Justice Kennedy's Million Dollar Question

Can you create commerce in order to regulate it?

by Richard A. Epstein

The entire landscape of Congress’s constitutional powers changed on March 27, 2012, when, very early in the argument over the individual mandate, Justice Anthony Kennedy asked a somewhat shaken Solicitor General Donald Verrilli this simple question: “Can you create commerce in order to regulate it?”

I was as surprised by that opening gambit as everyone else. But surely not as dismayed. As three full days of oral arguments confirmed, that one question turned the constitutional showdown over Obamacare into a real horse race, with a five to four vote to strike the mandate down perhaps now the most likely outcome. The public realization, with this one question, was that the moderate Justice Kennedy, long regarded as the perennial swing vote, had bought into the argument of the opponents of the statute, chiefly crafted by Professor Randy Barnett of Georgetown University Law Center.

The individual mandate, which requires all individuals either to purchase health insurance or pay a penalty, may be struck down by the Court as unconstitutional, in isolation from the remainder of the Patient Protection and Affordable Care Act. The law’s regulation of the private health-care market, and even its extension of Medicaid may go down with it.

Prior to March 27, the confident assumption of the American constitutional establishment (of which I am decidedly not a charter member) was that the government would cruise to victory on the constitutional issue for the simple reason that health care was such a large part of the overall economy that Congress could effortlessly regulate it in order to produce a coherent national plan to address the chronic problems of the health-care market.

As professors Charles Fried and Abbe Gluck put the point in their brief on behalf of 104 constitutional law professors in the United States, the health-care market in the United States “operates on a national level,” in which everyone, almost inevitably, will sooner or later participate. Not content to note the size and ubiquity of the health-care market, they observed further that the health-care law will actually “improve health care outcomes nationwide” by its combination of broader health-care insurance in the private market, coupled with community rating in the individual market. These wildly optimistic statements were made without a shred of evidence in their favor.

In fact, the far more likely outcome in this case is that both the traditional private health-care markets and the new government exchanges will buckle under their regulatory burden. In my view, it was a tactical mistake for the defenders of the ACA to paint a rosy picture of so controversial a statute. In so doing, they opened themselves up to the implicit criticism that if the ACA did not achieve its lofty goals, it would dragoon ordinary people into a scheme built to fail. Could that have been the implication of Justice Kennedy’s question? The last thing that any defender of the ACA should want to do is make its constitutionality turn, even in tiny part, on the soundness of its legislative scheme.

Not surprisingly, once it became clear that the mandate was in trouble, and worse, could bring down much of the ACA with it, the defenders of the legislation retreated to more traditional doctrinal arguments in order to rebuild their frayed case. Yet here again, the deep sense of outrage led them to make all the wrong turns, by insisting that within traditional doctrinal categories, the case for constitutionality was clear. Fried, who served as Solicitor General under President Reagan, displayed an astonishing lack of subtlety when he declared: “Health care is interstate commerce. Is this a regulation of it? Yes. End of story.”

Not quite. Fried mangles Supreme Court history by insisting that the scope of the commerce power was settled as early as 1824 in Gibbons v. Ogden, which he does not refer to by name. Of Gibbons, Fried explains, “If something is within the power of Congress, Congress may exercise that power to its fullest extent.” Fried is not alone in offering this preposterous interpretation of Gibbons. In a recent public broadside, over a hundred law professors put the point as follows: “The current challenges to the constitutionality of this legislation seek to jettison nearly two centuries of settled constitutional law.” Both these statements are flat out falsehoods.

For starters, it is clear that the defenders of Obamacare are seeking the high ground by establishing a link back to our greatest Chief Justice, John Marshall, by making it appear as if nothing much of consequence happened betweenGibbons and the present time. In so doing, they act like the New Deal revolution in Commerce Clause jurisprudence never really happened, when, as I have previously written, it expanded the scope of the commerce power by perhaps one hundred-fold, if not more, in the 1937 decision of NLRB v. Jones & Laughlin and the 1942 decision of Wickard v. Filburn.

Before those revolutionary decisions, Supreme Court doctrine was faithful to the text and purpose of the Commerce Clause when it divided commerce into three parts. There was local commerce that led up to interstate commerce; there was commerce among the several states during any journey that crossed state lines; and there was local commerce once the interstate portion of the journey was over. In other words, Congress could not regulate the local taxi or bus service that takes people to the train station or airport for an interstate trip. It could regulate that trip, but it could not regulate the continuation of the journey once the train or plane reached its destination. By that test, the role of Obamacare in the national market would be to supply medical service for people struck ill in interstate journeys.

