could still be so unstable that congress will have to revisit this law, reopen it, and as we know, there will be at least one house or a high likelihood there will be at least one chamber of congress that will only be at satisfied with full repeal of the law. >> okay. wait for the microphone. let's start right here. state your name and any affiliation. and please actually ask a question. >> okay. my name is jim, no affiliation, and this question is directed to miss wydra. you mentioned a bill of rights as a restraint on the commerce clause. congress first sat under the constitution in march of 1789. the bill of rights was ratified on december 15th, 1791. are you saying that between nose two dates, it would have been proper for congress to authorize searches and seizures under the commerce clause? >> no. i mean, that was -- the fourth amendment was simply an example i gave.

the rest of the constitution, in addition to the amendments to it, also serve as a limit on the exercise of any of the other provisions in the constitution. you know, you have things -- so for the necessary and proper clause, it says "proper." that means several things. it has to be a properly enacted law, according to the ways that the constitution sets out for legislation to be passed, you know, by both houses of congress, et cetera, et cetera. and it also means proper in terms of not violating any other provision of the constitution. that means both any amendments to the constitution or any provision of the original constitution itself. >> sure. >> many of the supporters of the bill say that one of the limits on the commerce power is the bill of rights, for example. you can't use the commerce power to violate the bill of rights.

they stress this even more than elizabeth does. yet, that is just a concession that the commerce power -- it's an indirect way of admitting that under their theory the commerce itself has no power. the commerce power is unlimited except for when it violates the right of freedom of speech. that's the same degree of power that states have. the state's power and police power is unlimited unless it violates the freedom of speech. so essentially what their argument is the scope of the congress's powers is the same as the scope of the state's power, which is the police power. and as you so rightly point out, it was two years before there was a bill of rights, which would suggest that the scope of the national power was changed when the bill of rights was enacted under that argument, and nobody thought that at the time. in fact, what they thought at the time was the bill of rights, many people thought, but not everybody, thankfully, is that the protection of individual liberty was to be provided by the limited and scheme of article 1, section 8. that was a protection of

individual liberty that the federal government would be limited in those powers. and that is a proposition that the supreme court unanimously affirmed last year in the bond case, in an opinion by justice kennedy in which he said that an individual citizen has standing to bring a claim that commerce has exceeded its enewsroom rate powers because it's not only the states that are protected by the enumeration of powers, but it's the individuals and their liberty that are protected. and that is a decision that just came out last year authored by justice kennedy. >> but it's not the same as police power because it has to be related to commerce among the several states. that's another example of where the constitution itself places the limit on the commerce power. >> that's true. and it's a useful concession. but i would say if you take the theory of the necessary and proper clause, that anything that has an economic effect, including, you'll notice the euphemisms here, a decision not to engage in commerce, a decision not to enter a marketplace is then deemed an economic decision. and the economic decision to refrain from entering the marketplace is said to have an effect on interstate commerce,

which of course it does. then by that route you're back to a unlimited police power in the federal government. >> i hope everyone was listening to that that's the key. this colloquy is the key to the whole thing. >> i'm sorry, i can't hear you. >> i would like to address this question to anyone on the panel. as a professionally trained clinician working in health care, mr. cannon was asked what would be the consequences if this law were upheld or not upheld. what is not in this law was tort reform. and for those of us who are -- i don't know if there are any physicians, is this an appropriate thing to pass without tort reform, or would it be something would have to go back and be revisit and rewritten, because tort reform was never part of this health care law. >> mike, if you want to address the policy, randy. >> i think the constitutionality

is probably the more important. >> i have a niece who is a doctor in philadelphia, and she says that if it weren't for the threat of tort liability, she wouldn't perform some 90% of the tests she has to perform and she wouldn't keep 90% of the people who have to stay for an overnight stay, except for the fact if they were to release these people without performing that test, and some doctor anywhere would say that test, they would have prescribed that test, then she and her hospital are on the hook under the state tort law. tort liability. that has substantially driven up the cost of both health care and the insurance to pay for health care. and it's something that must be addressed. however, it's something that must be addressed at the state level because tort law has historically been a matter of state law, and should it be a matter of state law. and the only way congress can claim power to effect tort -- a reform of tort law would be to claim the same kind of expanded commerce clause power that they

