All Commentary
Monday, October 23, 2017

Obamacare Subsidies Are Unconstitutional

The subsidies for Obamacare were never constitutional, and we shouldn't ignore that just because Trump got rid of them.

Last week, President Trump issued an executive order instructing the heads of Health and Human Services and the Treasury to stop making ACA subsidy payments to 6 million people who qualified for them.

Calumny and challenges quickly followed. Attorneys general in 18 states quickly sued that the order was unjustified. That same group has now also asked for a restraining order to stop it. California Attorney General Xavier Becerra, one of the 18, called it irresponsible and illegal.

Blowing Constitutional Smoke

Trump’s challengers are blowing constitutional smoke. Every federal program requires two steps before it can spend money. Congress must authorize it and appropriate the money for it. Both steps are necessary. And the Constitution could not be clearer on the second step: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” However, the money for the ACA subsidy payments was never congressionally authorized.

The bet was that the subsidies would be politically impossible to undo. So where did the subsidy money come from? President Obama simply ignored the constraints of the Constitution when it got in his way. He instructed the heads of Health and Human Services and the Treasury to divert money appropriated for other programs, but he left unspecified which programs were to be cut. Why leave that unspecified? If a specified program was raided, Congress and the beneficiaries of that program would have a clear cause of action to prevent it. It could be judicially enjoined immediately. But somehow, Obama’s failure to specify where funds would come from, even though every possible diversion would be unconstitutional, and delegation of the dirty work to cabinet members was supposed to shield the President and his signature legislation from constitutional scrutiny long enough (given the slow-grinding wheels of justice) to make it a fait accompli.

After that, the bet was that the subsidies would be politically impossible to undo, even if the courts eventually ruled against them, because members of the House and Senate would then authorize the money to continue the subsidies, too afraid of the electoral consequences of taking away what millions of people had already been given unconstitutionally.

Supporters of that game plan to finalize getting around the Constitution also chimed in. For instance, law professor Nicolas Bagley (“Trump’s disastrous war on the ACA,” Los Angeles Times, 10/16) advocated that we should just ignore the violation of the Constitution. Even though the administrative decision to commit subsidy funds from other programs when Congress wouldn’t appropriate the money was known to be unconstitutional, he argued that we should ignore that, because he claimed Trump’s “constitutional rhetoric is pure pretext” to sabotage the ACA. That is, we should just fall in line with Obama’s illegal administrative commitments because Trump’s closer adherence to the Constitution than law lecturer Obama lines up with his belief ACA is a bad deal. In other words, Trump’s opposition to ACA justifies maintaining Obama’s constitutional violation in implementing the ACA.

Constraining Government

Americans should be learning a very important lesson on the importance of keeping government within its Constitutional powers. Such a conclusion may deserve a place in a “how not to interpret Constitutional law” illustration, but it does not deserve serious consideration. However, that argument, and the plan it supports, seems to be winning the day. The subsidies that millions have gotten used to having already hardened into a sense of entitlement, un-swayed by inconvenient Constitutional restraints, which, with the flames fanned by Democrats, have cowed many ACA opponents into proposals to provide the money (of course, “just temporarily,” even though, as Milton Friedman pointed out long ago about New York city’s “temporary” World War II rent controls, “there is nothing so permanent as a temporary government program”).

What we are seeing is another lesson in the art of creating an end run around the Constitution’s protections for Americans against their government overstepping its enumerated powers. And it is hardly the first time, even for the ACA. Remember the penalties for not having insurance under the ACA plan? It was emphatically claimed to not be a tax, but a regulation (and hence not counted against the ACA in fiscal scoring), but Chief Justice Roberts’ 5-4 majority decision found the ACA constitutional only because it really was a tax, which Congress has the power to impose, when a regulation to mandate that Americans must purchase something would have been unconstitutional.  

With such a vivid current illustration of the evisceration of the Constitution joining many more that we have already seen, Americans should be learning (or, perhaps better, re-, re-, re-, re-learning) a very important lesson on the importance of keeping government within its Constitutional powers to protect our freedoms from abuse at its hands. However, it remains to be seen whether we will.

  • Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network.

    In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).