Thus it is no surprise that in Gibbons, Chief Justice Marshall wrote without embarrassment that “the completely interior traffic of a State” was beyond the power of commerce to regulate. A fortiori, the regulation of manufacture, agriculture, mining, or health care was far outside the scope of Congressional regulation. The great virtue of this system is that it set states in competition with each other in ways that increase the overall level of economic production. Obamacare supporters could consider this interstate regulatory competition a silly distribution of powers in a national economy, and then argue why monopolization of labor and agriculture is a good thing.  But it is not permissible for them to write as though the New Deal transformation never happened.

In dealing with this argument, Fried simply misstates the early law, insisting that if “something” is within the scope of Congress’s powers, then Congress can regulate it to fullest, or, as Marshall said, “plenary” extent. Once again, the meaning of a word like “plenary” is dependent on context. Here is what Marshall wrote: “The sovereignty of Congress, though limited to specified objects, is plenary as to those objects.” The correct reading of his position is not that Congress can regulate whatever “something” it chooses. It is that for those specified objects—e.g. the middle leg of that three-part journey—the states cannot override Congress’s power.

The point may seem trivial today, but make no mistake about it, Marshall’s reading of the Commerce Clause, considered broad at the time, instilled dread in the hearts of state’s rights advocates, including many southerners who feared that a broad interpretation of commerce could lead Congress to tamper with slavery, which the Framers had, regrettably, shielded from national control.

The 100+ law professors bolster their claim of the sweeping historical application of the Commerce Clause with examples that are so far off point that they are bewildering. They refer to the Militia Act of 1792 in order to point out that the action/inaction distinction is no part of our Commerce Clause jurisprudence:

Indeed, the Framers would be surprised by this view of Congress’s powers; they enacted an individual mandate in the Second Militia Act of 1792, which required all men eligible for militia service to outfit themselves with a military style firearm, ammunition, and other equipment, even if such items had to be purchased in the marketplace.

Given their obsession with the Commerce Clause, these overeager professors never bothered to inform their readers that the Militia Act of 1792 was enacted pursuant to Congress’s powers under the militia clauses of Article I, authorizing it:

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress.

Surely, under that mandate, Congress can order a member of a militia to buy a gun. If the Second Militia Act of 1792 is a pointless diversion, the learned professors do no better when they discuss the Necessary and Proper Clause, which they claim backstops the Commerce Clause:

In a landmark decision studied by every law student, the Supreme Court in 1819 explained that the Necessary and Proper clause confirmed Congress’s broad authority to enact laws beyond the strict confines of its other enumerated powers:

But again, their history is cockeyed. At stake in the 1819 decision in McCulloch v. Maryland was whether the United States had the power to establish the First Bank of the United States. The issue was difficult for the government because, as Marshall acknowledged, the Constitutional Convention had refused to include the power to create a bank on the list of powers conferred to Congress under Article I, Section 8.

The ever resourceful Marshall denatured the two words “necessary and proper” so that they authorized any means that were “appropriate” to a legitimate end, which is indeed a broad reading. He then argued that the creation of the bank was one of those “inferior” powers to “the great powers, to lay and collect taxes; to borrow money; to regulate commerce; to declare and conduct a war; and to raise and support armies and navies.”

Note that commerce is only one of the powers to which the bank is supposedly attached. But this case tells us nothing of Marshall’s interpretation of the Commerce Clause. It is also worth noting that his decision in Gibbons some five years later limited interstate commerce to cross-border transactions, while explicitly disclaiming reliance on the Necessary and Proper Clause, for the simple reason that it was irrelevant to his mission. Necessary and proper to what is always a fair question, but only as choosing a means to a given end.

On that point, the constitutional text speaks of “carrying into execution” the power to regulate commerce, without expanding the definition of commerce itself. Neither in 1819 nor in 1824 was it necessary and proper to regulate intrastate commerce, manufacture, agricultural, or mining to make sure that boats in interstate commerce were equipped with horns or red warning flags.

The claim of an unbroken historical understanding of the Commerce Clause put forward by Obamacare supporters is nothing more than a myth cooked up for the occasion. But to supporters of the ACA, it is a necessary myth, which they invoke in order to lend legitimacy to their case for the constitutionality of the law. And on this point at least, for all their anger and resentment, they are correct. It is far easier to extend Wickard v. Filburn to the case of supposed inaction if that decision were on all-fours with Gibbons.

But once it is recognized that it these New Deal Commerce Clause decisions represent a conscious and violent departure from the pre-1937 precedents, we can fairly ask whether it makes sense to take a manifestly wrong decision one step further. The original constitutional balance is far wiser than the souped-up version whose chief contribution to the welfare of the nation was to legitimate the national agricultural cartels that the states could never form acting alone.

Charles Fried may rail against Randy Barnett and the Tea Party all he wants, but that won’t fix his flawed constitutional history of the Commerce Clause, on which he and his confederates have chosen to rest their shaky case.