are doing with obamacare. and that's something they shouldn't do. >> elizabeth do, you have anything on that? >> no. >> let's go right there. >> john with congressman garrett's office. if the penalty is considered to be attacks for not adhering i guess this is all for the constitutional lawyers too. is that tax then considered a direct tax and therefore subject to apportionment? and if so, what sort of problems do you see that causing? >> so i think the question whether it's a tax is really the dispute has been over whether it's a tax at all. so the argument that it is constitutional under the taxing power is that it raises revenue. it's not punitive, and the

supreme court has held that the label given to attacks is not going to be determinative. so the fact that it's called a penalty does not necessarily mean that it's not actually a tax. i don't think anyone is talking about the aia. i want to raise an interesting point about that. as randy mentioned in his opening remarks, the anti-injunction act could hunt this issue until the individual mandate goes into effect in 2014 and the tax or penalty or whatever you want to call it is paid on your tax return in 2015. so if the court does that, decides that the anti-injunction law applies, that's a pretty big endorsement that it thinks the mandate is a constitutional tax. so even though the obama administration might not have won on the merits if the court applies the anti-injunction act, i think it will go a long way

towards the supreme court saying eventually it is a tax. >> i don't want to get into the aia. interestingly enough, in a development only lawyers can love, this could be a tax for anti-injunction act purposes, but not for constitutional purposes and vice versa. i mean, the fourth circuit, which is the court that ruled applying the anti-injunction act to bar one of the lawsuits there specifically dropped a footnote to make that point. and this is commonly held. i'm not going to go into why that is. it's very, very technical. >> can i say about the tax power? people are interested. it's going to be an argument that will come up. there are several reasons why this is not a tax, and then i'm going to address the tax question. first of all, it's not called a tax. i agree what something is called is not dispositive. but the first approximation of an answer is they didn't call it a tax. they call a lot of other things in the bill a tax there is a reason why they didn't call it a tax, because they didn't want political accountability for having called a tax. it isn't called a tax.

secondly, it doesn't fit the definition of a tax. tax has been supplied by the supreme court as a measure the purpose of which is to raise funds for the federal government or raise funds for the general government, as opposed to a penalty, which is defined as a sanction for the failure to perform an act that the government does or does not want you to perform. which does this look like? it is a penalty and it functions like a penalty. and it was not among the revenue raising provisions of the bill. it wasn't even scored as a revenue raising provision by the cbo. so it doesn't fit the definition of tax. but if it were a tax, it would be a direct tax. a direct tax, this is really arcane, but a direct tax, which is okay, congress has the power to impose direct taxes, but if they do, it has to be apportioned by population among the respective states, a direct tax is on you, a head tax, you or your property. you have to pay a tax because you're you. that's what this is. for example, congressmen posed a

tax on carriages, a license tax on carriages. and that was held to be excise tax. i bet your bottom dollar if congress had imposed a tax on people who did not own carriages that that would have been found to be a direct tax. if it was a direct tax it needs to be apportioned. since this bill does not apportion it, this bill is unconstitutional. having said all that, i don't believe the court is going to reach that issue. for one thing, they hate that question. they're not going to go there. if they're going to uphold it, they're going to uphold it for reasons that elizabeth says, the original reasons. it's commerce, it's economic, it's necessary and proper. that is what the opinion is going to look like. so this whole tax theory, which was the -- which was the darling of the academia professors of my friends, some of the smartest people i know have just become hypnotized by the tax theory, it's going to be a non-starter in the supreme court there may be some talk about it.

but they'll likely be for the justices who are probably disinclined to uphold the law. disinclined to strike the law down. sorry, i said it backwards. >> the gentleman in the blue shirt. >> my name is james. i'd like to go back to the debate that wydra and barnett were having what is left for the states. is there any activity that i could do in my everyday life that could only be regulated by the states and could not be preempted by the federal government? if this law is determined to be constitutional? i'd like to hear from both of you on that. >> absolutely. any activity that does not have a substantial effect on interstate commerce. i think that what is important to note between the hypotheticals, broccoli, blah

blah blah, you have to say okay, what is the enumerated power that congress is using. how in the world is that regulation necessary and proper to achieving that enumerated power. and third, do you need to pile inference upon inference in order to see the connection between the conduct being regulated and the enumerated power? i guess and fourth, does that even all of those apply, does it conflict with any other provision of the constitution. i want to get back in some ways what randy said about the comstock decision that he said the end of that opinion, there are some narrowing factors on the court's endorsement of the necessary and proper clause, that it's otherwise sweeping power. and i think that narrowing part

