To Hell With the Constitution?

Via American Thinker

By Jon N. Hall    

Much has been made recently of the unconstitutionality of federal health care reform, especially a government-run system (the "public option") that could devolve into a "single-payer" system. The main objection is that the federal government has no authority to operate a health care system. Indeed, the 9th and 10th Amendments forbid it, according to Larrey Anderson of American Thinker.

In The Wall Street Journal, Judge Andrew Napolitano writes that Congress has been getting around such constitutional bans by invoking its Commerce Clause, "the favorite hook on which Congress hangs its hat in order to justify the regulation of anything it wants to control." Perhaps the most outrageous abuse of this tiny clause is the case of Wickard v. Filburn (1942), where the Supreme Court cited the Commerce Clause in denying a man the right to cultivate his own land for the purpose of feeding his family.

Judge Napolitano deems ObamaCare "unconstitutional at its core".

Besides the systemic ban, a key component of ObamaCare may also run afoul of the Constitution. The "individual mandate" for citizens to buy health insurance seems to violate the 14th Amendment's Equal Protection Clause. In The Washington Post, attorneys David Rivkin and Lee Casey assert:

The otherwise uninsured would be required to buy coverage...for no other reason than that people without health insurance exist. The federal government does not have the power to regulate Americans simply because they are there.

During last year's campaign, I made this "existential" argument myself, comparing the "individual mandate" to poll taxes. In Harper v. Virginia Bd. of Elections (1966), which struck down poll taxes in Virginia, Justice Douglas delivered the Court's opinion:

Long ago in Yick Wo v. Hopkins ... the Court referred to "the political franchise of voting" as a "fundamental political right, because preservative of all rights." ... fee paying has, in our view, no relation to voting qualifications; the right to vote is too precious, too fundamental to be so burdened or conditioned.

Is not the right to exist even more "fundamental" than the right to vote? Isn't existence a precondition of "all rights"? Yet this is what the "individual mandate" taxes: existence. In the Wall Street Journal, Rivkin and Casey write:

But if over time, as many critics fear, a "public option" health insurance plan turns into what amounts to a single-payer system, the constitutional issues regarding treatment and reimbursement decisions will be manifold...The only thing that is certain today is that the courts, and not Congress, will have the last word.

In her coverage of the November 5 rally on Capitol Hill and attorney Mark Levin's impassioned speech to the assembled throng (great video of it in the link), Penny Starr reports:

Both the House and Senate versions of the health-care reform bill would force all individuals who are citizens or legal residents of the United States to buy health insurance or else pay a fine, even though the Congressional Budget Office has reported that the federal government has never before required Americans to buy any good or service. Sen. Orrin Hatch (R.-Utah), a longtime member of the Senate Judiciary Committee, told CNSNews.com recently that this mandate is not constitutionally justifiable and that if Congress can force Americans to buy health insurance "then there's literally nothing the federal government can't force us to do" [emphasis added].

America once made the required nod to the Constitution. When We the People wanted to make some fundamental change or expand the federal government's reach, we did the right thing and amended the Constitution.

The Constitution has 27 amendments, and 12 of those amendments came within the last century. One of those 12 amendments (#18) was repealed by a later amendment (#21). If we once thought that we had to amend the Constitution to ban "intoxicating liquors" and later had to again amend the Constitution to re-legalize the stuff, wouldn't we need an amendment to allow the government to intrude even more intimately into our lives?

But the amendment process is arduous (the 27th Amendment took 203 years to ratify). And there's no guarantee the states will go along (the Equal Rights Amendment failed). So Congress goes its merry way, the Constitution be damned.

But now Congress is ramming through their abortion of a bill by the thinnest of majorities. The House just passed its version 220 to 215 -- a 3-vote margin to pass the "mother of all entitlements." The Senate is considering its options, among them the "nuclear option" (called "reconciliation"), which would allow them to get around a filibuster.

If Congress were to do the right thing and initiate an amendment to enshrine the "individual mandate" in the Constitution...it would fail miserably. If America is still America, Americans will not tolerate being told they have to buy something, especially if it's for no other reason than that they exist. If ObamaCare becomes law, folks will drop their insurance out of principle. They'll file suits against the feds. The states will resist, perhaps rebel. And great will be the tumult thereof.

