The Scary Permanence of Congressional Power

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Everyone no doubt remembers the proverbial recipe for boiling a frog. As our federal government confronts the catalogue of "crises" roiling the country, who is keeping track of the accumulated powers that will remain as a permanent legacy of these troubled times?

If a new power is used to solve a problem so pressing that a majority believes the short-term consequences of not using that power are worse than the fear of its long-term abuse, who puts the genie back in the bottle after the crisis is resolved?

When a future Congressman tries to wield that new power pursuing a solution to some other problem at some later time that is perhaps not quite so pressing, who can then claim that this already exercised power is forbidden?

You can already watch this happening.

When reckless bankers built a derivatives casino atop a toxic waste dump dug by Fannie Mae and Freddie Mac, destabilizing the entire global economy, they invited populist retribution and they got it. Bailed out with taxpayer dollars, they were forced to accept oversight from a Federal government that arrogated to itself the power to set executive compensation. The Supreme Court stood mute and the precedent was established that reining in executive pay was the proper function of government. But the world economy was "saved."

When incompetent auto executives destroyed an iconic American manufacturing industry undermined by decades of union excess, they invited government intervention and they got it. Bailed out with taxpayer dollars, they were forced to cede control to Federal czars that arrogated to themselves the power to flout bankruptcy laws, seize ownership of private companies, and dismiss CEOs. The Supreme Court stood mute and further precedents were set. But the US auto industry was "saved."

The healthcare crisis now consumes Congress, determined to remake vast swaths of our economy before veto-proof control slips through party fingers. The energy and environmental crisis waits on-deck with the education crisis batting cleanup. While the Afghan war crisis has been temporarily sidelined and the inflation crisis may be biding its time until next season, you can bet they will both be back.

Take a good look at the fabric of powers being woven in response to the crisis parade. These extraordinary new powers will be with us long after the reasons for creating them have passed.

Using the tax code as a club, the Senate Finance committee voted last week to control the pay of healthcare industry executives. The justification for this intervention, aside from the fact that insurance CEOs are unpopular, is that the mandatory coverage provisions of pending healthcare legislation will result in a windfall for the insurance industry.

The legislative principle being established is that what Congress giveth, Congress can taketh away.

Imagine how else this power might be used as politicians become entangled in more businesses. If power companies are going to be handed billions in free cap-and-trade certificates to buy their support for climate change legislation, cannot tomorrow's Congress demand any tribute it pleases from their executives, shareholders, and employees?

A pending Senate proposal will penalize doctors that order too many tests by withholding 5% of their Medicare reimbursements. No doubt a future proposal will find a way to punish doctors that shed their sickest patients to avoid tripping the limits. Perhaps another law will reward whistle blowers for ratting out doctors who secretly order tests on behalf of their most overworked colleagues.

According to the Wall Street Journal, more than 660,000 seniors next year will lose the private Medicare Advantage plans they now have because some insurers are dropping coverage in response to tougher federal requirements. If insurance companies are going to receive a windfall due to mandatory coverage, shouldn't they be punished for refusing to sell products just because they lose money? After all, hurricane or car insurance companies that try to leave a state for that reason often get punished by losing their right to sell any other products in that state.

To help pay the bill for extending government supported healthcare to the un-insured, medical device manufactures are being asked to pay a $4 billion dollar per year excise tax assessed in proportion to their market share. Voilà, Congress now has the power to asses a market-share based tax. How does one even calculate a number as subjective and ephemeral as a market share? What new powers will be invoked to punish companies that shuffle product features to get them re-categorized into adjacent markets, raise prices to reduce their share of selected markets, or refuse to reduce prices when future innovations lower the cost of production?

Do you wonder where this all ends? How many new powers will have to be manufactured next year to fix problems caused by the misuse of powers that are introduced this year?

Where can our Supreme Court justices be hiding? What will it take to get them to do their Constitutional duty and examine this new power tsunami to see whether Congress has a right to exercise any of them in the first place?

A crisis, no doubt.


Bill Frezza is a fellow at the Competitive Enterprise Institute, and a Boston-based venture capitalist. You can find all of his columns, TV, and radio interviews here.  If you would like to have his weekly columns delivered to you by e-mail, click here or follow him on Twitter @BillFrezza.

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