Halbig v. Burwell Winners Outnumber Losers by More than Ten to One

Today at DarwinsFool.com, I released estimates of the impact of a potential ruling for the plaintiffs in Halbig v. Burwell, one of four cases currently before federal courts claiming that the subsidies and taxes the IRS is implementing in the 36 states with health-insurance Exchanges established by the federal government are illegal. The Patient Protection and Affordable Care Act repeatedly says those taxes and subsidies are authorized only “through an Exchange established by the State.”

Left-leaning groups and media outlets that defend the IRS are attempting to portray a potential ruling for the Halbig plaintiffs as catastrophic, because it would put an end to the subsidies roughly 5 million individuals enrolled in federal Exchanges are currently receiving. As I explain in detail, those commenters ignore three crucial facts. One, a victory for the Halbig plaintiffs would increase no one’s premiums. It would merely stop the IRS from unlawfully shifting the cost of those overly expensive PPACA premiums from enrollees to taxpayers. Two, if federal-Exchange enrollees lose subsidies, it is because the courts will have found those subsidies are, and always were, illegal. And three, if the Halbig plaintiffs prevail, the winners in the 36 states with federal Exchanges would outnumber the losers by more than ten to one.

As I explain at Darwin’s Fool, here is what the IRS’s defenders don’t want you to know about the impact of a potential Halbig victory.

  • A Halbig victory would free more than 8.3 million individuals from the PPACA’s individual mandate. That’s how many people in those 36 states the IRS is currently subjecting to the individual-mandate tax without statutory authorization.
  • In the 36 states with federal Exchanges, a Halbig victory would free 250,000 firms and 57 million employees from the PPACA’s employer mandate. That’s how many people the IRS is unlawfully subjecting to the employer mandate.
  • The number of winners under a Halbig victory is therefore more than ten times larger than the 5 million people who would lose an illegal subsidy.
  • Those 5 million people are “losers” not because they were deprived of an illegal subsidy. Regardless of one’s position on the PPACA, we can all agree that courts should put an end to illegal government spending whenever they can. Those people are “losers” because the Obama administration recklessly induced them to purchase overly expensive Exchange coverage with the promise of billions of dollars in subsidies that it has has no authority to offer, and that could disappear with a single court ruling.

I also provide state-level estimates of the number of firms and individuals Halbig would free from these mandates. For example:

  • A Halbig victory would free nearly 1 million Floridians from the individual mandate, and more than 16,000 firms and 5.1 million Floridians from the employer mandate.
  • It would free more than 1.5 million Texans from the individual mandate, and free more than 24,000 firms and nearly 7 million Texans from the employer mandate.
  • A Halbig victory would also enable the 14 states (plus D.C.) that established Exchanges to exempt residents and employers from those mandates by switching to a federal Exchange, as well as create political and economic incentives for states to make the switch.
  • If the Halbig plaintiffs prevail, the 14 establishing states (plus D.C.) could cumulatively exempt 3.8 million residents from the individual mandate and exempt 123,000 firms and nearly 29 million residents from the employer mandate.
  • California, for example, could exempt 1.7 million residents from the individual mandate, and exempt 32,000 firms and 9.4 million workers from the employer mandate.
  • Though those states would lose Exchange subsidies if they switched to a federal Exchange, the much larger number of firms and residents who would benefit could still pressure state officials to make the switch.
  • These states could also experience economic pressure to switch to a federal Exchange, because the employer mandate (which increases the cost of doing business) will be operative in their states but not in states that opt for a federal Exchange. Establishing states could therefore lose jobs to federal-Exchange states, unless they become federal-Exchange states themselves.

Click here for state-by-state data on the impact (or potential impact) of a Halbig ruling.

U.S. Should Test China’s Disenchantment with North Korea

Evidence mounts that the Chinese government is mightily annoyed with its volatile North Korean ally.  Long gone are the days when Chinese officials invariably described the relationship between their country and North Korea as being “as close as lips and teeth.”   In a new article in China-U.S. Focus, I show how the chill in the bilateral relationship has been growing for years and has now reached unprecedented levels.  A stark indication was Chinese President Xi Jinping’s recent state visit to South Korea, which became a blatant snub to Pyongyang.  Xi did not even bother to stop in the North Korean capital either before or after his summit meeting with South Korean President Park Geun-hye.

