State AGs Lay Out Constitutional Case Against "Cornhusker Kickback"

Thirteen state AGs--all Republicans--sent a letter to House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid setting out their constitutional objections to the provision in the Senate health care reform legislation that exempts Nebraska from paying costs of new enrollees in the Medicaid program.  (Instead, under the provision, the federal government would pick up these additional costs.  Senator Ben Nelson is the only senator to have successfully negotiated such an arrangement for his state.)  We most recently posted on this here.

From the letter:

In Helvering v. Davis . . . the United States Supreme Court warned that Congress does not possess the right under the Spending Power to demonstrate a "display of arbitrary power."  Congressional spending cannot be arbitrary and capricious.  The spending power of Congress includes authority to accomplish policy objectives by conditioning receipt of federal funds on compliance with statutory directives, as in the Medicaid program.  However, the power is not unlimited and "must be in pursuit of the 'general welfare.'"  South Dakota v. Dole . . . .  In Dole the Supreme Court stated, "that conditions on federal grants might be illegitimate if they are unrelated to the federal interest in particular national projects or programs." . . .  It seems axiomatic that the federal interest in H.R. 3590 is not simply requiring universal health care, but also ensuring that the states share with the federal government the cost of providing such care to their citizens.  This federal interest is evident from the fact this legislation would require every state, except Nebraska, to shoulder its fair share of the increased Medicaid costs the bill will generate.  The provision of the bill that relieves a single state from this cost-sharing program appears to be not only unrelated, but also antithetical to the legitimate federal interests in the bill.

This seems deeply confused on a number of points.  First, both Helvering and Dole emphasize the expansive nature of the spending power and Congress's--not the courts'--discretion in determining what constitutes the "general welfare."  From Helvering: 

Congress may spend money in aid of the "general welfare." . . . There have been great statesmen in our history who have stood for other views.  We will not resurrect the contest.  It is now settled by decision.  United States v. Butler. . . .  The conception of the spending power advocated by Hamilton and strongly reinforced by Story has prevailed over that of Madison, which has not been lacking in adherents.  Yet difficulties are left when the power is conceded.  The line must still be drawn between one welfare and another, between particular and general.  Where this shall be placed cannot be known through a formula in advance of the event.  There is a middle ground, or certainly a penumbra, in which discretion is at large.  The discretion, however, is not confided to the courts.  The discretion belongs to Congress, unless the choice is clearly wrong, a display of arbitrary power, not an exercise of judgment.  This is now familiar law.

Next, the AGs ask too much of the "arbitrary" standard.  This is a very low standard, not requiring much.  Surely the Nebraska compromise cannot be "arbitrary."  This is especially true in light of the all-too-numerous state-specific benefits that we see in any major piece of legislation--any one of which is at least as "arbitrary" as the Nebraska compromise. 

Third, it's not clear how or why conditional spending plays any part in a constitutional analysis of the Nebraska compromise.  Nothing's conditioned here.

Finally, it's not at all obvious that a part of the purpose of the legislation is to get states to pay jointly with the federal government.  As Professor Mark Tushnet said, the legislation could ultimately aim to get the federal government to pay all of the increased costs; Nebraska simply represents the first step.

The other points in the letter seem equally confused.  For example, the Privileges and Immunities Clause of Article IV has been interpreted as a restriction only against the states, not Congress.  (The Privileges or Immunities Clause of the Fourteenth Amendment obviously doesn't apply at all--by its plain terms it restricts only the states.)  There's no Due Process problem here.  And any Equal Protection problem would get only rational basis review.  The courts would almost certainly uphold the provision for the reasons that Professor Tushnet articulated, among others.

The AGs dropped the Port Preferences Clause claim.

SDS