Archives: 06/2012

Taxes & Regulations: Free Trade Has a Smarter Guardian

Today’s Supreme Court decision upholding the individual mandate rests on a purely fictional distinction between taxes and regulations that does not exist in other areas of law that restrain the power of Congress.  While the Constitution is a document that, when properly read, grants limited power to the national government, the United States has signed international documents promising not to exercise some of those powers.  The agreements that form the obligations of membership in the World Trade Organization contain direct disciplines on the exercise of government power relating to the regulation of international trade. The reason this is particularly relevant today is that the drafters of these texts were acutely aware that a tax, by any other name, would impede trade just as effectively.  Consider paragraph 1 of Article III of the General Agreement on Tariffs and Trade:

The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production. (emphasis added)

This coupling of taxes and regulations is found throughout international trade law for the simple and obvious reason that if the disciplines addressed only taxation, national governments would just alter the form of their protectionist measures and apply equivalently restrictive internal regulations.  These disciplines harness the power of international law to prevent (or at least hinder) the U.S. government from coercively directing the commercial choices of Americans for the benefit of special interests.

In a post earlier today on Cato@Liberty, my colleague Chris Edwards offered some hypothetical laws of the future that would be justified under the reasoning embodied in the Supreme Court’s decision.  One of them especially caught my attention:

Federal Domestic Jobs Act of 2016: Don’t exceed 25 percent foreign content on family consumer purchases, else pay the IRS $4,000.

While the Supreme Court’s constitutional analysis could now be affected by the fact that the word “IRS” is mentioned in the law, the WTO doesn’t care because it treats taxes and laws the same.  What matters for WTO purposes is the effect of the measure, regardless of its form.  The words “Don’t exceed 25 percent foreign content” are sufficient to make this law WTO-inconsistent regardless of who you have to pay when you do.

Although the Supreme Court may fail to recognize constitutional restraints on power that should prevent the federal government from forcing us to buy insurance, eat broccoli, or recycle, there remains one institutional impediment (albeit one of narrow scope and power) that is not hoodwinked by a fictional distinction between laws and taxes.

NATO and Turkey: Moribund Alliances, Military Snares, and Unnecessary Wars

NATO fulfilled its Cold War role by deterring rather than sparking conflict. Yet if Turkey and Syria come to blows, the transatlantic alliance could turn into a transmission belt of war for America.

Syria’s developing civil war has spilled over into Turkey. Moreover, Ankara has begun to meddle in the conflict next door. Despite Turkey’s denials, the Erdogan government appears to be channeling arms shipments to rebels and sheltering Syrian opposition activists.

Thus, tension between the two governments was rising even before the Syrian military destroyed a Turkish RF-4E reconnaissance plane. Damascus claimed the aircraft was in Syrian airspace; Ankara said the jet had strayed over Syrian territory but was over international waters when downed. The plane may have been on a surveillance mission:  the Erdogan government has been pressing for NATO military action against Syria.

After the shoot-down, Prime Minister Recep Tayyip Erdogan said “any military approach to the Turkish border from the Syrian side will be perceived as a threat and will be dealt with accordingly.” Ankara also sought backing from NATO’s members: “We consider this act to be unacceptable and condemn it in the strongest terms,” explained Alliance chief Anders Fogh Rasmussen.

Rasmussen said that Article 5, regarding use of military force in defense, had not been discussed. And he stated “It is my clear expectation that the situation won’t continue to escalate.” Wars have a way of happening unexpectedly, however. If Turkey attacks Syrian military units in their own territory, sparking retaliation by Damascus followed by a call from Ankara to NATO for support, the United States could find itself, however reluctantly, at war.

Alliances make sense when directed against an overwhelming outside threat. The Soviet Union constituted one. Syria does not.  NATO has turned into an association which drags members into everyone else’s wars, actually reducing collective security.

The United States pulls Europe into Afghanistan, a mission widely opposed by the European people. Europe pulls America into Libya, a mission widely opposed by the American people. Turkey could pull both America and Europe into Syria, a mission generally opposed by both the American and European people.

The security argument for Washington’s defense of Europe disappeared years ago. The worsening confrontation between Turkey and Syria offers a sharp reminder that NATO is not only unnecessary but dangerous. The U.S. should drop this outmoded security commitment before it draws America into yet another war in the Middle East.

Cross-posted from the Skeptics at the National Interest.

Yes, the Federal Government Has a Broad Power to Tax, but That’s Different from Having a Green Light to Spend

I’m not a lawyer, or an expert on the Constitution, though I sometimes play one on TV.

