wherewithal to further address our long-running problems of the declining middle-class and an unsustainable federal budget. the extension of the 2% payroll tax cut and continuation of extended unemployment insurance benefits, which president obama called for in his american jobs act, should support demand for the economy in the current year and provide a buffer against the rise in gasoline prices. as the president has said, he wants us all to create an economy that is built last. the president has made clear his goal to rebuild a strong foundation for the u.s. economy , based on a revival of american manufacturing and the development of a wide array of domestic energy sources. in his state of the union

address, the president outlined the clear agenda to achieve these goals, including a lower corporate tax rate that will enable our manufacturers to be more competitive, investment in infrastructure, innovation, and education, and and all of the above strategy for developing domestic energy resources. the u.s. economy has considerable long run strengths the will put us in good stead, as long as we build on our strengths and take the necessary actions to make the economy more innovative and our work force more highly skilled. this point was made very clearly by president obama. in his speech in kansas, he noted that "the world is shifting to an innovation economy, and nobody does innovation better than america. no one has factor colleges.

nobody has but to universities. nobody has a greater diversity of talent and ingenuity. no one's workers and entrepreneurs are more driven or more daring. the things that have always been our strengths match up perfectly with the demands of the moment." i would add that no country has a better group of business economists who helped to guide business decisions and provide new insight into the workings of the economy. so i very much appreciate the opportunity to be with you this morning, and i hope i left a little time for questions. [applause] i do not know your schedule, so tell me how much time i have

left. >> the associated general contractors of america. you made a strong case for improvements in the labor market, but we heard yesterday from chairman bernanke and have seen a lot of articles recently about disparities in that labor market. there are a lot of workers who have been unemployed for a long time still being left out, workers with lower skills being left out. the you not see that as a problem? if it is a problem, how would you address it? >> i should be as clear as i can, and i do not think there is any disagreement in my view and what chairman bernanke said yesterday. the job market has made a lot of progress from a very bad situation. we still have far too many workers unemployed. long-term unemployment, i think, is a very important problem we face. i agree with the broad outlines of ben bernanke's speech

yesterday on the job market. as a labor economist, i certainly agree that the main problems we face in the job market today are cyclical, although there have been structural problems going on for a while. the rise in unemployment and much of the remaining elevation of unemployment is primarily a cyclical phenomenon. >> lisa with fidelity investments. first off, thank you for continuing the tradition of the cea breakfast. really appreciate it. second off. really appreciate the point that the interaction between policy- makers and business is important. we do do a policy survey, and our membership, but extremely large majority, thinks that the fiscal deficit is one of the biggest problems facing the united states.

as we advise our businesses that work with, i think most of us, our biggest concern over the long term is the fiscal deficit. what are your thoughts on balsam since -- bowles-simpsons, group of six, and other attempts at addressing this large problem? >> there is no question that the fiscal situation is a large challenge for the united states. we need to strengthen and sustain the recovery, and we need to address our long run deficit problem. we have a window where we can do both. i think the president has made clear his intention to use a balanced approach to addressing our fiscal situation. he wants to have a balance between raising additional revenues and spending cuts.

he wants the solutions to the deficit to be widely shared. and i do not think that is at odds with what i have seen from surveys. i think that is free much in the spirit of bowles and simpson as well, which proposed a balanced approach. >> i also want to say i appreciate your focus on data and the limitations of data. we were told several years ago that economists in general were guilty of collective delusion. i think what happens is we do not have enough of the right kind of data. i support you. i wonder, on the government side, for government data, is there a focus about being transparent, just as the government requires publicly traded corporations to do,

having a full balance sheet for the federal government? on the stability side, are you satisfied with the focus on getting the kinds of indicators you need to make sure we do not have the instability and financial crisis we were completely shocked by three or four years ago? thank you. >> i spoke in more detail in my previous recitation to nabe about efforts to improve the data so we have a better handle on risks developing in the financial sector. i think a major development since then is the creation of the office of financial research. i think it is headed by the past president of naeb, as the nominee to head f.o.r. f.o.r. would greatly improve our access to new types of products in the financial sector that could potentially cause risk.

data really are a public good. it is the quintessential public good. one of the problems when it comes to data, because it is a public good, is no one reaps the full benefit, no individual party has the proper incentive to fully collect the data. that is what i think it is important that organizations like naeb highlight the role economic indicators play in government decisions as well as business and household decisions. businesses and households make better decisions if we have better information about the performance of the economy. that is a broader constituency than just economists. in an era where government budgets are under stress, government statistics are also under stress. that is something of would encourage his group to pay attention to, going forward. many of the innovations in our statistical infrastructure are

at risk as statistical agencies will be facing tighter and tighter budgets, going forward. thank you. [applause] >> thank you, chairman krueger. i want to make a quick announcement. for the session on single-family finance -- the session has been moved. it is not as printed in the program. the concurrent session will take place in seven minutes. see you then. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> coming up, how people -- the

proposed budget for next year. then an investigation of the west virginia called -- call mine disaster. after that, federal chairman -- fed chairman ben bernanke teaching a class of george washington university yesterday. then an argument from the supreme court over whether requiring people to buy health insurance is unconstitutional. >> starting wednesday, see document trees on the theme "the constitution and you." we will air the top 27 videos, and you will meet the students who created them during washington journal each day. for a preview, check studentcam.org. >> tomorrow, we will preview the supreme court case on the

constitutionality of the president's health care law, and will look at today's argument over the requirement that all americans buy health insurance. then, a law professor on whether the entire law will be thrown out if the justices find the individual mandate unconstitutional. also a conversation on the health care law fifth expansion of medicaid. we are joined by a reporter for kaiser health news. "washington journal "is live every weekday at 7:00 a.m. eastern. >> tomorrow, the house of representatives takes up the republican budget proposal for the next year. the budget would increase pentagon spending, create just tw a tax rates, and give seniors a set amount of money to buy health insurance from medicare

or a private insurer. you can watch the debate live on c-span. >> the republican study committee today released its proposed federal budget for next year. it would spend about $70 billion less than the budget proposed by the house republican leadership. congressman jim jordan of ohio was the first speaker at the 30 minute news conference. >> let me thank you all for being here. one of the things that makes our country so special and so great is the simple concept that parents are willing to make sacrifices for their kids so that when they grow up they have life better than we did. they do it for their children. each generation in this great country has done it for the next. now unfortunately what we have

is -- and frankly, the plan is with both parties. for the last couple decades, we have had the political class spend for the moment and decide it is ok to send the bill to the next generation. that is wrong. we have reached the point where for the first time since world war ii we have a get bigger than our entire economy. it is time things change. "we hope to unveil today, under the hard work of our budget and spending taskforce is a budget that exercises fiscal discipline, that understands the basic concept that you should not send the bill to someone else. you should pay for things -- each generation should pay for the thing they are actually spending the money on. we have a cut, capped, and balanced budget that is consistent with what the vast majority of the house of representatives voted on last

year, when we voted to try to get the balanced budget amendment in the united states constitution. we have a budget we think is appropriate for the serious situation we now face, and one we think that will solve the problems in a sound way that will promote economic growth and help our country. i want to turn it over to the guy who has done the work on this, the chairman of the budget task force, mr. scott garrett of new jersey. >> good morning. first of all, let me thank our chairman of the rsc for work not only on this issue, but throughout this 112th congress. very much appreciate it. i want to commend mr. mulvaney who has worked with his staff in an extraordinary manner. also the gentleman recently recognized by "the wall street

journal" for his efforts. and my other colleagues, who worked in a yeoman's away on the budget before you today. i will be brief and allow my colleagues to say a few words. earlier today, i heard the famous "by thomas paine, "that we may live in troubled times so that our children may live in peace." it is important as we look at the budget process. this past week, the house gop laid out its republican budget to deal with the debt and declinable come about if we follow the president have path going forward and try to reverse it. we tried to build off of, you might say, some of the plans in that, and offer a further planned to cut spending, to place caps on it, and to provide for a balanced budget, going forward.

we do this by reining in spending, by making sure in potomac plans are protected not only for this generation, -- entitlement plans are protected not only for this generation, but for the future. this has been a time when we have seen a train wreck in slow- motion, coming toward this country, one that is totally predictable. where has the senate then? where has the president then? they have not been taking part in the debate. the senate has been absent, without any leadership, without a budget, for over 1063 days. the american people are asking for more. the american people deserve better. the american people ask one question. when will washington stop borrowing and spending my children's money? we see the answer is not coming from the white house.

we see the answer is not coming from the senate. we have stepped up to the plate, as we have in the past, to provide cuts, caps, a balanced budget, in answer the american public's request that washington live within its means, just as every family has to do. we offer a different path to the future. today, we are able to say that we will live in troubled times today so that our children in the future will be able to live in peace. with that, i would like to turn the microphone over to my colleague, who has done an extraordinary job on many aspects of this budget, and a staff as well. the gentleman from south carolina. >> i appreciate that. and i want to think not only mr. garrett for his work on this budget, but everybody up here, and for work on making the gop

budget better. because of the group behind us, the bill we will see offered by the larger republican congress later this week is a much more conservative budget then we started with. the number that gets attention in washington but not back home is the discretionary spending level. the beginning of this calendar year, everybody expected us to spend $1.04 trillion. that was the cap for discretionary spending set in the budget control act of last year. it is a number that few people have supported. we thought it was too much. we have worked hard to get that number down. the number you will see in the brian budget is 1028. the number in our budget is 931. first of all, it is the spending level from last year's budget. the budget we offered last year

had a discretionary spending budget of about $933 million. that is the same number as the second year of ryan's budeget last year. that is a coincidence, but it is true. coincidently again, 931 is the exact level of discretionary spending the last time nancy pelosi offered a budget. many of us promise to roll back spending to pre-stimulus levels. we have sent in there. that is the number we have been fighting force and stingray. it is a number we will continue to fight for. it is a number we are going to freese. it is a concept that seems rational to most of us. evidently it is not rational in washington, d.c. if you do not have money, the first thing you do is stop spending more money. we keep discretionary spending at 931 until the budget is

balanced, which is in five years. it is something we think folks back home will understand. if you do not have the money, you stop spending what you are spending. we set that number at 931 and leave it there. there is one person i can look at and say this is a guy who has helped us move in the right direction, so i will let him talk. >> thank you, mr. mulvaney. i think congressman garrett as well. during the budget hearing committee last week, too many in washington focused on the date of november 6. the dates we need to be concerned about our april 1 and january 1. just five days from now, the u.s. will have the highest corporate tax rate in the world. at a time when we have high unemployment, which cannot afford to the first on this