I'm afraid Congress has not only misread the Constitution, but they've also misjudged the American people. Or maybe they just don't know what country they live in.

Jon N. Hall is a programmer/analyst from Kansas City.

The U.S. House of Presumptuous Meddlers

Via TownHall.com

By John Stossel

As an American, I am embarrassed that the U.S. House of Representatives has 220 members who actually believe the government can successfully centrally plan the medical and insurance industries.

I'm embarrassed that my representatives think that government can subsidize the consumption of medical care without increasing the budget deficit or interfering with free choice.

It's a triumph of mindless wishful thinking over logic and experience. 

The 1,990-page bill is breathtaking in its bone-headed audacity. The notion that a small group of politicians can know enough to design something so complex and so personal is astounding. That they were advised by "experts" means nothing since no one is expert enough to do that. There are too many tradeoffs faced by unique individuals with infinitely varying needs.

Government cannot do simple things efficiently. The bureaucrats struggle to count votes correctly. They give subsidized loans to "homeowners" who turn out to be 4-year-olds. Yet congressmen want government to manage our medicine and insurance.

Competition is a "discovery procedure," Nobel-prize-winning economist F. A. Hayek taught. Through the competitive market process, we producers and consumers constantly learn things that force us to adjust our behavior if we are to succeed. Central planners fail for two reasons:

First, knowledge about supply, demand, individual preferences and resource availability is scattered -- much of it never articulated -- throughout society. It is not concentrated in a database where a group of planners can access it.

Second, this "data" is dynamic: It changes without notice.

No matter how honorable the central planners' intentions, they will fail because they cannot know the needs and wishes of 300 million different people. And if they somehow did know their needs, they wouldn't know them tomorrow.

Proponents of so-called reform -- it's not really reform unless it makes things better -- have shamefully avoided criticism of their proposals. Often they just dismiss their opponents as greedy corporate apologists or paranoid right-wing loonies. That's easier than answering questions like these:

1) How can the government subsidize the purchase of medical services without driving up prices? Econ 101 teaches -- without controversy -- that when demand goes up, if other things remain equal, price goes up. The politicians want to have their cake and eat it, too.

2) How can the government promise lower medical costs without restricting choices? Medicare already does that. Once the planners' mandatory insurance pushes prices to new heights, they must put even tougher limits on what we may buy -- or their budget will be even deeper in the red than it already is. As economist Thomas Sowell points out, government cannot really reduce costs. All it can do is disguise and shift costs (through taxation) and refuse to pay for some services (rationing).

3) How does government "create choice" by imposing uniformity on insurers? Uniformity limits choice. Under House Speaker Nancy Pelosi's bill and the Senate versions, government would dictate to all insurers what their "minimum" coverage policy must include. Truly basic high-deductible, low-cost catastrophic policies tailored to individual needs would be forbidden.

4) How does it "create choice" by making insurance companies compete against a privileged government-sponsored program? The so-called government option, let's call it Fannie Med, would have implicit government backing and therefore little market discipline. The resulting environment of conformity and government power is not what I mean by choice and competition. Rep. Barney Frank is at least honest enough to say that the public option will bring us a government monopoly.

Advocates of government control want you to believe that the serious shortcomings of our medical and insurance system are failures of the free market. But that's impossible because our market is not free. Each state operates a cozy medical and insurance cartel that restricts competition through licensing and keeps prices higher than they would be in a genuine free market. But the planners won't talk about that. After all, if government is the problem in the first place, how can they justify a government takeover?

Many people are priced out of the medical and insurance markets for one reason: the politicians' refusal to give up power. Allowing them to seize another 16 percent of the economy won't solve our problems.

Freedom will.

Understanding the Costs of Health Care

Via Mises Daily

by D.W. MacKenzie

"The idea that we must choose between public healthcare and politicized-private healthcare is false. We can also move to depoliticize the healthcare industry."

Rising costs are the main issue in the debate over healthcare reform. Most everybody thinks of healthcare as expensive, but there is much confusion over these costs. On September 9, President Obama attempted to clarify cost issues concerning the medical industry. The federal government will supposedly reduce costs, curtail abuses, and make healthcare services more affordable.