The main reason for Beijing’s annoyance has been North Korea’s repeated defiance of China’s warnings not to conduct nuclear tests or missile tests.  Both Kim Jong-un and his father and predecessor as North Korea’s supreme leader, Kim Jong-il, ostentatiously ignored Beijing’s admonitions that such conduct was provocative and disruptive.  Xi’s courtship of Seoul sends a new warning to Pyongyang that there may be a high price to pay for such defiance.

It also creates an ideal opportunity for the United States to see whether, for the right price, Chinese leaders might be willing to dump North Korea and treat South Korea as its future partner on the Peninsula.  Clearly, that would require an even more drastic shift in China’s policy than what has occurred so far.  It also would require Washington to make an equally drastic policy change.  The core of any deal would be a willingness to withdraw all U.S. forces from the Korean Peninsula and phase-out the defense treaty with Seoul, if Beijing agreed to end its support of North Korea and facilitate Korean unification.  Since Washington’s alliance with South Korea is a relic of the Cold War, when Seoul was incapable of providing for its own defense and both Beijing and Moscow firmly backed North Korea militarily, such a concession would not come at the expense of crucial U.S. interests.  Today, Seoul has more than enough financial resources to build whatever military capabilities it deems necessary.

There is, of course, no guarantee that Beijing would accept such a deal, but the time is ripe at least to explore that possibility.  Chinese leaders are clearly disenchanted with their North Korean ally.  We need to find out just how disenchanted, and that requires flexibility and creativity in U.S. foreign policy.

The Dangers of Waging War by Proxy

The shocking destruction of Malyasian Airlines MH17 is merely the latest in a string of cases in which irresponsible and unaccountable proxies have brought shame and international condemnation down upon the heads of their foreign sponsors. The precise details of how a passenger airliner carrying 298 souls fell from the sky still aren’t known, but, as Jon Lee Anderson notes in the New Yorker, ”however it played out, this sort of tragedy is a natural consequence of giving weapons to violent men who feel that their powerful sponsor allows them to commit crimes with impunity.”

One hopes, once the memorials to the victims are concluded, and friends and families have had time to come grips with their loss, that the MH17 incident will induce greater caution on the part of would-be foreign sponsors the next time they consider arming shadowy rebels. But I’m not that optimistic. It certainly won’t be sufficient to stop all such cases. Advocates will likely claim that the particular proxy group that they favor isn’t at all like the pro-Russian separatists in Ukraine, and, thus, that there is nothing to worry about. “Our guys can be trusted with these weapons,” they’ll say. One hopes that skeptics won’t be scorned and ridiculed for voicing concerns. 

For now, the focus is appropriately on Russian President Vladimir Putin’s cynical manipulation of the unrest in Ukraine. And that is where it should stay. I warned more than two months ago that Putin wasn’t the evil genius that some in the West have made him out to be, and that he likely had less control over the separatists in Ukraine than some alleged. His proxies might ignore him if he told them to stand down, I predicted, or do other things that he didn’t entirely support. The downing of a civilian airliner isn’t what I had in mind, but the bottom line is the same: senseless, tragic death. It doesn’t matter that Putin didn’t push the button that launched the missile, or that he didn’t want civilians – especially foreign nationals – targeted. If he provided separatists with weapons capable of causing such destruction, he bears responsibility for their actions. 

That Putin appears to recognize this is proved by his mouthpiece Russia Today’s ham-fisted attempt to shift blame. RT’s initial report that it was caused by a Ukrainian missile fell apart almost immediately. Separatists, with Russian help, were seen trying to cover their tracks by moving SA-11 missile batteries within a few hours of the disaster. Strategic masterminds don’t deny responsibility for military operations that they are proud of. Eisenhower didn’t try to claim that the Normandy landings were a false flag operation. Douglas MacArthur’s forces at Inchon weren’t disguised as little green men. The absurdity of RT’s latest efforts prompted London-based RT reporter Sara Firth to quit in protest. “I couldn’t do it any more,” she told BuzzFeed. “Every single day we’re lying and finding sexier ways to do it.”