list. at the end of the year, the bush-obama tax cuts disappear, burning americans with the highest tax increase in u.s. history. this requires a tax bill by september 15 of this year, for getting the scheduled tax increase. our job is to be revenue neutral with tax reform. we leave it up to the committee. it is critically important we prevent the tax increase from killing our fragile economic recovery. as the supreme court considers the constitutionality of obamacare, this incorporates the state health act -- medicaid reform. that embraces entitlement reform successfully and creates medicaid to a block grant program. it restores the 10th amendment and gives the states the freedom

and accountability they need in order to serve their people better. we want accountability by putting states back in charge, rather than nameless and faceless bureaucrats. medicaid costs are exploding in washington and in our states. i served 14 years in the state legislature. i know the struggles of our states have. the idea that we can simply and millions more to our medicare rolls is unsustainable. what we need is flexibility. we need to reduce the red tape out of washington. give our governors the flexibility and accountability on medicare so they can do with the single fastest-growing part of our state budgets. that is what washington can do. i am excited with those proposals. we know one size does not fit all in medicaid. we know there are massive tax increases the would come in january 1. they would kill any economic

recovery we have. i look forward to pushing this budget forward. we need to have solutions. we have tough choices to make today. on taxes, we can promote a pro- growth agenda, which is what i think most american people want to see. with that, i will turn it over. >> i am here today not only as a representative, but also as a mom. this budget will provide a secure future for our children. it does that in many ways. it takes us from a path of bankruptcy to a balanced budget. i am part of the freshman class, and i was sent here to bring our country back from the brink of bankruptcy, and to put us on a new course for our children. right now, my child and every child has $48,000 worth of

personal debt because of our spending ways. our national debt is not equal to our gdp, and this is unsustainable. our children deserve a better future in america. it also provides a more secure future by removing our dependency on foreign countries in at least two ways. our debt right now is held by many foreign countries. china holds 29% of our foreign debt. i do not want to see my children have further dependence on china. i want to see us be independent in america. it also reduces our dependency on foreign oil. it will get us to the path of energy independence. that is a way to make our children's future more secure. it prioritizes national defence. there are only a few things we are supposed to be doing as part of the constitution, and one is

to provide for the common defense. the president's plan is unsustainable and jeopardize our national security. we address that in our budget and make sure our children will have a secure future. thank you. >> i am glad to be here. i look at this group and realize i am the longest serving member, which is scary. i think had we adopted the early budgets of this committee, we would be a lot better off today. this will be cast by some as a draconian budget. i can hear "grapes of wrath" playing in the background. we are taking the budget back to where it was in 2008. people recognize we have to do more than we are currently doing with regard to get this budget back in control. this is driving the debate the right direction.

this conference is producing a better budget because of this budget. i am pleased to support it. >> i am cynthia lammas from wyoming. i am happy to stand with my colleagues to make these points. can we balance our budget within 10 years and yes -- 10 years or less? yes we can. this budget proves it. why should that matter? why should it matter to the mom who is pulling up to a gas pump and only putting in $5 of gasoline because she cannot afford more? the answer is this. what effect gallon of gasoline was $6.25 instead of $5? how could that happen? it could happen if the dollar is replaced as the world's reserve

currency by a basket of currencies that include the chinese currency, the japanese currency, and others. when england ceased to be the reserve currency, the value of their pound dropped 25% immediately. that could happen to the dollar. that is why the single mom who is pulling up to a gas pump to get $5 worth of gasoline and would instead possibly be paying $6.25 for that same amount of gasoline should be very concerned about our debt and our deficit. so let us return to that question. can we balance our budget in 10 years or less? yes we can. the rnc -- rsc budget proves it.

we should do it for every struggling american, everyone who wants a higher standard of living for themselves and their children. >> i would be glad just to echo those words. really to everything that has been said -- if you notice, five out of the nine standing up here came from the freshman class. we came to washington with the goal of getting our financial house in order here in this country. let us cut spending. let us rein in deficits, start paying back our debt. i am wearing this button to date. 1063 days since the u.s. senate has passed a budget. last year, we passed a house budget. we will take those up again. i think this budget is a clear path for america to address the

things i personally believe we need to do. a lot of hard-working colleagues have helped craft this budget. i fully support it. i look forward to talking about all of the dynamics on the house floor. i yield back. >> we have a couple of questions. >> you want to repeal the health care law, but your revenue number assumes -- why use that revenue number? >> our budget does not assume the tax increases. >> $37 trillion and is in the ryan budget. >> we are below the cbo baseline. >> the only differences -- the only differences between our budget and the conference budget is what we do on discretionary spending. we hold it under 931 for five

years. we freese the spending and hold it. we have also looked at growth and discretionary. and we change medicaid, where we give it to the states, at 2012 levels. the conference budget gives to the state's 2012 levels. with those differences, you can do what americans expect, and get to balance in a reasonable amount of time. >> what you are getting at is the fact that the tax reform that ryan offers and the one we offer is revenue neutral. you can make whatever assumptions you want to. we do not explicitly increase the taxes. >> but revenues compared to a baseline that assume the taxes go into effect. >> but we think you can get that level with tax reform.

>> are you prepared for what the ryan budget will do, or is this ultimately a side show? >> i think the vast majority of folks appear are going to support the conference budget, because it can get 218 votes to pass. it is important to show the american people you can pass something. budget relative to medicare reform, welfare reform. we would tell the authorizing committees to find savings. we have a commitment that those bills will come to the floor. all of that is because of the good work of members of the budget committee. i think you are coin to see strong support for the conference budget. but we do think you should build on that good work and still get to balance in a reasonable time. we do think, as congressman

mulvaney and congressman garrett pointed out, you should deal with the sequestered in a straightforward way, which is what we do in our budget. >> i would suggest that every member of the republican conference who several months ago came to the floor, gave speeches, and eventually voted for a balanced budget amendment, which was over 218 members of congress, have to think long and hard when the only budget that comes to the floor this week that will actually fulfill that promise will be the rsc budget. the rsc budget is the only one that will bring us to balance within five years, 2017. if you are a member of either side who voted for the bba, you have to ask yourself what you were voting for at that time.

was that a side show, or was a serious? if you were serious about doing something, you would vote for this budget. >> the fact that the senate has approved a budget -- using the brian budget has any chance? if not, why do all of this stuff? >> that is a great question. i speak for myself and my colleagues. we do not anticipate the senate to have a budget. harry reid has announced that. we do set a discretionary number. that number matches and number of, i think, goals we have talked about consistent with what the republican conference has proposed. this is where we differ as well. the budget would not require

reconciliation on tax issues. it would require a strategy and plan to deal with the massive tax increases scheduled to take effect. the president's budget assumes tax revenue we do not assume. we have to make more in savings and reductions in spending to get to his level. but then we return it to the 931 level that does bounce it in five years. that is a significant improvement, i believe, to the conference budget. but it would require action and reconciliation on the tax side as well as the medicare side. this budget would require some action on the side of the house. finley will leave it up to the senate. >> this sort of gets lost in washington. we are required by law to pass a budget by april 15. if you look closely at the budget act, which we have done, the problem is there is no penalty for not doing it.

still, we do take our legal obligations seriously, which is why we are rushing to do this before easter. we will continue to leave -- to live up to the legal obligation, which the senate does not seem to think applies. >> the 931 number, you wanted a lower discretionary number. you are in a fight with the leadership, essentially, overspending. you think they will cut spending? >> i have listened. months ago, everyone assumed the discretionary spending number would be 1047. we argued it should be 1027 -- 1028. the disagreement is how you deal with the sequestered. we said 1028 is where we were last year. we should at least be there.

without the sequestered number, that is 931. it is a question of how you account for that number, or whether you do the reconciliation number this conference has. >> [unintelligible] >> we think we are making a lot of headway. this budget moved in that direction. we think that last year, when we had the big debates. that is why we are here. that is what these freshmen members were about, coming here to cut spending. >> paul ryan said the budget would use dynamic scoring. what kind of assumptions to you use, going forward? >> one of the things some of us

insisted on when we through this budget together was that we would be as credible as possible. we do not get the benefit the budget committee gets of having cbo running it through all of their scoring for us. what we insisted when we sat down was that we would do a couple of things. wherever we karen, we took cbo numbers, so we could say we are basically working off of cbo scores. wherever we can on projections of gdp growth, we did the exact same thing. we are working of the same baseline and the ryan budget is. that is credible. the other major point we wanted to say we are credible on is the credibility of the numbers we put in here. take this really quick. there are three major differences in the budget. the first is with regard to discretionary. we believe that is not only a credible number, but a number

that everyone basically voted on. tim brought up the second major point. on medicaid, we think that is entirely credible, putting in medicaid in 2012 figures and freezing that out. tim can deliver a better than i. that is credible because of the block grant for the states. the third is on the area of welfare and other entitlements. what we do there -- someone described it this way -- is to smooth off the growth curve. you had some spiking during the past administration. we keep it at that number now. we could have gone nowhere. but we are staying at the cbo growth level for the first five years and in smoothing the curve. all you are doing is moving off for inflation up until 2020 to. all as aspect i think are inherently credible and should

theoretically pass this congress. no one can attack us for not using the baseline or for saying anything radical and extreme. >> [inaudible] >> what we do in our budget is -- it is discretionary. but we account for how, as vic he pointed out -- as vikki pointed out -- we will make the cuts to national spending, but not out of defense. we will do it out of discretionary. we are not changing the amount. we are changing where it gets reduced. a second. -- exactly. >> i did. >> you voted for the budget? >> i did. i would add there have been

departures from the budget control act since the budget control act. >> [inaudible] as is the president. as is mr. van holland. all of the budgets will depart from that. we are the only ones that take the $97 million out of discretionary spending. >> are you actively encouraging members to support -- >> heck yes. we are actively asking them to support our budget. i announced that i will be supporting the brian budget -- the ryan budget as well. thank you very much.

>> tomorrow, the house of representatives takes up the republican budget proposal for the next year. the budget would increase pentagon spending, create just two tax rates, and give seniors a set amount of money to buy health insurance from medicare or a private insurer. the debate gets underway at noon

eastern, and you can watch it live here on c-span. >> follow our local content vehicles throughout the weekend as a book tv and american history tv explore the book and history culture of little rock, arkansas. an author on little-known riots and killings of the least 20 african american sharecroppers. >> we have had calls up and down the mississippi delta saying that blacks were now in revolt. the next morning, between 601,000 men, white men -- 600 and 1000 man, white men, pour into phillips county and began shooting down blacks. >> sunday at 5:00 p.m., a former student on integration at north little rock high school.

