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Federalist Society Student Symposium, University of Texas, Austin, Texas. "The Federal Leviathan"
Schedule page: http://texasfederalistsociety.com/symposium/?page_id=13
Moderator: Edith Jones
Panelists: Lynn A. Baker, Michael S. Greve, Samuel Bagenstos
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0:00
[Music] ladies and gentlemen welcome back from lunch I'm sorry I didn't get to join you
0:07
um my name is Ed Jones I'm a judge here in Houston but a former UT grad myself
0:16
and very happy to be uh uh the moderator of this panel on uh conditions on
0:22
federal spending following nfib versus sellus we have three excellent speakers
0:29
here who whom I could take half of our time introducing but I'll try to give them short introductions and then move
0:36
on into the panel uh Professor Baker holds the Frederick Baron chairin law
0:42
University of Texas here she's a leading academic defender of federalism and the
0:47
rights of States uh Professor baker has published dozens of Articles and book uh chapters
0:54
her scholarship has been cited by numerous state and federal courts including the US Supreme Court Court
1:00
among our best known Publications on conditional spending are uh conditional
1:05
federal spending after Lopez getting off the Dole and how a too clever Congress
1:12
could provoke it to do so uh the last of which was cited by Jess Ginsburg in the
1:18
nfib decision she's a graduate of Yale College Yale Law School Oxford and she
1:25
attended Oxford as a martial scholar professor beus in the middle of the panel is a professor uh in civil rights
1:32
Public Law and litigation Michigan right uh from 2009 to 11 he was a political
1:39
appointee in the Department of Justice the principal Deputy Assistant Attorney General for civil rights uh he he
1:47
promulgated the 2010 Ada regulations the first comprehensive update since
1:55
1991 and helped to reinvigorate the Civil Rights division uh enforcement of
2:00
the alad decision which guarantees people with disabilities the right to live and receive services in the most
2:07
integrated appropriate setting um he's published articles in numerous law
2:13
journals and again I could go on for a long time but he uh uh was a visiting
2:20
professor at UCLA clerk for judge Reinhardt and um served in the
2:26
Department of Justice clerk for justice Ginsburg um and has his law degree from Harvard
2:33
uh at the end of the panel is Professor Michael graa at from George Mason University School of Law from 2000 to
2:42
2012 he was the John surl scholar at the American Enterprise Institute where he
2:48
remains a visiting scholar uh for many years he directed the center for individual rights of public interest law
2:55
firm uh Professor graa holds an Ma and a PhD from corn
3:00
completed his undergraduate studies at hurg and is chair of the on of the board
3:07
of the competitive Enterprise Institute he's written on many different legal
3:12
subjects and a number of books uh most recently the upside down
3:17
Constitution another book called The demise of environmentalism in American law and real federalism why it matters
3:25
how it could happen he's also co-authored with Richard EP and uh with Michael Zeller so without
3:34
Ado further Ado we'll hear first from Professor Baker then Professor vus then
3:40
uh professor graa and then we'll have questions and answers thank
3:50
you well thank you very much judge and I'm delighted to be here at a federalist
3:57
Society conference yet again are always such terrific events because of the diversity of viewpoints and the level of
4:04
Engagement of the audience and it's always a treat uh to be invited to speak uh at these today in my remarks I'm
4:12
going to take up two questions and then I'm going to pose uh two questions and
4:18
the two questions I'm going to take up are first of all what is the challenge that confronts modern spending power
4:24
Doctrine and secondly what is the courts spending power Doctrine after NFI
4:30
I prior to the Supreme Court's decisions beginning in 1992 which kicked off the
4:36
so-called Federalist Revival there wasn't a lot of reason to care about the spending power in a world in which
4:44
Congress was understood to have virtually plenary power regulatory power
4:49
directly over the states there was little reason to worry about any limits that might exist on the more indirect
4:56
regulatory power via conditional spending the task for a modern spending power
5:02
Doctrine however is not so simple as say prohibiting any conditional offer of federal funds to the states which if
5:10
accepted might regulate the states in a way that Congress could not directly mandate since at least 1936 and us
5:18
against Butler we have also understood that congress's power to spend is greater it is more expansive and broader
5:25
than its power to regulate the states at the the same time we cannot have a
5:32
spending power doctrine that would simply allow Congress to spend and impose conditions in any way that it
5:39
might choose on the simplistic ground that a state that doesn't like the offer can always simply turn it down such a
5:47
Doctrine would strip all meaning I believe from The Constitution's notion of a federal government of liit of
5:52
limited enumerated powers so the problem simply put is this how can one
5:59
distinguish and invalidate those conditional offers of federal funds to the states that
6:04
threaten to render meaningless the 10th Amendment and its notion of a federal government of limited powers while at
6:12
the same time affording Congress a power to spend for the general welfare that is
6:18
greater than its power directly to regulate the States since 1987 in
6:25
Dole the court uh has provided us a Doctrine a controversial and highly
6:31
imperfect Doctrine as a response to this problem and until the last term in the
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Court's decision in nfib this Doctrine the do Doctrine was thought to be essentially toothless
6:43
certainly with regard to the coercion prong of its test never before had the
6:50
court invalidated any offer of federal funds to the states on the grounds that
6:55
it was unconstitutionally coercive in the nfib decision the court while
7:02
claiming to be applying the do Doctrine and finally giving its coercion Doctrine
7:07
some bite has also I believe left us with a St substantially altered
7:13
Doctrine so as most of you likely know the power uh the spinning power question
7:19
raised in the nfib uh against seia case involved the medicate expansion provision of the Affordable Care Act
7:27
which would have increased the numbering categories of individuals that participating states must cover the ACT
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increased federal spending to cover some but arguably not all of the state's
7:40
costs in expanding Medicaid coverage in the specified ways if a state did not
7:46
comply with the act's new coverage requirements critically it would lose
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not only the federal funding for those new requirements but all of its Federal
7:57
Medicaid funds the 26 States and others who challenged the act contended that
8:03
this Medicaid expansion exceeded congress's Authority Under the spending clause and seven justices across two
8:10
opinions agreed I'm going to refer to these two opinions as the Roberts Group which
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includes uh chief justice Roberts and justices Brion Kagan and then we have
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these so-called joint denters who actually agree with the Roberts group on this issue which are Scalia Kennedy
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Thomas and Alito in reaching their decision in nfib both groups of justices claim to be
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applying the test set out in the Court's 1987 decision in Dole in fact however
8:44
both opinions deviate significantly from that decision at issuing Dole was a
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federal statute that famously withheld 5% of Federal Highway funds from any
8:56
state that did not have a minimum drinking age of 21 in upholding the challenge statute
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the Dole Court held that the spending power is not unlimited and went on to set out five
9:09
restrictions two of those prongs of the five prong task played no role in the
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nfib decision the requirement that the spending power must be exercised in
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pursuit of the general welfare has long been viewed as essentially non-justiciable uh by the Supreme Court
9:28
and that did not change in nfib similarly the independent constitutional bar prong of the do test
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did not come into play uh in nfib and that's the Restriction that precludes
9:40
Congress from using the spending power to induce the states to engage in activities that would themselves be
9:48
unconstitutional is when we get to the third prong the so-called clear notice were peners prom of the do test that
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things begin to get interesting the Roberts group did invoke this provision in reaching its result
10:02
The Joint Des centers did not more critically the Roberts group I
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believe critically changed the meaning of this restriction from its historical
10:12
meaning historically this provision has sought to ensure that the terms of the conditional offer made to the state is
10:19
clear at the time the state is asked to make the choice whether or not to accept
10:25
the condition under that traditional understanding the Medicaid expansion act
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would arguably pose no problem the terms of the offer are clear no state has
10:36
contended that it doesn't know what its obligations would be if it accepted the deal nor what the implications would be
10:43
if it turned it down the Roberts group however read this provision in an entirely new way I believe such that the
10:51
