been spilled since Thursday re-hashing the ruling and its many and fascinating implications.  On the conservative/libertarian side of things, there is significant disagreement about whether Chief Justice John Roberts' opinion was a "good" or "bad" thing from a legal, policy and political perspective, but there appears to be pretty widespread agreement that the Chief switched his position very late in the game - going from the four conservative justices who wanted to kill the whole damn thing on the grounds that it was an unconstitutional expansion of the federal government's authority to regulate interstate commerce to the four liberal justices who wanted to save it on the grounds that the federal government has essentially unlimited regulatory power over such commerce - in order to protect the Court's legitimacy from an onslaught of criticism from the President, his supporters and a large percentage of the commentariat (many of whom were questioning the Roberts Court's legitimacy before the ruling was even out).  CBS today reported that Roberts did indeed change his vote in May, although the reasons for that about-face remain unclear.

But while everyone - and I mean everyone - has weighed in on Chief Justice Roberts' opinion and the future of Obamacare, the 2012 election and constitutional jurisprudence, I've yet to see any in-depth analysis of the ruling's effect on the rule of law.  Sure, constitutional "scholar" James Simon did proclaim, with no actual evidence, that "Chief Justice Hughes, and now Chief Justice Roberts, demonstrated that they placed a high value on projecting the image of the court as a nonpartisan judicial institution that upholds the rule of law and is above partisan politics."  But Simon's opinion - like those of many other Obamacare supporters - appears based on little more than the fact that Roberts upheld his preferred policy position, not an actual review of how the ruling affects the rule of law.

So, given this apparent dearth of legal analysis, I'm going to switch my trade-geek hat with my ConLaw-geek hat and spend a little time examining this aspect of Roberts' decision.  Unfortunately, it seems that Roberts' grand Machiavellian bargain may have done far more damage to the rule of law than he - or at least most legal commentators - realizes.

Before I get to my reasons for this depressing conclusion, it's important to first define "rule of law" and briefly discuss why it's so important to our legal and economic system.  Although there are lots of definitions, my examination of the Obamacare decision's effect on the "rule of law" will ask whether Chief Justice Roberts' ruling bolsters or undermines the law's stability and predictability (sometimes called "legal certainty") - elements that are essential to any lawyer's or layperson's ability to navigate our legal system.  As noted in a recent paper on the subject:
Legal stability and predictability are a fundamental part of “what people mean by the Rule of Law."  In the absence of stability and predictability in law, citizens have difficulty managing their affairs effectively.  Legal stability also has a moral valence insofar as it assures that like cases will be treated equally. In common law systems, legal stability and predictability are furthered by judicial adherence to precedent and the informal norm of stare decisis.
Of course, the rule of law is far more important than merely something which helps lawyers advise their clients; Hayek wrote a lot about the value of the rule of law in any well-functioning free market society, which Wikipedia summarizes quite nicely:
Hayek proposed that under the Rule of Law individuals would be able to make wise investments and future plans with some confidence in a successful return on investment when he stated: "under the Rule of Law the government is prevented from stultifying individual efforts by ad hoc action. Within the known rules of the game the individual is free to pursue his personal ends and desires, certain that the powers of government will not be used deliberately to frustrate his efforts."  Hayek defined the Rule of Law as the opposite of arbitrary government: "The distinction we have drawn before between the creation of a permanent framework of laws within which the productive activity is guided by individual decisions and the direction of economic activity by a central authority is thus really a particular case of the more general distinction between the Rule of Law and arbitrary government. Under the first the government confines itself to fixing rules determining the conditions under which the available resources may be used, leaving to the individuals the decision for what ends they are to be used. Under the second the government directs the use of the means of production to particular ends. The first type of rules can be made in advance, in the shape of formal rules which do not aim at the wants and needs of particular people. They are intended to be merely instrumental in the pursuit of people's various individual ends. And they are, or ought to be, intended for such long periods that it is impossible to know whether they will assist particular people more than others. They could almost be described as a kind of instrument of production, helping people to predict the behavior of those with whom they must collaborate, rather than as efforts toward the satisfaction of particular needs."
It's for these reasons that the UN and other international organizations measure the efficacy of fledgling democracies, in part, on their adherence to the rule of law.  (And they're certainly not alone.)