>> we did not know what was going to happen. we do not realize what is going to happen when we go to school. but they seem to, because the crowd is with us now. the momentum is behind us. and they are pushing us up the steps. >> these stories and others in little rock, this weekend on c- span. >> a government report says investigators missed problems at the upper big branch call mine in west virginia before a deadly explosion two years ago. 29 miners were killed. the head of the mine safety administration testified yesterday before congress about the accident. >> a quorum being present, the

committee will come to order. thank you for being with us today. on april 5, 2010, the people of montcoal, west virginia, faced a tragic loss. workers concluding their shift at the upper bay branch mine felt a strong draft of wind and hit their backs. an explosion which killed 29 miners and severely injured two more. the continue to mourn the men and women who died and keep their families in our prayers. since that fateful day, the people of west virginia have been searching for answers. how could such a catastrophic event take place? could it have been prevented? what steps need to be taken to ensure this kind of tragedy never happens again? as part of the federal response, three teams were assigned to examine the events.

and emission investigation team determined the cause of the explosion, an internal review team, and a team from the national institute of safety and health would complete an internal review. after examining more than 1000 pieces of evidence, there was a report last december. it documents three events that facilitated the worst mining disasters in 40 years. first, one drill bits and faulty water control in the mining device credit a spark. that, combined with a buildup of methane gas, triggered an explosion. a massive accumulation of coal dust fuel the fire throughout the mine. while this explains the physical cause of the disaster, the real enesis lies in massey's corporate culture.

bassie energy bears responsibility for the deaths of these miners. the investigation reveals numerous safety violations, including keeping two sets of books and routinely providing advance notice that inspectors were on site, part of a campaign to conceal the true working condition underground. disabling detectors that could have alerted miners to the accumulation of methane gas. and failure to comply with blockbusting standards that would have contained the fire before it consumed in mind. he list goes on and on. safety was clearly not a priority for massey. 29 miners and their families paid the price. mine operators have a legal requirement to protect their

workers. 95% of mine operators are trying to do the right thing, yet bad actors continue to jeopardize safety. that is why we have the mine act and the mine safety administration. when workers are needlessly put in harm's way, federal enforcement must hold the operator accountable. as we have learned in startling detail from independent review and assessment, regrettably, this did not happen at the upper bay branch. miners were faced with reckless safety practices and enforcement affairs. inspectors identified safety hazards, but others went unnoticed altogether. in december 2009, there was a new plan to secure the roof of the mine. however, subsequent inspections failed to cite violations of the approved plan.

this proved to be a critical error once the roof collapsed allowed the buildup of methane gas. furthermore, it is almost impossible to imagine enforcement personnel missing the coal dust accumulated throughout the mind. this neglected a crucial safety concern that would later enhance the magnitude of this disaster. we have also learned that other enforcement tools were either poorly used were never implemented. reforms enacted in 2006 created a new category of flagrant violations, yet there were never imposed against massey. computer glitches allowed them to avoid reports. and concerns for never transmitted to the mine operator. sadly, the list of enforcement lapses could go on as well. niosh states that proper enforcement would have lessened the chances or possibly could

have prevented the upper bay bridge explosion. there may be a number of reasons for these errors. some enforcement barriers have plagued the agency for years. but the mistakes are always followed with a pledge to do better. yet upper big branches still happened. tragedy struck. a broken enforcement regime goes on. i hope you can convince this committee and the nation at this time it will be different, that this time we will learn from past mistakes and keep our promise to do better. i look forward to discussing these matters further with our witnesses. i now recognize my distinguished colleague, ms. wolsey, for her opening remarks. >> and you, mr. chairman. -- thank you, mr. chairman.

there were 29 families that lost their fathers, brothers, husbands, and best friends. almost two years ago, this committee travelled to west virginia, where we heard chilling testimony about the unbelievable conditions in this mine, most of which you have listed in your opening testimony, mr. chairman, so i will not repeat it. lille long, a lifelong minor, testified -- mr. long, a life- long miner, testified that day. he asked us to do something for the other miners. he said he prays for it every day. he said if we do not, something like this would happen again. mr. long, we hear your plea. since that hearing, there have been for investigative reports. all found that massey energy

failed to comply with -- established safety standards. -- comply with long-established safety standards. it did not sure of the mine roof to keep the mind and collected. it failed to keep the rock dusted to prevent coal dust explosion. on top of the failure to follow basic safety protections, it also engaged in a pattern of obstruction. the routinely provided advance notice of inspections, which gave foreman time to correct hazardous conditions or stop production of four inspectors arrived underground. the kept two sets of mind examination -- mine examination books, and threatened to those who tried to stop production for

safety violations. these failures were the result of the constitution were wrongdoing became acceptable, where deviation became the norm. under the mining act, a mine operator is responsible for the health and safety of its miners. if not, our responsibility to bring them back into line. but those efforts were compromised. there were poor inspection practices and failure to identify violations. there was a failure to apply maximum penalties. there was a failure to investigate managers who may have engaged in knowing and willful violation. and plans were approved without resolving previous safety concerns. today, we must examine why this happened. we have to know what broke. we know that budget cuts and

retirements have incapacitated effectiveness, particularly in early 2000. 2006,three tragedy's, in congress finally provide resources to put more inspectors back into the minds. but the new inspectors did not have the needed experience, and there were not enough technical specialists. violations went undetected, including critical violations highlighted in the latest niosh report. only a few weeks before the ubb explosion, inspectors were underground near the source of the explosion, but the lead inspector had only 13 months experience and obviously missed a number of violations that may have prevented this accident in the first place. while inspection definitely fell short, it was not for lack of trying. they issued $1.30 million in

penalties prior to the accident. they shot down parts of the mine 52 times in the previous year. but these citations did not change massey's conduct. penalties were met with litigation, not compliance. at ubb, massey contested 92% of all penalties prior to the explosion. it is clear msha was no match for an operation where corporate greed came before the health and safety of their workers. today we recognize that the entire system failed the miners at the upper bay branch. past congresses should not have slashed funding for mine inspectors. inspectors needed to do a better job, and massey exploit the

weaknesses in the law and hurt their workers. the law should have been much stronger. that is what it takes when there is little to no regard for workers. we are prepared to work with our colleagues to enact meaningful reform so we can honor of mr. long's please and the lives of our country's miners. the blood spilled must not be in vain, and it must not be forgotten. we must protect all miners from the errors that led to the ubb disaster. in closing, i want to welcome our witnesses that will be here today, as well as representative ray hall, who has a lot invested in our getting this right. i yelled back. >> pursuant to committee rules, all committee members have submitted written statements to

be included in the permanent record. the record will remain open 14 days to allow us statements and other extraneous material referenced during the hearing to be submitted in the official record. let me add my welcome today to our colleagues from west virginia. without objection, they will be permitted to participate in our hearing today. i hear no objection. we have two distinguished panels of witnesses today. i would like to begin by introducing the first panel, which is a panel of one, assistant secretary of labor for mine safety and helped administration, mr. joe main. he worked for the united mine workers of america from 1974 through 2004, including 22 years as the administration of the health and safety department.

he worked as a mine safety consultant. welcome back. before i recognize you to provide your testimony, let me remind you of our quaint but nevertheless effective lighting system there. we want to share with you have to say. all of your testimony will be included in the record. you are free to summarize as you wish. when we get into questions, i will be asking my colleagues to stick to the five minute rule so we can all have a chance to engage in discussion and have time for the second panel. with that, sir, you are recognized. >> thank you, chairman klein and members of the committee. i appreciate the opportunity to report on the disaster in the upper bay bridge mind that caused the death of 29 miners.

-- the upper big branch mine that caused the death of 29 miners. the tragedy which occurred a few months following my confirmation was the deadliest coal mining disaster in 40 years and has caused unimaginable grief for the families and loved ones for the minors. -- miners. they all want assurance that an explosion like this never happens again. we are doing all we can to keep miners safe. our investigations -- throughout, we have held numerous meetings with the families as well as public briefings. the investigation team issued a report that found the explosion was likely started with a methane emissions, fueled by excessive amounts of coal dust, which became an explosion. the physical conditions were the result of a series of violations

of basic safety, which were disregarded at the mine. it was also unlawful practices and by massey that were at the root of the tragedy, including intimidation of miners and concealing hazards. one official recently validated our investigation's findings. a superintendent at the time of the explosion testified it was standard process to warn employees underground of inspections and to conceal hazards before the could be observed. he stated he would always make everything a good when he was told inspectors were on their way. the operation was issued 369 violations, totaling $10.80 million in penalties. these were not contested by the organization that acquired massey after the explosion,

which paid the penalties in the fall. despite aggressive enforcement efforts, among the toughest in the nation, there were many deficiences, including a failure to attend a five the extent of noncompliance and significant shortcomings in the ventilation and roof control plans. the internal review also discovered deficiencies to entry policies and procedures, including those cited by previous internal reviews. these deficiencies were primarily a result of budget constraints and the attrition of experienced staff, which left them short staffed. this is particularly true with the roof control ventilation. the control team also acknowledge the fact that we should not lose sight of the challenges.

the internal review concluded that we have read you the file name. we know more needs to be done. we are reviewing the additional ideas of the independent panel. they have worked harder to use every tool to ensure operators by helpful workplace. we believe our efforts are making a difference. it the most effective are the ones that began immediately after the disaster. we have conducted more than 400 inspections. we strengthen the pattern of violation process to make it as effective as we can.

for the first time in history, their place to mind on it and have seen the approval subject to the process. despite our efforts, it is still flawed. it should address flaws in the current roll that makes it less effective. they take actions to improve compliance and require compliance. but three organizes the office of the assessment for accountability audits. the majority of operators to try to obey the law. as they illustrate, there are still some and illustrators to flaunt the law. these reforms are not enough.

