An Examination Of CATO's Analysis Of The ACA


#1

This is my take on the CATO piece that RWNJ referenced in another thread, they are attempting to determine the ramifications in a practical way of the Obamacare decision handed down by the Roberts Court.

George Will referenced this piece as a possibly brilliant move by Roberts instead of the pure condemnation of this ruling that Constitutional Conservatives are in nearly unanimous agreement over.

Will’s position was basically that Robert’s had created an environment that would doom Obamacare by calling the “penalty” a “tax”, apparently Will thinks that Robert’s reasoning (quoted here) is binding;

The penalty for not buying insurance is constitutionally a tax, the majority reasoned, because it is relatively small in size, has no “scienter” requirement (i.e., does not require an intentional failure to purchase insurance), and is to be collected by the Internal Revenue Service.

There is no doubt that this was the reasoning of the majority, it is a direct quote from the opinion.

The part that I fail to understand is why Will thinks that the non specific term “small in size” amounts to a Supreme Court order that this “tax” cannot be increased, CATO offers nothing to suggest this and I am aware of no precedent for the idea that taxes “must be small” or they become “true” penalties and then become “Unconstitutional”.

Here is the Robert’s quote that Will’s opinion hinges on;

The shared responsibility payment may for constitutional purposes be considered a tax, not a penalty: First, for most Americans the amount due will be far less than the price of insurance, and, by
statute, it can never be more.

I assume “By Statute” means the text of Obamacare itself since no former ruling or legislation is mentioned supporting this idea.

CATO and Will seem to think this statement from Robert’s could doom Obamacare by following this pattern;

  1. The young and healthy will opt to “pay the tax/penalty” instead of buying insurance because it would be much cheaper and Obamacare assures that citizens can wait until they are sick to buy insurance since no person can be refused based of pre-existing health issues.

  2. The resulting exodus by the young will mean the insurance roles will be populated by mostly older, sicker citizens with much need for care, causing insurance rates to rise dramatically.

  3. Due to the Statute restrictions on the size of the tax/penalty there will be no funds available to adequately subsidize the rising insurance rates, rendering Obamacare bankrupt and forcing its demise.

CATO summarizes it this way;

This reasoning suggests that the penalty for failure to carry health insurance can count as a tax for constitutional purposes only if it is kept so small as to be largely ineffective.

The first two points are undeniable, anyone with any understanding of economics and human nature will see that. It is the 3rd point/conclusion that I take issue with for these reasons;

  1. The closest Robert’s came to defining “small penalty” was “less than the cost of a policy”, even if his opinion regarding this element was binding the tax/penalty could rise to just one penny less than an insurance policy (or HUGE in other words) before the Robert’s opinion was violated.

  2. There is nothing to stop Congress from funding Obamacare with other/new taxes derived from other sources via new legislation, meaning the tax/penalty could be left alone in respect of the Robert’s opinion and we could be paying the cost through new fuel taxes or any other number of alternatives.

  3. There is nothing that demands Congress must take in as much as it spends to begin with, massive deficits are commonplace in Washington.

In short, I think Will and to a degree CATO are trying very hard to save Robert’s reputation by suggesting that he came up with a complex and brilliant way of stopping Obamacare without appearing to do so. Every justification Robert’s offered in this decision is ridiculous and indefensible, especially the “custom” of making the highest priority “finding a way to call the law constitutional” instead of being a firewall between the whims of Congress and the Constitutional foundation of our Nation.

The entire CATO piece is worth reading, they outline very well how the multitude of flaws will compile and create devastation for the Heath Care industry. I only disagree on the issue of the Democrat’s arriving at a place where they must repeal Obamacare, I think they knew exactly what this structure would cause and they intended it all.

Once private insurance companies go broke the way is clear for a “single provider” (or more accurately a “no competition” government solution, that is what they wanted all long.


#2

[quote=“RET423, post:1, topic:39879”]
The entire CATO piece is worth reading, they outline very well how the multitude of flaws will compile and create devastation for the Heath Care industry. I only disagree on the issue of the Democrat’s arriving at a place where they must repeal Obamacare, I think they knew exactly what this structure would cause and they intended it all.

Once private insurance companies go broke the way is clear for a “single provider” (or more accurately a “no competition” government solution, that is what they wanted all long.
[/quote]I also believe this to be the case. The economics of this program are absurd. Honestly, if Will and CATO (the writer) are correct, then it only hastens the demise of ACA to this end. I haven’t had a chance to finish that article yet myself, but I will return here when I do.

Links to the topic:

The time bomb in Obamacare? - Washington Post

Full text of the Supreme Court health-care decision - The Washington Post

How the Supreme Court Doomed the ACA to Failure by Thomas A. Lambert :: SSRN


#3

Great thread RET!


#4

I guess that I need to read this entire article. CATO usually has decent articles that are well-researched. Reason.org was very similar too.

I’m with RETs thus far in that I’m not sold that calling a penalty a tax is a good thing.


#5

The one saving grace may be the timing, with SSI, Welfare, Unemployment and Medicaid there was a period of escalation that occurred while the traditional means of dealing with these various issues were dying out and being forgotten so the burden to Taxpayers grew gradually.

With Obamacare the Nations fiscal condition is horrible to start with and the escalation of dependance will be rapid, everyone will remember how much better health care was when at least some Market Forces were still in play.

That may cause the unthinkable historically, repeal for political survival due to voter outrage.

If I was betting I would put my money on this course over the tabling or repeal based on politicians worried about the increasing debt and their hands being tied on tax increases due to the Robert’s opinion.