Now, I will try - really! - to approach this analysis without my usual limited-government-libertarian blinders on and instead merely look at the decision as good or bad for the rule of law from the viewpoint of a legal practitioner and someone who understands how lawyers try to interpret the law in order to provide their principals (be they companies, politicians or ordinary citizens) sound advice regarding the legal implications of their future decisions.  Clearly, I am not a fan of this rube-goldbergian expansion of state power and hope that it will be repealed as soon as humanly possible, and I'm inclined to agree with Richard Epstein's take on the ruling's substantive implications.  But for now I will try to ignore my biases and simply look at whether the Roberts ruling supports or undermines the law's stability and predictability.

From this perspective, I think that Robert's decision fails on at least four counts:

First and most obviously, if it is true that the Chief Justice of the United States Supreme Court bowed to political pressure, then his ruling has established that judges may, in certain extreme instances, decide cases on politics rather than law, essentially becoming miniature legislatures rather than independent adjudicators of existing legal rules.  As Professor David M. Wagner eloquently put it:
And what did the Court supposedly gain in the Obamacare decision? Every claim being made on that score is a claim based on the supposed benefits of giving in to intimidation. The narrative runs: the Court now knows how naughty it was to protect speech that liberals don't like in Citizens United, and it therefore knows it would have been grounded for a week if it had struck down government health care that liberals also like, so it just had to be good. Or rather, if the Scalia-Kennedy-Thomas-Alito boys wouldn't be good, Roberts had to be good and do what the grown-ups say or, you see, they'd all be punished. With what, I'm not sure, but liberal columnists like Jonathan Chait seem to understand these things.  
In short, the Court got zilch, or worse - it got, as a fact on the ground, the principle that a campaign of threats against its "legitimacy" (whatever that means) in the elite press can actually change outcomes. I really didn't think it could. I was wrong. But to claim - especially for conservatives to claim - that the Court is the winner for being given thirty rather than forty lashes by Slate and MSNBC and New York Magazine is to signal that the "Constitution in exile," far from being on the verge of a return, may as well buy property in Fiji.
The adverse implications of such politicization are plain: it undermines the ability of principled policymakers and their legal advisers to predict whether a potential policy will conform to the law, and encourages their less-principled counterparts to ignore the legal system's constraints on their activities and to resort to crass intimidation in order to secure the "legality" of their favored policies.  Meanwhile, ordinary citizens will be discouraged from challenging these policies on the grounds that, while their claims may be legally sound, the State and its many allies can influence the outcome of any such challenges.  This is the antithesis of the rule of law and, frankly, I am amazed that some very smart people (rather than partisan hacks) steadfastly claim that Roberts' ruling has preserved the "legitimacy" of the judicial branch.

Second, Roberts' "creative" decision to deem the individual mandate a "tax" and thus permissible under Congress' taxation power - despite the fact that the Affordable Care Act, quite intentionally, refers to the mandate as a "penalty" (mentions of "tax" were specifically removed from the earlier version of the bill), and that its drafters and defenders repeatedly promised the polity that the mandate was most definitely not a tax - could dramatically undermine the ability of citizens to understand a law by its literal text and to conform their actions thereto.  In essence, Chief Justice Roberts re-wrote the law, finding a "tax" where none existed, and he did something similar with respect to Obamacare's Medicaid provisions.  Constitutional scholars David Rivkin and Lee Casey - some of the mandate's original critics - touched on this point when they stated (emphasis mine):
The court's ObamaCare opinion presents an uncertain legacy. The court reaffirmed and clarified the constitutional limits on Congress's power to regulate commerce and to spend money. Yet the individual mandate and the law's Medicaid expansion were upheld through judicial copyediting that the court has always found to be beyond its own constitutional power. 
The implications of such novel "copyediting" are obviously significant for the rule of law.  Not only is it now more difficult to understand a law's meaning and effect until a judge has ruled on it, but it also is now easier for unseemly politicians to disguise their legislation in publicly-acceptable-yet-legally-suspect terminology only to later ask courts to re-write the law to make it legally-acceptable-yet-politically-suspect (long after the politics have been settled, of course).  Indeed, this latter problem is precisely what the Obama administration did in this case - insisting for two years that the mandate was most definitely not a tax, only to argue before the courts that, if the mandate didn't survive Commerce Clause scrutiny, it should be viewed a constitutional tax permitted under Congress' tax power.  The Atlantic provides the full history of this rhetorical prestidigitation, and now after Roberts' decision, President Obama and his fellow Democrats are already back to saying that the mandate is, like, totally not a tax.  