The president proposes creating a low-cost market for health insurance. Previously uninsured people would be required, with some exemptions, to buy health insurance — so as to avoid high-cost emergency-room visits. Businesses would be compelled to provide insurance, with some exemptions for the smallest businesses. The federal government would also promote preventative care and nonprofit health clinics.

Senator Baucus has proposed a new plan whereby people who do not buy health insurance will be fined $3,800. These fines will force people to buy insurance, and this will spread costs more broadly.

Economist Paul Craig Roberts criticizes proposals for forcing people to buy insurance. He argues that fining people who cannot afford health insurance is like "solving the homeless problem by requiring the homeless to purchase houses." Roberts recognizes that fines forcing more people to buy health insurance are the equivalent of a new tax. He objects to this new tax on the grounds that it is imposed on those who cannot afford it.

Roberts believes that taxes for healthcare should be apportioned according to the "ability-to-pay" principle. He favors a "single-payer, not-for-profit healthcare system." According to him, private healthcare does not work because of expensive medical technology, malpractice suits, bureaucratic third-party-payer costs, and the "cost" of shareholder returns.

The remarks that the president, Senator Baucus, and Paul Roberts have made regarding profits and executive compensation reveal problems with their understanding of economics. The president, for instance, sees profits and high executive salaries in insurance companies as unnecessary costs, fat that can be cut from the health industry. In economic terms, however, profits represent success in satisfying consumers of particular products at relatively low costs.

Successful executives keep revenues high by gaining market share and satisfying customers in large numbers. They also keep financial costs low by cutting waste in the use of labor, capital, and supplies. High profits are often a sign that companies are serving their consumers at a low cost.

The president's remarks regarding profits and executive salaries likely derive from the hostility towards all profits characteristic of many people on the Left (such as Michael Moore), rather than from sound economic reasoning. Executives earn high salaries by delivering high profits to owners, and high profits derive in part from keeping costs under control. Would a nonprofit, single-payer (i.e., taxpayer-funded) system also be run on a cost-minimizing basis?

"High profits are often a sign that companies are serving their consumers at a low cost."

The basic choice we have to make is between healthcare based on the profit motive and healthcare based on some kind of service principle. On the one hand, corporations do make profit by developing new drugs for consumers, and by manufacturing medical supplies and equipment. On the other hand, nonprofit clinics do exist, medical professionals do perform pro bono services, and some companies do donate medical supplies and equipment. But what serves the public best: private profit seeking, or the desire to do public service?

Of course, we don't want to assume that all profits and executive salaries derive from efficient management. Some executives increase the profitability of their operations through lobbying the government to secure state-granted privileges and subsidies.

Roberts recognizes such problems with special interests. Senator Baucus proposes that people be pressured into buying more insurance, but Roberts notes that Baucus has taken large campaign contributions from insurance companies. Lobbying by special-corporate interests generates profits that are "fat in the system" and should be cut.

But will increased government involvement in the healthcare industry cause more or less corporate lobbying? Both mandated-private and single-payer, nonprofit insurance proposals will likely increase wasteful lobbying by corporate interests.

The real question is, how far can we replace legitimate profit seeking with public service? Some people donate time and goods to healthcare. It is also true that some people work at Medicare or the Center for Disease Control because they want to do public service. But how much more of this conscientious public service can we expect? Other people seek federal jobs for an easy path to early retirement, or for power. The president is assuming a ready supply of capable and conscientious public servants, as well as effective means of managing and organizing healthcare along bureaucratic lines.

In the absence of market prices and profits, large-scale organization requires central planning. The idea of such planning scares many people, and rightly so. The planning of entire national economies during the 20th century ended in disaster. Large public bureaucracies have also exhibited significant problems with waste and rigidity.

These problems exist for specific reasons: central planning suffers from the defect that small groups of leaders or officials cannot possibly understand local conditions in modern industries like healthcare. The modern world is simply too complex to be planned. Of course, the private system of profit and loss also has defects, but we must be careful in identifying the source of the worst problems with profit seeking.

"Income taxes create a bias in favor of healthcare funding through insurance."

