Even before the Supreme Court decision on Obamacare was handed down yesterday the markets were selling off hard.
They were tanking on news that the latest European summit was unlikely to be a game-changer, that U.S. gross domestic product was a paltry 1.9% in the first quarter, and a New York Times
story that JPMorgan Chase's derivatives loss could top $9 billion.
Then came the long-awaited decision from the country's highest court on the divisive healthcare law, the Patient Protection and Affordable Care Act, which unhinged markets further.
The Court's historic decision shook the markets for several reasons.
But the single overriding effect of the mixed-bag decision will be its impact on markets going forward.
That's because the divided decision further fuels partisan politics going into the November elections and sets the stage for an all-or-nothing battle between Republicans and Democrats.
The chances of there being any compromise anywhere on any divisive issues before the elections is now mathematically zero, where before it was somewhere between slim and none.
The Bigger Issues Behind the Obamacare Ruling
What the markets now face aren't just healthcare, tax and spending issues.
As a result of the Court's stunning decision, we face something much bigger -- Constitutional issues of the highest and deepest order.
The High Court, with Chief Justice John Roberts unexpectedly siding with the Court's four liberal justices, rendered a 5-4 victory for President Barack Obama's prized legislation.
The ruling upholds the "individual mandate" that requires citizens to either pay for "minimum essential" health insurance or pay a "penalty" through the IRS as a "tax" towards offsetting the shared costs of national healthcare.
But the Court also struck down the Act's provision allowing the Federal Government to effectively "hold a gun to the head" of states if they failed to increase Medicaid benefits, largely expanded under the new law.
In its original form, states could lose all Federal funding of Medicaid for non-compliance with Federal demands.
By its decision the Court effectively admitted that the Commerce Clause argument underpinning the individual mandate's Constitutionality was null and void.
But while they said that the individual mandate that "forced" citizens to buy health insurance wasn't intended as a "command" that fell under the Commerce Clause, they incongruously flipped the argument on its head and agreed (by a one-vote majority) that the mandate was legal under Congress' authority to "tax" citizens for the benefit of the nation.
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