This is precisely the type of "creative" and unpredictable behavior that the rule of law seeks to protect against: in order to have any degree of legal certainty, a law must be judged on its text (and, where necessary, legislative history), not on a single judge's novel interpretation of that text.  Just think of it this way: how can a lawyer advise a client - for example a small businessman - on whether his company's existing or contemplated business activities comply with a new law if a court can, quite literally, re-write the law's substantive provisions two years after it's enacted?  The problems with such uncertainty are manifest.

Third, and perhaps somewhat surprisingly, the Roberts opinion has potentially undermined the stability of constitutional jurisprudence on the Commerce Clause.  Yes, it is true that five Justices - Roberts and the four dissenters - ruled that the federal government's authority under the Commerce Clause and the Necessary and Proper Clause did not extend to inactivity, and it's also true that Roberts' opinion was creatively structured in such a way that the Commerce Clause and Necessary and Proper Clause conclusions are essential to the final taxation ruling (on which the four liberals concurred).  For this reason, many conservative and libertarian constitutional scholars, including Georgetown's Randy Barnett (one of the primary architects of the Obamacare challenge), have praised these conclusions and described them as definitive. Indeed, Professor Lawrence Solom also has specifically opined that the structure of Roberts' arguments indicates that these conclusions are binding precedent rather than mere dicta.  

These views, however, might be a tad sanguine and premature, reflecting the theoretical thinking of constitutional scholars rather than the more pragmatic views of actual litigators.  As one practitioner noted to me in an email:
I just don't see how, in the simplest possible way, if the Court when creating its syllabus does not describe those sections as the court's, you cite them as the court's. By the same rationale that you can't escape his reasoning, you can't as a matter of law escape their dissents...

I am a member of the Eleventh Circuit Bar and have filed briefs there and in District Court, and on Constitutional issues, at that. I am totally at a loss for how I say, This is the ruling of the Court rather than This is a ruling in which four members of the majority refused to participate in the underlying reasoning, explicitly dissenting, but the dissenters, while not joining, agreed in the reasoning. It's a good argument, but it's not that kind of precedent.
This lawyer is not alone, as the Institute for Justice's Clark Neily notes on SCOTUSblog's post-ruling symposium:
First, as litigators know very well, it is always more important what a court did than what it said. Courts deal in holdings, not rhetoric, and from that perspective the decision to uphold the key ACA’s key provisions, including the individual mandate (can we still call it that?), appears to have been a significant blow to the cause of limited government. Notwithstanding the majority’s assurances about the limits of federal power under the Commerce, Necessary and Proper, and Spending Clauses, the Court ratified what many perceive as the most significant expansion of federal power in 75 years. Whether those assurances will be treated as a holding of the case or mere dicta remains to be seen, and the fact that this particular exercise of federal power was, as Randy Barnett has emphasized, “unprecedented” would seem to sharply limit their scope either way. 
Thus, whether the libertarian language on the Commerce Clause and Necessary and Proper Clause is binding precedent or worthless dicta might very well require years of future litigation on the very few cases that push the margins of constitutional jurisprudence like Obamacare did.  This type of uncertainty is the antithesis of what you hope to get from the decisions of nation's highest court, and it seems pretty clear that the stability of our Commerce Clause jurisprudence - and the rule of law more broadly - would have been much better off with a "clean" ruling in which Roberts joined the four conservatives or - shudder to think - the four liberals.

Fourth, Roberts' rulings on the federal government's taxation and spending powers appear to be a classic example of the type of ad hoc judicial rulemaking that undermines the rule of law.  In order to maintain legal stability and predictability, it is important for judges, especially the Supreme Court, to establish simple, bright line rules which "resolve[ ] a legal issue in a straightforward, predictable manner" and thus make it easier for the various lower courts to rule consistently on related cases and for individuals to know whether their actions are lawful and, hopefully, avoid litigation altogether.  Roberts' ruling on the mandate-as-constitutional-tax, however, appears to establish almost no guidance as to what other federal taxes also will pass constitutional muster.  Cato's Ilya Shapiro explains the complexity of Roberts' tax ruling as follows:
Roberts went on to cabin his taxing-power justification in such a way as to make it seem that this ticket would be good only for this train: the tax (if one chooses to pay it) is not so burdensome as to be punitive, is enforced through normal tax-collection means (with no threat of criminal sanctions), and merely encourages rather than requires certain behavior.

