How Obamacare Will Be Settled: A Primer on the Commerce Clause

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As the Supreme Court hears arguments about the individual mandate, a complete look at the history of similar constitutional decisions.

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Amid rampant speculation over the fate of Obamacare in the Supreme Court, a critical question has been missed: How will the justices decide whether to uphold or strike the individual mandate?

The case the Supreme Court will hear is an appeal of an Eleventh Circuit decision holding the individual mandate unconstitutional under both the Commerce Clause and the Taxing and Spending Clause of the Constitution. The only potential positive for Obamacare in the ruling was the finding that the mandate is "severable." Severability would allow the rest of Obamacare to stand even if the mandate falls.

To date, four of 13 circuit courts have ruled on the individual mandate. The Sixth Circuit and D.C. Circuit upheld the individual mandate under the Commerce Clause. The Fourth Circuit dismissed a case on the rationale that the mandate's penalty for not buying insurance is a tax. Under the Anti-Injunction Act, taxpayers cannot challenge a tax before it goes into effect. Only the Eleventh Circuit found the mandate unconstitutional under the Commerce Clause.

The Court's roughly 75-percent rate of reversing lower courts seems promising for the U.S. in the abstract. Circuit-by-circuit data suggest the potential to determine how in-step a circuit's judges are with the Court on average -- and thus the likelihood the Court will reverse a circuit's case.

In the 1950s, the Court upheld a wide range of legislation regulating everything from forms of fraud to discrimination against small businesses to unfair business practices within professional football.

Senator Rick Santorum has used these statistics to claim that the Ninth Circuit is a "rogue" court and "a pox on the western part of our country." Santorum and former House Speaker Newt Gingrich have called for the abolishment of the Ninth Circuit. But Santorum and Gingrich's complaints about the Ninth Circuit have been discredited. Last term the overall reversal rate was 72 percent. While the Ninth Circuit was reversed 79 percent of the time, the Fifth Circuit -- at 80 percent -- and Sixth Circuit -- at 83 percent -- had higher reversal rates.

Reverse-affirm ratios cannot reliably forecast individual case outcomes. Statistics are particularly uninformative in this instance. There are too many variables -- and too few data points since Justice Elena Kagan's confirmation -- to predict how the Court will rule on the Eleventh Circuit appeal.

Last term, Kagan's first, the Court heard 82 cases overall. Only 71 of these cases were circuit court appeals; just 13 came from the four circuit courts that have ruled on health care so far. Kagan recused herself from 29 cases. Moreover, every circuit court decision is made by a panel of three judges randomly selected from a pool of between six and 28 judges, depending on the circuit -- meaning each circuit has between 20 and 3,276 possible three-judge panels.

The lines of argument for the Eleventh Circuit appeal to the Supreme Court have already been defined. In his January 6 brief (PDF), the Solicitor General placed renewed emphasis on the claim that the individual mandate can be justified under the Taxing and Spending Clause. But that's the backup plan -- the Obama administration's legal Hail Mary if it loses the Commerce Clause argument.

The individual mandate will likely live or die by the Commerce Clause. When the Supreme Court hears the Eleventh Circuit appeal this month, arguments -- and the justices' questions -- will revolve around strict guidelines for Congress's exercise of commerce power.

Congress introduced the basis for the contemporary view of its commerce power in the 1880s. In the 1930s, the Court accepted the definition and began developing and refining the principles for assessing Commerce Clause legislation. Today's Commerce Clause jurisprudence is the cumulative product of a series of cases spanning from 1937 to 2005.

BACKGROUND ON THE COMMERCE CLAUSE

In the first century of our nation's history, Congress hewed to a very literal, limited understanding of the relevant text of Article I: "To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes." Put simply, Commerce Clause legislation could regulate only business-related activities in interstate commerce.

The inception of contemporary Commerce Clause doctrine dates to the Interstate Commerce Act of 1887, regulating railroad monopolies, and the Sherman Antitrust Act of 1890, designed to curb monopolies and trusts. The Court upheld the Sherman Antitrust Act in 1905 -- in Swift and Company v. United States, 196 U.S. 375. However, the justices based that decision on the finding that the effect of price-fixing by Chicago meat-packers on interstate commerce was not "accidental, secondary, remote or merely probable" but immediate. The opinion reinforced the traditional literal view of Congress's Commerce power.

The Supreme Court case that established the constitutionality of the expanded interpretation of Congress's commerce power was National Labor Relations Board (NLRB) v. Jones & Laughlin Steel Corporation, 301 U.S. 1, in 1937. The case originated in Aliquippa, Pennsylvania, where Jones & Laughlin was penalizing and discriminating against workers attempting to unionize. NLRB ordered Jones & Laughlin to end its coercive union-busting tactics; the firm refused to obey. After the circuit court refused to enforce the NLRB's order against Jones & Laughlin, the NLRB appealed to the Supreme Court.