President Obama wants to further politicize the medical industry. He seems to assume that private profit seeking is wasteful. The president would be right if he specifically criticized profiteering through the manipulation of public policies. Since the medical industry is heavily regulated, we should expect that part of its profits serves special interests rather than consumers.

But the president's complaint about executive pay and profits in general is more in line with the socialist idea that profits necessarily serve a particular interest group — capitalists — at the expense of everybody else.

There are, of course, other sources of waste in the current healthcare system. Laws that mandate coverage of minor and routine healthcare services increase private administrative costs. For that matter, income taxes create a bias in favor of healthcare funding through insurance, rather than through per-service fees charged directly to consumers.

Third-party administrative costs could be slashed simply by removing the current bias towards healthcare financing through so-called insurance (as opposed to through true insurance for high-cost/low-probability health events). Frivolous and fraudulent lawsuits have also imposed high costs through inflated malpractice-insurance rates. Would either single-payer or mandated-insurance proposals decrease these costs?

We have three options: our current system, permeated by ill-gotten politicized profits and wasteful special-interest lobbying; a largely untried privatized system, based on private profits and limited private charity; and a system of centralized, single-payer healthcare through public bureaucracies. The type of compromises that the president proposed in his September 9 speech have already been tried and failed. We already have regulation by bureaucratic agencies.

Public bureaucracies have well-known and well-deserved reputations for rigidity, waste, and, at times, abuse. The private sector has a bad reputation in the healthcare industry, but that is largely due to the fact that healthcare has already been politicized.

Obama's plan for healthcare amounts to a self-fulfilling prophecy: if we further politicize the healthcare industry its profits will be even less justifiable, and public options will gain legitimacy. Paul Craig Roberts has seen ahead of this curve, and recognizes that a centralized, single-payer system might have some advantages over a politicized system of government mandates favoring private-corporate interests.

But the idea that we must choose between public healthcare and politicized-private healthcare is false. We can also move to depoliticize the healthcare industry. A depoliticized, free market in healthcare would be run on the basis of profits that are for the most part earned through cost efficiency and customer service.

A truly competitive health industry of this kind would best serve American consumers. Unfortunately, we are as far from approaching this situation as President Obama is from comprehending its merits.

D.W. MacKenzie teaches economics at the Coast Guard Academy. (The contents of this paper do not reflect official views of The U.S. Coast Guard Academy.) Send him mail. See D.W. MacKenzie's article archives. Comment on the blog.
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The President Learned Nothing From August

Via The Heritage Foundation

The Foundry

“There remain some significant details to iron out.” Thus spoke the President of the United States last night, in an address in which, with a straight face, he told an awaiting nation that he was finally delivering not lofty rhetoric, but his grand plan on health care.

On that score President Obama was right. It may have been, however, a bit of an understatement. Absent, of course, was how exactly all the savings he confidently predicted would materialize, how exactly the government would prevent employers from dumping all their employees into a government plan and how czars and boards would operate without bureaucrats coming between Americans and their doctors. Ah, details, details.

In fact, while he kept referring to “our plan” he never explained whose plan he meant. One of the two House plans? The one Senate plan that exists or the Finance one that’s under construction? What’s he actually for? What’s the President against?

To the question that all of America wanted an answer, to wit, is the President abandoning his stubborn attachment to a public plan, the President had no clear response.  Or maybe he did. He appeared to draw a line on the sand at one point by saying, “I will not back down from the idea that, if Americans cannot find affordable coverage, we will provide you with a choice.” Maybe that was the clearest indication of the night that Barack Obama is still sticking to the public plan, to be introduced by whatever means. But a minute later he said he was open to other ideas!

As for the rest on this subject in a 45-minute speech, his 29th devoted to health care in nine months in office, Mr. Obama ducked behind the English language—or, more charitable observers would say, used it to its fullest extent. There was his promise, for example that “nothing in this plan will require you or your employer to change the coverage or the doctor you have.” [italics added] This is a change, even an improvement on past exertions.

Previously, the President had insisted that nobody would be forced to abandon the insurance plan they have. Last night he said nobody will be required. See the change? Of course, all he seems to mean is that the government won’t require you – he said nothing about what the consequences of the plan may prod your employer to do.