as they have made clear, we do need legislative reform without undercutting the provisions that have saved many miners from illness. they attack issues and trying to out box operators and validate the support for focused improvement. they will work to strengthen the criminal provisions. the risk corners by providing an advance notice of inspections. congress should provide support. as this committee heard, miners are often afraid to speak out because they fear of losing

their jobs. i look forward to working with the committee to find the best way of providing our nation's miners the protections they deserve. >> thank you. you mentioned in your testimony and every investigation and report of the upper big branch disaster has made it clear that he is operating outside the law. they are officially one of the bad guys here. you are here today representing the agency that is gravitas with ensuring the safety of our nation's mines and that included safety of the upper bay branch. i would like to quote an independent review again where they said if they had engaged in

a timely enforcement of the mine act, it would have lessened the chances of and could have prevented the upper big branch explosion. do you agree with that statement? >> if you look at all the investigative findings so far, it may cause this disaster. having said that, i cannot say for certainty that it could or could not have been preventable. we look at all the facts on the table. i've not seen the facts that tell me we a taken the actions. there's a lot of stuff we could have done differently. it is by believe that if an inspector had found what was

going on the mine, he would have shut it down immediately. >> the question remains, msha have the ability to see what was going on even though massey was against the law. it would have lessened the chances of them and prevented the upper big branch explosion. >> i have tried to apply for everything. some of the issues point to a closer fix on the question you raised on the inspections that

were done over the last inspection. did they identify it? i have found no case they did not take action. with regard to the foreign inspection, only one was a regular inspection. one took place where they went mine to issue an order. they have to mine down for three days. the other inspection was an inch

off the tell the 22. -- was off of intel 22. in terms of the rock issue, let me swing back to that. i do not folks have had a chance to look at this. there was a proceeding about three weeks ago. he admitted that they used advance notice to keep msha from learning what the violations were even though when msha they will come into the mine he shattered the dust around to make it look like they had been rocked dusting. prior to the explosion there up to head gate 22, the development

section. this is where it was the worst in the mine be found. it was the heaviest. on march the 15th, they went into that section, sampled the rock and dust that went to the lab. what the lab found was at that time, that section was in compliance. they were in compliant. between the 15th of march and april 5, something happened. the inspector was that in that area. they could buy us more material. if you look at the area that the explosion travel through, inspectors went into that area, conducted an inspection, it issued an order and have a citation on the entire belt

itself. they went back and on the 24th of march to make their last inspection, which the company required to clean it up. that was terminated based on the 24th of march. that is the last time an inspector was in that area. if you look at the record and the cold spell it, you will see the heavy treatment of conditions. >> my time has expired. >> it depends on which set of companies you were looking at. >> thank you very much. apologies for being late.

thank you very much for your leadership. thank you for rebuilding the resources so we do not have to go here again. i want to read from this transcript. the question is, well you were there, there's the practice of providing warnings when they are coming to the mind. can you tell us from beginning to end how the warnings were anticipated? it will come when someone came through the guard shack.

how often were the warnings given to the inspector? a lot. did you know if it is illegal to give the advice t? yes.

i always spirited i know they're coming. >> how do you conducted in that atmosphere? >> it is almost impossible that these activities are in place. >> i have to give them credit. despite that plan, they issued no closure issues. it shows that we have some pretty aggressive aggressors. >> it is about to a calculated interference.

efforts were made to move them to other parts of the operation or shut down operations or clean them up prior to letting them come to that part of the active mine. >> yes. >> in the report, it is clear that there were procedures that did not fall in place. is that correct? >> some reports were made. they were left on a shelf. >> there is no question of things that we could have done better.

>> at the same token, what you are expressing that was well articulated was a challenge beyond the capability of any inspector to catch up with. >> in your review, you say district for did not collect rock dust samples in the injury. they began production. was the guidance wrong? were they not doing their job? >> there was a serious problem of the policies of the agency. it is dismantled for whatever reason. every program was on their own to develop policies.

depending on when your higher, you may not have known about this. then different instructions. >> thank you. >> one condition that led to the impact are pictures of belts. they stated it did not in cannot conceal readily observable conditions such as floating dust accumulations. and she alluded to, how could msha contribute this to resource

constraints? >> i'm looking at to pieces. one are the conditions treacly involved in the explosion is themselves. if you look at the area where it occurred, because that explosion. we have examined this. is there something we missed? what hours trying to explain and i did not see any evidence on reports i found that inspectors had walked by an area and did not take appropriate action. what they did find, one area that is important have a we have such an explosion of the tailgate? there was no explosion of that

area. we found that the inspection was made of that area. we had a supervisor and training in that area. this is the area were they issued an area down because the ventilation problem. when the inspectors showed that to do this inspection, and here comes a gain of six inspectors into the parking lot of the massey mine. i think the word that was used was "hailstorm." it took an hour-and-a-half for them to get up to that spot. before they got that and about 9:48, they claim they have a problem. this is according to their

records. it is so convenient for that to happen. they arrived 1.5-2 hours after they showed up on the property. the area is not a large area. the question everybody has to ask was did those inspectors see totally black step they did not do anything with or was there something that ahead of them? that is what has bothered me, how they could have missed that coal dust unless it was masked. >> i do not know. >> let's talk about the review. it sounds like you're saying

regardless of experience or inexperience, this probably would have been missed. if they were there the day of the explosion they would have caught it. >> some more bothersome. did that come any do something the date that the last inspection was made that masked what they were doing? >> do you agree they were inexperienced? >> absolutely. >> when do think there'll be adequately trained? >> this is not something that happens overnight. if you took that the reports, there was a severe problem that was treated starting back around 2001. because the agency to have to

feed itself by cutting back to stay at the funding level. it is pretty overwhelming. 1000 people left that agency. 690 something left the coal thaenforcement ranks. congress made a wise decision in 2006. in 2007 there able to start hiring again. it takes two years to get the inspectors to the training programs. just about the time they were hitting, and respect of to level they were able to start. they have a lot of inexperienced.

we had six different district managers running it from 2003- 2006. you have management of the field offices that was changing out. there were three different managers. all this stuff caught up with the agency. there were two galatians specialists. they had over 50 massy mines. they're down to two ventilation specialist. am there are budget constraints.

time is moreman's than expired. >> this is going to get me to a question i'm going to ask you. he said i am outraged because of the minuscule amount provided by the criminal statutes in the sanctions of finding these criminals. i have a copy of that.

the mine act classifies a whiffle -- a willful violation even when minors are injured or killed. that is true even when making a false statement. would it make a different -- why would it make a difference if instead of the minuscule criminal statutes we had some strong year, whenever you call them, in danger of miners that were hurt and in willful violation of mandatory safety

standards were treated as a felony. >> i believe the judge expressed his frustration at his inability to take tougher action. he believed it was needed. it is pretty straightforward. i think they express americans aren't of what they believe their limitations -- expressed their concerns of what they believed their limitations. we are living in a different world. this contact is ongoing. >> thank you france in my

convoluted question. >> the msha review found that in six separate cases management should have been investigated for willfully violating safety laws. why were they investigated? >> and is the question of why weren't they? and also affected special investigations. but think if you look at our testimony, there is a chart that shows this fall step. there is a whole resource problem. the other problem that existed that was raised in the review was at around 2006 -- if you are

to carry it out, they were shifting people over. they were pulling off the insulation specialists. they were shoso short staffed. >> been completed for a complete inspections each year. would this help? >> all of those cases were shipped off at the u.s. attorney's office. these were process. i went before. i remember the first time they showed up.

it was a game changer. i can tell you that the mandatory inspection program has saved more lives than probably any other single thing. if you look at 2178 miners were dying on the job -- 217 miners or dine on the job in 1977. to strip the way, it is like taking to breaks there. this is the most fundamental protection they have. >> thank you.

they work on weekends. unfortunately, i prefaced my set of questions by noting that the past five weekends one of our nation's miners have died including friday night at the shoal creek mine in my home state of alabama. they found that the agency conducted five in the upper big branch at regular intervals and none of the inspections occurred on a saturday. they also found "inspectors were contractually required to begin their work week no later than tuesday which limited the opportunities for inspecting on fridays and saturdays." if i understand this correctly, it does this mean there were no

inspections on sunday? >> set to go back and check it. i directed my staff. we approach these problems differently. a lot of these inspections are done on all shifts when they are least expected it. it is time for capturing the phones to prevent them from changing the conditions. you are right about the past

five weekends. the start wondering are we so much on the weekends we're shifting some of the activities to a time they still do not think we will show up? i do not know. we put a load out to the mining industry to get them to focus on that as well. we have changed the way we do business. we're focusing more time on the off shifts. and we are plowing through the data. i think these could realize that there will be more weekend inspections. >> i understand you were involved in the jim walter's mine investigation in alabama. during that investigation, msha

discovered the mine operator can to set of books. -- kept two set of books and that massey was keeping two sets a book by illegally recording hazards in the coal production report. what are you doing? what will you be doing to ensure they are recording it in the official book? >> no. if i had been assistant secretary back in 2001, we would have taken more aggressive action not to talk as much about it in 2010. there are a number of things that we are doing. we have made this about what is going on.

what we're finding was that they were listing hazards in their production books. they were not in their routine books. this is conduct that you have to get into the books to find. we do not have the powers to do subpoenas to demand this kind of records. our inspectors are alert to the fact that this is a problem. we need to be doing a much better job of looking at the books. the this was a failure we found that the inspectors were not as focused on what was in the books. the notice has been given to the mining industry.

>> much time has expired. >> thank you. thank you for holding this hearing. i think for 29 of our fellow citizens we have all engage in an inexcusable failure. i would start with us. i think that we have failed to give prosecutors the tools to convict people of serious differences and have sufficient punishment when they do. it is really outrageous that some of these events that were involved or not felonies. we need to fix that. we have responsibility for not giving msha all the tools of personnel that it has needed overtime. it is our responsibility to fix that. i think a fair statement is

that some of the inspectors from msha failed to capture things that cannot be written off for lack of personnel but they just cannot do their job very well. i think there should be some consequences. the root of this problem is absolutely deplorable behavior by a mine operator. our focus should be on finding out what happened in this senseless loss of 29 lives. our focus ought to also be on preventing something like this from happening again. one of the things i'm confident you are doing is to think about how you train and supervise a

man is the people who work for you. i will leave this to your discretion. i do want to take a look at whether we have given this agency that you run the resources and experience personnel we should. it bears mentioning in 2001, we spent $122 million to run your agency. by 2006, it was down to $170 million. that is about a 15% cut. not coincidentally, and i liked that chart to be back, what happened during that time, it looks like many of your experienced inspectors represented by the red line, that the number of experienced inspectors dropped precipitously. it was from about 12 years of experience to about five.

why were experienced people leaving the agents and -- agency during that time? >this was from 2002-2006. >> i cannot speak for the mothers of the folks why they left. there was a large number of employees that work retirement eligible. why they decided to exit that, that is something you have to ask them perrin we're on a path to really taking a step back and fixing the problems at msha, we're not taking the same

approach. i said that we do the same thing the last folkestone, will compound the problem. >> i do not believe that spending more money works. i do think spending less may exacerbate the problem. budget that will be on this, if the pro rate them, which the mayor may not do, if you break them, you have 5.4% less. if you pro rated for 2014, you have 19% less than the have to operate on right now. what impact would do have right now? >> we will see what they have found in the last impact. i think he could pretty well predict the future. if you expect to have an effective enforcement agency, you have to pay for it.

it is that simple. in terms of the lesson that has been learned, of the can all go back and redo history there 2001-2006. -- through 2001-2006, we would do that. >> thank you. >> thank you. want to offer the safety to the families. this is a perfect storm. i agree that msha did not cause the explosion. in reference to mr. interest chart, reduced mr. andrew's

chart, it does not show what folks are required to have before they come to work force msha. your agency received a funding increase. it is a 34% increase. in 2010, the late robert byrd set up the upper big branch disaster. i am perplexed as to how such a tragedy has failed to have been given the significant increases in funding in manpower msha the that has been provided.

i do not believe it is because of lack of funding msha that lacked enforcement authorities. i like to include the opening statement from a senate hearing held on may 20. they did you see funding every year for the past six years. bill >> yes. we have to look at it in context. they were deleted to their lowest point in 2006. this is when they made a decision to add more, resources. the mountain time into it for

them to get through the training process was about 18 months-two years. as far as the help thinness of where we are, and having -- as far as the healthiest of where we are in having more stability -- >> we have young doctors that come out to that are fully trained. you cannot use this as an excuse when someone does a cancer operation. you're either qualified to do it or you are not appearin.

