Brookings Review

Industrial Policy: A Dissent

The last ten years have been a time of troubles for most of the world's industrial economies. The growth of output and productivity has slowed. Both inflation and unemployment have averaged substantially higher than in earlier postwar years. And the decade has produced the two worst recessions of the postwar period.

In the United States, this experience has spawned two new economic doctrines, each purporting to explain the source of at least some of our economic ills and offering a plan of action to deal with them. These economic theories originated outside of the mainstream of professional economic thought. The first of them is supply-side economics, which is based on a vast exaggeration of the incentive effects of lower taxes. It has had a spectacular political success, and was installed in early 1981 as official U.S. government policy.

The second of these new theories - and the latest entry in the competition for the hearts and minds of political candidates - is a set of economic ideas and policy recommendations that goes by the name "industrial policy." It has been the subject of a growing stream of books and articles; it has been endorsed as a concept by the AFL-CIO; its precepts have been incorporated in a number of bills now before the Congress; and it is receiving a sympathetic hearing from many of the candidates for the 1984 Democratic presidential nomination. The phrase "industrial policy" means somewhat different things to different people; it refers not so much to a single theory as to a loose collection of similar diagnoses and proposals. The diagnoses generally cluster around two basic propositions.

IssueOptions for the CourtLikely Outcomes
1a. Is the ACA penalty for failure to carry insurance a tax?
1b. If it is does the Tax Anti-Injunction Act bar jurisdiction?
i. It isn’t a tax for purposes of the TAIA, skip to other issues.
ii. If it is a ‘tax,’ does the TAIA flatly bar jurisdiction? If so, plaintiffs cannot sue until they pay the ‘tax’–end of decision.
iii. If it is a tax and the government can waive its rights to bar suit under the TAIA, go to the other issues
Both sides want a decision. Court unlikely to treat the TAIA as a bar.
2. Does the Constitution permit Congress to require people to buy health insurance?2a. Yes, under the commerce clause
2b. Yes, under its power to tax
2c. No, under narrow reasoning
2d. No, under broad reasoning
Likely, 2a or 2c
3. If the individual mandate is not allowed, should the rest of the bill stand?3a. Yes, all other provisions should stand
3b. (The government’s position) Two other provisions should be tossed out—‘rate bands’ and mandatory issue; the rest should stand
3c. (Plaintiff’s position) The entire bill should be declared unconstitutional
4. Is the Medicaid extension constitutional?4a. Yes
4b. No, narrow reasoning
4c. No, broad reasoning
4b would be a shock;
4c would be revolutionary