Jones & Laughlin argued that Congress could not regulate its labor practices because manufacturing is an intrastate activity, not interstate commerce. The firm based its argument on then-standard reasoning stemming from a 1918 Supreme Court case, Hammer v. Dagenhart, 241 U.S. 251. In Hammer, the Court allowed a father to commit his son to child labor in a North Carolina textile mill despite the Keating Owen Child Labor Act of 1916, reasoning that mill work was part of intrastate manufacturing, not commerce between or among states.

Rejecting the firm's argument and ruling in favor of the NLRB, the Court stated for the first time that Congress could regulate activities with "a close and substantial relation to interstate commerce." The NLRB decision marked the replacement of the strict criterion that regulated activities must be part of the "stream of commerce" with the "substantial effects" doctrine still in use in Commerce Clause cases.

Just a few years later, in 1941, the Court rearticulated its "substantial effects" test in upholding the Fair Labor Standards Act of 1938 in United States v. Darby, 312 U.S. 100, forcing a Georgia lumber company to improve worker conditions. Now, any activity with substantial effects on interstate commerce can be a proper subject of congressional regulation.

Congress continued to exercise this expanded Commerce Clause power for the better part of six decades -- with periodic affirmation and clarification from the Court. The Commerce Clause was the basis for not only New Deal legislation but also the Civil Rights Act of 1964.

In the 1942 case Wickard v. Filburn, 317 U.S. 11, the Supreme Court upheld federal legislation -- the Agricultural Adjustment Act of 1938 -- that restricted individual wheat production in the name of broader regulation. The ruling generated the "aggregate effects" doctrine, licensing Congress to legislate local, individual actions that could potentially affect interstate commerce in the aggregate. Congress does not need to prove the aggregated effect on interstate commerce -- only a rational basis for believing there will be an effect.

In the 1950s, the Court upheld a wide range of legislation regulating everything from forms of fraud -- Federal Trade Commission v. Mandel Bros., Inc., 359 U.S. 385 (1959) and Securities & Exchange Commission v. Ralston Purina Company, 346 U.S. 119 (1953) -- to discrimination against small businesses -- Moore v. Mead's Fine Bread Company, 348 U.S. 115 (1954) -- to unfair business practices within professional football -- Radovich v. National Football League, 352 U.S. 445 (1957).

In 1964, in Heart of Atlanta Motel v. U.S., 379 U.S. 241, the Court unanimously upheld the desegregation of public accommodations by the Civil Rights Act under the Commerce Clause. The majority wrote, "Congress may -- as it has -- prohibit racial discrimination by motels serving travelers, however 'local' their operations may appear." A second 9-0 ruling issued the same day, Katzenbach v. McClung, 379 U.S. 294, found that racial discrimination by restaurants also impeded interstate commerce -- another victory for the Civil Rights Act.

It was 30 years before the Supreme Court checked Congress's commerce power. The Rehnquist Court limited the exercise of the Commerce Clause in a pair of critical cases in 1995 and 2000, but returned to the prior, expanded view of the power based on the same criteria in a 2005 case.

In a five-four decision in U.S. v. Lopez, 514 U.S. 549 (1995), the Court struck down the Gun-Free School Zones Act of 1990 as beyond the scope of the Commerce Clause after a high-school senior caught carrying a .38-caliber revolver on campus challenged his conviction. The justices wrote that to be constitutional, the legislation would have to "limit its reach to a discrete set of firearm possessions that additionally have an explicit connection with or effect on interstate commerce." The Court scolded, "[I]f we were to accept the Government's arguments, we are hard pressed to posit any activity by an individual that Congress is without power to regulate."

The second major blow came five years later in U.S. v. Morrison, 529 U.S. 598, another five-four split. A student at Virginia Tech filed suit against her rapists under the Violence Against Women Act of 1994 (VAWA) after a state grand jury refused to charge either man. The Court struck down VAWA on the grounds that gender-based violence was not sufficiently relevant to interstate commerce. Like gun possession, the Court reasoned, violence against women is not "some sort of economic endeavor."

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Rebecca Buckwalter-Poza is a writer and political consultant. She has worked on campaigns and policy projects on five continents, most recently with the Asian Human Rights Commission and Asian Legal Resources Center in Hong Kong. More

Rebecca Buckwalter-Poza is a writer and political consultant. She has worked on campaigns and policy projects on five continents, most recently with the Asian Human Rights Commission and Asian Legal Resources Center in Hong Kong. Rebecca contributed to James Carville’s 40 More Years: How Democrats Will Rule the Next Generation as well as Paul Begala's Third Term. Previously, Rebecca served as deputy national press secretary of the Democratic National Committee during the 2008 election. She has also worked for the Progressive Accountability Office, the Center for American Progress, and the Office of James Carville.
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