Sunday, February 19, 2012

We can't let individual mandate stand

Published in The Tennessean, Sunday, February 19, 2012 and Forbes

by Richard J. Grant

“Is a thumb a finger?” That is the question Major Muller asks in Michael Ondaatje's, The English Patient, to mock the Geneva Convention before severing his prisoner's thumbs. Were he a present-day Congressman, he might better ask, “Is an individual mandate a tax?”

This is the question that U.S. Rep. Scott Garrett, R-NJ, asked White House budget director Jeff Zients about President Obama's claim that no family earning under $250,000 would be subjected to a tax increase. Rep. Garrett asked, “So if I am part of a family that does not buy health insurance in violation of the president's health-care program and I have to pay [a fine] because of that, that is not a tax increase – that is not a tax on me?”

Sensing the trap, Mr. Zients tried to evade. He replied, “The Affordable Care Act saves money.” But not only was his statement absurd, it further highlighted the weakness of the Obama administration's case. The Affordable Care Act (ACA) raises costs. The individual mandate has no other purpose than to force low-risk, low-cost individuals to purchase medical insurance at a price that would subsidize insurance companies and current consumers for their increased costs.

Even with the individual mandate, costs will be higher and efficiency lower than it would have been in the absence of the ACA. Neither the individual mandate nor the other parts of the ACA will correct, or be justified by, the present-day high-cost environment created by previous government interventions. But without the individual mandate, the higher costs will be glaringly obvious.

Next month, the U.S. Supreme Court will consider the constitutionality of the ACA and its individual mandate, which coerces individuals to purchase a private product. If the act is struck down, due to the inclusion of the individual mandate, the Government will argue that the mandate is “severable” and that the remainder of the act should stand. But even if the remainder survives court scrutiny, the burdensome cost structure would more-rapidly be revealed.

This is why Rep. Garrett's question was so important. He closed in with, “A moment ago you said there's no tax increase.” Mr. Zients replied, “There aren't.” Rep. Garrett: “So that's not a tax?” Mr. Zients: “No.”

Rep. Garrett then put the issue in context, “That's not a tax. Okay. I just want to be clear on that because that's not the argument the administration is making before the Supreme Court.”

Politicians are often accused of saying different things to different audiences, and that is what the Obama administration has been caught doing. When speaking to voters, the administration claims that the individual mandate is not a tax. But if it says the same thing before the Supreme Court, the individual mandate will almost certainly be ruled unconstitutional.

Such mockery of the Constitution worked for the Franklin Roosevelt administration when it was marketing Social Security and defending it in court. But with closer scrutiny and better public awareness, neither the Supreme Court nor future congresses are likely to let the ACA stand.

The ACA shifts us further away from the rule of law toward a regulatory state. The longer it takes to remove this act, the more resources will be wasted by governments and private businesses in preparing to implement the act's provisions.

May checks and balances save us from an administration that is all thumbs.

Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee. His column appears on Sundays.

Twitter: @RichardJGrant1

Copyright © Richard J Grant 2012