question becomes whether the states could have known at the time they agreed to participate in the original Medicaid
10:58
plan that those funds might later be at risk unless additional conditions to be
11:05
disclosed at some unknown point in the future were met thus stated it seems clear to me
11:12
that even the sort of obviously prospective condition presented by the Medicaid expansion act could be
11:19
construed to be oddly retroactive and thus problematic thus interpreted this
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provision would also now seem to pose a significant threat to any new condition on previously available funds even if
11:33
the condition is both clear and entirely prospective in its application a fourth do restriction was
11:40
also seemingly relevant to the Roberts group's decision but again not to the decision of the joint Des centers and
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this is the so-called germanness or relatedness requirement that conditional
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offers of federal funds to the states must be related to the federal interest
11:58
in particular National projects or programs historically this provision has
12:05
required for example has been read to require that a condition on the receipt of Federal Highway funds for example
12:12
must be related in some fashion to a state's other decisions regarding highways and not for example instead to
12:20
whether or not a state chooses to include the death penalty as part of its
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criminal laws the conditions imposed by the Medicaid expansion are imposed on the
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receipt of Medicaid funds and would therefore seem quite clearly to be related to Medicade and to the federal
12:38
interests underlying that larger program the Roberts group however however seemed to read this requirement to permit only
12:45
modifications of Medicaid defined somehow and deemed the Medicaid expansion an attempt by Congress to for
12:54
quote an entirely new Health Care System upon the states
12:59
now it's the final requirement set out in do the so-called anti-coercion
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prom where the Crux of the action turns out to be primarily because this is the
13:11
only prong of the Dole test that both the joint dissenters and the Roberts group agreed that the Medicaid expansion
13:19
act did not meet in setting out this requirement the do Court noted that in
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some circumstances the inducement offered by Congress through the conditional offer of funds might be so
13:32
coercive as to pass the point at which pressure turns into compulsion in do
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you'll recall that the threatened loss to the states of 5% of their Federal Highway money was deemed not to cross
13:46
this particular line but the court indicated in Dole that it was not
13:52
precluding the possibility that some other amount of funds so conditioned might in the future be found too crossed
13:59
that line and the Roberts group determined that in fact the Medicaid expansion act
14:05
did cross that line and indeed they term this offer a gun to the
14:11
Head they noted that a state that did not comply with the new conditions would
14:16
lose not merely a relatively small percentage of their existing Medicaid funding but all of it they further noted
14:24
that the Medicaid funds that issue amounted to 10% of a state's over all
14:30
budget the Roberts group explicitly did not fix the precise line where they
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believe persuasion gives way to coercion but they did conclude that wherever that line might be the Medicaid expansion act
14:44
would surely beond it now the joint Des centers agreed with the Roberts group on
14:49
all these points they noted that the federal Medicaid expenditures are nearly 22% of all state expenditures whereas
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the funds at issu in do amounted to only two1 of 1% of all state
15:03
expenditures a critical difference however in a problematic critical difference I believe between the Roberts
15:10
group and the joint dissenters is that the entire analysis of the joint denters
15:16
focused on this anti-coercion principle they paid lip service to the
15:21
other four D requirements but not but did not invoke any of them on route to
15:28
invalid the expansion act it is not clear to me that Dole can sensibly be read to
15:35
invalidate legislation it fails only the anti-coercion prong of the five prong
15:41
test and in any event the opinion offered by the joint desent or standing
15:46
alone does not I think provide any sort of judicially manageable reading of
15:53
Dole presumably The Joint dis Centers do not mean to say that it is problema if
15:59
the federal government offers the states a great deal of money with any conditions at all attached presumably it
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must matter to them what those conditions are presumably Congress must
16:13
be allowed to fix at least some of the conditions on federal money that it offers the states but the joint the
16:20
centers provide no particular elaboration on that point and so where we are left at the end of their
16:27
decision is with the possib ability that the best way to understand at least their portion of this nfib decision on
16:36
spending is that they have begun crafting for us along with perhaps the
16:41
Roberts group a kind of freestanding fiscal anti-commandeering
16:47
principle whose details would remain to be worked out in future cases so here
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are my two questions for us to discuss uh perhaps here going forward inent these are two questions that keep me um
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awake at night which reflects I'm sure poorly on the rest of my life in any
17:05
event and any event the sorts of things that I worry about there are two uh
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primarily and and here's the first does the spending power Doctrine
17:17
after nfib as interpreted by the Roberts group and in particular The Joint Des
17:23
senters would it prohibit the federal government from offering each State a
17:30
grant equal to that State's current annual expenditures for primary and
17:35
secondary education without any conditions attached other than that the money be
17:42
spent for primary and secondary education now in Texas just to give you
17:49
a sense of the enormity of these funds in Texas in 2012 this was
17:55
44% of total State General Revenue expenditures primary and secondary
18:02
education I'm not at all certain that the joint Des centers would find this offer coercive or otherwise problematic
18:09
and I think Sam bagin stas may end up disagreeing with me here the joint Des Center's own example along these lines
18:17
notably in their opinion included a variety of conditions on the federal education offer conditions governing
18:25
curricula the hiring and firing of teachers and so on and their concern was they did not want Congress to be left
18:32
rightly to dictate policy quote in areas traditionally governed primarily at the
18:37
state or local level it was arguably those conditions together with the size
18:43
of the offer that render the hypothetical Grant problematic for the joint
18:49
denters but we'll see now my second question is this and it's one asked by
18:55
Justice Ginsburg in her opinion could con was going forward simply take
19:02
the repeal and reenact route whatever that might look like could Congress
19:09
avoid a concern that spending in one program is being conditioned on
19:14
participation by the state in a second new program simply by simultaneously
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even repealing the old program and reenacting perhaps even in the same bill
19:26
the combined program in this case that would leave us with a single Medicaid
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Program that would combine the expansion acts um components with the old Medicaid
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uh components and the question would then be with that one time brand new
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seemingly brand new proposal would this in any way violate
19:56
the spending power Doctrine as Now by The Joint Des centers uh and the Roberts
20:03
group Ginsburg posed this question in the decision and the Robert's group offered a very indirect response to the
20:10
argument noting that well that would never really happen basically that practical constraints they said quote
20:16
would plainly inhibit putting every feature of Medicaid on the table for political reconsideration which of
20:22
course wouldn't necessarily happen if we were doing this simultaneously The Joint denters had
20:29
response to this particular question so I will now leave you with these two questions um as for where we go from
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here I hope our fellow panelists my fellow panelists Will now tell us thank
20:41
[Applause]
20:50
you well so now this is my second uh spending Clause panel in a row following
20:55
ly Baker and I didn't do well the last time following Lyn Baker she's very tough act to follow and I I'm sure that
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she'll be a tough act to follow again I do want to say just at the beginning I I really appreciate the opportunity uh to
21:08
speak to this group um as as judge Jones's introduction suggests you know
21:14
Reinhardt clerk Obama administration political appointee uh I have and and what you didn't say is you know proud
21:20
graduated the University of North Carolina as such I feel sometimes I've gone to a lot of federalist Society
21:26
events and I always enjoy the give and take and and enjoy the welcome I get but I always feel a little bit like my
21:31
beloved Tarheels walking into Cameron Indoor Stadium uh going to these events and and uh so I appreciate the
21:38
opportunity to come here at least you're not sticking out of your hands at me like they do uh so thank you uh and and
21:44
I I I also I also think that this is just such a great opportunity to have a