In the United States, hawks wasted no time trying to build support for tougher actions against Russia. This was inevitable. Whether any of these measures – including more military aid to Ukraine, more troops in Eastern Europe, and more sanctions – will have the desired effect seems to be beside the point. For my part, I would prefer forcing Putin to stew in the juices of his disastrous proxy war a little longer while the evidence of Russian complicity accumulates. We shouldn’t allow him to divert attention away from this heinous act.

Is Fiscal Constraint a Bug or a Feature?

A Washington Post profile of Art Pope, political donor and now budget director of North Carolina, finds a flaw in his fiscal management:

For all of his pull, the revolution Pope helped set in motion is not going quite as planned. The tax overhaul, styled in part off ideas promoted by Pope-backed groups, has contributed to tight finances in North Carolina at a time when other states are flush with cash.

Is that bad? Fiscal conservatives such as Pope just might think that budgetary constraints are a good thing, perhaps especially when revenues would otherwise be rising, leading to profligacy. State governments have a tendency to overspend when the economy booms, and then face difficult adjustments in downturns. Limits on overspending, whether constitutional constraints or tax reductions, should be seen as a feature, not a bug, in state fiscal systems.

By the way, this Post profile of Pope, who is a contributor to the Cato Institute, is not exactly positive, but it’s nothing like Jane Mayer’s 2011 profile in the New Yorker, which I dubbed “Snidely Whiplash in North Carolina.”

Foreign Policy Hawks Ignore Data

As 2016 presidential contender Rand Paul catches flack for his so-called foreign policy “isolationism,” the neocons go on frightening the public. According to the hawks, the world is getting more dangerous.

In a Politico interview last Monday, Dick Cheney said, “The world’s not getting safer, it’s getting far more dangerous.” On the same day, Newt Gingrich said on CNN:

After 9/11, the United States is not safer … in an increasingly dangerous world… If you look at what’s happening around the world today, it’s almost impossible to say that we’re safer… The worldwide scene is not a very safe scene.”

Senator John McCain also said on CNN that the world is “in greater turmoil than at any time in my lifetime.”

While 2014 may in some ways be less safe than 2013, foreign policy hawks ignore long-term trends that show an increasingly safer world. Consider the following evidence from HumanProgress.org. First, all types of wars, from civil to interstate, are less deadly:

U.S. Chamber of Commerce Seeks to Defeat Top Free-Enterpriser Rep. Justin Amash

In 2008 the U.S. Chamber of Commerce supported TARP, the $800 billion Wall Street bailout. Early in 2009 the Chamber supported President Obama’s $800 billion “stimulus” bill. Then four months later it announced its creation of the “Campaign for Free Enterprise.” As I pointed out at the time, it would have been nice if the Chamber had discovered the virtues of free enterprise when it mattered.

Now the Chamber’s got a new campaign that seems incongruous for a “free enterprise” organization. It has endorsed the primary opponent of Rep. Justin Amash (R-MI), the most pro-free-enterprise and most libertarian member of Congress. You don’t have to take my word for that. The Club for Growth rates Amash 100 percent. The National Taxpayers Union rates him second among 435 members of Congress in fiscal conservatism. He scored 100 percent on the Freedomworks Scorecard.

So why would the Chamber of Commerce oppose him? I looked at big business opposition to Amash and several other libertarian-leaning legislators last month:

In Michigan business leaders are funding financial consultant Brian Ellis’s primary challenge to Rep. Justin Amash. Since his election in the 2010 tea party wave, Amash has emerged as the most libertarian member of the House of Representatives. He’s second to McClintock on the National Taxpayers Union spending-vote ratings. He organized a bipartisan effort to rein in the National Security Agency that came within a few votes of passing the House. He heads the House Liberty Caucus. Amash told the New York Times, “I follow a set of principles, I follow the Constitution. And that’s what I base my votes on. Limited government, economic freedom and individual liberty.”