of the decision is there because in comstock, that chain that i just discussed was much more aattenuated. comstock was about using federal law to detain dangerous -- certain dangerous sex offenders after they served their time in prison. so that power when you link it back to the enumerated power, you have to say okay, well, civil commitment is necessary to enforce federal criminal laws. and oh, i'm sorry. i made it even closer than it is. that goes back to the federal government's authority to run prisons. federal government's authority to run prisons is then related to the federal government's power to enact criminal laws. but those of you know the constitution know that's not in there. so then we get back to, okay, what allows congress to impose criminal laws? that's congress's -- that's the federal government's ability to do things like establish post

offices and patent laws. so things that are violations of those powers can be made criminal. so you have a much more attenuated step. so i think that's an important thing to remember when we talk about how broad or narrow comstock is. that chain of necessary and proper and enumerated power is pretty attenuated in comstock. i think -- i know randy doesn't like to say this is an easy case, but it's certainly easier than comstock i think when it comes to necessary and proper. >> first of all, there's bad news i've got for you and that's after the raich case, the medical marijuana case by a 6-3 vote, congress has really sweeping powers to regulate any activity that is deemed to be economic, including the growing of a plant in your backyard for your own consumption. >> well, not just any plant. >> well, it could be any.

it could be any plant. >> the plant is tied to national market. >> any plant that was tied to a policy of banning anything in the regulated market. as long it is purported to increase interstate commerce, it can pretty much reach any activity it wants, whether it's economic under the majority opinion or noneconomic under justice scalia's concurring opinion. however, there is still a line that none of us really imagined when the raich case was decided because nobody had previously thought to do this and that is not only to say that you can't grow marijuana or that if you're going to grow marijuana here's how you should grow it, but that you must grow marijuana. i mean there's -- the same sweeping scope that can reach all of those kinds of activities now says that you have to do any one of those activities so long as we deem it in our own discretion to be essential to our interstate scheme of regulation of something completely different, let's say. so that would be a tremendous

increase in federal power over the already tremendous power that the federal government currently has. >> well, i'm afraid that's all the time we have. please join our panelists upstairs for lunch after this. rest rooms also are downstairs and upstairs. we'll resume in exactly an hour. please join me in thanking our panelists. [ applause ]

good afternoon. welcome back to the second panel of our conference on the question is obamacare unconstitutional, or constitutional as the case may be. i want to also welcome our c-span audience as well as our audience seeing us on cato's web streaming. the second panel is going to be discussing a question that surprised many because the supreme court took it upon itself to reach out for this question. the issue below of whether the medicaid expansion of both the

scope of coverage and the actual substantive coverage of medicaid would be constitutional under congress's taxing power was argued below and the courts, both the district court and the appellate court found against the plaintiffs in that case, against the states. but the supreme court thought the issue was important enough that it reached out su esponte on its own to consider this question. and it's no surprise considering a suit brought by 26 states that to them at least it's a very burning question. and it raises the question of whether the federal government, the congress through its power to tax can do indirectly what it is prohibited from doing directly.

in other words, the federal government cannot directly order states to set up programs for their indigent citizens to help provide for their health care. but if through the taxing power, the court can compel states to enter into these nominal relationships, these federal/state partnerships, is the question that is before the court. and it raises the question under south dakota v dole about whether given that we're talking about now a program that is a federal program putting to the state proposition namely expand your medicaid or you will lose all of the current funds you get from the current funds you get from the federal government for your current medicaid recipients as to whether that will be

unconstitutional in south dakota v dole. the court held that because the imposition amounted to only 5% of the federal transportation funds that came to the states, the compulsion required in urging the states to raise their drinking age from 18 to 21 was not all that great. i think south dakota v dole was wrongly decided, but still they left open, the court left open the possibility that if the compulsion amounted to more than 5% of the budget and here on average it's about 40%, then you might have a case of using the taxing power coercively. that's one of the questions indeed the central question that is before the court in this aspect of its proceedings. we're going to discuss this issue of the implications of obama care for medicaid. first by having our own

jagadeesh gokhale set forth some of the findings that he has done recently of an empirical sort so you'll have the facts before you before we turn to the lawyers to argue that this aspect of obama care is an unconstitutional and then to simon lazarus to argue that it is constitutional. i'm going to introduce each of our speakers before they speak unlike on the last panel. and we'll start with our jagadeesh gokhale, and you'll get to see a power point presentation, the first one here in the new auditorium using the wonderful facilities we just finished creating. jagadeesh gokhale is a senior fellow here at the cato institute, and he is recognized internationally as an expert on entitlement reform, labor productivity, and composition, u.s. fiscal policy, and the impact of fiscal policy on future generations. he served in 2002 as a