21:50
discussion not only with the folks in the audience but but also with the folks on the panel whose work on on these
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issues well I may my disagree disagreements with I have learned just so much from uh through the years and
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and I'll talk some about about a little bit of their work while while I go through but obviously uh Lynn's article
22:12
on conditional spending after Lopez kind of sets the entire agenda for this field
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uh and Mike's recent book The Upside Down Constitution you know has this very interesting uh I have a reaction that I
22:24
find interesting which is I completely disagree with nearly every normative premise behind the book and yet every
22:30
page I found fascinating and felt like I was learning something from it so I thought that I thought that was really
22:35
terrific and and it has a lot to say about these topics and I think a lot that a lot that people um who are coming
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to these topics a new or who have thought about them for a long time uh really can learn from so I really
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appreciate the opportunity to talk here um so this conference is uh about the
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federal Leviathan right that's in the title of this conference uh the federal Leviathan and one agenda that a lot of
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folks have had uh for a long time has been uh how do we tame this Federal
23:07
Leviathan and I just I want to take as a given that there's a federal Leviathan for these purposes and and that there
23:13
ought to be an agenda to tame it that's a subject of some normative debate but but I want to take that as a given for a
23:19
second um now conditional federal spending has been one of the significant
23:25
arenas for decades now in efforts to tame the federal Leviathan for people
23:31
who are concerned about the size and the scope of the federal government conditional federal spending has been a
23:36
major Target for a long time now and I think there are a couple of reasons for it one is and I think this ties very
23:43
much into to Lynn's uh to Lynn's conditional spending after Lopez argument article as the Supreme Court
23:50
narrowed congressional power to regulate private primary conduct and state conduct in the 80s and 90s and 2000s uh
23:59
the conditional spending looks like a way Congress might be able to circumvent those limitations and certainly you saw
24:06
efforts uh very quickly after many of the limiting decisions issued by the Supreme Court efforts in Congress to use
24:13
conditional spending to rely on the vast amount of federal spending going to the states attaching conditions to that
24:19
federal spending to try in effect to override or circumvent the uh the
24:25
Supreme Court's decisions uh in cases like Lopez in sovereign immunity cases for example so one significant reason
24:32
why we're looking at conditional spending is it looked like the last thing left for Congress and it looked like if the Supreme Court really had an
24:40
agenda of trying to close off what what the court might have considered to be overriding overweening or overe
24:46
extensive Federal power uh that it had to look to conditional spending but
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there's a longer and more pre-existing uh Trend here and that trend is the growth over many many decades beginning
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with the new deal with some drop in the 1980s but then returning uh after that
25:05
of conditional federal spending to the states of federal grants to the states uh with big political coalitions uh that
25:13
might be sort of politically surprising coalitions including a lot of a lot of Governors including a lot of
25:19
Conservative Republican Governors saying yes yes yes money with conditions is good for me I want it please give me
25:26
more uh and so if your concerned and and I think one of the things that that Mike's book does so well is showing in a
25:33
from a political economy perspective how this happens and how and how looking at it from a systems perspective you see um
25:39
how this has occurred and why this if you if you're concerned about the size the scope and the extent of the federal
25:45
government why this might be a problem so conditional spending is a Target now
25:51
lots of scholarly effort was devoted in the 80s the '90s the a to trying to to
25:58
articulate a constitutional or legal basis for the courts including the
26:03
Supreme Court uh to try to limit congress's conditional federal spending power and there were hints in the during
26:11
this time that the jurist Prudence might move in that direction uh particularly with the aggressive expansion of the
26:19
notice requirement which Linda has talked about what what the court did expanding it even further in the nfib
26:24
case or at least chief justice Roberts in the nfib case expanding it even further but this sort of aggressive use
26:30
of the notice requirement to try to to try to at least trim more and more
26:36
significantly what Congress was doing or could do in the conditional spending area and Hint by a number of individual
26:41
justices Lower Court judges um that perhaps more was in the offen in this
26:46
context the spending Clause holding of the nfib case looks like it ought to be a big deal it looks like it ought to be
26:54
this is The Taming of the federal Leviathan of this aspect of the federal Leviathan that people have been waiting
27:01
for uh it is the first time the very first time that the Supreme Court has ever held a spending condition
27:08
unconstitutional because it coerces the States you may think of the butler case we all studied in constitutional law
27:14
held a spending condition unconstitutional as coercive but of coercive of the farmers of the individual Farmers this is the first
27:21
case in which the court has held a spending condition coercive of the states and therefore unconstitutional
27:26
exceeding congress's spending power the coercion Doctrine itself right was just a hint in a couple of cases before this
27:33
Steward machine chief justice cardoo kind of throws off a well there might be a point where where where this moves
27:40
into compulsion there might be a point but you know we don't have to decided here Chief Justice renquist in the do
27:46
case again in articulating in articulating coercion as a potential
27:52
limitation on congress's conditional spending power actually treats it as something a little different than the he
27:58
says there are four limitations and then there might be a point where again this
28:04
turns into compulsion we don't have to decided here clearly this is well within uh the inducement not compulsion side
28:11
okay so it's just a hint up until that point it's just a suggestion there's no holding and the Supreme Court says this
28:18
is in nfib coercion of the states should be a big deal so how much does nfib tame
28:25
the federal Leviathan I would say not very much I would say nfib by its holding does not tame the federal
28:31
Leviathan that much um and we you've heard from you've heard from Lynn about this I don't want to talk a lot about
28:38
kind of how how I would parse the various opinions I I think I basically agree with how Lynn would read the
28:44
opinions let me just say I've made an argument an article I have coming out uh in a month or so in Georgetown Law
28:49
Journal that the chief Justice's pivotal opinion render Su spending condition coercive only in very narrow
28:56
circumstances where con takes what's first a very large second pre-existing
29:01
conditional spending program and third tells the state that if you want to continue participating in that program
29:08
you have to also agree to participate in this entirely separate and distinct program uh and in those circumstances uh
29:16
there is coercion and in the context of Medicaid uh which is the largest
29:21
conditional spending program by far to the states by an order of magnitude to the states by actually by two orders of
29:27
magnitude I think to the states um in the context of Medicaid itself there's a
29:32
powerful argument there we can have our quibbles I have some quibbles in in in the in this article I have forthcoming
29:39
with how the Chief Justice applied this principle to the nfib case itself but at least you see how it works in the
29:45
context of Medicaid but I think any reading of the opinion as imposing more significant limitations on congress's
29:53
conditional spending power is inconsistent both with what chief justice Roberts said he was holding and what his reasoning was in his pivotal
30:00
opinion but also with the constitutional principles that he says drive him constitutional principles of
30:06
accountability on the one hand and of ensuring that the current Congress can continue to tailor and mold and shift
30:13
spending programs in accordance with its view of what the general welfare is okay so I don't think there's much taming
30:20
going on here I think that this I think that this decision really limits Congress in only a very narrow set of
30:27
situations and I'd like to argue for the rest of my time that that's a good thing uh and and so here's here's the point
30:34
where you know I I might start to see some of the Cameron crazies coming out and that's okay um and so it's a good
30:39
thing for a number of reasons first of all I I want to note that coercion uh in
30:45
the sense that the nfib joint descent uses it uh is really not the right
30:51
concept here so the idea that states have a will that's overborne by large
30:56
offers of federal money uh it raises serious conceptual problems it's problems we've known about about
31:02
for a long time uh what's the difference between an offer that is too good to
31:07
refuse and then offer you can't refuse right I can't do my Marlon Brando but you you know how Marlon Brando said it
31:13
uh and you know since cardoo talking about how this kind of inquiry plunges us into endless difficulties we've
31:20
understood the conceptual problems with saying that by offering you too much money you you have been coerced as an