To critics, including analysts at The Heritage Foundation, who charge that many employers would gladly dump all their employees into his proposed exchange, leaving millions of American with no real choice but the public plan, President Obama mysteriously said that the government plan “would only be available to those who don’t have insurance.” But the congressional plans are open to smaller firms with insured workers. So what proposal is he referring to?

One could praise the President for showing moxie, as when he evoked America’s “self-reliance, our rugged individualism and our fierce defense of freedom” as he tried, yet again, to sell sweeping controls over one sixth of our economy. Less of a surprise was the decision to close the speech with an ode to the late Sen. Ted Kennedy. Just about everyone was waiting for the Camelot Moment.

And the President did stump for civility. Yes, the man who weeks ago told his opponents “I don’t want the folks who created the mess doing a lot of talking. I want them to just get out of the way,” said with hope in his eyes “I still believe we can replace acrimony with civility.”

He also threw Republicans a bone, or at least hoped that the nation would see it that way. He offered to look at a proposal near and dear to conservatives’ heart—tort reform. That is, reforming the legal system so that bad people will not game the medical malpractice system. Or, rather, Mr. Obama offered to send the proposal to the states and let them experiment with a few demonstrations of ideas — approved by his Health Secretary, of course.

But why not get serious with state experiment, not just for tort reform but for a range of reforms? In fact, that has been proposed in true bipartisan legislation the President seems to have overlooked. The 50 states are the proper laboratories to try out different proposals. But the states need Washington to give them the power to do so.

What we did not see, alas, was a willingness to start over and set aside those issues where the American people can’t agree – most importantly the public plan, the individual and employer mandates, a maze of new federal regulations that pre-empt existing laws, and a massive Medicaid expansion. There are ideas that really do have broad support. The key ones:

1. Empower the states to explore ways of achieving the goals of affordable and accessible coverage for their citizens. Bi-partisan proposals to do this have been introduced in both the House and Senate. As welfare reform showed us, states are laboratories for change and can learn what works and what doesn’t.
2. Extend tax relief for those who need help. Offering tax credit to middle class families in need by reforming the way the tax code treats health insurance. And instead of expanding Medicaid, providing lower-income families will assistance offset by other spending.

At the very least, Mr. Obama and the Democrats should stop trying to ignore reality; they should stop pretending that August didn’t happen, that there hasn’t been a national revolt against a government takeover of health care. They keep telling themselves—and thus keep hearing—that the Town Hall meetings of summer were concocted by FOX News and abetted by the Internet. Reality may need to set in before we can get real reform.

 

Universal Coverage means Suppressing Human Choice

Another Gem from the Mises Institute.  Eric Staib explains why any centrally planned economy, even if it could produce the results it promised, will always be inefficient and a devastating intrusion on human liberty.

It's not that central planning simply doesn't work, it's that it cannot work.  Unless one is prepared to accept a life of utter slavery in all aspects of their lives, philosophies of collectivism can never be considered virtuous or even desirable.

Understand also that the history of human existence does not lend itself to being easily overwhelmed by central planners.  It is because of this that government attempts to regulate human action must always do so with the threat, and use, of force.  A society as large as the United States, with 300+ million citizens, would never voluntarily submit to having their health care choices made by the Government.  It is for this reason that H.R. 3200 carries stiff penalties for individuals who fail to obtain coverage, despite their own personal desires.

Enjoy.  I always do.

Via Mises Daily

By Eric M. Staib

Even if by some miracle Obamacare was able to deliver on its promises, it is still not clear that universal coverage would be a laudable achievement. In fact, the exact opposite is true.

What Efficiency Is and Is Not

To properly address the merits of universal coverage, we must first establish exactly what we as economists consider ideal. Any college freshman can easily cite the promotion of "efficiency" as the ultimate goal of economics, but contemporary political economists profoundly lack an understanding of what it actually means for a market to function efficiently.

A market is said to be "efficient" when its producers and consumers are acting cost-effectively; in other words, when they are economizing on their scarce resources. Consumers are said to be acting efficiently when they choose to consume only those goods and services that most please them. It is easy to see that individual consumption decisions are the only method by which consumer welfare can be maximized.