>> i think what the sinister and a lot of folks were relieved -- the center did not get to live long enough to see this through. it is to see how much the agency would shortage. at the time of the tragedy and the lead inspectors, i think by about 1/6 of them were hired in this latest class of 2006 for words. if you look back in 2007 and look at the make up of the agency, 33% of district 4 were trainees.

>> they went down and shut them down using the full measure of a law they have. these are some issues. this is. we try to come up with ways to deal with this. it took us three months to get there. >> the disaster occurred. >> the gentleman's time has expired. >> thank you for being here today. >> there are about fear of

discrimination. can you tell me what you're doing in that regard specifically? >> i miss the last part of that question. >> it indicates the you're pursuing policies to ensure minors are aware of their rights report this without fear discrimination. >> their number of things that we have done. we developed a lot of training programs for getting information to move out. we have beefed up our response to minors.

kevin obligation to protect them when we do. -- we have the obligation to protect them when we do. yes steadily increasing number of cases -- we have steadily increased the number of cases. there are a number of things we're doing in response to the issue. this is something that was part of the legislative processes that was discussed last year. we think it is something that needs to give them protection. >> that is about is trying to get to. i think that contributed to the problem. >> everybody saw the numbers. the last complaint we received was in 2006.

this is a sign that we need to figure out a better way to give them a voice to help them. >> do you believe that msha should have subpoena powers? do you think it could have changed the outcome of the upper bay branch case the? >> i do not know how would have been utilized. this is something in the legislation that was sponsored of the last couple of years. if you look at the history, we had a number of witnesses that exercised rights. it is easy to get to that spot where they could be subpoenaed.

>> thank you. the game moreed people continue to warn mining companies that inspectors are on the property after the upper bay branch. they continue to cook the books. they are immunized against downsizing because congress has given me a subpoena power. we are right back where we were before. all of the internal reviews, you're still citing people the 32 times you had to grab the bones and warning people that the government is on the property.

the books continue to be kept. we can i get to them. we do not have the subpoena power. congress is going to insulate them from responsible and eagle behavior. i do not know how may people we give you. you will be playing on the short end of the field. that is thought acceptable. you have to do this with a blindfold with one of them. at the end of the day that is what you're describing. >> this is according to the question that was asked. we can ask them to produce books but does not need to be legally maintains.

what we do beyond that is what we're creative enough to do. >> thank you. i do not think there is anyone that a question the desire to make sure that people were say all the time. unfortunately, change is not take place unless there is a tragedy or crisis. you have to have a knowledge of 4500 pages of inspection. is that right? >> yes. >> how would you change what you have now?

this is a waste of money. what would you do differently? >> if you look at the number of the past tragedy is, we have taken a procedure process that was pretty challenging for an inspector to do. we expect him to do 1000 things. he can do 750. they come up to 200. >> since july 2006, i am not doing this. we're rewriting the entire manual from base in zero. we're cleaning out a lot of the controversy. we're making sure all these internal reviews and accountability audits are placed into their in a straightforward

way. an inspector knows what they're supposed to do. we can have greater clarity. we held this until we finish the review. i asked our folks to go to the root of this. we have to find their problems and fix them. we are rewriting the entire procedure to clean up this. >> part of the problem, and that none of the experience you have. and people get cited for having the proper height for a cover on the trash can and things like that, at the start to wonder if it is really a tragedy prevention. we get to the point where we are placing too many things in the same level. i know you do not have subpoena

power. if we know something is wrong and the people that work for them are complacent in using them, i do not know how to clear that up. they say we have a bad actor and shut them down. >> if you look at the history of the mine act until the upper big brands, i can tell you the choice of this agency or the orders that allow them to quickly go in.

they run up there a fourth of the day. this is a company that did not pay its fines. it challenged the law. if you know this is going on and, the have to go somebody of the latter. >> we mentioned a number of pools. we're not there yet. it measures their safety and their compliance record and puts them on a program. if you are still looking for this, they had a record similar

to the upper big branch. it is three months to get there. we need to be look a better tool that gives us a slip ability to go in. -- gives us the ability to go in. we are using the impacts and the other enforcement polls. there's still short. >> the gentleman's time is expired. >> thank you. i have been serving on this committee for 36 years trying to make this world safe for minors.

-- miners. we had a hearing on mining safety. they wonder how a city such a high priority. they get the same testimony from many of them. when i was a child, my dad put

me on the back of a buckboard into me up to the next caller. that is 36 years later. i think we should have made more progress. we still see this attitude very often of the owners trying to get by as cheap as they can stick to make greater profits. >> we should be strengthened to make sure there finality and stupidity is brought into range.

stronger regulation, more stringent enforcement, greater penalties. >> they do managers systems still have systems in place to operate. i believe that many operators tried to do what is right. i believe that there are those that just do not carry it these are showing new that these are some of the mines that are

operating. dealing with some of them, and do believe there needs to be more respect of the law and a greater fear of the penalties that exist to deter them from the conduct we are finding. on the regulatory front, we have a list of recommendations from the internal review team. we try to figure out what it is we need to do better. administratively, we're doing things differently to make sure we have the best inspection we can. there'll be a lot of changes. at the end of the day, there are different ones that congress

.eeds a look at pa you cannot scramble trying to get into mines.

. >> we will continue argument this morning in case 11398, the department of health and human services vs. florida. >> mr. chief justice and it may please the court. the affordable care act addresses a fundamental and enduring problem in our health- care system and our economy. insurance has become the predominant means of paying for health care in this country. insurance has become the predominant means of paying for health care in this country. for most americans, for more than 80% of americans, the insurance system does provide effective access. but for more than 40 million

americans who do not have access to health insurance through their employer or government programs such as medicare or medicaid, the system does not work. those individuals must resort to the individual market and that market does not provide affordable health insurance. it does not do so because the multibillion-dollar subsidies that are available for the employer market are not available in the individual market. it does not do so because of hippa regulations that preclude discrimination against people based on their medical history do not apply in the individual market. that is an economic problem and

it gets another -- >> those are problems that can be addressed directly. >> they are through this act, regulating the means by which health care is purchased. that is the way this act works. under the commerce clause, what congress has done is to enact reforms of the insurance market directed at the insurance market that preclude discrimination based on pre- existing conditions that require guaranteed issue community rates and a uses -- it uses, the minimum coverage provision is necessary to carry into production those reforms. >> [unintelligible] >> that is not what is going on

here, justice kennedy. we're not seeking to defend the law on this basis. what is being regulated is the method of financing the purchase of health care. that in itself is economic activity with substantial effect on interstate commerce. >> any self purchasing -- if i am in any market at all, my failure to purchase something in that market subjects me to regulation. >> no. that is not our position at all. the health-care market is characterized by the fact that aside from the few groups that congress chose to exempt from the minimum coverage requirements, those who for religious reasons -- reasons do not want to participate, those who are incarcerated, indian tribes, virtually everyone else

is in that market which will be in that market. the distinguishing feature is they cannot -- people cannot generally control when they enter that market or what they need. >> the same it seems to me would be true for the market in emergency services. police, fire, ambulance, roadside assistance, whatever. you do not know when you are going to need it. i am not sure that you will but bush -- the same is true for health care. he did not know if you need a transplant or if you ever will. to extend -- there is a market. can the market require you to buy cell phone? that would facilitate responding when you need emergency services? you could just dialed 911 no matter where you are? >> no, i think that is different. i do not think we think of that as a market. this is a market. this is regulation. you have a situation in this market not only where people enter in voluntarily as to when they enter and will not be able to control when they enter. >> that is in the same as my hypothetical. you do not know when you will need police assistance. you cannot predict the extent of emergency response you will need.

but when you do and the government provides it. that was an important part of your argument. when you need health care, the government will make sure you get it. >> when you need police or fire assistance or ambulance assistance, the government is going to make sure to the best extent it can that you get it. >> the fundamental difference, mr. chief justice, that is not an issue of market regulation. this is an issue of market regulation and that is how congress look at this problem. there is a market, insurance is provided through a market system. >> do you think there is a market for burial services? >> for burial services? >> yes. >> suppose you and i walked around downtown washington and we found a couple of healthy young people and we stop the man said, "do you know what you are doing? you are financing your burial services because eventually you will die and someone will have to pay for it and if you do not have burial insurance or you

have not said money, you will shift the cost to somebody else?" isn't that an artificial way of talking about what someone is doing? is it not equally artificial to say that no one is doing anything -- was doing anything about health care is financing health care services? >> is different. the reason is the burial example is -- the difference here, while regulating the method by which you are paying for something else, health care and the insurance requirement -- the key thing here is my friends on the other side acknowledge is that it is under the congress's power to guarantee the waiting to end, to impose the minimum coverage position.

their argument in -- is it has to occur at the point of sale. >> i do not see the difference. most people will need health care. everybody is going to be buried or cremated at some point. >> one big difference, just as alito, you do not have the cost shifting to other market participants. >> if you do not have money, the state will pay for. >> that is a significant difference. in this situation, one of the economic effects congress is addressing is the many billions of dollars of uncompensated costs are transferred to other market participants. because health care providers charge higher rates to cover the cost of uncompensated care and insurance companies reflect those rates in higher premiums, translating to $1,000 per family. >> is that not a small part of what the mandate is doing? you can correct me if these

figures are wrong. it appears to me that the cbo has estimated the average premium in the market will be $5,800 in 2016. respondents estimate that young, healthy individual targeted by the mandate on average consumes $854 in health services each year. the mandate is forcing these people to provide a huge subsidy to the insurance companies. for other purposes that the acted serbs. if those figures are right, what this mandate is doing is not requiring the the people who are subject to it to pay for the services they are going to consume. it is requiring them to subsidize services that will be received by somebody else. >> i think that is what the respondents argue. it gets to a fundamental

problem. >> if they have insurance -- >> it is how >> it is how insurance works. they do not have the effect of forcing insurance companies to take on lots of additional people who they cannot afford to cover because they tend to be the sec. that it -- the sick. the issue -- and you do so in the absence of a provision, it is not that insurance companies take on more people and need a subsidy coverage. fewer people and put insurance because their rates are not regulated. insurance companies when they have to offer guaranteed rating,

they are entitled to make a profit. they charge rates sufficient to cover only the sick population. >> tell me what this. assume for the moment, you may disagree. assume for the moment that this is unprecedented. this is the case beyond what our cases have allowed. if that is so, do not have a heavy burden of justification? i understand that we must presume laws are constitutional. even so, when you are changing the relation of the individual to the government, we can stipulate what it is, a unique way. do not have the heavy burden of justification to show authorization under the constitution? >> two things about that. we think this is regulation of people's participation in the health-care market. all this minimum coverage provision does is that inquiry -- instead of requiring insurance at the point of --

congress has the authority, the necessary -- necessary proper power to insure people have insurance in advance of the point of sale because of the unique nature of this market. this is a market in which -- although most of the population is in the market most of the time, 83% visit a physician every year. 96% over a five-year period, virtually everyone in society is in this market. you have to pay for the health care you get. the predominant way is -- in which it is paid for its insurance and the respondents agreed that congress could require that you have insurance in order to -- that pro -- forbids health care from being provided. >> it may well be that everyone needs health care but not everyone needs a heart transplant. not everyone needs a liver transplant.

