Archives: 10/2012

Exactly What Is Max Baucus Saying Here?

At a packed Cato Institute briefing on Capitol Hill yesterday, Jonathan Adler and I debated ObamaCare expert Timothy Jost over an admittedly wonky issue that nevertheless could determine the fate of ObamaCare: whether Congress authorized the IRS to subsidize health insurers, and to tax employers and certain individuals, in states that refuse to establish one of ObamaCare’s health insurance “exchanges.”

I want you, dear Cato@Liberty readers, to help us get to the bottom of it.

Adler and I claim that Congress specifically, repeatedly, and unambiguously precluded the IRS from imposing those taxes or issuing those subsidies through federal “fallback” Exchanges. We maintain the below video shows ObamaCare’s chief sponsor and lead author–Senate Finance Committee chairman Max Baucus (D-MT)–admitting it. Jost says Baucus’s comments have “absolutely nothing” to do with the matter. You be the judge, and tell us what you think.

A bit of background will help to frame what’s happening in the video: Both sides agree this issue hinges on whether the statute authorizes “premium assistance tax credits” through both state-created and federal Exchanges, or only state-created Exchanges. The video is from a September 23, 2009, Finance Committee markup of ObamaCare. In it, Baucus rules out of order a Republican amendment on the grounds that medical malpractice lies outside the committee’s jurisdiction. Sensing a double-standard, Sen. John Ensign (R-NV) notes that Baucus’s underlying bill directs states to change their health insurance laws and to establish Exchanges, matters which also lie outside the Finance Committee’s jurisdiction, and asks why aren’t those provisions also out of order. Okay, go.

I might note that these are the only comments anyone has unearthed from ObamaCare’s legislative history that bear directly on the question of whether Congress intended to authorize tax credits in federal Exchanges.

Baucus’s response is hardly a model of clarity. But I can see no possible interpretation other than Baucus is admitting that (A) the statute makes tax credits conditional on states establishing an Exchange, and therefore does not authorize tax credits through federal Exchanges, and (B) that this feature was essential for the Senate’s tax-writing committee to have jurisdiction to legislate in the area of health insurance.

But maybe I’m wrong. What do you think Baucus is saying? Since we don’t enable comments on Cato@Liberty, post your interpretation here on the Anti-Universal Coverage Club’s Facebook page. Or post it on your own blog and send me a link.

For more on this issue, see what Adler and I have written for the law journal Health Matrix, the Wall Street JournalUSA Today, the Health Affairs blog, and National Review Online.

An Insider’s Account of the White House’s Unseemly Tactics in the Chrysler Bailout

A Wall Street Journal editorial this morning points out that Indiana Republican Senatorial candidate Richard Mourdock is getting pounded by his Democratic rival for having opposed the Chrysler bailout.

Mourdock opposed the bailout on principle, but at that time he was also the Indiana state treasurer and fiduciary for several state pension funds, including two holding the retirement resources of Indiana police officers and school teachers, which owned about $42 million dollars of “secured” Chrysler debt in 2009. When Mourdock rejected the administration’s offer of $0.29 for each dollar of debt held, his position was publicly excoriated by President Obama as greedy, unpatriotic, and reflecting and unwillingness to ”sacrifice for the greater good.”  There’s much more to this story.

If you are interested in a first hand account of the strong-arm tactics, threats, and intimidation employed by the White House to get its own Chrysler bankruptcy plan rubber stamped through the process in 2009, you will want to see this video of Mourdock speaking at a Cato event.  It is truthful and chilling.

Romney Derangement Syndrome Begins

Back in 2003 psychiatrist-turned-columnist Charles Krauthammer “discovered” a new psychiatric syndrome:

Bush Derangement Syndrome: the acute onset of paranoia in otherwise normal people in reaction to the policies, the presidency – nay – the very existence of George W. Bush.

