| January 4, 2013
Hope, Advent reminds us, often comes from unlikely protagonists and places, such as a peasant girl in a no-name village. In the less earth-shattering but still consequential case of constitutional federalism, hope comes from frightened state politicians: they can, should, and very likely will interpose their authority against the national government, in protection of their citizens.
The notion of state “interposition” is usually traced to Madison’s and Jefferson’s 1798 Virginia and Kentucky Resolutions. Those resolutions, sent from the two states’ legislatures to legislatures in other states, well served their intended purpose of launching Thomas Jefferson’s campaign for the presidency. But they don’t make much constitutional sense. The whole point of the Constitution is that the federal government can tax and regulate citizens without the states’ help; and since federal law always trumps state law, it’s hard to see what and how—short of armed rebellion or secession—states could “interpose” athwart the feds’ designs. The Resolutions contain a lot of bluster to the effect that the right to string people up for seditious libel really belongs to states and not the feds, but that’s about it.
That was then, though, and this is now. The heart and soul of our government consist of the delivery of services, benefits, and entitlements; and with the exceptions of Social Security and the federal tax code, all of that work is being done through and with the assistance of state and local governments: education, transportation, welfare, housing, food stamps, medical services, the environment, etc., etc. States cannot be compelled to do that work (the Constitution gets in the way); they have to be asked and incentivized. Under the “cooperative” federalism programs that implement the states-do-the-feds’-bidding m.o., states gain what they lacked in 1798: an institutional trump against the feds. And for the first time in memory, states now have a powerful incentive to play that trump. They will very likely do so within the next two or three years, to altogether salutary effect.
The States Project (a joint enterprise of Harvard’s Institute of Politics, the Fels Institute of Government at the University of Pennsylvania, and the American Education Foundation) has recently released its 2012 State of the States Report. It paints an unremittingly grim picture of unfunded pension obligations (upwards of $3.4 trillion), a crumbling infrastructure, out-of-control health care expenditures, and increased state dependency on federal transfer payments. More than ever, Medicaid—as yet, still in its pre-Obamacare configuration—takes the cake. Federal Medicaid payments come to $265 billion, or 43.3 percent of all federal transfers. (K–12 education and food stamps are next, at slightly over $100 billion and about 17 percent each.) Pennsylvania and Massachusetts spend over 40 percent of their budgets on health care. In Illinois, Missouri, and North Carolina, Medicaid alone consumes more than 30 percent of the state budget. The rest of the country isn’t really different, the Report notes. It’s just a tad behind the curve.
Having painted a harrowing picture, the Report comes up with decidedly lame recommendations for better bookkeeping and improved intergovernmental “dialogue”—plus two substantive recommendations:
States must reduce Medicaid costs. While supporting the public safety net is an important priority, states must balance this need with other objectives, such as supporting education and infrastructure.
States must tackle persistent unemployment by supporting education on all levels, giving citizens the skills necessary to compete in a 21st century job market.
Sorry, dear policy experts: ain’t gonna happen. See Figure 4 on page 16 of your Report:
Wow. This momentous shift over a very short time lends urgency to the experts’ recommendations. However, the stern “states must” policy advice is feckless: states “must” reduce Medicaid expenses and support education with what? The federal government expects state and local Medicaid expenses to “settle” into an annual growth rate of 7.4 – 7.7 percent, assuming full implementation of Obamacare (about which more anon). But even without that program, state and local government expenses will double over roughly a decade. State revenues won’t. So where is the money going to come from? Answer, in large measure: the next-best federally funded programs—education.
Hurrah: at long last, the entitlement state has begun to eat its own. The biggest federally funded program (Medicaid) is competing directly with the next-biggest set of programs (education). State politicians are now squeezed between the two most voracious (and unionized) constituencies in American politics: the education blob, and the health care/AARP/provider complex. They will want a way out; otherwise, they’re toast. And the only way out is interposition to Obamacare.
Obamacare est omnis divisa in partes tres: Medicare, a grandly expanded Medicaid, and health care “exchanges.” Crucially, both Medicaid and the exchanges require the states’ active cooperation. The Affordable Care Act seeks to “incentivize” states to cooperate in Medicaid’s expansion by offering 100 percent federal reimbursements for previously uncovered individuals. (Over time, the payment is scheduled to decline to 90 percent.) Obamacare seeks the states’ cooperation in establishing exchanges by threatening the establishment of federal exchanges in states that fail to see the good sense of the overall system.
It now looks as if a good number of states will decline either of those offers. As for Medicaid, many states fear not only the marginal added cost in the out-years but also, and far more, the lock-in effect: once the feds have lured states into expanding the covered population and services, they are free to reduce their promised payments—and leave states holding the bag. Ordinarily, state politicians ignore these dangers because their time horizon extends no farther than the next election. Evidently, however, the situation is sufficiently dire, the counter-pressure is sufficiently severe, and the federal government’s commitments are sufficiently empty, to have prompted an outbreak of long-term thinking and public spiritedness. Something like that is also true of the exchanges: the power to establish a state exchange is the power to be commandeered by Kathleen Sebelius from here to eternity. No, thank you.
Should a sufficient number of states stick to an interpositionist position, Obamacare will still consist of three parts: a quarum unam incolunt Belgae Medicare program that wreaks havoc on the federal budget, and a Medicaid-cum-exchange system that will leave millions of poor and near-poor consumers in the lurch. They can’t be covered under a non-existent Medicaid program, and they can’t receive subsidized insurance under non-existent exchanges. The uninsured on whose behalf the Affordable Care Act was ostensibly enacted will gain a lot of company in a real hurry. At which point, Obamacare will collapse. Or so one hopes.
Come the Constitution
In a pre-election Wall Street Journal op-ed, my brother-in-arms-and-despair Chris DeMuth warned that the election would have one irreversible consequence: President Obama’s reelection would render Obamacare effectively irreversible (and there goes the country). That may well be right. However, state interposition—meaning a refusal to cooperate in Medicaid or exchanges—may yet produce an Obamacare crash-and-burn within the President’s term in office. Moreover, and more importantly, it may produce a collapse on constitutional terms, provided someone can articulate them.
Envision early 2014, when Obamacare will fully kick in: if a sufficient number of states hold out, the system will break. Mrs. Sebelius cannot run a workable exchange in a single state, let alone 13 or 16. Small employers will cancel whatever health insurance they once offered. And far from expanding Medicaid, states follow the States Project’s sage advice to hack away at the system and its beneficiaries. The uninsured—the ostensible beneficiaries of the law— get a lot more company. Lawsuits over HHS regulations come from the left and the right. What happens then?
Politics- and policy-wise I have no idea. I am, however, quite confident of the constitutional possibilities.
It will be said—by, e.g., E.J. Dionne and Ezra Klein, whose prospective columns I offer to write for them now so they can attend to their full-time occupation as shills—that Obamacare would have worked but for partisan opposition in the states. It wouldn’t have, but the far more important point is that state opposition is how the system is supposed to work. A ruthless partisan scheme will beget ruthless partisan opposition: that’s how we check ambition.
The Madisonian precept gains special force and constitutional dignity in the context of federal programs that require, or rather imperiously demand, the states’ active cooperation. A state failure to do the feds’ bidding is not an ugly outbreak of neo-Calhounism. The power to interpose comes from a form of government that the Constitution permits but, unmistakably, treats as deeply suspect: a government over governments. States have been complicit in that scheme for far too long. Saying “no” to a further extension—for partisan reasons, fiscal reasons, or no reason at all—is an implicit embrace of a constitutional proposition: the feds have their sphere, and we (the states) have ours. If the feds insist on their scheme, let them do so with their money and their officers: they have the power. If they want to work through us, we interpose. The Constitution contemplates it; allows it; and very nearly demands it.
Behold: from the rubble and depredations and fiscal ruin of our politics, a constitutional thought and agenda.
Michael S. Greve (Ph.D., Cornell University) is a professor at George Mason University School of Law and a visiting scholar at the American Enterprise Institute. His publications include numerous law review articles and books, including most recently The Upside-Down Constitution (Harvard University Press, 2012). This article was originally published by the Liberty Fund at its Library of Law and Liberty (libertylawsite.org).