>> that is correct. >> you could -- could you define the market? everyone has to buy food trade you can define the market as food. you can make people like broccoli. -- by broccoli. >> no. it is not a market in which participation is often unpredictable and often involuntary. it is not a market in which too often do not know before you go in what you need and it is not a market in which if you go in and seek to obtain a product or service -- >> is that the basis for distinguishing this from other situations? you could say the person who needs this has blue eyes. that is -- can distinguish it from other situations.

>> is the basis that explains why the government is doing this but is it a basis which shows this is not going beyond what the system of enumerated powers allows the government to do? >> yes, for two reasons. this is the test, this court has articulated it. is congress regulating economic activity with a substantial effect on interstate commerce? the way in which the statute satisfies the test is on the basis of the factors that i have identified. >> i thought your main point is that unlike food or any other market, when you make the choice, not to buy insurance, even though you have every intent in the world to self insured, to save for it, when disaster strikes, it may not have the money.

and the tangible results of that we were told, there was one brief, one maryland hospital bills 7% more because of these zero uncompensated costs. families pay $1,000 more. what was unique about this is it is not my choice whether a want to buy a product to keep me healthy but that -- the choice i am foisting on others if i do not buy the product sooner rather than later. >> that is definitely a difference that distinguishes this market and justifies -- >> if that is or difference, i am uncertain about your answers to justice kennedy, can you under the commerce clause, congress create commerce were previously none existed. >> i thought the answer to that

was since mccullough v. maryland, -- which did not previously exist. the job -- the answer has been yes. i would have thought that your answer, can the government require you to buy so funds or buy cereals, if we propose comparable situations, if we have, for example uniform united states system of paying for burial such as medicare burial, medicaid burial, chip, emergency burial beside the side of the road, and if congress wanted to rationalize that, the answer would be yes. the same with computers. the same with cell phones if

you are driving by the side of the highway and there is a federal emergency service just as you say you have to buy certain mufflers for your car that do not hurt the environment. you can -- does not depend on the situation? >> it does and if congress were to enact laws like that, i would defend them on a rational like that. i think we are advancing and there were -- the question is whether or not there are any limits on the clause. can you identify for us some limits on the clause? >> the rationale currently under the commerce clause that we're advocating here would not justify forced purchases of commodities for the purpose of stimulating demand. it would not justify purchases

of insurance for the purposes -- to situations in which insurance does not serve as the method. >> why not? if congress says the interstate commerce is affected, is that not the end of the analysis? >> no. we think the difference between the situations and the situation is that in those situations, your honor, congress would be moving to create commerce. hear, congress is regulating existing commerce, economic activity that is already going on. people's participation in the health-care market and regulating to deal with existing

facts. >> that is a passage in your reply brief i did not quite grasp. you say health insurance is not purchased for its own sake like a car or broccoli. it is a means of financing health care consumption in care of -- covering universal risk. a car or broccoli is not purchased for their own sake. there purchased for transportation or covering the need for food. >> health insurance is the means of payment for health care. broccoli is not the means of payment for anything else. >> it is satisfying a basic human need. insurance is a need -- a means. >> that is the difference between existing commerce activity in the market already occurring. people in the health-care market purchasing, obtaining health care services and the creation of commerce and the principle we are advocating here under the clause does not take the step of justifying. >> when we go back to -- the justice asked a question and interrupted your answer to my question.

tell me if i am wrong about this. i thought a major point of your argument was that the people who do not participate in this market are making it much more expensive for the people who do. that is, they will -- a goodly number will get services they cannot afford at the point when they need them. the result is everyone else's premiums get raised. it is not your free choice to do something for yourself. what you do is owned -- going to affect others, affect them in a major way. >> that absolutely is a justification for congress's action. existing economic activity that congress is regulating. >> you could say that about buying a car. if people do not buy cars, the price that those who do buy

cars pay will have to be higher. so you can say in order to bring the price down, you are hurting these other people by not buying a car. >> that is not what we're saying. >> i thought it was. >> other people will have to pay more for insurance because you're not buying it. >> it is because you are going in the health-care market, you are going into the market without the ability to pay for what you get to my getting the health care service anyway as a result of the social norms that allow -- to which we have obligated ourselves. >> did not obligate yourself to that. >> i cannot imagine but if the congress clause would forbid them taking into account, you can do it. does that expand your ability to issue mandates to the people? >> this is not a purchase mandate. this is all law that regulates a method of paying for a service that a class of people -- [unintelligible] or will consume.

>> i see or have seen 3 stanek -- strands of arguments in your brakes. one of them is echoed today. the first strand that i have seen is congress can pass any necessary laws to affect those powers within its rights. because it made a decision to affect mandatory issuance of insurance, that it could also obligate the mandatory purchase of it. the second strand icy self insurance affects the market. and so, the government can regulate those who self-insure. the third argument, i see all of

them as different. what the government is doing and i think it is the argument you're making today, what the government is saying is if you pay for -- if you use health services, you have to pay with insurance. because only insurance will guarantee that whenever means for health care that you have will be covered. because virtually no one, perhaps with the exception of 40% of the population can afford the massive cost if the unexpected happens. this third argument seems to be saying, what we're regulating is health care. when you go for health services, you have to pay for insurance. and since insurance will not issued at the moment you have consumed the project, we can reasonably, necessarily tell you to buy it ahead of time.

because you cannot buy it at the moment that you need it. which of these three is your arguments? are all of them your argument? i'm not sure. >> let me state it this way. congress enacted reforms of the insurance market. began issuing community rating reforms. to do with the very serious problem that exists in 40 million people not be able to get insurance and not access to the health-care market. everybody agrees in this case that those are within the congress's article 1 powers. the minimal coverage provision is necessary to carry those provisions into execution because without them, without those provisions, without minimum coverage, guaranteed and

issued community reing will -- rating will make things better. >> you are answering affirmatively to my colleague. can the government force you into congress? there is no limit to that. >> no. that is the first part or argument. the second part is the means here that congress has chosen. the minimum coverage position is a means that regulates economic activity, namely, your transaction in the health-care market with substantial effects. interstate commerce and it is the conjunction of those that provides a particularly secure foundation for this statute under the congress's power. >> you talked about alternatives congress might have had, other alternatives that the respondents suggest to do with this problem and in particular, your report of mandating insurance at the point at which someone goes to a

hospital or an emergency room and asks for care. in congress consider those alternatives? why do it to reject them? how should we think about alternative ways of dealing with these problems? >> the point of difference is about one of timing. they have agreed that congress has authority to impose an insurance requirement or other penalty at the point of sale and they have agreed that congress has the authority to do that to achieve the same rejections [unintelligible] congress gets substantial differences in the choice of means. if one thinks about the difference between the means, they say congress should have chosen and that means congress did choose. white -- we can see why it was eminently more sensible for congress to choose the means it chose. >> i am not sure which way it

cuts if -- let's assume it could use the tax power. to raise revenue and disseminate single payer health service. how does that factor into our analysis? in one sense, it can be argued that this is what the government is doing. it out to be honest about the power is using and use the correct power. on the other hand, it means that the court can -- congress can do it anyway. i am not sure which way the argument goes. >> i will try to answer the question and get back to the question u.s. -- you asked earlier. i do think one striking feature of the argument that this was a novel exercise of power, is what congress chose to do is rely on market mechanisms and efficiency and a method it has more choice than with the traditional medicare or medicaid type model.

it seems ironic to suggest that counts against it. beyond that, in the sense that it is novel, this provision is novel in the same way or unprecedented in the same way that the sherman act was unprecedented when the court upheld it in the northern securities case. the packers in stockyards act was unprecedented. the national labor relations act was unprecedented. or the dairy price supports. >> that all involved commerce. there was no doubt that what was being regulated was commerce. here you are regulating somebody who is not commerce. i do not agree with you that the relevant market here is health care. you're not regulating health care. your regulating insurance. it is the insurance market you are addressing. you are saying some people who are not in it must be in it. that is different from regulating in any manner. >> commerce that exists out there. >> to the extent we are looking at the scheme, it is regulating that exists out there and the means in which the regulation is

made effective here, the minimum coverage provision is a regulation of the way in which people and -- can participate in the method of their payment in the market of health care. that is what it is. i do not think, justice kennedy, getting back to your question. what matters here is whether congress is choosing a tool to use on the problem congress is confronting. that may mean the tool is different from the tool congress has chosen to use in the past. that is not something that counts against the provision in the commerce clause. >> it is both necessary and proper, what you just said addresses what is necessary. >> yes. >> it has to be fully adapted, necessary does not mean essential. just recently adapted. in addition, it has to be

proper. we have held in two cases that something was not proper because it violated the sovereignty of the states. the argument here is that this also is may be necessary but it is not proper because it violates an equally evident principle. the federal government is not supposed to be a government that has all powers. it is supposed to be a government of limited powers and that is what all this questioning is about. what is left if the government can do this? what else can not do? >> this does not violate the norm as this court articulated it as it does not interfere with the state as sovereigns. this is a regulation -- >> that was my point. that is not the only constitutional principle that exists. this is the principle that the

federal government is a government of enumerated powers and the vast majority of powers remain in the states and did not belong to the federal government. do you acknowledged that? >> of course we do. >> and the way in which this court and its cases has policed the boundary, what is the national sphere and what is in the locals fear, to ask if congress is regulating economic activity? it is impossible in view of our history to say that congress is invading the state spear. this is a market in which 50% of the people in this country get their health care through their lawyer. there is a massive federal tax subsidy of $250 billion a year that makes that more affordable. regulations insure the kinds of bans on pre-existing condition discrimination and pricing practices that occur in the

