Counterparties: The Supreme Court’s healthcare tax argument

June 28, 2012

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If you haven’t seen by now, or were, like President Obama, confused by CNN and Fox News or are already fleeing for Canada the Supreme Court upheld Obamacare today. The individual mandate, Chief Justice John Roberts wrote in his ruling, is not broccoli or car insurance. It’s effectively a tax (even if Obama didn’t want to call it one).

The court ruled that the penalty for not buying health insurance contained in Obamacare is part of Congress’s wide constitutional power over the tax code. Legal scholar Erwin Chemerinsky, in comments to NPR, put this into context: “Since 1937 not one Federal tax and spending program has been declared unconstitutional”. David Leonhardt helpfully points out that the tax code effectively penalizes Americans for all sorts of things like not having children.

The economic impact of the ruling is immense. To the right, it’s the “biggest permanent tax increase in history”. To the left, millions more Americans will now have access to healthcare. (In the long term, some 30 million more Americans will have health insurance; the short-term benefits include adding some 3.1 million young Americans to the ranks of the insured.)

The ruling, Jared Bernstein writes, did have at least one dark cloud for Obamacare fans. The bill said the federal government could withhold all Medicaid funding from states that didn’t agree to expand Medicaid coverage to older and poorer Americans. The court shot that portion of the bill down, leading to worries that some states would begin withdrawing from Medicaid altogether. Josh Barro isn’t concerned; the choice is really “should we take this nearly free money from the federal government?”

There are murky long-term issues as well. Jonathan Chait and Tom Scocca both note that five justices ruled that a health insurance mandate not structured as a tax is unconstitutional. To Socca this reading of the Commerce Clause is a serious attack on congressional power over the economy: “Obama wins on policy, this time. And Roberts rewrites Congress’ power to regulate”. Ryan McCarthy

On to today’s links:

The Supreme Court’s healthcare decision in one paragraph – SCOTUSblog

A profile of Chief Justice Roberts, the man who just saved Obamacare – New Yorker
The economics of the SCOTUS healthcare decision – Mark Thoma
There goes the uncertainty crutch for healthcare companies – WSJ

New Normal
Markets can’t prosper without heavy intervention and liquidity injections – Deutsche Bank
Long-term unemployment is doing permanent damage to the US economy – OECD

Negative Indicators
Local governments in China are selling their luxury car fleets – Walter Russell Mead

The market’s ability to price risk is “broken at a deep level” – Brad DeLong

JPMorgan’s botched hedges could cost it up to $9 billion – Teri Buhl
“It’s getting less & less believable that JPMorgan exited 65-70% of its trade”– Lisa Pollock

Scandal or not, two graphs that show just how sharply interbank lending has fallen – Sober Look

This is Actually Happening
Elizabeth Warren and Scott Brown are arguing over who supported Dodd-Frank more – WaPO

News Corp board agrees to split the company up – WSJ
The long history of reporting on LIBOR’s inconsistencies – CJR

Phil Falcone’s alleged piggish behavior made him some enemies – Dealbreaker

ince 1937, not one federal taxing or spending program has been declared unconstitutional.




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The immediate issue should what is going to be done to get more health care supply now that demand has increased. Doctors and nurses are well paid once they are in the profession and paid off loans. But how do make them if the roadblocks to becoming one, limit the supply. One obvious thing is free tuition at schools the accept the paid amount as payment in full. Also do we have enough hospitals to employ them all.

Posted by SamuelReich | Report as abusive

As a Canadian, I resent that so many Americans I know are offering to come live with me.

Americans need to go through the tweaking process to get to where we are today… and just a reminder… Canadians hated the first drafts as well and took years to come round. Now, we would be storming the capitol if it were revoked.

After birth there is still a lot of whining and crying, teething and potty training…so good luck with your new baby!

In case you missed this Dewey defeats Truman pic:  /2012/06/Ouch.jpg

Posted by youniquelikeme | Report as abusive

@SamuealReich What is the productivity of the US medical care system? I refrained from using “Health Care” as it is the patient end of the business your point referred to. Usually private healthcare covers its low productivity with high costs – and the US healthcare costs are probably the highest in the world; not because the care is better, but because there are so many golf courses.

You don’t have to look at other countries such as Canada (where the identical prescription drugs are significantly cheaper than in the US) or Switzerland (where health insurance costs roughly half that in the US for the same or better healthcare – eg unlimited cover, no penalties for pre-existing conditions) for comparisons; just look at the productivity levels of Medicaid provision, and the Community Hospitals. Somewhere in the mix there is a sweet spot that improves things all around. The Doctors should see that…

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Posted by traducator daneza romana | Report as abusive