But I can read, and I’ll agree with my friends on the left that the federal government has a broad power to tax. I wish the 16th Amendment had never been ratified, but its language gives the federal government a green light to rape and pillage.

The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

That being said, the power to tax is not the same as the power to spend. And at the risk of sounding old fashioned, my big objection to the Obamacare decision is that health care is not listed as one of the federal government’s enumerated powers in Article I, Section VIII of the Constitution.

Sadly, that horse got out of the barn many decades ago, culminating in a horrible 1942 Supreme Court decision that said a man couldn’t grow crops on his own land to feed his own animals for consumption by his own family.

But let’s look at the bright side. Even though the Obamacare case was decided incorrectly, at least the judiciary is beginning to reconsider these issues, thanks in large part to the work of the Cato Institute’s legal scholars and adjunct legal scholars.

P.S. While the federal government has a broad power to tax, I should add that this doesn’t - or at least shouldn’t - vitiate other provisions of the Constitution. This is why it is so disappointing that we’ve seen the erosion of key civil liberties such as the presumption of innocence and the 4th Amendment’s protection against unreasonable searches and seizures.

P.P.S. This Michael Ramirez cartoon about Obamacare and the Constitution is amusing, though that’s not much solace given what happened. And here’s another one of his cartoons, this one on the broader theme of Obama vs. the Founding Fathers.

P.P.S. Speaking of cartoons, this one seems especially appropriate today.

If you like that one, you can see another Breen cartoon here.

The NSA Spying Numbers We Can’t See

While the nation’s political reporters were waiting for this morning’s Supreme Court ruling on the Affordable Care Act, the House Intelligence Committee reportedly voted unanimously, in a closed session, to approve a five-year extension of the controversial FISA Amendments Act. As I noted earlier this week, this is moving forward despite the National Security Agency’s refusal to provide some extraordinarily basic information about the law’s implementation—such as the number of Americans whose communications have been intercepted pursuant to this sweeping authority.

One odd thing about the NSA’s claim that they are simply unable to provide such information is that it would seem to be impossible to comply with several of the FAA’s safeguard provisions without some way of tracking this information. And indeed, as I reviewed the most recent publicly available report on the intelligence community’s compliance with these procedures, I noted the following passage:

During the onsite visits to NSA, the team reviews NSA’s [REDACTED] of Section 702-acquired data to verify compliance with minimization procedures. The team reviews all serialized reports based on Section 702-acquired data that NSA identifies as containing United States person information. The results of these reviews have been documented and included as attachments to the Section 707 Report. During this review period, the team also began to take a random sample of reports not identified by NSA to ensure that NSA was accurately identifying all reports containing United States person information.

Now, to be sure, what they’re talking about here is reports and not acquisitions: From what we understand about how FISA surveillance generally works, NSA vacuums up an enormous amount of communications data, only a fraction of which ultimately is (or in practice ever could be) reviewed by human analysts to be written up, summarized, and disseminated to other agencies. But that figure is at least something, and would at least give us an inkling of how many Americans’ communications have been reviewed by NSA personnel. Moreover, the same random sampling method could surely be used to determine, at least approximately, what proportion of the not-yet-reviewed intercepts concern Americans. Again, it’s almost impossible to believe that an estimate is impossible to produce—as opposed to merely inconvenient for those who’d rather not risk rousing the public from a state of apathy about the scale of spying underway.

More generally, these reports contain a good deal of redacted statistical information that there is simply no plausible excuse for keeping secret. A table of “statistical data relating to compliance incidents,” for example, is included—but entirely blacked out. Are we to believe that the national security of the United States would be imperiled if the public knew the number of times the NSA had difficulty following the law? The reviewers conclude that the “number of compliance incidents remains small, particularly when compared with the total amount of activity”—but is there any legitimate reason for barring the public from knowing what counts as a “small” number, or just how massive the “total amount of activity” truly is? For traditional, individually targeted FISA surveillance, this kind of aggregate information must be reported by law, and is made public as a matter of course—providing citizens with one of their only warning flags when secret surveillance increases dramatically. Aren’t such numbers—whose publication clearly hasn’t done anything to injure national security—even more important when the spying is no longer constrained by any obligation to seek individualized warrants?