individual market do not occur. whatever the states have chosen not to do, the federal government can do. >> no. not at all. the power is not given to the federal government, that is for the states. the argument here is the people were left to decide whether they wanted to buy insurance or not. >> this brought -- what the court has said it will be a substantial departure from what the court has said, when congress is regulating economic activity with a substantial effect on interstate commerce, that will be upheld. that is what is going on here. and to embark on, i would submit with all due respect, to embark on the kind of analysis that my friends on the other side suggest the court ought to embark on is to import due process. they key in lochner is we were

talking about regulation of the states, right? the states are not limited to enumerated powers. the federal government is. it seems to me it is a different question when you ask yourself whether or not they're going to be limits on the federal power as opposed to the states which was the issue in lochner. >> i agree except the way in which the federal government stays in its sphere is by policing the boundary. is the government economic -- regulating economic activity? >> the reason this is concerning is because it requires the individual to do an affirmative act. our law has been you do not have the duty to rescue someone if that person is in danger. you do not have a duty to stop

a man walking in from the car. absent some sort of relationship. there is severe moral criticism of that role but that is generally the rule. here the government is saying the federal government has the duty to tell the individual citizen it must act and that is different from what we have in previous phases. it changes the relationship of the federal government to the individual in a fundamental way. >> i do not think so, justice kennedy. it is predicated on the participation of these individuals in the market for health care services. it happens to be that this is a market in which aside from the group's the statutes excludes, virtually everybody participates. it is a regulation of their participation in that market. >> is critical how you define the market. if i understand the law, the

policies you are requiring people to purchase involve must contain a provision for maternity and newborn care, pediatric services, a substance used treatment. it seems to me that you cannot say that everybody is going to need substance-abuse treatment. substance used treatment for pediatric services and yet, that is part of what you require them to purchase. >> is part of what the statute requires insurers to offer and the reason is is big -- it is trying to define minimal and essential coverage. there is a market in which everyone participates because everyone might need a certain range of health-care services. and yet, you are requiring people who are never going to need pediatric or maternity services to participate in that market. with respect to what insurance has to cover, your honor, congress isn't tired -- entitled to its attitude of making judgments about what the appropriate tsk -- scope of coverage is. you might think you are healthy and you might think that you are being forced to subsidize

every -- someone else. this is not a market in which you can say there is an immutable class of healthy people who are being forced to subsidize the and healthy. this is a market in which you may be healthy one day and you may be a very unhealthy participant in the market the next day and that is a fundamental difference. >> that does not apply to a lot of what you are requiring people to purchase. pediatric services, maternity services, you cannot say that everybody is going to participate in this substance use treatment market. and yet you require people to purchase insurance coverage for that. >> congress is enacting economic regulation here, it has latitude to define essential, the attributes of essential coverage. that does not seem to me implicating the question whether congress is engaging in economic regulation and solving an economic problem.

>> are you denying this? if you took the group of people who are subject in the mandate and you calculated the amount of health care services this whole group would consume, and figured out the cost of the insurance policy to cover the services that group would consume, the cost of the policy would be much, much less than the kind of policy these people are now going to be required to purchase. under the affordable care act. >> well, while they are young and healthy, that made by -- that may be true. they're not born to be healthy forever. you do not know which among that group you do not know what among them is the person that will be hit by the bus are get this definitive diagnosis. >> some people will be hit by a bus. some will unexpectedly contracted or be diagnosed with a disease that is very expensive

to treat. if you take their lost any calculate it, it is a lot less than the amount they will be required. >> to cannot just sit on their shifting their cause. >> they give the benefit they would not otherwise have. i do not think it would be unusual to say it is and a legitimate exercise of the car myers power. telephone rates for a century were said to be the exercise of the commerce power in the way that some people paid rates higher than their cost to subsidize it. >> it is a live in the modern world. everyone needs a telephone. and it is the same thing where they support the court upheld this.

the economic get those as advantageous contracts. it is sure they can raise the month of milk. and the commerce power -as a result of the exercise of the subsidizing somebody else - >> and this is especially true, isn't it, general - >> -- because that's the judgment congress has made. >> -- verrilli, because in this context, the subsidizers eventually become the subsidized? >> well, that was the point i was trying to make, justice kagan, that you're young and healthy one day, but you don't stay that way. and the -- the system works over time. and so i just don't think it's a fair characterization of it. and it does get back to, i think -- a problem i think is important to understand - >> we're not stupid. they're going to buy insurance later. they're young and -- and need the money now. >> but that's - >> when -- when they think they have a substantial risk of incurring high medical bills, they'll buy insurance, like the rest of us. >> that's the problem, justice scalia.

that's -- and that's exactly the experience that the states had that made the imposition of guaranteed-issue and community rating not only be ineffectual but be highly counterproductive. rates, for example, in new jersey doubled or tripled, went from 180,000 people covered in this market down to 80,000 people covered in this market. in kentucky, virtually every insurer left the market. and the reason for that is because when people have that guarantee of -- that they can get insurance, they're going to make that calculation that they won't get it until they're sick and they need it, and so the pool of people in the insurance market gets smaller and smaller. the rates you have to charge to cover them get higher and higher. it helps fewer and fewer -- insurance covers fewer and fewer people until the system ends. this is not a situation in which you're conscripting -- you're forcing insurance companies to cover very large numbers of unhealthy people - >> you could solve that problem by simply not requiring the insurance company to sell it to somebody who has a -- a condition that is going to require medical treatment, or at least not -not require them to sell it to him at -- at a

rate that he sells it to healthy people. but you don't want to do that. >> but that seems to me to say, justice scalia, that congress -- that's the problem here. and that seems to be - >> that seems to me a self- created problem. >> congress cannot solve the problem through standard economic regulation, and that -- and -- and i do not think that can be the premise of our understanding of the commerce clause - >> whatever - >> -- this is an economic problem - >> -- whatever problems congress's economic regulation produces, whatever they are, i think congress can do something to counteract them. here, requiring somebody to enter -- to enter the insurance market. >> this is not a -- it's not a problem of congress's creation. the problem is that you have 40 million people who cannot get affordable insurance through the means that the rest of us get affordable insurance. congress, after a long study and careful deliberation, and viewing the experiences of the

states and the way they tried to handle this problem, adopted a package of reforms. guaranteed-issue and community rating, and -- and subsidies and the minimum coverage provision are a package of reforms that solve that problem. i don't -- i think it's highly artificial to view this as a problem of congress's own creation. >> is your argument limited to insurance or means of paying for health care? >> yes. it's limited to insurance. >> well, now why is that? congress could -- once you -- once you establish that you have a market for health care, i would suppose congress's power under the commerce clause meant they had a broad scope in terms of how they regulate that market. and it would be -- it would be going back to lochner if we were put in the position of saying no, you can use your commerce power to regulate insurance, but you can't use your commerce power to regulate this market in other ways. i think that would be a very significant intrusion by the court into congress's power.

so i don't see how we can accept your -it's good for you in this case to say oh, it's just insurance. but once we say that there is a market and congress can require people to participate in it, as some would say -- or as you would say, that people are already participating in it -- it seems to me that we can't say there are limitations on what congress can do under its commerce power, just like in any other area, all -- given significant deference that we accord to congress in this area, all bets are off, and you could regulate that market in any rational way. >> but this is insurance as a method of payment for health care services -- >> exactly. >> and that -- and that is -- >> and you're worried -- that's the area that congress has chosen to regulate. there's this health care market. everybody's in it. so we can regulate it, and we're going to look at a particular serious problem, which is how people pay for it. but next year, they can decide everybody's in this market,

we're going to look at a different problem now, and this is how we're going to regulate it. and we can compel people to do things -- purchase insurance, in this case. something else in the next case, because you've -- we've accepted the argument that this is a market in which everybody participates. >> mr. chief justice, let me answer that, and then if i may, i'd like to move to the tax power argument. >> can -- can i tell you what the something else is so -- while you're answering it? the something else is everybody has to exercise, because there's no doubt that lack of exercise cause -- causes illness, and that causes health care costs to go up. so the federal government says everybody has to -- to join a -- an exercise club. that's -- that's the something else. >> no. the -- the position we're taking here would not justify that rule, justice scalia, because health club membership is not a means of payment for -- for consumption of anything in -- in a market. >> right. right. that's -- that's exactly right, but it doesn't seem responsive to my concern that there's no reason -- once we say this is within congress's commerce power, there's no reason other than our own arbitrary judgment to say all they can regulate is the method of payment.

they can regulate other things that affect this now-conceded interstate market in health care in which everybody participates. >> but i think it's common ground between us and the respondents that this is an interstate market in which everybody participates. and they agree that -- that congress could impose the insurance requirement at the point of sale. and this is just a question of timing, and whether congress's -whether the necessary and proper authority gives congress, because of the particular features of this market, the ability to impose the -- the insurance, the need for insurance, the maintenance of insurance before you show up to get health care rather than at the moment you get up to show -- >> right. no, i think -- >> -- show up to get health care. and that -- >> -- unless i'm missing something, i think you're just repeating the idea that this is the regulation of the method of payment. and i understand that argument. and it may be -- it may be a good one. but what i'm concerned about is, once we accept the principle that everybody is in this

market, i don't see why congress's power is limited to regulating the method of payment and doesn't include as it does in any other area. what other area have we said congress can regulate this market but only with respect to prices, but only with respect to means of travel? no. once you're -- once you're in the interstate commerce and can regulate it, pretty much all bets are off. >> but we agree congress can regulate this market. erisa regulates this market. hipaa regulates this market. the -- the market is regulated at the federal level in very significant ways already. so i don't think that's the question, mr. chief justice. the question is, is there a limit to the authority that we're advocating here under the commerce power, and the answer is yes, because we are not advocating for a power that would allow congress to compel purchases -- >> could you just -- before you move on, could you express your limiting principle as succinctly as you possibly can? congress can force people to purchase a product where the failure to purchase the product has a substantial effect on interstate commerce -- if what? if this is part of a larger regulatory scheme?

was that it? was there anything more? >> we got two and they are -- they are different. let me state them. first with respect to the comprehensive scheme. when congress is regulating -- is enacting a comprehensive scheme that it has the authority to enact that the necessary and proper clause gives it the authority to include regulation, including a regulation of this kind, if it is necessary to counteract risks attributable to the scheme itself that people engage in economic activity that would undercut the scheme. it's like -- it's very much like wickard in that respect, very much like raich in that respect. with respect to the -- with respect to the -- considering the commerce clause alone and not embedded in the comprehensive scheme, our position is that congress can regulate the method of payment

by imposing an insurance requirement in advance of the time in which the -- the service is consumed when the class to which that requirement applies either is or virtually is most certain to be in that market when the timing of one's entry into that market and what you will need when you enter that market is uncertain and when -- when you will get the care in that market, whether you can afford to pay for it or not and shift costs to other market participants. so those -- those are our views as to -those are the principles we are advocating for and it's, in fact, the conjunction of the two of them here that makes this, we think, a strong case under the commerce clause. >> general, could you turn to the tax clause? >> yes. >> i have to look for a case that involves the issue of whether something denominated by congress as a penalty was nevertheless treated as a tax, except in those situations where the code itself or the statute itself said treat the penalty as a tax.