Moreover, this voluntary unicorn-like tax is not a “direct” tax—which the Constitution says must be drawn such that each state pays in proportion to its population—because it’s neither a tax on property nor a “capitation” (defined as “a tax that every­one must pay simply for existing”). Instead, Roberts explains, this novel tax is triggered by a specific circumstance: “earning a certain amount of income but not obtaining health insurance.”

I guess that means it’s not an income tax—where income itself is the trigger and sole basis for assessment—which leaves, among the exactions the Constitution authorizes only excises. (We can all agree that the non-punitive indirect voluntary tax incentive isn’t a “duty” or “impost.”)

But excises are taxes on a use of property, a transaction, privilege, or activity, and here Roberts has already recognized there’s no property, transaction, or activity involved. You just have this condition—not owning health insurance—that triggers the tax. Does that mean that being free from a government command (“shall”) to buy health insurance is a privilege?

I don’t think that’s what the Chief Justice meant at all, and I’m not trying to be cute. The point is that the opinion’s taxing-power section is a complete head-scratcher. Even Justice Ruth Bader Ginsburg, who was skeptical about the taxing-power theory during oral arguments, expressed some disbelief at Roberts’s theory in orally summarizing her partial dissent on behalf of the no-limits-on-federal-power bloc.
So the next time that the federal government decides to influence individual behavior via a tax disincentive, does Roberts' ruling give us any indication as to whether that tax will be constitutional?  The answer, it seems, is "no," as the Chief Justice himself admits with respect to whether a tax is unconstitutionally "punitive":
We have already explained that the shared responsibility payment's practical characteristics pass muster as a tax under our narrowest interpretations of the taxing power. Because the tax at hand is within even those strict limits, we need not here decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it. It remains true, however, that the "‘power to tax is not the power to destroy while this Court sits.'"
As Ben Domench smartly described this statement in The Transom: "Roberts’ attitude is apparently the same as that of Potter Stewart on pornography—he doesn’t know what a punitive tax is, but he knows it when he sees it."  Other aspects of the tax ruling reflect similar subjectivity.  So, kids, the next time you need to know whether Congress has overstepped the bounds of its taxation power, I guess you just have to pick up the phone and call the ol' Chief Justice.  Problem solved.

Unfortunately, it's not just the taxation standard that fails to establish a bright line test: as John Yoo notes, Robert's conclusions on Medicaid spending also provide little guidance as to whether other congressional spending ultimatums will be constitutional:
The limits on congressional coercion in the case of Medicaid may apply only because the amount of federal funds at risk in that program's expansion—more than 20% of most state budgets—was so great.  If Congress threatens to cut off 5%-10% to force states to obey future federal mandates, will the court strike that down too?
Yoo concludes that conclusion is "doubtful," but that doesn't really matter for today's purposes.  Instead, what matters is the fact that Roberts' conclusions on the limits of congressional spending power provide little guidance for future cases, and instead will require more litigation and depend on a few judges' subjective analyses.

And, again, the rule of law is worse off for it.

As a law student, one of my least favorite parts of the already-miserable exam season was reading a fact-pattern in an exam question and realizing that the applicable law was murky and replete with myriad judicial "balancing tests" rather than bright-line rules.  The result was always a long and meandering exam response full of vacillation and uncertainty and thus containing more "other hands" than Vishnu.  As annoying as this was, however, we students could still succeed as long as we got the law right.

But as practicing lawyers, our clients are not looking for "the other hand."  While a certain amount of "likelys" is understood and acceptable, these decision-makers - be they legislators or business-owners or whatever - need some degree of legal certainty before they risk their money, reputation and/or livelihoods on our legal advice.  Their goal is almost always to avoid litigation or other conflict - to devote their finite resources to their actual vocations rather than to lawyers and legal fees.  Stable and predictable legal rules are essential in this regard (unless, of course, a person wants to succeed via graft and intimidation), but Chief Justice Roberts' opinion appears to fail this particular test on several important levels.  So while some advocates of limited government view Roberts' ruling as a "long-game" masterstroke that will ensure conservative/libertarian victories for generations, it seems to me that, from the perspective of the rule of law, the only winners here are the lawyers.