I myself identified – but sadly, never in print – Bush Derangement Syndrome-II, the onset of unfounded enthusiasm for George W. Bush in people who otherwise supported smaller government. BDS-II manifested itself most publicly on February 8, 2008, at the Conservative Political Action Conference, when after seven disastrous years of overspending, federal intrusion, entitlement expansion, civil liberties abuses, and foundering wars – and indeed the day after Bush’s Economic Stimulus Act of 2008 passed Congress – President Bush spoke at CPAC, and the assembled conservatives greeted him with chants of “Four More Years!” Really? Four more years of that?

And of course I hardly have to mention Obama Derangement Syndrome, which found many people convinced that Barack Obama was a Kenyan, a Muslim, the son of Malcolm X, or some other wild fantasy.

Now, even before the current election, while Mitt Romney remains a 64-36 underdog on Intrade, I’m seeing the first signs of Romney Derangement Syndrome. Take this item on NPR this morning:

A woman in the audience named Mary Ann … says she’s not impressed by Governor Romney’s claim that he recruited women to serve in his Cabinet in Massachusetts.

“Yes, he hired women, and I’m thinking to myself yeah, because he could get them at a lower rate. That’s the only reason Mitt Romney hired women.”

He hired women to serve in the state Cabinet, where I’m sure the salaries are set by law. And he wasn’t all that frugal with taxpayers’ dollars anyway. And yet Mary Ann just can’t imagine that Romney would hire women for top positions – positions that would play an important role in his success as governor – unless “he could get them at a lower rate.”

Romney Derangement Syndrome. You read it here first.

Water: Excess of Subsidies, Lack of Markets

A recent op-ed in the Wall Street Journal describes what happens in an industry that suffers from a plethora of subsidies and a dearth of free markets. Water experts Peter Culp and Robert Glennon write:

In 2012, the drought-stricken Western United States will ship more than 50 billion gallons of water to China. This water will leave the country embedded in alfalfa–most of it grown in California–and is destined to feed Chinese cows. The strange situation illustrates what is wrong about how we think, or rather don’t think, about water policy in the U.S.

You can read about the historical background to this “strange situation” in an essay I co-authored with Peter Hill. Basically, irrigation water in the Western states is heavily subsidized and–unlike most commodities–is not easily traded in open markets. The result is a great deal of waste, economic inefficiency, and negative environmental consequences.

Here is some of Culp and Glennon’s discussion of the perverse results of big government water policies. (Keep in mind that ”water rights” for farmers has come to mean ”rights” to hugely subsidized water).

Alfalfa is a water-guzzling crop and the water embedded in the alfalfa that the U.S. will export to China in 2012 is enough to supply the annual needs of roughly 500,000 families.

Southern California’s Imperial Irrigation District gets its water from the Colorado River, 82 miles to the east. Alfalfa farmers in the district use as much as 50% more water than growers in other areas of the state due to scorching heat, salty soil and, perhaps most important, their legal rights to an enormous quantity of cheap water. This single irrigation district controls more than 20% of the total annual flow of the Colorado River. Remarkably, the district’s water rights are 10 times higher than that of the entire state of Nevada.

The perversity of a situation in which California taxpayers must spend tens of billions to protect the water supplies of vital farms and cities even as California farmers convert tens of thousands of irrigated acres to feed cows in China reflects the growing incoherence of domestic water and agricultural policy. Antiquated Western water laws often block intrastate or interstate water transfers that could satisfy changing domestic urban, agricultural and environmental needs.

In many Western states, moreover, farmers who conserve water by modernizing their irrigation systems don’t get to use, lease or sell the water they save … Even when a transfer is possible, complicated regulatory procedures mean that final approvals can take years. Interstate transfers typically fare even worse.

Cops on Camera Update

A Maryland judge has thrown out the first of three assault charges against two police officers who were caught on tape beating student John McKenna after a 2010 University of Maryland basketball game. The judge said “there was not enough evidence” to show the officers were engaged in first-degree assault. Second-degree assault and official misconduct charges remain.