31:27
empirical man in in addition this is not how conditional spending laws actually work
31:33
number one at least over the past over the past period of time Mike's book has
31:39
some suggestions has a nice suggestive chart that this might change in the future but at least in the past Federal
31:46
Taxation and federal conditional spending have not crowded out the state's ability to raise its own revenues and this is an area where Lynn
31:53
and I have had some discussion I'm sure we'll have more uh as States and and and moreover States and state officials are
32:00
very much at the table in developing conditional federal spending packages
32:06
this is in part why the other reason being the states can always say no and so that the federal government has to
32:11
pay enough to overcome the state's holdout price essentially uh this is why
32:16
the matches two states the inducements to States tend to be so generous in the context of Medicaid itself every state
32:24
gets at least half of its expenses reimbursed many states much more than half of their expenses reimbursed in the
32:30
context of the Medicaid expansion that was before the court in nfib the additional increment of expansion
32:37
population would be paid for 100% by the federal government for the first couple of years dropping to 90% by the end of
32:43
the decade very generous terms for the state States and state officials might
32:50
not like particular conditions but they're parts of a package that is that
32:55
results from a negotiation between between State officials and federal officials in which state officials have
33:01
substantial leverage and involvement so the idea that what's going on here is coercion in the sense of overbearing a
33:08
will which is sometimes the way you read it often often the way it's expressed in some of these opinions I I don't think
33:15
that really works and I think that's why the most sophisticated challenges critiques of conditional spending like
33:20
like Lind and mik which are different from each other they're the same in the sense they focus on its homogenizing
33:26
effects its effects limiting Interstate competition but even here let me just say a couple of things in favor of
33:33
conditional spending uh first of all often the alternative to conditional spending is not that the government that
33:40
that this is devolved to the states whatever issue it is or there's less government involvement in general often
33:45
the alternative is complete nationalization if you think about Healthcare the subject of nfib it would
33:51
be remarkably easy for congress when it was setting up not leaving the politics
33:57
aside remarkably easy administratively for congress when it was setting up Medicaid when Lynden Johnson in whose
34:03
building or Shrine we are right now was setting up Medica it would have been remarkably easy administratively to say
34:11
let's do this entirely as a national program as a federal program Medicaid is an insurance program that's all it is
34:17
right it would be very easy to have HHS do it they wouldn't even have to have HHS people in Washington do it they can
34:23
have offices everywhere they do have offices everywhere um and you see even in the context of the Affordable Care
34:29
acts exchanges uh when the states have not participated in exchanges set up
34:35
exchanges the federal government has set up those exchanges Congress in the architecture of the Affordable Care Act
34:41
said look you do it or we'll do it we can do it cooperatively or we'll do it nationally lots of arguments about what
34:47
that means as far as the law goes but as far as the alternative of State versus
34:53
federal or cooperative versus Federal if there's no cooperative it's going to be simply fed um so if that's right so I'm
35:01
running low on time um so if that's right then the question is what are we
35:07
what are we buying what's good the question for me is what's good about having the States involved in a
35:14
conditional spending program and I think that what what's good about having the States involved is actually a lot of
35:19
stuff that a lot of folks who care about who care about federalism should care about what's good is there's an
35:25
opportunity in the administration of the program for states to make substantial molding of the program to their local
35:31
conditions through the negotiation of waivers and such which have grown up exponentially uh since the Clinton
35:37
Administration uh in particular and the Bush Administration continued and the Obama Administration has continued it uh
35:43
there's an opportunity for quite substantial uh tailoring of federal state Cooperative programs to local
35:50
conditions whether they're factual conditions or different local values and that's important and that's something
35:55
that you wouldn't get if you just had National ation now of course there are times when the alternative isn't nationalization in these cases if you're
36:02
really against policy that takes place pursuant to Federal Direction and paid for by federal revenues you're not going to like conditional spending but I
36:09
wouldn't join you in that opposition I'd say because of collection Collective action Dynamics among states there are
36:14
lots of very worthy objects of government that can't be achieved without a strong federal policy and
36:20
financial role and that's true even if people all over the country want all else equal for their states to achieve
36:27
those object I think about Medicaid but of course I also think about the interstate highway act Elementary and secondary Education Act all these all
36:34
these statutes have problems but I would submit that they're all quite successful
36:39
in significant ways and none could happen without a strong policy and financial role you might disagree I
36:45
suspect a lot of you do but that to me highlights the problems with imposing some sort of judicial effort judicial
36:52
effort to tame Leviathan here because these sorts of disagreements I would say are the stff of democratic politics one
37:00
person's race to the bottom maybe my race to the bottom is another's interjurisdictional competition one person's effort to avoid
37:07
Collective action problems or to adopt Universal entitlements of national citizenship is another's cartel there's
37:14
no way to resolve these questions without making very contestable normative judgments about what the proper object of government is what our
37:21
nation is supposed to be about what citizenship as an American is supposed to be about and we can't resolve these
37:27
questions also without making highly contestable empirical judgments I would submit with all the problems of our
37:33
national political process and boy I could talk for 15 20 minutes about that but I'm not going
37:40
to I've learned judge Jones probably doesn't remember I've appeared in front of her and I've learned not to cross
37:46
judge J um still the political process of debate
37:52
of argumentation of deliberation of pulling hauling and trading to me is superior to a process of judicial Fiat
37:59
for resolving these questions and so I would argue that what the court did in the nfib case by not aggressively taming
38:08
the Leviathan through of conditional spending was a good thing so thank you very [Applause]
38:22
much um thank you all uh it's a pleasure to be here I want to commend Sam's
38:28
article uh to you it's already on ssrn uh the one that's going to be in the law
38:34
in the Georgetown uh Law Journal uh there are
38:40
and I want to say I agree and almost entirely um with the article there are
38:47
two arguments or two points in particular that I agree with one is Sam say uh maybe you can extract some anti
38:57
leveraging rule from the nfib opinions that is to say uh the Congress cannot
39:04
use um funds to leverage programs in entirely unrelated areas in some sense
39:11
um but if that's so that'll probably be a one trick pony because as Sam just
39:16
said that there's no other statute uh that comes even close to Medicaid in terms of uh its size and those things
39:24
matter in the Court's opinion and the second thing is he says the principal effect of the nfib decision has to be
39:30
has been to increase the state's bargaining Power Visa uh the federal
39:37
government in Medicaid in particular I believe that's right the state Governors have said that and they have acted on it
39:45
I myself I'm not sure that that's a good thing but in any event that's not a SE change uh in the conditional spending um
39:52
Arena so I want to commend this arle article to you and in particular I want to commend it to you because tries to
39:57
take the opinion seriously I myself have never managed to play it for anything but laughs um so I I want to in instead
40:07
of going over that opinion yet again I want to take a step back and as a b critiques the conservative critique of
40:13
cooperative federalism programs um the my reason for doing that is that I believe that most conservatives have no
40:20
clue as to what's wrong with these programs uh and that is true at a constitutional and at a political level
40:28
so the pro problem with conditional spending programs supposedly is
40:34
coercion now we can't be talking about literal coercion on the part of the
40:40
federal government that's already unconstitutional because it's called commandeering so we're talking about
40:46
something that's a little more subtle and metaphorical something more like duress um but I think there's no
40:54
coherent constitutional theory of duress and I think even if there were uh I
41:00
wouldn't put much hope in it because it would miss the political economy of these programs entirely so let me give
41:07
you three examples of the kinds of things that I have in mind um first is this the nfib case itself was one and
41:15
argued on coercion the proverbial gun to the Head presumably the decision remove
41:23
the gun to the head and now that the gun is gone the victims the supposed victims
41:30
are making a be line for the money uh that result was altogether
41:36
predictable and we could have had it without all the commotion that's the second Point why is it predictable uh
41:44
and the answer is that Medicaid has grown by Leaps and Bounds over the decades not because the feds require it
41:51