UPDATE 1: Here's the full CBS story on Roberts switching his vote, and boy is it a doozy. 

UPDATE 2: In response to the CBS story, Randy Barnett allegedly states "Fact this decision was apparently political, rather than legal, completely undermines legitimacy as a precedent."  Not exactly sure what this means, but... yikes.

UPDATE 3: David Post over at the Volokh Conspiracy also thinks that the ruling's Commerce Clause language is mere dicta.  Ruh roh.

UPDATE 4: WSJ's James Taranto disagrees with Post on the "dicta" question and confidently states, "Don't worry, it's binding."  I think he's probably right, but, again, it might just take a court to decide that.


DRDR said...

I understand your displeasure with the ideas that only punitive taxes that act as mandates are unconstitutional and that what is punitive is a case-by-case judgment, but it's not like Roberts invented this argument ad hoc out of thin air. Is there any reason why the amicus briefs supporting Roberts' position are misguided?

The brief seems to provide a sound rebuttal to the Epstein op-ed, but I'm an economist, not a constitutional lawyer. I would appreciate your insight.

Scott Lincicome said...

Not sure I follow your second point, DRDR, so I'll take it first: I don't think that that amicus rebuts Epstein's concern - as I understand it, that Congress now has near-unlimited authority to regulate via its tax power instead of the commerce clause - at all. In fact, it seems that they can be read in harmony - I doubt that the amicus authors would disagree that, under their (and apparently Roberts') interpretation, Congress' tax power is almost unlimited and entitled to significant deference from the courts. Such a constitutional interpretation, however, it not what limited government advocates - a group that was supposed to include Roberts - would support.

On your first point, sure, there were a few people who argued this (and were mostly mocked at the time), but I think this summarizes why people - including most legal scholars, the lower courts and the dissenting justices - were surprised (or upset by) by Roberts' legal reasoning:

Hope this helps.

Scott Lincicome said...

Here's more from that new CBS story that I linked:

"Roberts had begun to focus on a different argument to uphold the law and the mandate's penalty by defining it as a tax. That strained argument had received almost no attention in the lower courts, which had uniformly rejected it. It was seen as a long-shot by the law's supporters."

DRDR said...

Thanks for your response. Yes, I agree that the brief does not rebut any of Epstein's claims and concerns that you just mentioned.

But my understanding is that the brief rebuts Epstein's claim that the Roberts decision went against legal history. Epstein's bottom line was, "Chief Justice Roberts has ignored this fundamental principle: If direct regulation is beyond the scope of the Commerce Clause (as he held), then taxation as an indirect route to the same regulation should be off limits as well (as he failed to hold)."

Both the Roberts decision and the brief argue that there's a clear line at taxes that are equivalent to a prohibition (though Roberts uses the word punitive). The brief agrees with Epstein to the extent that past cases "support invalidating as pretextual a tax so high as to amount to a coercive penalty to compel compliance with a regulatory scheme that falls wholly outside Congress’s other enumerated powers."

The difference between Epstein & the brief is in the Constitutionality of taxes that don't fully "compel compliance." The brief says, "Absent such extreme circumstances, however, those cases do not license judicial second-guessing of Congress’s intentions in enacting legitimate taxes. Instead, any scrutiny the Court today devotes to the purposes underlying a tax focuses on ensuring it is not a criminal sanction in disguise." So we're left then with the Court's judgment of whether a tax is a "coercive penalty to compel compliance." This is Roberts' position, and if the brief is right, then he did not invent it.

Now I agree with you and Domench that this is some lousy jurisprudence if the brief is correct, because how do you determine whether a tax is "punitive" or a "coercive penalty to compel compliance?" Whether a tax (or equivalent mandate and penalty) were constitutional or not would then depend on whatever happens to be the present state of demand in the economy. And any tax is going to be coercive from the perspective of some group of people who is compelled to buy what the government is mandating. I believe the dissenting justices should have made a similar argument in trying to persuade Roberts to their side.

One final aside, Posner appears to agree with Roberts:

Scott Lincicome said...

You might find this from Randy Barnett useful: