The path to Federal takeover
Charles E. Rice | Tuesday, October 6, 2009
The health care debate makes sense only in the context of the transformation of our constitutional system. So let’s do a quick review of Constitution 101.
The Constitution of the United States was the first creation in history of a national government with only limited, delegated powers. Magna Carta, the English Bill of Rights and other documents involved only limitations on the otherwise unlimited power of government. The Articles of Confederation, under which the United States functioned from 1781 until the Constitution took effect in 1789, created essentially a confederation of semi-autonomous states. The Constitution created a real government of the nation, but a government limited to specified powers.
Under the Constitution, neither Congress, nor the Executive nor the Judiciary, had unlimited jurisdiction. Article I, Sec. 8, specified that “The Congress shall have Power” to legislate only on specified subjects. Incidentally, no power was granted to Congress to regulate health care as such. Nor was Congress granted a power over education, apart from special situations such as land-grant schools. The states retained all powers not delegated by the Constitution.
That constitutional system has gone the way of the bronze axe and the spinning wheel. One transformative event was the Supreme Court’s definition in U.S. v. Butler (1936), that Congress’ power to tax and spend for the “general welfare of the United States” was not limited to spending on the subjects on which Article I, Section 8, authorized Congress to legislate. But Congress’ spending had to be for the “general welfare.” Congress, however, has wide latitude to determine what is the “general welfare.” While the Court said that the spending power was not a general power to regulate for public purposes, the Court has held that Congress can impose conditions on the subsidies it grants. South Dakota v. Dole (1987). That power to regulate recipients of federal money is, to put it mildly, very broad, as General Motors, banks and other recipients of bailout money have learned. And as all of us will learn when the likely terms of Obamacare go into effect in 2013 (after Obama’s reelection), there is no such thing as a free lunch. If you take the money, you take the controls.
Many factors contributed over the years to the centralization of power in Washington. But in the past eight months, Congress’ use of its spending power, and President Obama’s unprecedented executive edicts, have so expanded federal power that it amounts to an extraconstitutional coup. The federal takeover of health care, one-sixth of the economy, is essential to the success of that coup. It would open the door to federal controls not only on what medical care you can receive but potentially also on what you eat, how much you weigh, your exercise regime, the level of heat and noise in your home and whatever else might affect your health and therefore the cost of your health care to the taxpayers. The framers of the Constitution would be surprised, to say the least.
Health care, however, is not the only centralizing initiative in Congress. Another example is H.R. 3221, the Student Aid and Fiscal Responsibility Act of 2009 (SAFRA). It advanced under the radar while everyone was talking about health care. SAFRA reduces the financial options of students seeking higher education. It passed the House and now is in the Senate Health and Education Committee.
The federal government now subsidizes student loans through the Federal Family Education Loan program (FFEL), which offers subsidized loans to students from private lenders at low interest rates, and through the Direct Loan program (DL), in which the Department of Education is the lender and the funds come from the U.S. Treasury. The Higher Education Act sets the terms and conditions on FFEL and DL loans. FFEL was created in 1966. More than 2,000 lenders participate in FFEL, serving 4,400 institutions, with $70 billion in loans this year. The DL program, established in 1993, serves 1,700 institutions, with $22 billion in loans this year.
SAFRA would terminate FFEL and shift all federal student loans, including Federal Direct Perkins Loans, to the DL program. SAFRA would also create nine new programs and otherwise increase federal involvement in early education, school construction, etc. On September 10, 40 current and former presidents of state, regional and national financial aid associations alerted House and Senate committees to problems involved in implementing SAFRA as early as the 2010-11 school year.
Beyond those implementation issues, SAFRA would be a huge expansion of the DL program. It would dismantle a system that has worked fairly well for four decades. It would eliminate private sector jobs as well as consumer choice, competition among lenders, and existing programs to reduce defaults. For non-wealthy high school seniors, SAFRA would make their potential for federal student loans depend entirely on approval by government bureaucrats or contractors retained by government. One concern is that the predictably voluminous SAFRA regulations could provide openings for covert political or other illicit discrimination against borrowers or recipient schools. A more obvious concern is that “Congress,” in the words of Representative Paul C. Broun (R-GA), “has no business putting taxpayers on the hook for defaulted student loans when the private sector would gladly bear this risk.”
The objections to federal takeovers of the private sector do not arise from constitutional archeologism. Those takeovers violate the social principle of subsidiarity: “Just as it is wrong to withdraw from the individual and commit to the community at large what private enterprise and industry can accomplish, so too, it is an injustice, a grave evil, and a disturbance of right order for a larger and higher organization to arrogate to itself functions which can be performed efficiently by smaller and lower bodies. This is a fundamental principle of social philosophy, unshaken and unchangeable, and it retains its full truth today … The true aim of all social activity should be to help individual members of the social body, but never to destroy or absorb them.” Pius XI, “Quadragesimo Anno” no. 79.
“Subsidiarity,” said Benedict XVI, “is the most effective antidote against any form of all-encompassing welfare state.” “Love in Truth,” no. 57.
When they elected Notre Dame’s most obsequiously honored alumnus, the American people voted for both hope and change. They are, indeed, getting one of those. Congressman Broun asked the question about the change that, so far, has no answer: “When will the massive spending and Federal takeover end?”
Professor Emeritus Rice is on the law school faculty. He may be reached at [email protected] or 633-4415.
The views expressed in this column are those of the author and not necessarily those of The Observer.