but because States demand it the way the program works is there are some surfaces and populations that you have have to
41:57
cover as a state under the program so those are mandatory uh but there are also optional uh services and if you
42:05
cost this out uh well over 60% of all Medicaid spending is optional this is
42:12
not something that the federal government forced on the states uh third example is is this um in
42:20
the 80s in in the 80s and '90s there was as as both of your speakers here
42:25
indicated a conservative debate over these programs over unfunded mandates I
42:32
remember it all too well um which goes to show that I'm getting old and listening to Too Much Taylor Swift uh
42:40
the argument then um was that it's
42:45
what's wrong here what's coercive is that the feds s of toss a few dollars into the street uh and then they refuse
42:52
to pay the full price for the conditions for the implementation of the conditions that come along
42:57
along with these programs with the money there was a lot of conservative agitation over it was the unfunded
43:04
mandate Reform Act and there was a lot of demand to make the grant conditions more favorable less
43:11
coercive and note that the nfib argument was exactly the uh the opposite medit is
43:18
too generous because it pays 100% And one of the justices asked Paul
43:24
to amend um counselor I mean if they H 120% would it be yet more coercive and
43:30
he had to say Yes um and so which is it to be um maybe there's some Goldilocks
43:36
theory of um you know federalism and adequate funding out there uh but I
43:41
think it's more likely that uh one of the coercion arguments at least is wrong and I think it's still more likely that
43:48
both are wrong because the pathologies of spending statutes have nothing to do whatsoever with coercion they have to
43:55
the very bad in incentives I'll group these incentives under four headings
44:00
fiscal Illusions F fiscal asymmetry time inconsistency and locking
44:07
effects let me take them one at a time what I mean by fiscal illusion is that conditional funding programs are a
44:14
systematic effort a systematic effort to exploit voter ignorance for the purpose
44:19
of making government services look much cheaper than they are and in that fashion to increase the demand for those
44:25
programs let's start with ballpark numbers on Medicaid um even before
44:31
Obamacare that was the biggest and most generous Federal transfer program it's about $275 billion a year 45% of all
44:40
federal funding uh you have to add so another 180 billion or so in state
44:47
spending so now you're over 450 billion a year uh the program is close to 25% of
44:54
all state spending much more in some states is projected to grow at 99% over
45:00
years with or without Obamacare um that means it will double
45:05
in less than a decade and then you ask yourself would any state lock itself
45:11
into that commitment if it had to paid the full price I think the answer to that is
45:17
no uh would the federal government sustain Medicaid at those levels I think
45:23
the answer is it would never have gotten to this level uh if is precisely because of the joint funding that Medicaid has
45:30
become so big and so fast growing um at the federal level Medicaid looks
45:35
comparatively cheap because hey for every dollar we spend we get well not exactly two but close to $2 of services
45:43
so that hey that looks like a bargain and the state level Medicaid expansion also looks cheaper than any other
45:50
program um in other words the federal grants spur the spur the local demand
45:56
for taxes in spending and that is the intended result of these programs what
46:01
the state voters and all of this uh ignore is that they are also paying for the federal portion that is not as
46:07
stupid as it sounds because Medicade from their advantage is just you know another claim on a common pool and you
46:13
can't trace the effects on your federal tax rate but what happens is you end up with a level of spending that no
46:19
jurisdiction would ever choose on its own and that is the point of configuring the program that way it's very nasty
46:25
ruinous political but it's not unconstitutional for the government to create fiscal Illusions if
46:33
that were so there'd be no government um the second Point um fiscal
46:39
asymmetry all the governors the Republican governs Governors who now caved into Obama C said the same thing
46:47
uh we can't simply leave the money on the table because our taxpayers will uh pay their share quote unquote of the
46:54
federal uh program either way so we can only opt out of the benefits but never the costs of the program and that's a
47:01
Pon strand of the uh coercion argument uh the way the argument goes is well
47:07
feds here act like a pickpocket who first steals your wallet and then promises to give it back on condition
47:13
that you cooperate in some scheme office um that's suggested for example in
47:18
Paul's briefs in these cases um the argument I think has some plausibility but again it's a problem of incentives
47:26
and not coercion look the feds don't tax states at all they tax
47:33
individuals and the states can't interpose in that relation the receipts
47:38
then go not to individuals but to the states and government actors at all
47:44
levels exploit the asymmetry but the pig pocket analogy nonetheless fails because
47:50
the money wasn't taken from the folks to whom it's then given back or given
47:55
conditionally so the problem you have is there's nothing wrong with either leg of this transaction uh so you can't I think
48:02
get a constitutional handle on the problem that way the third uh thing time
48:08
inconsistency State officials who agree to conditional funding programs often know that these programs or the
48:15
expansions will require very substantial tax effort in years ahead uh and they
48:21
may wreck state budget so why do they agree the answer is because state
48:26
officials have the time Horizon of a mole they think to the next election and
48:32
no further and the breage down the road is somebody else's Pro problem so the
48:38
problem with these programs is not that state officials can't say no it's that they don't want to say no um State
48:46
officials s constricted time Horizon that's actually a constitutional problem um as Alexander Hamilton said in
48:52
Federalist one all these State officials look to is the power and molent and consequence of their offices they don't
48:59
have any encompassing interest and Hon's conclusion was that you couldn't build a
49:04
constitution with State officials you would have to Simply beat these people uh and for some reason modern day
49:11
conservatives want to empower them um how that would improve the situations I
49:16
don't really know um the last s of incentive effect I want to talk about is
49:22
the lockin effect uh when Rick Scott governor Scott uh the state's ring leader in the anti ACA litigation agreed
49:29
to the Medicaid expansion a few days ago he said well I'll do only do this so long as the feds pay 100% And then I'll
49:36
do it only for 3 years well great um this is not going to work uh if I
49:43
have to say that because Federal programs one once in place grow in electively because every expansion looks
49:50
relatively cheap and every cutback looks idiotically expensive because to save a
49:55
single dollar and state revenue you have to cut two or three or four dollars worth of of
50:02
Medicaid um and that's particularly unlikely to happen because over time
50:07
these funds have a fight paper effect as the economists say the money sticks where it hits meeing with state
50:13
governments and their clients so education funding doesn't fund education it funds Educators and Medicaid funding
50:21
doesn't fund the poor because if we wanted to do that we' give them the money um it funds the providers and the
50:28
nurses unions and so on and on uh and so once you strip the nfib plaintiffs
50:34
argument of the arguments of the bural what comes down to is look we State
50:40
officials have an alienable right to build up our own political constituencies with federal dollars um
50:47
at our own chosen speed um I don't think that's plausible um my point is not so
50:54
much that the nfib arguments are laughable although that's true uh the
51:00
point is I can't think of any coercion argument or theory that goes anywhere near any of these perverse incentives
51:06
that drive the programs so key problem to say this simply is that very clearly
51:13
the Constitution permits the federal government to give States money that they haven't raised and very clearly the
51:20
states May accept that money so in combination these entitlements allow government actors to collude for the
51:26
purpose of of overe exploiting uh the tax pay base but it's not coercion
51:31
that's the problem it's the Constitutional entitlements themselves the power to spend and the power to accept the money and once you see it
51:38
that way and you look at it that way uh the painful reality is the Supreme Court can't do anything about it the solution
51:45
would have to be political um unfortunately the political agenda has also been affected by the
51:52
coercion virus the Mantra is let's block grant these programs so so that they're more acceptable for States I think
51:59
that's a dumb idea for three reasons one is it'll make the programs vastly more
52:05
expensive I'd be happy to explain you know the slightest provocation why that
52:10
is um uh second more freedom for the states means more freedom to dissipate
52:17
the funds to favored constituencies in particular unionized constituencies why
52:23
that is a plausible conservative program I will never understand and the third thing is that the block
52:29
bands still don't come to grips with the real problem which is that so long as
52:34
States get to spend money they haven't raised you get rotten incentives and
52:40
strategic behaviors on all sides so what would fix the problem uh well a number
52:46
of things um you could uh either abolish Medicaid
52:53
that is not going to happen you could as Sam suggested you could nationalize the
52:59
program and run it directly from Washington but that might not be very effective but at least it wouldn't grow
53:06
on autopilot anymore you could nationalize the pro
53:11