consultant to the u.s. department of the treasury, and in 2003 as a visiting scholar of the american enterprise institute. he was a senior economist advisor to the federal reserve bank of cleveland from 1990 to 2003. he holds a ph.d in economics from boston university and is currently a member of the social security advisory board. he has published voluminously in leading academic journals of economics. his most recent book, which is available outside, he'd be glad to sign it for you if you care to purchase a copy was -- is entitled "social security, a fresh look at policy alternatives" which was published by cato in conjunction with the university of chicago press in 2010. please welcome jagadeesh gokhale. [ applause ] >> thank you very much, roger,

for inviting me to be part of this inaugural event at the cato institute. i expect the phase of admiring all the new facilities is oaf. that was what the first section was for. now we can focus on some real information. >> you mean the power point presentation? >> well, someone also complained about my power point presentation, saying it's unconstitutional. but i might note simply that my decision to use it has nothing to do with interstate commerce. thank you very much. so for those of you who know me, know i spent most of my career studying and documenting the dire condition of the federal budget. lately i have turn mid attention more to state and local and the information i'm going to tell you a bunch of projects i

recently undertook to precisely the question at hand, which is what is the likely effect of obamacare on state medicaid spending. as you all know, state participation in medicare is supposed to be voluntary. over the years the programs and also the federal funding has grown so large that really opting out is not really a practical solution for sate state policymakers. obama care uses fund to force medicaid expansion. the sport question, the question that the supreme court has taken on is whether it's constitutional for the feds to do that. the bottom line, however, is this rio -- relatively underreported and underrated issue implies that despite the massive federal funding that is

forthcoming to support the states' medicaid expansion, the interaction of two provisions, one the medicaid expansion itself and the individual mandate will lever state general fund expenditures to sky-high levels. that's the bottom line that emerges from my research. so the medicaid expansion part is basically two components. one the income eligibility limit is increased from 100% to 1089% of the federal poverty limit. and all adults rather than all those with dependent children are now eligible for medicaid. the individual mandate has really nothing necessarily intrinsically to do with medicaid expansion as such. it's really to accommodate the coverage of those with preexisting conditions to avoid the adverse selection that would go with that. but the interaction of these two elements really spells looming disaster for state budgets.

so to understand how that would come about, think about two types of new medicaid enrollees that will emerge once obamacare becomes effective in 2014. first of all, those who are newly made eligible for medicaid under obamacare, these groups of medicaid eligibles will be 100%, 100% federally funned through 2016. and the federal funding rate gradually ramps down to 92% by 2019. but still that's a fairly large fraction of the expenditure that the states would incur that is supported by the federal government. the question remains about whether this level of funding for newly eligible medicaid enrollees will persist after 2019, given the dire state of the federal budget itself.

but that's a separate question. then there's a second group of eligibles. those who are eligible under the old law, the pre-obamacare law. the individual mandate will induce greater enrollment. not everybody who's current eligible for medicaid is necessarily enrolled in it. but the individual mandate and generally the desire on the most part, on the part of most citizens to follow the law will induce greater participation. there's also other reasons with greater participation. the law envisions enrollment pass silltation drives, leaving those not enrolled in medicaid or have no insurance to enroll into medicaid, it might induce some folks who are privately covered to switch to medicaid.

so these new enrollees among all eligibles will not be federally funded at the same rate that is close to 100% initially and then 90% plus after 2017. they will continue to be federally funded only at the old, that is the current rates, the federal medical assistance percentages, which averages about 59% across all states. now i debated a lot about whether to include this slide. i'm going to bring you this. this is a method logical thing. the way i estimate state medicaid spending under obama care is to track four different factors. three of them are shares. for example, a share of the medicaid eligible population in the total population, the share of intern enrollees among those eligibles, and then the share of those who actually receive medicaid benefits, the

beneficiaries among the enrollees. and finally, the rate of medicaid spending per beneficiary. these three shares and that rate of spending each evolve differently, historically at least have evolved differently for -- in different u.s. states, and also within each state evolved differently for people of different age, gender, medical need, eligibility category, income group and so on. so i incorporate each of these details. my estimates are disaggregated at a very high level of detail. projections of these shares and the rate of spending per beneficiary into the future according to historically observed trend and then taking the product of all of these four elements together essentially is a method to project what would happen in the future under a specific law. so i do this exercise first