We might argue about whether dropping those charges was the right call. What we know for certain is that before the tape surfaced, McKenna was the one charged with assaulting officers and a police horse. A good samaritan’s cell phone video was the only thing standing between justice and the student being branded a criminal and thrown in jail.

The lesson should be clear. Citizens recording police encounters can reveal truths the police might prefer to hide. Evan Banks and I made a short video detailing the incident (among others) and the importance of protecting the right of bystanders to record the police.

GOP Groups’ Ads on Sequestration, Defense Jobs Are Misleading

It is no surprise that the defense contractors want to protect their profits by getting taxpayers to pony up more money. Now they have secured the support of Crossroads GPS in a commercial against Senate candidate and former Virginia governor Tim Kaine. The Crossroads ad follows similar ones from Kaine’s challenger, George Allen, and the National Republican Senatorial Committee. All three ads claim that spending cuts under sequestration will result in devastating job losses to the defense industry and Virginia; the Crossroads ad claims 520,000 jobs will be lost. But these estimates are wildly inflated and represent the short-term interests of the defense industry, not the American taxpayer.

In actuality, the cuts, if they occur, will be evenly divided between the Pentagon and the rest of the discretionary budget. They are a very modest share of total federal spending over the next decade, and the assertion that the cuts will lead to massive job losses have been thoroughly refuted here, here, and here. Indeed, there is good reason to believe that such cuts will have beneficial effects over the medium- to long-term, if the savings are returned to taxpayers, and not merely plowed into other federal spending.

All of these pro-GOP ads get the lost jobs number from a study commissioned by the Aerospace Industries Association and authored by George Mason economist Stephen Fuller. Last Friday, the Cato Institute hosted a forum—which included Fuller—that considered the effects of military spending cuts on employment and the economy. We discussed the positive impact that cuts in Pentagon spending can have in the wider economy, and even in a state like Virginia that is more dependent than other states on federal spending. The Wall Street Journal’s Steve Moore argued we should just let sequestration happen (I agree). As the Washington Post reported, Economist Benjamin Zycher summed up the hypocrisy of conservatives claiming the defense budget produces jobs:

“Conservatives . . . are highly dubious about the purported [gross domestic product] and employment benefits of federal domestic spending, as illustrated by the meager effects of the Obama stimulus fiasco,” he said. “There’s no particular reason to believe that defense spending is different.”

I wish that organizations like Crossroads GPS were as committed to saving the taxpayers money as they are to electing Republicans. I’d also like it if they relied on objective facts, not statistics designed to protect the narrow interests of an industry that relies overwhelmingly on taxpayer dollars. We wouldn’t expect Republicans to accept the teachers unions’ claims about job losses from cuts in the Department of Education. Why, then, do they promote these phony numbers by the defense contractors?

On Thursday, Dan Mitchell and I will be discussing this issue—the effects of sequestration—on Capitol Hill. It is not too late to register, but space is limited, so act now.

Buckyballs, the CPSC, and the Coconut Menace

It’s rare for a regulated company to mount open and disrespectful resistance to a federal regulatory agency, but that’s what the maker of BuckyBalls, the popular desktop magnetic toy, is doing in response to the Consumer Product Safety Commission’s effort to ban its product. Powerful magnets can be harmful if swallowed, and the maker of BuckyBalls has extensively warned that they are meant for adult use and should be kept out of kids’ hands. The CPSC considers these warnings inadequate and wants to ban the product even for adult use. As I have noted elsewhere, the agency mounted

an unusually aggressive show of legal muscle to force the product off the market: while suing the manufacturer, it strong-armed retailers into suspending Buckyball sales, thus cutting off the manufacturer’s revenue while a court decides whether the commission had an adequate basis in law and fact for its action.

Further posters in the series compare the risks of other familiar consumer products, namely hot dogs, stairs, and beds, each associated with significant numbers of fatalities and emergency room injuries. Following a recent hearing, seven members of the House signed a letter challenging the CPSC’s unilateral action. More coverage at Overlawyered here.