program and cash it out to individuals the late Senator monam had a fa I mean
53:17
when you sort of looked at these programs you like to say well if we want to redistribute income I have an idea
53:24
let's redistribute income um the idea is give money to people not to places or to
53:31
politicians the third thing you could do is you could try to realign the incentives so Medicaid is now about 8 9%
53:38
of all federal spending you could pass a law or Medicaid Amendment or whatever uh
53:44
providing that for a state that doesn't participate in Medicaid the state's taxpayers not the states but the
53:50
individual taxpayers get an 8 or 9% refund on their income tax uh what I
53:56
think that would do is it would actually get at the heart of what is now called coercion at a minimum it would generate
54:03
a somewhat more honest debate at the state level uh and if implemented it
54:08
might actually do something to sort of curb the governmental bureaucracies that
54:14
tend to grow up around these Pro uh programs I'd be happy to entertain any
54:20
of these proposals or any proposals that go into that direction um but but uh my
54:27
main point is coercion is a distraction thank [Applause]
54:40
you can you hear me yes um do you have any comments make would you like to go around or just
54:48
open for questions all
54:53
right would you where are the microphones that there's one
55:02
down J
55:18
yes okay well let um is someone standing back at a mic over there yes all right
55:25
hi my name is my name is Chris Ward I am an attorney at y Coleman and president of the Austin lawyers chapter and I'm a
55:33
graduate of Harvard where Professor s was one of my professors and I've been waiting 12
55:39
years to ask him this question actually for civil rights
55:45
litigation this is unrelated well it's a little related um but uh Professor bin
55:51
says um as a conservative I have
55:56
sympathy with your your idea that certain things should be left primarily
56:04
to the political process to determine what our what our response will be
56:11
politically and whether that response will be at the national or the state level um but I think our
56:19
experience has been that without judicial articulation of limits on
56:27
federal power um you know the the political give and take is pretty
56:34
one-sided with the federal government taking whatever power it's allowed to
56:39
take um so isn't there a role for
56:45
judicial articulation of the limits of federal power under our constitutional
56:51
structure and isn't it possible that you know
56:58
more more better and clearer and further
57:03
judicial articulation of those limits would help that political power you know
57:09
I think a good example is the passage of Obamacare if you go politically if you
57:15
go by the polls at the time it was passed and the election that occurred right after that the public politically
57:21
was saying we do not want this nationally done Texas and several other
57:28
states qua states are still of the opinion that it shouldn't have been done
57:33
but it was done anyway and it's been up hell so I think that that's a great
57:40
question I will say though I mean you're being a little disingenuous because strip of Obamacare you did ask me this
57:45
question 12 years ago I remember it was a very it was a very use
57:52
I actually I love that was my my favorite year of teaching that class because we had such a such an
57:57
interesting diversity of views among among the students um and I will say a couple things about that I mean first of
58:04
all I want to make clear that what I'm saying is having some judicial some
58:10
judicial rule limiting the ability to put conditions on federal spending is
58:17
problematic um and and probably not something that that courts ought to do at least beyond the very kind of extreme
58:24
case that the Chief Justice dealt with in n FIB I'm not making an argument generally that courts should stay out of
58:30
policing the line between federal and state uh federal and state roles or or policing the federal state balance or
58:37
however you want you know whatever metaphor you like here uh spheres balance whatever um it's not an argument
58:43
about that I mean it's very much an argument about when when when courts are making decisions they have to make
58:48
decisions that are the kind of decisions that courts can make without embarrassment and I think a court can't make without embarrassment a decision
58:56
that uh that an offer of funds to a state is so generous as to be coercive I
59:02
I think that that I mean and and I've already started laughter to the person next to by the person next to me I I
59:08
think it's just it's a it requires such a such a determination of what are
59:14
highly contestable highly highly divided issues um in our American politics that
59:21
it's the kind of question this kind of question what is coercion is the kind of question that I think is not very well
59:28
dealt with by courts in the ordinary rount of cases now there might be lots of other places that you want to have
59:34
courts making decisions that the federal structure has been somehow transgressed
59:39
inappropriately and I I don't actually I don't think there's anything wrong with that so so Lynn and and my friend Ernie
59:45
Young have written a lot about I have a nice paper about that um the question is what those rules ought to be and I think
59:52
I think this kind of rule is not a good one I think there I think the political process process is a better place to deal with this kind of
1:00:02
question question uh regarding uh your proposal which I found quite interesting
1:00:08
on the uh on an on an idea to and an idea to get a lower tax rate
1:00:14
for people in states which do not take the federal money would there be any
1:00:19
constitutional concerns raised regarding Direct capitation in this regard I thought you were going to ask
1:00:27
about the uniformity Clause um right which you could argue to
1:00:33
be blunt I mean I can't sit here and say I really thought carefully about this
1:00:40
this was more like you know it's a trial balloon for p sakes right I think it
1:00:46
would pass master um right and and I could I'm I'm pretty
1:00:52
confident you could find uh examples like that um in in in in our attacks history
1:01:01
uh am I totally confident about that no um but again I mean my my main purpose
1:01:08
was to sort of get at least look the argument that who we'd be
1:01:14
leaving money on the table right was very prominent in nfib uh it was even
1:01:20
more aggressively pedal in some of the briefs and I was just trying to explain
1:01:26
if you really thought that was a problem then the holding is not the remedy it
1:01:32
you'd have to do in terms of the incentive something like
1:01:37
this right so one of the great uh public policy challenges for state governments
1:01:42
is uh their state public pension that a lot of states have overextended themselves drastically so one of the pin
1:01:48
want to address how um Federal conditional spending can use to achieve various Poli policy goals without the
1:01:55
states that have so poorly mismanage their uh public pensions from just
1:02:00
simply looting it in order to uh keep those pensions
1:02:08
going here's here's my sort of two minute or 3 minute rip on this um in a
1:02:15
very real sense I believe that uh the unfunded pension
1:02:21
liabilities uh and and other benefits which now stand out of four trillion
1:02:27
dollar are a consequence of federal conditional funding statutes the way I
1:02:34
would think about it is you have this bizarre combination in American politics now of relatively hard budget
1:02:41
constraints of the state level and almost non-existent budget constraints at the federal level and so the money
1:02:47
flows you know from the and states don't want to give up on the federal receipts and and the federal funds at the same
1:02:54
time they operate under budget amendments and so forth where do they hide the shortfalls answer and they by
1:03:00
you know underfunding um uh the pension accounts I am extremely worried about
1:03:07
this in the long run because as one of my banker friends says debts that cannot
1:03:13
be paid will not be paid um and in a lot of States these pension funding these
1:03:18
pension obligations will not be payable by the states and then the question is what happens then um there will be I
1:03:26
believe over the next few years increased demands for federal bailouts
1:03:32
of these funds uh the first one is Obamacare because what it allows states
1:03:37
to do or what it will states allow what it will allow states to do is to
1:03:43
transfer a lot of their health care obligations and people onto the federal accounts and subsidies and all the rest
1:03:49
of it um that is why a lot of the states were for ObamaCare before some of them
1:03:55
were against it um and and the other thing that that may happen is that
1:04:02
conditional funding programs offer vehicles to bail out State Pension funds
1:04:08
right they're not the only vehicle the biggest vehicle we probably have is financial repression by the FED
1:04:15
something along the lines of hey you know Mr Diamond perfectly fine Bank you have there it really looks nice I'd hate
1:04:21
to see anything bad happen to it why don't you buy something illinoid bonds
1:04:28
um right but you could also see something along the lines of a um you
1:04:36
know teacher oriented bailout and the argument is we're committed to leaving
1:04:41
No Child Left Behind that requires quality teachers we can't have quality teachers if they're uncertain about
1:04:48
their pensions therefore we'll pass a pension amendment to you know the nclb
1:04:53
or some other federal statute the sky is the limit um it's one of I mean if you
1:04:59
look at other countries in particular one of the problems of these programs is
1:05:04
that they induce irresponsible State bets on federal de facto bailouts we're
1:05:10
already there in one of the future fights over fiscal federalism or whatever you want to call it is how is
1:05:17
that stuff going to shake out and again coition ain't it it's
1:05:23
where is the money coming from let me just may I just interject one little defensive coercion here everyone's
1:05:29
dumping on it as a theory but U Mr bagin sus actually appeared before me in court
1:05:35
