Friday, December 20, 2019

Texas v. United States and the Recurring Myth of State Destruction

[by David Schwartz, guest blogger]

Two days ago, in Texas v. United States, the Fifth Circuit held that the Affordable Care Act (a/k/a “Obamacare”) is an unconstitutional exercise of the Taxing Power. The Court reasoned that, because the 2017 Tax Cuts and Jobs Act eliminated the tax for individuals who failed to comply with the “individual mandate” to purchase health insurance, the ACA no longer raised revenue, making the individual mandate a bare regulation and not a tax.
This issue would not even have arisen but for the 2012 decision in NFIB v. Sebelius that Congress could not impose the individual insurance mandate under its commerce power. That ruling was a mistake: whether or not requiring a purchase of health insurance was itself a commerce regulation, it was plainly necessary and proper to a regulation of interstate commerce in health care, and therefore a legitimate implied power under McCulloch v. Maryland. In denying that straightforward application of the doctrine of implied powers, Chief Justice Roberts relied on the longstanding canard that states--and with them, our federal system—would be destroyed unless assertions of federal power are from time to time rejected, notwithstanding their prima facie validity under McCulloch.
The myth of state destruction has a long pedigree. Antifederalists during the Ratification debates insisted that the broad powers granted to the federal government would lead inexorably to a “consolidated” government, which was the late-eighteenth and nineteenth century word for a “completely centralized” government in which states were nullities with no meaningful regulatory power. The proposed Constitution, in the words of one prominent antifederalist, would empower the national government to “legislate the height of fence posts,” leaving nothing for state legislatures to regulate. This myth was perpetuated by the Taney Court, which argued that states held “a sacred right of self-defense” by which they could defeat prima facie claims of federal power that might touch on state powers to protect slavery.
As I argue in The Spirit of the Constitution, this exaggerated fear was perpetuated by a jurisprudential error: that legislative power must be exclusive rather than concurrent. 

We now know that states can thrive under a concurrent powers regime. Under modern Commerce Clause doctrine, for example, the federal government has plenary power to regulate all aspects of the national economy. Yet the states’ powers to regulate their economies remain vast: with the narrow exception of the Dormant Commerce Clause doctrine (which prohibits state protectionism), states are free to legislate on any economic matter unless affirmatively preempted by federal legislation.  While in theory, Congress could preempt all state regulation on matters substantially affecting interstate commerce, in practice preemption remains the exception rather than the rule.
Late eighteenth and early nineteenth century legal thinkers were very confused about the idea of concurrent powers. Constitutional thinkers repeatedly asserted that powers granted to the federal government were “surrendered” by the states: not shared, but lost. This mistaken belief is built into the Tenth Amendment, which provides that “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.” That 1789 text is not an accurate statement of our modern legal regime of concurrent powers mediated by the doctrine of federal preemption, because states in fact retain, by sharing, many of the powers delegated to the federal government.
While the Supreme Court in McCulloch v. Maryland recognized that the federal government and the states held overlapping taxing powers, the Marshall Court seemed unable to wrap its head around concurrent powers in general. Chief Justice Marshall in Gibbons v. Ogden seemed unable to sort through the question of whether the commerce power was exclusive. Marshall’s colleague, Justice Bushrod Washington, captured the confused state of thinking perfectly in announcing the judgment of the Court in Houston v. Moore, 18 U.S. (5 Wheat.) 1 (1820), a case involving the question of federal versus state power to regulate state militias. “I am altogether incapable,” Washington wrote, “of comprehending how two distinct wills can, at the same time, be exercised in relation to the same subject, to be effectual, and at the same time compatible with each other.”
Following the Civil War, legal thinkers seemed to understand that the Constitution could and did empower both the federal and state governments to regulate “the people” concurrently. The idea that the Constitution created “an indestructible union composed of indestructible states,” Texas v. White, 74 U.S. (7 Wall.) 700, 725 (1869), could co-exist with the idea that the federal government could exercise regulatory power over “every foot of American soil.” Ex parte Seibold, 100 U.S. 371, 394-95 (1880). Yet the Court disingenuously re-purposed the myth of state destruction to support a laissez faire jurisprudence. Asserting that states would be destroyed as sovereign entities unless they held identifiable “reserved” powers, the Court enumerated state powers over labor and production—agriculture, mining, and manufacturing—that the federal government could not regulate.
The myth of state destruction persisted through the New Deal. Consider this famous phrase from Justice Benjamin Cardozo in his concurring opinion in A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 554 (1935). Schechter Poultry is the infamous “Sick Chickens” case, in which the Supreme Court struck down the National Industrial Recovery Act (“NIRA”), the signature legislation from FDR’s first 100 days in office. The Court’s principal objection to the law was that a local “code of fair competition” promulgated under the NIRA, which purported to regulate health standards for commercially sold poultry, was too indirectly connected to interstate commerce to be a valid exercise of Commerce Clause power. Cardozo observed that upholding the NIRA would “obliterate the distinction between what is national and what is local and create a completely centralized government.”
The idea that a thriving federal system requires identifiable subject matter “reserved” to the states and prohibited from federal regulation was killed off—or so we thought—in the  late New Deal. It is obviously false: the states as semi-sovereign regulatory entities continue to thrive today despite a recognized federal power to regulate virtually all national problems. The national political process protects federalism because it will always be practical to devolve a hefty chunk of policy matters to the states. Yet the myth of state destruction continues to arise, like the walking undead. Cardozo’s line from from Schechter Poultry was “re-tweeted” as recently as 1995, in United States v. Lopez, 514 U.S. 549, 566-67 (1995), where the Court reminded us that it will continue to strike down laws as exceeding the commerce power. Texas v. United States demonstrates that the myth continues to rear its ugly head.

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