The problem with socialism is that eventually you run out
of other people’s money.
– Former British Prime Minister Margaret Thatcher
(quoted by Whole Foods Market (NYSE: WFM) CEO John Mackey)
With the U.S. Supreme Court’s June 28th 5-4 decision upholding Obamacare, the dirty deed is done. Freedom is dead, socialism is triumphant, and the quality of health care will get worse, not better. No wonder that 68% of Americans wanted Obamacare struck down, according to a recent CBS News/New York Times poll.
“Conservative” Chief Justice John Roberts changed his mind at the last minute under intense political pressure and sided with the four left-wing justices, essentially rewriting the law in order to squeeze it within the U.S. constitution. In the past, Roberts has complained about President Obama and Democratic congressmen publicly criticizing the Court, but he ended up succumbing to these troubling pressure tactics. After the Obamacare decision, Roberts fled to Malta to escape the barrage of criticism that resulted from his unprincipled switcheroo.
President Obama has repeatedly said that the individual mandate — that compels people to purchase health insurance or pay a penalty – is not a tax. Obama’s Justice Department – in its Supreme Court Brief (p. 21) – argued that the mandate was authorized under the U.S. constitution’s Commerce Clause (Article I, Section 8, clause 3). Nancy Pelosi, Democratic leader in the House of Representatives, has also repeatedly rejected the notion that Obamacare is a tax, calling it a “myth.” In other words, the Democratic legislators who drafted and passed Obamacare and the President who signed it into law intended that the law’s constitutional basis be the commerce clause. Some law professors take solace in the fact that Roberts rejected the constitutionality of Obamacare under the Commerce Clause, ruling that:
The Framers gave Congress the power to regulate commerce, not to compel it, and for over 200 years both our decisions and Congress’s actions have reflected this understanding. There is no reason to depart from that understanding now. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions. Any police power to regulate individuals as such, as opposed to their activities, remains vested in the States.
The end result of this judicial rejection should have been striking down the law. After all, the primary duty of judges when considering legislation is to determine legislative intent. The legislative intent was the commerce clause, the law was unconstitutional under the commerce clause, ipso facto the law was unconstitutional.
Guns and Health Care: Activist Supreme Court Renders Two Bad Decisions
But Chief Justice Roberts decided to rewrite legislative intent and unilaterally upheld the law under the U.S. Constitution’s taxing power (Article I, Section 8, clause 1). This is the second time in two years that a supposed “conservative” Supreme Court justice has legislated from the bench. As I wrote in Gun Owners and Gun Manufacturers: Happy Independence Day, “conservative” Justice Antonin Scalia fabricated an individual right to bear firearms despite the clear intent of the U.S. Constitution’s Second Amendment to limit the right to bear arms to government-run militias and police forces. The result of striking down Chicago’s gun ban has been predictable – the murder rate in Chicago has skyrocketed.
In the Obamacare case, Chief Justice Roberts has similarly fabricated the individual mandate into a tax when it was clearly intended to be a penalty. The Supreme Court dissenting opinion pointed this out:
The provision challenged under the Constitution is either a penalty or else a tax. We know of no case, and the Government cites none, in which the imposition was, for constitutional purposes, both. The two are mutually exclusive. The issue is not whether Congress had the power to frame the minimum-coverage provision as a tax, but whether it did so. We have never held that any exaction imposed for violation of the law is an exercise of Congress’ taxing power—even when the statute calls it a tax, much less when (as here) the statute repeatedly calls it a penalty.
If compelling the purchase of insurance under the Commerce Clause violates the constitution’s limitation on federal power over individual conduct, how can compelling the purchase of insurance under the taxing power not similarly violate the constitution? Justice Roberts’s ruling on the Commerce Clause has not limited federal power at all; the expansion of federal power to compel individual conduct has just been shifted two clauses down in the Constitution. To be fair, Chief Justice Roberts points out that there is a slight difference between the commerce power and the taxing power:
The taxing power does not give Congress the same degree of control over individual behavior. Congress may simply command individuals to do as it directs. An individual who disobeys may be subjected to criminal sanctions. By contrast, Congress’s authority under the taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more. If a tax is properly paid, the Government has no power to compel or punish individuals subject to it. We Congress can punish violations of its commerce power regulations with imprisonment. But under the tax power, the worst that can happen is a fine.
Roberts admits that taxes often impose a “severe burden” and consequently will compel people to engage in conduct they otherwise would not, but upholds the law anyway.
Obamacare Will Cause Higher Taxes and Higher Health Insurance Premiums
And there is no doubt that the tax burden of Obamacare will be severe indeed. According to both the Washington Times and Americans for Tax Reform both provide a detailed list of the 20 or so tax hikes imposed on Americans by Obamacare – tax increases that will equal a colossal $675 billion over ten years. Some of these taxes are imposed on corporations, which will inevitably pass them through to individuals in the form of higher health insurance premiums or reduced health benefits, but others are imposed directly on individuals. Of particular interest to investors is the 3.8% Medicare surtax on investment income.
All of these taxes are necessary because estimates of the costs needed to implement Obamacare are exploding – now amounting to $2.6 trillion. Things get really bad after the first 10 years. Medicare’s independent actuaries estimate that under Obamacare health-care spending will rise from 17.9 percent of GDP in 2010 to 19.6 percent in 2021. In 1980, by contrast, health care was only 9 percent of GDP. Furthermore, the Supreme Court’s ruling making Medicaid expansion optional for states is expected to increase the cost of Obamacare by up to $50 billion per year because the federal government will be forced to provide 100% of more-expensive private-insurance subsidies for those individuals earning 100 percent to 133 percent of the poverty level that aren’t allowed access to Medicaid.