in a case that had to do with a Rehabilitation Act and or Ada as
1:05:41
implemented through the Rehabilitation Act on behalf of people and I don't
1:05:46
don't get don't think that I'm against the disabled but it had to do with uh uh
1:05:52
requiring curb Cuts throughout an entire small town in in um Texas and uh so the
1:06:00
people in wheelchairs could travel around the town more easily well why did
1:06:05
they have to why was this claim made because Federal money was going into the town and therefore you have to abide by
1:06:12
The Rehabilitation Act as interpreted by the government which means that every town in Texas is I if they followed our
1:06:20
ruling we're going to spend a billion dollars or more during C doing curb cuts
1:06:25
this case came down around 2009 or so and most uh even Texas was not having
1:06:32
economic uh High Times at that moment and uh so what happens is that the
1:06:38
federal control does in fact coers the states to spend money in ways that they
1:06:44
wouldn't other that the taxpayers would not otherwise allow yes there's too much
1:06:49
money being spent at all levels yes the people who spend other money people's money are not respons responsible with
1:06:56
it but it's sort of a parallel problem with the idea that the states are spending money that they don't have to
1:07:02
tax their citizens for the feds are imposing regulations that uh cost them nothing
1:07:10
but cost the states a lot of money next
1:07:19
question from Stanford law school um I wanted to take um take up Professor
1:07:24
Baker's question I guess that keeps you up at night uh the Ginsburg challenge that if they can just repass Medicare
1:07:30
then Medicare most the point so my question to you is could one answer to that be to create a constitutionally
1:07:37
enforcable rule whereby the federal government cannot do indirectly what it does not have the power to do directly
1:07:44
so in the case of nfib yeah sure Congress I mean if you buy the Commerce Clause argument which I don't but let's
1:07:50
say we do that Cong Commerce Congress has the power to do Medicaid under the Commerce Clause then yeah sure if you
1:07:56
can enact it directly let it instead give it to the state's money and decide how to do it but it can't just it does
1:08:01
not have the power to tell to directly uh have speed limits uh on highways so
1:08:07
South Dakota V also on the decided uh it can't enforce a national curriculum so President Obama's race to the top
1:08:13
program is also unconstitutional wouldn't that be a judicially enforceable rule with clear uh I guess
1:08:19
limits uh and that's also easily understandable um if I'm understanding
1:08:24
your question you're suggesting that uh there's no difference between congress's direct regulatory power or might we
1:08:32
might have a rule that had entirely coextensive the spending power and Regulatory power is that
1:08:38
correct um I think it's certainly theoretically possible um I don't think that's the current state of American
1:08:45
jurist Prudence uh For Better or Worse um someone else who might disagree with me but I think I think the reason why we
1:08:52
have a problem now is um or something that merits uh the deep thinking of of
1:08:58
intelligent people is precisely because uh We've created a gap um our jurist
1:09:04
Prudence has for many many decades now created a gap between the ability to spend uh and and limits on that versus
1:09:11
limits on on the regulatory power so um would I personally favor something that
1:09:19
uh that uh precisely coextensive uh I'm not sure I think personally probably not
1:09:25
know in general I'm very um concerned about conditional federal spending
1:09:31
but to my mind the the diff I mean there's a it has a sort of certain
1:09:37
surface uh attraction but there are several problems and several different levels I think so the first one is that
1:09:44
um as we all know there's no spending Clause right there's only a taxing
1:09:50
clause and we know that the power to tax is broader than the power to regulate
1:09:57
right so and and if that's true and if youer the spending power from the taxing power presumably it follows that the
1:10:04
spending power is broader than the taxing power right that's one problem the other problem is that um there are
1:10:12
lots of situations where it's not a problem of or not a question of doing indirectly what you can't do directly uh
1:10:20
especially if you live in a sort of dual federalism world right there are lots of
1:10:25
things where you have to allow intergovernmental Bargains because the project cannot be accomplished by one
1:10:31
government actor alone right and then the question is what are the terms what
1:10:37
are the permissible terms of the bargain and right we we have several rules that
1:10:44
that are addressed to dealing with that problem so the clear statement rule has come up repeatedly that is a rule that's
1:10:51
targeted to curb the bargaining problem because what it says is that well the
1:10:58
bargains may be good or bad but the loss of transparency and accountability is a
1:11:03
given for each of those Bargains and therefore we want to make sure that you were clear at the front and as clear at
1:11:09
least as you could be that's an example right but but I'm not sure that that the
1:11:16
so you can't do indirectly what you can't do directly that that helps you very far in a lot of these situations
1:11:26
if the Constitution were amended to prohibit the federal government from giving free Federal money to other
1:11:31
governments what would we lose what we
1:11:40
gain question is what do you want right so so if so so if the I and I tried to
1:11:47
suggest one thing you might have happen is it really depends on you know what what it depends on what the government
1:11:53
what the federal government is giving States money for for right now and what they could do by themselves one thing you might have happened is a lot more
1:11:59
federalization a lot more nationalization of of of the projects um and I think it's an interesting point in
1:12:06
the joint descent in nfib none of us have talked about uh where the joint to
1:12:11
centers say yes we accept that given the hamiltonian understanding of the spending
1:12:17
power a lot of stuff that Congress is now giving money to the states to do
1:12:23
Congress could do itself the federal government could do itself Congress could decide to leave in federal government in federal government but the
1:12:29
joint descenders said they probably won't do that so we're raising the cost essentially of having big government if
1:12:36
we limit the ability of the federal government to give money to the states and maybe it raises the cost and the
1:12:42
question is whether that leads to less government or more inefficient government and I think that's very much
1:12:47
an empirical question that depends on what it is that the federal government is spending money on right now so so I
1:12:53
don't think there's any way to answer in the Abra what would happen in a world like
1:12:58
that so also the Constitutional question you have to ask yourself and wonder about and it's also political economy
1:13:05
question Congress can hire all sorts of outfits to do its bidding quote unquote
1:13:11
right it hires Boeing to build aircraft right it hires military
1:13:17
contractors lots of you know hospitals to provide services on and on and on why
1:13:23
can't it s quote unquote hire States and locals on the same basis there may be an
1:13:29
answer but that's the way I would go about answering it I'm Mike Dy um I am I'm a member of
1:13:36
the fal Society but I am not a lawyer I'm the CEO of a medical laboratory so I too lose sleep at night a lot listening
1:13:44
to some of these discussions because what we do is molecular testing of chromosomes for cancer propensity or
1:13:50
tumor markers or pathology analysis and it's different than putting in curb
1:13:56
openings or highways and I feel like the flea at the end of the tail of the dog
1:14:01
here because with what I'm afraid of is I hear Medicaid so big yet I've been working in laboratory medicine for 20
1:14:07
years in surgery for that I can tell you in my world Medicaid is the most inefficient the worst paying the largest
1:14:14
loss leader so I wonder what how does the how do the feds enforce
1:14:22
Effectiveness from the states they've coerced how do the providers use the legal system then since this is I'm
1:14:29
sorry you hadn't heard they're very effective I was I've been before your
1:14:36
before actually and you always do solve my problems thank
1:14:41
you but it is it is I you know I what I love about being part of federal Society
1:14:46
about about not being a lawyer is this type of discussion and it it but in different Industries especially medicine
1:14:52
I feel like we are in a grand experiment that's going to really hurt people that
1:14:57
are sick that don't know about this and those are and how is that going to work other than oh well so what you know so
1:15:03
going back to Theory um how do we hold the states hold the feds accountable or
1:15:09
the feds hold the state accountable for the money they give if if we don't have any sense of measuring Effectiveness and and work when you're talking about
1:15:15
health not my highway yeah I think that's you know so
1:15:20
so I think we can have a robust debate about what Effectiveness means in this or any other context and I think people
1:15:26
would have lots of disagreements about it um but you know I I would say there is a lot of people would agree that a
1:15:35
there ought to be ways of measuring Effectiveness and they ought to be prioritized in how how money is spent uh
1:15:41
but be that once we start to put Effectiveness measures into legislation
1:15:47
that often is the most controversial Place uh that you know folks who are
1:15:52
contending on opposite sides of legis will focus healthare a prime example of
1:15:57
that um so the question is is is there some better way than having our
1:16:03
political process with its flaws work that out and you know from my perspective although I don't necessarily
1:16:10
like all the outcomes all the time I don't think there's a better place but but I think this is we're having a
1:16:15
constitutional discussion right now you could have a very interesting regulatory discussion about how to structure regulation or structure non-regulation
