I agree with Becker (and with the Supreme Court) that the “mandate” in the health care law—the requirement that people who can afford to buy health insurance must do so on pain of having to pay a “penalty” if they do not—is within Congress’s taxing power under Article I of the U.S. Constitution, the article establishing the legislative branch of the federal government. Article I among other things authorizes Congress "to lay and collect taxes, duties, imposts and excises." The fact that Congress called the mandate exaction a penalty rather than a tax is of no significance. It was done simply because “tax” has become a dirty word in American political discourse.
It is true that the main reason for taxes is to generate revenue for the government, and the mandate exaction is not a revenue tax but a regulatory tax. But regulatory taxes—a tax on emission of pollutants, for example—are common; their aim is not to generate revenue but to discourage undesirable practices, though they generate some revenue because some of the taxpayers find the tax less onerous that discontinuing the taxed activity. The “duties, imposts, and excises” to which Article I refers would include tariffs, which are often intended to discourage imports rather than to raise revenue. It is true that from an economic standpoint a regulatory tax may not seem sharply different from a fine (for illegal parking, for example), which is not a tax within the meaning of Article I (if it were, Congress would have virtually unlimited regulatory power, rather than just the enumerated powers set forth in Article I). But there is a significant difference. Fines are imposed on activities that are forbidden, rather than merely sought to be discouraged or reduced. Even when the fine is light, as in the case of most parking tickets, repeated violations will result eventually in severe sanctions, so the violator really doesn’t have an option to pay rather than comply. Fees for specific services, such as for a passport or a driver’s license, are also distinguishable from regulatory taxes, because fees are in exchange for specific government services, whereas taxes are not usually paid in exchange for specific services.
So the mandate exaction, though called a penalty, is in fact a regulatory tax and therefore within Congress’s power. Whether it’s set at a rate that will actually induce many people who currently lack health insurance to buy health insurance is a separate question, and still a third question is whether if so the result of adding to the number of Americans who have health insurance will be good for society as a whole. The idea behind the mandate that the tax is designed to enforce is that the uninsured are free riders. They tend to be young and therefore on average in good health, and by opting out of the insurance pool they increase the cost of insurance to the people who remain in the pool. In addition, when they do get sick, they tend to visit hospital emergency rooms for diagnosis and treatment, and emergency rooms tend to be very expensive. The hospitals send the uninsured whom they treat stiff bills, but often the bills are not paid.
If the mandate succeeds in inducing many uninsured to buy health insurance, this should reduce the health insurance premiums paid (either directly or in the form of lower wages because their employer is paying the premiums) by those who already have health insurance. But this will just be a transfer of wealth from one group of people to another. More important from an overall economic standpoint, a reduction in the number of uninsured will increase aggregate health costs because uninsured people demand and receive less health care, on average, than the insured. The study by Hadley and coauthors that Becker cites estimates that providing health insurance (whether private or, in the form of Medicaid or Medicare, public) to all the currently uninsured would increase total health care expenditures in the United States by 5.1 percent a year, a substantial increase (given the size of the health care industry) equivalent to 0.8 percent of GDP. (Their study was conducted four years ago; I don’t know what the current best estimate would be.)
It cannot be assumed that the cost increase would be offset by a reduction in medical expenses attributable to the better health that people who by virtue of having health insurance can expect to have because they don’t skimp on medical screening and treatment. Better health care will increase longevity, but that means more old people, who consume a disproportionate amount of medical care as it is.