It is almost a shame that the part of the Supreme Court's ruling in National Federation of Independent Business v. Sebelius upholding the Affordable Care Act's individual health insurance mandate was so hotly contested. This controversy diverted the public's attention from a less flashy but equally significant part of the decision: the invalidation of the Medicaid expansion. The Court missed a golden opportunity to eliminate the coercive aspect of the federal government's spending power. Withdrawing any pre-existing federal funding from the states in order to force them to change policy is unconstitutionally coercive no matter how small the funding cut is.
In Sebelius, the Court ruled that Congress could not force the states to expand Medicaid coverage by threatening to deprive them of all of their pre-existing Medicaid funding. Chief Justice John Roberts argued that such draconian cuts would leave the states with little choice but to follow federal orders. This kind of coercion violates state governments' autonomy and thus American federalism along with it. Unfortunately, the Court reaffirmed its earlier ruling in the 1987 case of South Dakota v. Dole. That decision upheld the 1984 federal law that threatened states with minimum drinking ages under 21 with five to ten percent cuts in federal highway funding. The Dole Court concluded that this punishment was so mild — less than half of one percent of South Dakota's budget, for instance — that the states still remained free to write their own policies.
The Supreme Court should have sent this precedent packing in Sebelius. Washington has no authority to dictate to the states in areas where they are sovereign. Judging the constitutionality of such a regulation based on the size of the funding cut is too arbitrary a standard. If a five percent funding cut is too small to matter, then how big would it have to be to qualify as coercive? Would ten percent be enough? Or 15 percent? 20 percent? Where should the line be drawn and can it be drawn anywhere above zero percent with any principled consistency?
This is why the Dole ruling was so unconvincing. Coercion is a matter of kind not degree. It means using threats to bully others. That does not change simply because the threat happens to be relatively mild. Coercion is coercion, even if it is as weak as the National Minimum Drinking Age Act's threatened penalty against noncompliant states.
In fact, the threat of slashing highway funding was arguably not weak in that case. After all, more than half of the states did, in fact, raise their drinking ages in response to the federal law. If a five percent funding cut was such a negligible threat to the states, then why did so many of them cave in to it?
Some observers, like the Washington Post's E.J. Dionne, have argued against this on the grounds that the states are not entitled (constitutionally or otherwise) to federal funding. If they want to govern on Washington's dime, they should play by Washington's rules. Actually, this makes sense up to a point: the federal government has every right to reduce or eliminate payments to the states for its own policy sake.
The feds go too far, however, when they use the spending power to push the states around in their own areas of jurisdiction. The US Constitution delegates certain specific powers to the federal government and reserves the rest to the states. Congress should not be able to circumvent this limit on its power. It should not be able to use the power of the purse to make the states into its puppets, forcibly doing by proxy what it cannot do directly.
To be clear, this rule would not make it unconstitutional for Congress to attach policy strings to any funding it gives the states. It simply requires that those conditions be imposed at the time that the federal funding is initially offered. Why would this be constitutional while the retroactive attachment of such provisos to funding schemes would not be? While the latter would amount to coercion, the former would constitute mere inducement. The difference between the two equals the difference between bribery and blackmail. Bribery amounts to mere inducement because it entails offering to make someone better off in exchange for a favor. Blackmail constitutes coercion because it means threatening to make someone worse off in order to control the latter's actions. Bribery allows its object to refuse the offer without fear of negative repercussions; blackmail requires its object to pay a price for refusing. Blackmail constrains the victim's freedom whereas bribery does not.
If the federal government introduces a new stream of funding to the states with strings attached up-front, it is merely trying to induce the states to comply with those conditions. Since the states can say no without ending up any worse off, the policy is not coercive and is thus constitutional. However, a state that accepts those monies should not be threatened with a funding cut later on for not complying with a new condition added after the fact. That penalty would make the recalcitrant state worse off and would thus amount to coercion, which offends the principles of federalism.
Whenever one threatens to injure others in order to force them to do one's bidding, one is perpetrating some form of coercion. Accordingly, the precedent of South Dakota v. Dole ought to go; any federal funding cut that is used to pull the states' strings should be held unconstitutional. Roberts and the rest should be applauded for reining in the federal spending power somewhat. They should also be chided for not reining it in enough.