do you know of any case where we've done that? >> well, i think i would point the court to the license tax case, where it was -was denominated a fee and nontax, and the court upheld it as an exercise of the taxing power, in a situation in which the structure of the law was very much the structure of this law, in that there was a separate stand-alone provision that set the predicate and then a separate provision in closing -- >> but fees, you know, license fees, fees for a hunting license, everybody knows those are taxes. i mean, i don't think there is as much of a difference between a fee and a tax as there is between a penalty and a tax. >> and that, and -- and i think in terms of the tax part, i think it's useful to separate this into two questions. one is a question of characterization.

can this be characterized as a tax, and second, is it a constitutional exercise of the power? with respect to the question of characterization, the -- this is -- in the internal revenue code, it is administered by the irs, it is paid on your form 1040 on april 15th, i think -- >> but yesterday you told me -- you listed a number of penalties that are enforced through the tax code that are not taxes and they are not penalties related to taxes. >> they may still be exercise of the tax -- exercises of the taxing power, justice ginsburg, as -- as this is, and i think there isn't a case in which the court has, to my mind, suggested anything that bears this many indicia of a tax can't be considered as an exercise of the taxing power. in fact, it seems to me the license tax cases point you in the opposite direction. and beyond that your -the -- it seems to me the right way to think about this question is whether it is capable of being understood as an exercise of the tax. >> the president said it wasn't a tax, didn't he? >> well, justice scalia, what the -- two things about that,

first, as it seems to me, what matters is what power congress was exercising. and they were -- and i think it's clear that -- that the -- the -- they were exercising the tax power as well as -- >> you're making two arguments. number one, it's a tax, and number two, even if it isn't a tax, it's within the taxing power. i'm just addressing the first. >> if the president said -- >> is it a tax or not a tax? the president didn't think it was. >> the president said it wasn't a tax increase because it ought to be understood as an incentive to get people to have insurance. i don't think it's fair to infer from that anything about whether that is an exercise of the tax power or not. >> a tax is to raise revenue, tax is a revenue-raising device, and the purpose of this exaction is to get people into the health care risk -- risk pool before they need medical care, and so it will be successful. if it doesn't raise any revenue, if it gets people to buy the insurance, that's -- that's what this penalty is -- this penalty is designed to

affect conduct. the conduct is buy health protection, buy health insurance before you have a need for medical care. that's what the penalty is designed to do, not to raise revenue. >> that -- that is true, justice ginsburg. this is also true of the marijuana tax that was withheld in sanchez. that's commonly true of penalties under the code. they do -- if they raise revenue, they are exercises of the taxing power, but their purpose is not to raise revenue. their purpose is to discourage behavior. i mean, the -- the mortgage deduction works that way. when the mortgage deduction is -- it's clearly an exercise of the taxing power. when it's successful it raises less revenue for the federal government. it's still an exercise of the taxing power. so, i don't -- >> i suppose, though, general, one question is whether the determined efforts of congress not to refer to this as a tax make a difference. i mean, you're suggesting we should just look to the practical operation. we shouldn't look at labels. and that seems right, except that here we have a case in

which congress determinedly said this is not a tax, and the question is why should that be irrelevant? >> i don't think that that's a fair characterization of the actions of congress here, justice kagan. on the -- december 23rd, a point of constitutional order was called to, in fact, with respect to this law. the floor sponsor, senator baucus, defended it as an exercise of the taxing power. in his response to the point of order, the senate voted 60 to39 on that proposition. the legislative history is replete with members of congress explaining that this law is constitutional as an exercise of the taxing power. it was attacked as a tax by its opponents. so i don't think this is a situation where you can say that congress was avoiding any mention of the tax power. it would be one thing if congress explicitly disavowed an exercise of the tax power. but given that it hasn't done

so, it seems to me that it's -- not only is it fair to read this as an exercise of the tax power, but this court has got an obligation to construe it as an exercise of the tax power, if it can be upheld on that basis. >> why didn't congress call it a tax, then? >> well -- >> you're telling me they thought of it as a tax, they defended it on the tax power. why didn't they say it was a tax? >> they might have thought, your honor, that calling it a penalty as they did would make it more effective in accomplishing its objective. but it is -- in the internal revenue code it is collected by the irs on april 15th. i don't think this is a situation in which you can say -- >> well, that's the reason. they thought it might be more effective if they called it a penalty. >> well, i -- you know, i don't -- there is nothing that i know of that -- that illuminates that, but certainly -- >> general, the problem goes back to the limiting principle. is this simply anything that raises revenue that congress can do? >> no. there are certain limiting principles under the -- >> so there has to be a limiting principle -- >> -- taxing power, and they -- and i think, of course, the constitution imposes some, got to be uniform, can't be taxed on exports, if it's a direct tax, it's got to be apportioned.

beyond that, the limiting principle, as the court has identified from drexel furniture to kurth ranch, is that it can't be punishment, punitive in the guise of a tax. and there are three factors of court has identified to look at that. the first is the sanction and how disproportionate it is to the conduct, the second is whether there is scienter, and the third is whether there is an -- an -- an administrative apparatus out there to enforce the tax. now in -- in bailey v. drexel furniture, for example, the tax was 10 percent of the company's profits, even if they had only one child laborer for one day. there was a scienter requirement, and it was enforced by the department of labor. it wasn't just collected by the internal revenue service. here you don't have any of those things. this -- the -- the penalty is calculated to be no more than, at most, the equivalent of what one would have paid for insurance if you forgone. there is no scienter requirement, there is no

enforcement apparatus out there. so, certain -- >> can the -- can the mandate be viewed as tax if it does impose a requirement on people who are not subject to the penalty or the tax? >> i think it could, for the reasons i -- i discussed yesterday. i don't think it can or should be read that way. but if there is any doubt about that, your honor, if there is -- if -- if it is the view of the court that it can't be, then i think the -- the right way to handle this case is by analogy to new york v. united states, in which the -- the court read the shall provision, shall handle the level of radioactive waste as setting the predicate, and then the other provisions were merely incentives to get the predicate met, and >> you're saying that all the discussion we had earlier about how this is one big uniform scheme and the commerce clause blah, blah, blah, it really doesn't matter. this is a tax and the federal government could simply have said, without all of the rest of this legislation, could

simply have said everybody who doesn't buy health insurance at a certain age will be taxed so much money, right? >> it -- it used its powers together to solve the problem of the market not -- >> yes, but you didn't need that. >> you didn't need that. if it's a tax, it's only -- raising money is enough. >> it's justifiable under its tax power. >> extraordinary. >> if i may reserve the balance of my time. >> thank you, gentlemen. we'll take a pause for a minute or so, mr. clement. >> why don't we get started again. >> mr. chief justice and may it please the court. the mandate represents an

unprecedented effort by congress to compel individuals to enter commerce in order to better regulate commerce. the commerce clause gives congress the power to regulate existing commerce. it does not give congress the far greater power to compel people to enter commerce to create commerce essentially in the first place. now, congress when it passed the statute did make findings about why it thought it could regulate the commerce here, and it justified the mandate as a regulation of the economic decision to forego the purchase of health insurance. that is a theory without any limiting principle. >> do you accept your -the general's position that you have conceded that congress could say, if you're going to consume health services, you have to pay by way of insurance? >> that's right, justice sotomayor. we say, consistent with 220 years of this court's

jurisprudence, that if you regulate the point of sale, you regulate commerce, that's within congress' commerce power. >> all right. so what do you do with the impossibility of buying insurance at the point of consumption. virtually, you force insurance companies to sell it to you? >> well, justice, i think there is two points to make on that. one is, a lot of the discussion this morning so far has proceeded on the assumption that the only thing that is at issue here is emergency room visits, and the only thing that's being imposed is catastrophic care coverage, but, as the chief justice indicated earlier, a lot of the insurance that's being covered is for ordinary preventive care, ordinary office visits, and those are the kinds of things that one can predict. so there is a big part of the market that's regulated here that wouldn't pose the problem that you're suggesting, but, even as to emergency room visits, it certainly would be possible to regulate at that point. you could simply say, through some sort of mandate on the insurance companies, you have to provide people that come in -- this will be a high-risk pool, and maybe you will have to share

it amongst yourself or something, but people simply have to sign up at that point, and that would be regulating at the point of sale. >> well, mr. clement, now it seems as though you're just talking about a matter of timing, that congress can regulate the transaction, and the question is when does it make best sense to regulate that transaction? and congress surely has within its authority to decide, rather than at the point of sale, given an insurance-based mechanism, it makes sense to regulate it earlier. it's just a matter of timing. >> well, justice kagan, we don't think it's a matter of timing alone, and we think it has very substantive effects. because if congress tried to regulate at the point of sale, the one group that it wouldn't capture at all are the people who don't want to purchase health insurance and also have no plans of using health care services in the near term. and congress very much wanted to capture those people. i mean, those people are essentially the golden geese that pay for the entire lowering of the premium. >> was the government's argument this -- and maybe i won't state

it accurately -- it is true that the noninsured young adult is, in fact, an actuarial reality insofar as our allocation of health services, insofar as the way health insurance companies figure risks? that person who is sitting at home in his or her living room doing nothing is an actuarial reality that can and must be measured for health service purposes, is that their argument? >> well, i don't know, justice kennedy, but, if it is, i think there is at least two problems with it. one is, as justice alito's question suggested earlier, i mean, somebody who is not in the insurance market is sort of irrelevant as an actuarial risk. i mean, we could look at the people not in the insurance market, and what we'd find is that they're relatively young, relatively healthy, and they would have a certain pool of actuarial risks that would actually lead to lower premiums. the people that would be

captured by guaranteed rating and community issue -- guaranteed issue and community rating would presumably have a higher risk profile, and there would be higher premiums. and one of the things, one of the things congress sought to accomplish here, was to force individuals into the insurance market to subsidize those that are already in it to lower the rates. and that's just not my speculation, that's finding i at 43a of the government's brief that -- it has the statute. and that's one of the clear findings. >> mr. clement, doesn't that work -- that work the way social security does? let me put it this way. congress, in the '30s, saw a real problem of people needing to have old age and survivor's insurance. and yes, they did it through a tax, but they said everybody has got to be in it because if we don't have the healthy in it, there's not going to be the money to pay for the ones who become old