Supreme Court Unlawfully Rewrites Obamacare to Save It; Four Votes (Led by Kennedy) to Strike It

Today’s baby-splitting decision rewrites the Affordable Care Act in order to save it. It’s certainly gratifying that a majority rejected the government’s dangerous assertion of power to require people to engage in economic activity in order to then regulate that activity. That vindicates everything that we who have been leading the constitutional challenge have been saying: The government cannot regulate inactivity.  It cannot, as Chief Justice Roberts put it, regulate mere existence. 

Justifying the individual mandate under the taxing power, however, in no way rehabilitates the government’s constitutional excesses.  As Justice Kennedy said in summarizing his four-justice dissent from the bench, “Structure means liberty.” If Congress can slip the Constitution’s structural limits simply by “taxing” anything it doesn’t like, its power is no more limited than would it be had it done so under the Commerce Clause.  While imposing new taxes may be politically unpopular and therefore harder to do than creating new regulations, that political check does not obviate constitutional ones—and in any event, Congress avoided even that political gauntlet here by explicitly structuring the individual mandate as a commercial regulation.

Nor does the Court vindicate its constitutional sleight-of-hand by rewriting the Medicaid expansion to tie only new federal funding to an acceptance of burdensome and fundamentally transformative regulations.  While correct on its face—and a good exposition of the spending power and what strings the federal government can attach to its funds—that analysis is relevant to a hypothetical statute, not the one that Congress actually passed.  Moreover, allowing states to opt out of the new Medicaid regime while leaving the rest of Obamacare in place throws the insurance market into disarray, increases costs to individuals, and gives states a different Hobson’s choice—different but no less tragic than the one it previously faced. As Justice Kennedy wrote in dissent, while purporting to apply judicial modesty or restraint, the Court’s rewriting of the law is anything but restrained or modest.

In short, we have reaped the fruits of two poisonous trees of constitutional jurisprudence:  On the one (liberal activist) hand, there are no judicially administrable limits on federal power.  On the other (conservative pacifist) one, we must defer to Congress and presume (or construe) its legislation to be constitutional.  It is that tired old debate that produces the Frankenstein’s monster of today’s ruling.  What judges should be doing instead is applying the Constitution, no matter whether that leads to upholding or striking down legislation.  And a correct application of the Constitution inevitably rests on the Madisonian principles of ordered liberty and limited government that the document embodies.

In any event, the ball now returns to the people, who opposed Obamacare all along, and whence all legitimate power originates.  It is ultimately they who must decide—or not—to rein in the out-of-control government whose unconstitutional actions have taken us to the brink of economic disaster.

Congress: ‘It’s Not a Tax.’ SCOTUS: ‘Yes It Is.’

The Supreme Court ruled that ObamaCare’s individual mandate is not constitutional under the Commerce Power, which was how Congress framed the mandate to avoid a political backlash from calling it a tax. Congress and the president swore up and down that the mandate was not a tax. Yet the Court upheld the mandate as a valid use of that disavowed taxing power. What Congress said the individual mandate is, the Court said is not constitutional. What Congress said the mandate is not, the Court ruled is constitutional. Everybody got that?

Where does that leave us?

  1. The Supreme Court just enacted a law that Congress never would have passed.
  2. The Court just told Congress it is okay to lie to the people to avoid political accountability.

The Individual Mandate Upheld as a Tax

Today, the Supreme Court upheld the Affordable Care Act in its entirety. The most controversial part of the act, the individual mandate, was upheld not as a naked command under the commerce power, but as a tax on those who choose not to purchase health insurance.

Upholding the individual mandate as a tax was the most politically safe path for the Supreme Court, and, unsurprisingly, it was Chief Justice Roberts who steered the Court toward that path. Nevertheless, just as a rose would still smell as sweet, a “tax” to coerce you into purchasing a product from a private business is still an unprecedented intrusion into the private lives of American citizens.

On the bright side, a majority of the Court agreed that upholding the individual mandate under the Commerce Clause would be an unprecedented stretching of the meaning of “commerce.” The Court broadly accepted the argument put forward in our brief (joined by Pacific Legal Foundation, the Competitive Enterprise Institute, 13 other organizations, and 333 state legislators) that neither the Commerce Clause or the Necessary and Proper Clause permits Congress to compel commerce into existence in order to regulate it. As Chief Justice Roberts wrote:

Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a “necessary and proper” component of the insurance reforms. The commerce power thus does not authorize the mandate.

The Commerce Clause returns to where it was in 2009, which is still wildly distorted from where it should be. The taxing power, already quite broad, gets even broader. Going forward, we’ll have to see how much Congress is willing to use this newfound taxing power. If there is one thing the federal government knows how to do well, it’s tax.