1:16:22
structure pulling back regulation in order order to achieve Effectiveness I'm not sure we're the experts on that
1:16:29
that's of my point situational Health thank
1:16:37
you General at constitution.org thanks Michael or your trial balloon hting at a
1:16:44
possible specific solution which is always in short supply in these
1:16:50
events but uh for you and for ly what do you think think about pushing
1:16:55
for a constitutional amendment uh pursuant to the doctrine
1:17:02
laid forth in myison in his veto message to Congress that Congress has no
1:17:08
authority to spend money not pursuant to an enumerated
1:17:14
power um I've actually written about that um the the reason why that
1:17:21
Amendment will never pass I've written indirectly about that um right now as
1:17:27
many in this room will understand the federal government is a massive engine of
1:17:33
redistribution um and uh the amendment can't pass because if we were to follow the current
1:17:40
amendment process uh we can identify very readily uh the states for whom it's
1:17:46
a net welfare gain in terms of actual dollars the redistribution to them
1:17:52
through the federal government and so um but for that not insignificant
1:17:59
practical difficulty of of getting such Amendment passed um I think it's a Nifty
1:18:04
idea um I would add that that's uh part of the reason why I firmly believe that
1:18:10
the courts are the ones that have to take on these issues um the the political process is not only flawed in
1:18:17
some of the ways that Michael so entertainingly pointed out but um it's
1:18:22
also the case that our ability to uh effectively use the amendment process is at this point in time severely
1:18:29
constrained um because of what the federal of and has
1:18:36
become um yeah I had a question kind of touching on this issue of political
1:18:41
versus judicial solutions that we seem to be kind of continuing on I know uh the first panel that was here there was
1:18:47
a gentleman who suggested something about abolishing the Internal Revenue Service uh while not entirely practical
1:18:55
uh I was interested in the last speaker's uh suggestion of having this kind of rebate partial rebate for opting
1:19:02
out I was wondering how we could effectuate something like that and whether or not you think that that would
1:19:08
be effective in riging in the Leviathan would you have a check box on one or two departments that you do not want to fund
1:19:14
on your 1040 form or something like that what what possible solution would
1:19:21
that present from a political perspective and would that at all pass
1:19:27
you know a judicial review uh as many of us I think view the the problem of the federal Advan being both Revenue
1:19:34
generation and revenue Direction I'm not sure how it would play
1:19:42
out in real life and the reason why I'm saying this is Lynn just mentioned this
1:19:48
uh for some states the calculus the inout calculus is extremely favorable
1:19:55
right um so if you said to let's say New Mexico hey if you don't participate in
1:20:02
Medicaid you know your top earners get 8% of their income tax that doesn't mean
1:20:08
anything to them because there are no millionaires in New Mexico right um and
1:20:13
on the other hand there are tons of people I mean it's a big big uh transfer St it's with outside Alaska it's the
1:20:20
biggest uh net positive transfer state uh other states would be in a very
1:20:27
different position right uh the reason why I sort of floated this proposal in
1:20:33
the first place is that um these programs are surrounded by so many sort
1:20:39
of misrepresentations and half truths um you know these Governors running around
1:20:45
you know we're leaving money on the table for distribution to others as if the state paid this in the first place
1:20:52
you know all that kind of jazz I'm I'm desperately looking for a way to squeeze that out of the system and to have a
1:20:57
little more sort of candid debate about it um how it would work out sort of
1:21:05
practically no the decision to up in or out would have to be made as it is now
1:21:10
by whoever in state government is responsible for these things and States operate these in in somewhat different
1:21:16
ways um and then the net effect would be on the citizens taxpayers and their
1:21:23
1040s let me just say we we'll take about five more minutes since we started a few minutes late but um I I read U
1:21:32
parts of Sam's article before coming here and I it is a it is a very uh
1:21:38
thoughtful exposition of the opinion but my initial reaction from my ears on the
1:21:44
bench was that um I do not see this case having much more practical significance
1:21:51
than I am extremely sorry to say uh the famous Lopez case did because uh when
1:21:58
Lopez was passed there was hemming and hawing from the uh oddly the odd new
1:22:05
Advocates of judicial restraint on the left oh my God we're going to have the
1:22:11
the courts interfering with the Commerce Clause how dare they get into regulation we killed that off after carolene
1:22:17
products how dare they and uh um and in fact their
1:22:23
prediction was totally correct because Lopez never had any effective legs in the federal court and some of us uh
1:22:30
tried to give it some legs so um it seems to me I mean just skeptical uh
1:22:37
that the criteria set out in and FIB whether you take them solely in terms of
1:22:44
coercion or you take them in a more nuanced uh approach that um Professor V
1:22:50
has mentioned uh in his article I'm not sure that they are effective and I have
1:22:56
to say realistically they would pose a very difficult challenge for a judge uh
1:23:01
just as we should not be orbiting uh issues of uh intimate uh personal
1:23:09
relations that ought to be left in the political process we should not be
1:23:14
telling Congress where to spend and how to micromanage every penny that it spend
1:23:21
that's a very difficult call so uh any comments about that or where do you
1:23:28
see future challenges coming from if they're going to get I think that's that's a great question and and
1:23:34
obviously the history of this is yet to be written because we we don't know what all the challenges will be um I do think
1:23:40
it in in the the last section of the article that that I wrote I I do talk about a number of places where we might
1:23:46
see challenges based on nfib and I think that actually I predict that if courts
1:23:52
are faithful to what the Chief Justice said said there are likely to be few instances where those challenges will be
1:23:58
successful so it's very consistent with what judge sh says I I you know the the most difficult statute I think to
1:24:05
justify given nfib is the part of the Clean Air Act that takes away F
1:24:11
potentially has has has an option for EPA to direct the taking away of all
1:24:17
Federal Highway funds potentially from a state for a violation of the Clean Air Act even if the violation has nothing to
1:24:23
do with traffic on the highways um I think actually theoretically that's a very difficult case um and and that's a
1:24:30
case that would pose very serious questions as a practical matter EPA has never taken away all the state's Federal
1:24:36
Highway funds for violating the Clean Air Act so I don't think that case is likely to come up but but the statute
1:24:41
sits there and at least has a potentially unconstitutional application theoretically otherwise you know so
1:24:48
judge sh talked about Section 504 the Rehabilitation Act there's a whole series of civil rights statutes that
1:24:54
impos conditions on federal funds I wouldn't be surprised to see the nfib arguments made in that context I I think
1:25:00
that those are unlikely ultimately to Prevail but you know we'll see I this is
1:25:05
a history that's yet to be written um and you know should Congress make significant changes to a statute like
1:25:12
Medicaid again or No Child Left Behind The Big Ticket uh transfer statutes to
1:25:17
States I I think again there might be states that find the the conditions coercive and we andate that so I think
1:25:24
those are the areas where you're lik to see things issues come up I I I tend to
1:25:29
agree with judge judge's prediction that where the law will go two more questions good afternoon I'm Kevin
1:25:37
Douglas and I'm from Stanford law school um my question is primarily for Mr greeves but would love to hear the
1:25:43
thoughts of the other panelists on the question as well in light of the pressures that state governments or
1:25:49
maybe the incentives that state governments received in terms of uh actually the Federal money
1:25:56
um what do you think would be the best way to persuade State voters and state
1:26:02
legislators to actually give up on these kinds of programs um without their first being some type of federal law
1:26:10
enacted right
1:26:17
part okay so I don't know what that even means so acknowledging
1:26:24
break Mark was oh sure the internet guy okay I mean if you reveal that's not
1:26:31
entire what I'm thinking of is the Medicare fraud cases that the government has been pursuing with a little bit of
1:26:38
aery in the last few years and the uh the shamelessness of what some of these
1:26:44
people do is just beyond belief and if somebody just showed how much fraud
1:26:50
there is in a lot of these programs it would be enough to make ta I mean the ultimate coer on our government is going
1:26:56
to be moody the rating service that you know you can't you can't print money
1:27:03
forever and and China's not buying our debt anymore you just can't do this forever so um the taxpayers May realize
1:27:12
this when when their taxes start to Skyrocket and also when they see how
1:27:18
just how much money is wasted but I'm sorry
1:27:24
no I think I I entirely agree with uh
1:27:29
judge Jones on on on this score look it's it's very very difficult there there are some sort of straws in the
1:27:36
wind that that you can point to that people maybe uh s getting a little more
1:27:42
you know long-term oriented and and wiser to it um so the highspeed
1:27:51
trains right those were grants under the stimulus funds and a lot of States I
1:27:56
mean several no I'm not a lot several States
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