Unfortunately, when they talk about "efficiency," mainstream economists all but ignore the dual pillars of efficacious market processes and optimal consumer behavior. Outside of theoretical claims about "market externalities," mainstream economists are content to measure what they call efficiency with political analysis of various statistics. These statistics range from the prices of certain goods to the availability of certain services, with the latter often measured in arbitrary terms such as "sufficient health insurance coverage."

To derive a measurement for efficiency, however, is both theoretically absurd and practically impossible, because the simple reality is that economists don't know and indeed cannot possibly ever know which quantities, prices, production processes, and types of employment are efficient.

Economists are able to estimate certain parameters, such as short-term commodity price trends, with some degree of certainty. But it is indeed impossible for economists to predict a prioriwhich goods will be produced, which methods they will be produced by, and what prices they will be sold at, in an efficient market (or what Cordato calls an open-ended universe). It is just as impossible to determine, therefore, whether any given market can be said to be working efficiently.

The only conclusion that economists are able to reach a priori with respect to consumption decisions is that a consumer necessarily consumes those goods within his means that he expects will please him most. This axiom is rooted in praxeological truths regarding human action — namely that man is rational, and that his actions, informed by experience and reason, fulfill his desires.

Therefore, we can observe an individual consumer's choices and thus know his preferences. While a group of consumers can tell a central planner that they really do prefer health insurance to the goods they currently buy, their actual purchases incontrovertibly reveal their true preferences. It is easy to see, then, that a truly free market, which allows each consumer complete freedom of choice, is the best mechanism for the maximization of consumer welfare.

L'Homme Politique versus Homo Economicus

Central planning, be it in health insurance or in farm products, is not designed with true economic efficiency in mind. An efficiently operating market economy does not strive toward political benchmarks — in fact, it abhors them.

Even in a politically regulated economy, individuals will attempt to fulfill their consumption desires so long as legal disincentives are not strong enough — in other words, as long as individuals don't believe they'll be fined or jailed to such a degree as to make the good or service in question too costly. This, of course, is the reason that black markets exist in every country on the planet.

The implications of this point are clear: to enforce central planners' decisions for consumer behavior, the governing body must enforce strict and serious penalties. Not surprisingly, the Democrats' healthcare bill includes just such a penalty for those consumers who refuse to participate in the plan. Such fines may make political plans more effectual, but they will not and cannot make the economy more efficient. Instead, they necessarily make the economy less efficient because they deliberately create suboptimal consumption choices.

Thus far, our discussion of efficiency has made clear what policy makers should not do to increase the efficiency of the operation of the economy. Perhaps we ought to consider what the government should do to increase market efficiency.

As discussed earlier, from the very fact of their abstention from the purchase of healthcare services, we know a posteriori that millions of individuals in this country do not desire health insurance more than other goods or services. Indeed, even with the lower prices for coverage that would prevail in a truly free market, there is every reason to expect that millions would choose not to purchase insurance.

Central planning authorities, then, ought to allow completely free consumption and production of all goods and services. This is not a recommendation for passive policy, but rather for an active policy of economic liberalization and the repeal of every type of prohibition.

The allowance of economic freedom must extend to every type of good, no matter how unsavory or immoral its consumption may seem to the general public. Undeniably, some people will choose to spend their money at their closest casino rather than on purchasing health services.

We should no longer treat such consumers as if they are too stupid or improvident to fulfill their own desires. They are merely individuals with high risk tolerances and strong desires for the psychological thrills of gambling. For such consumers, then, the enforcement of healthcare mandates (and the regulation or outlawing of gambling) unequivocally makes them worse off. While their choices may negatively affect national health statistics, the repeal of all prohibitions would unambiguously increase their happiness.

With such consumers in mind, we can assert with confidence that a health insurance mandate must, by praxeological definition, decrease consumer welfare and thus make the economy less efficient.

Any prescriptions contrary to this formula for efficiency must be criticized for what they are: attempts to impose undesired consumption on individuals, for the political benefit of self-righteous policymakers and so-called public economists.

Eric Staib is an economics major at the University of Oklahoma. Send him mail. See Eric M. Staib's article archives. Comment on the blog.

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