The following question is an intentional exaggeration.  It is designed to challenge the legality of legislation which requires Americans to purchase health insurance under threat of a tax penalty.

A Logical Extreme

Would it be constitutional for the Government to require Americans to purchase cigarettes each month or suffer a non-compliance tax?  How about a beer or bacon double cheeseburger quota?  While the rationale behind such proposals would be different than mandating health insurance, the underlying constitutional questions are the same.

If this extreme example is too fantastical to contemplate because it seems so unlikely, consider an alternative, more “digestible” riddle.

Would it be constitutional to compel every American to consume 5 servings of fruits and vegetables each day and tax those who lack the moral “fiber” to comply? 

The Government already strongly recommends this level of consumption.  And like Health Care Reform, the proposal would be well-intentioned, benefit consumers and proactively impact the nation’s health care costs.

Constitutional Context

The stated logic that mandated insurance coverage is constitutional derives from legal interpretation of the Commerce Clause, and the blueprint under which Social Security was implemented.  Yet many Americans do not understand what Social Security really is or why it has been considered constitutional historically.  The program is not a retirement fund or pension plan in the traditional sense, and no person who has paid Social Security taxes has a legal right or claim to benefits. 

The Social Security Act was a component of FDR’s New Deal during The Great Depression.  Many of the New Deal initiatives were found to be unconstitutional including the National Industrial Recovery Act, Agricultural Adjustment Act, Railroad Pension Act, Farm Bankruptcy Act and several minimum-wage laws. 

In response to these rulings, FDR attempted to “pack the court” in 1937.  While the overt effort to manipulate the court failed, justices began upholding New Deal initiatives, including Social Security, shortly thereafter.  FDR’s longevity further allowed him to transform the Supreme Court into a more sympathetic institution with the appointment of 8 justices beginning in 1937.

Why Social Security is Permissible

The court’s rationale for the constitutionality of Social Security included the following interesting observations.

1. It was determined by a 5-4 vote that the exigent circumstances of The Great Depression required a flexible interpretation of the U.S. Constitution.
2. The Court ruled 7-2 that Social Security was not a contributory insurance program and Social Security taxes were simply a mechanism for raising internal-revenue as derived funds were not specifically earmarked for any particular purpose.

In 1960 the court clarified point 2 by ruling that "entitlement to Social Security benefits is not a contractual right".

The Social Security tax is simply a revenue source for funding the Federal Government’s annual operations.  Nothing is necessarily put aside for the future or allocated to individual contributors.  Benefits are only paid if there is sufficient annual tax revenue and political will to do so.  And there is no predetermined or minimum level of benefits. 

This is the bizarre structure of Social Security; designed specifically to skirt legal restrictions on Federal influence.  The Constitution did not allow the Government to administer a solvent national pension plan, so politicians consciously created an unfunded program and spent Social Security taxes as they saw fit.

Debating the Constitutionality of Health Care Reform

It has been argued that recently passed Health Care legislation is constitutional under an interpretation of the Commerce Clause and because the bill simply levies a general-revenue tax on Americans just like Social Security.

But there are fundamental differences between Health Care Reform and Social Security. 

• The Social Security tax is universal.  The Health Care tax will be selectively and punitively applied only to people not in compliance with specific behavioral edicts.

• This slippery slope would expand the Government’s power to orchestrate virtually any activity which can be qualified as commerce, and would allow policy makers to tax anyone who refuses to engage in a politically directed activity that can be interpreted as commerce.

• The Reform would for the first time afford politicians the legal right to actively direct individuals to purchase specific goods or services. 

An Economic Lesson from The Great Depression

TheAMD.com observes that implementation of Social Security contributed to a worsening of The Great Depression (“the Roosevelt Recession” in 1937) as several billion dollars of incremental taxes were levied on a fragile economy. 

The proposed Health Care Reform will have a similar affect as incremental taxes and increased command-economy restraints stifle economic dynamism, recovery and growth.