Other unintended side effects of Obamacare include:
- “Dramatically higher” insurance premiums of 19% to 30% for young workers, thanks to a “community rating” system that subsidizes the premiums of higher-risk old people by charging young people more than justified by their health.
- A 2009 PriceWaterhouseCoopers report predicts an adverse-selection death spiral, where healthy people opt out of buying health insurance because the maximum $695 penalty (er . . tax) will account for only 10 percent of the average health insurance premium. Those opting out will leave only the sick to buy insurance, which causes costs to rise much faster than revenues, which causes health insurance premiums to rise further, which causes more people to opt out:
We anticipate significant adverse selection to occur in the existing market, increasing premiums for those who have coverage today. Higher premiums will result in more individuals being exempted from the coverage requirement. Once the requirement is implemented, the penalties will be phased in, so that they will not reach full effectiveness for several years. This lack of coordination increases the likelihood of a premium spiral that “gets ahead” of the coverage requirement which, with the combination of an income-based opt-out and low penalties, may further reduce the incentive for those who are healthy to buy coverage. This may then cause an increase in premiums for those with coverage today.
- Lower job growth. The employer mandate exempts firms with fewer than 50 workers from paying a tax, so there’s a strong incentive for firms to stop hiring at 49.
- Approximately 4 million fewer employees will get their health insurance through their employer because at least 30% of employers are likely to drop health insurance altogether and pay the penalty (er. . . tax).
The road to Hell is paved with good intentions. Stay tuned later this week for my take on which health-care stocks are the winners and losers under Obamacare.
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Mr. Fink, you characterize the administration’s health care reform law as socialism. Surely you’re aware that government mandated health insurance was first implemented by the great German socialist Otto Von Bismarck in 1883.
This noted Prussian leftist then started a program of government-run disability insurance in 1884, followed by a government-mandated old age pension program much like social security in 1889.
So if the Affordable Care Act is socialism, then it’s socialism within a long-standing tradition.
And anyone unfamiliar with Bismarck should note that he was considered one of the most conservative leaders in Europe during an era that was characterized throughout the West by intense conservatism.
He was in fact neither a socialist nor a liberal. It’s just that he put practical governance above ideology, an example the American Republican party and some in the investment community would be wise to follow.
Oh come on! You’re being far too critical of the President. Fair and equal access to healthcare should be a right for all. Mr. Obama is simply trying to level the playing field here. Of course this will cost more money. Had this been done decades earlier it would have been less painful, less of an issue and the bugs in the system would already be ironed out.
If support for “Obamacare” is regarded as socialism is opposition to it regarded as fascism?
What a pantload of horsepucky! Oh gee, you hit all the Faux News talking points and all the lies and distorted rhetoric, sounding like a damn fool in the process.
No doubt you think the 1% ers are job creators too. This article was so bad that as soon as I’m done posting this comment, I’m unsubscribing from this feed. Bleeeech!
I agree. We can have a better society and a better country without people who think like this.
Rob does make a point about the impact of this analysis on customers. I not only read this newsletter, but I am a paying subscriber to Investing Daily’s premium “Personal Finance” monthly.
What Mr. Fink writes here impacts my perception of all of Investing Daily’s products. Constantly name-calling Obama’s health-care reforms as “socialism”, a serious misuse of the term, is not credible analysis. If this newsletter’s analysis lacks credibility, maybe “Personal Finance” does as well.
And there’s no need for it. No one comes to Investing Daily seeking political commentary. That’s available for free everywhere, both left and right. And chanting a Tea-Party “socialismsocialism” mantra is, quite simply, uninteresting.
I once subscribed to Investors Business Daily and cancelled after a few months because the extremist front-page editorials detracted from the credibility of the entire newspaper. I came looking for investments, not politics.
I’m feeling the same way about “Personal Finance” and ” Investing Daily”. You folks need to fix this: If you’re going to do politics, then be more thoughtful about it. Better yet, forget the politics and concentrate on your core mission: Analyzing investments.
I have to subscribed to your publications in the past but if you’re going to be onservative Republican son-of-bitches than you’ll not get any more of my money. Everyone should have health insurance in this country it’s the moral thing to do. so go to hell ass holes. People in busineess need to learn not to keep their noses out of politics it can only hurt your busniess . I have stop doing business with others over their selfish views. I’ll just add you to the list. Put that in your pip and smoke it.
Randall T. Turner
Well, Mr. Turner, I certainly don’t agree that Mr. Fink deserves to be sworn at for having an opinion I disagree with.
My problem is with the quality of his analysis — calling something socialist when it isn’t — rather than his opposition to the ACA, which, given the compromises required to pass it, has a lot to dislike.
If only Mr. Fink would learn the difference between “statism”, which properly describes health care reform from Obama back through Romney and von Bismarck, and “socialism”, which is a matter of who owns the means of production, then he and I could, I’m sure, have a perfectly enjoyable conversation.
Seems like Mr. Fink’s “investment” articles have degraded to mere conservative ideological drivel. No need to click on them anymore…
Indeed!
But more like dogmatic claptrap.
Mr. Fink’s answer to anything he dislikes evidently is to hurl ignorant invective:
Obamacare is “unconstitutional,” just as Panera Bread is “communist.”
Au contraire, once again, Mr. Fink: Legislation passed by both houses of Congress, signed by the president, and upheld by the Supreme Court is, ipso facto, constitutional.
Incredible!