So why wouldn’t Grand Rapids business leaders be proud to have such a widely admired young representative? They say they want a congressman who will work with others to “get things done.” Andrew Johnston, the political director of the Grand Rapids Chamber of Commerce, told the Wall Street Journal, “There is frustration among those who think his rigidity makes it difficult to move forward on legislation.” He promised that Ellis “will have access to funds that will be helpful to his campaign.”

It’s not just local businessmen. Washington lobbyists are rallying around Ellis. He’s also put $400,000 of his own money into his campaign—in the form of loans, which can be paid back out of more lobbyists’ contributions if he wins the race.

In an interview with the Weekly Standard, Ellis strikingly dismissed Amash’s principled, constitutional stand: “He’s got his explanations for why he’s voted, but I don’t really care. I’m a businessman, I look at the bottom line. If something is unconstitutional, we have a court system that looks at that.”

Most members of Congress vote for unconstitutional bills. Few of them make it an explicit campaign promise.

Amash does have the support of Freedomworks, Club for Growth, and some local business leaders such as several members of Amway’s DeVos and Van Andel families. And polls show him 20 points ahead of Ellis. But Rep. Eric Cantor had a poll putting him 30 points ahead of David Brat before he unexpectedly lost, and Ellis’s self-funding now amounts to $800,000. So Amash can’t take anything for granted.

Of course, the Export-Import Bank is now a hot issue in Congress. Amash opposes it; the Chamber vigorously supports it. So it looks like it may be tough to support free markets, oppose bailouts and corporate welfare, and receive the support of the nation’s largest business organization.

Halbig v. Burwell Would End The Disruption

The U.S. Court of Appeals for the D.C. Circuit could issue a ruling today in Halbig v. Burwell, one of four lawsuits challenging an Internal Revenue Service rule that effectively implements the Patient Protection and Affordable Care Act’s exchange subsidies where the statute does not permit: in exchanges that were not “established by the State” – i.e., federal exchanges. 

Tim JostNorman OrnsteinAvalere Healththe Urban Institute, the Robert Wood Johnson Foundation, and others who support the Obama administration’s position (we cannot say they support PPACA) predict much disruption if the courts rule against the administration. 

Over at DarwinsFool.com, I have a new post explaining how Halbig would put an end to the disruption, which is much greater than they recognize:

In 2011, the Obama administration issued an IRS rule in which it unilaterally decided to tax, borrow, and spend billions of dollars. Treasury and IRS officials apparently knew they did not have statutory authority to do it. They did it anyway.

The impact of that IRS rule has been enormous. Insurers chose to participate in the PPACA’s Exchanges who otherwise would not have. Employers have reconfigured their health insurance benefits, eliminated jobs, and/or cut hours for perhaps millions of employees, including teaching assistants and restaurant workers, to comply with a mandate from which they are, by law, exempt. Millions of Americans are already paying penalties under, or have purchased coverage to comply with, an individual mandate from which they are, by law, exempt. Nearly 5 million Americans agreed to enroll in Exchange coverage with the promise of subsidies the Obama administration has no authority to offer to them, that could vanish with one court ruling or by regulatory fiat. With every unauthorized subsidy that flows from the IRS to private insurance companies, the federal debt rises above the level authorized by law, imposing an unauthorized tax burden on current and future generations.

The IRS rule has had a sweeping impact on the political process as well. It denied states—denied voters—the use of a policy lever Congress granted to them: the ability to veto the PPACA’s subsidies, employer mandate, and individual mandate. In effect, the rule disenfranchised voters in the 36 states that exercised those vetoes. Had the administration followed the law, those 36 vetoes would have led to changes in the PPACA, and possibly changes in Congress. Instead, the IRS rule altered the outcome of congressional votes and, likely, of congressional elections. Americans voted in 2012 as if there were not a gaping hole in the PPACA that would expose its full cost and destabilize its regulatory scheme. The IRS rule is still influencing congressional elections today. Potential candidates are deciding whether to enter the 2014 congressional races as if that gaping hole does not exist; as if the law Congress enacted were more popular and successful than it actually is…

The purpose of Halbig is to end the massive economic and political disruption caused by the president’s decision to ignore the clear statutory language he is sworn to uphold.

Read the whole thing.

Pages