Tag: rule of law

Government Can’t Simply Ignore Judicial Rulings It Doesn’t Like

By design, the federal judiciary is the weakest of the three branches of government. While the executive wields the sword, and Congress holds the purse strings, the courts have no temporal power.

To give effect to their decisions and orders, courts depend on popular legitimacy and the cooperation of the other branches. While that cooperation is normally forthcoming when needed to enforce judicial decisions against private citizens, when the subject of a court’s order is the government itself, there’s always a risk that it will be ignored or avoided.

Such is the case in Hornbeck Offshore Services v. Jewell, which began when the Interior Department (DOI) chose to put itself above the courts and above the law. Following the Deepwater Horizon disaster in April 2010, DOI issued a total ban on drilling activity in the Gulf of Mexico. A district court judge held that this drilling moratorium was irrational and not supported by scientific research or other credible evidence. The judge issued an injunction prohibiting DOI from enforcing its ban.

Instead of obeying the injunction — or appealing it — DOI ignored it. The Secretary of the Interior told Congress that as far as he was concerned, the drilling ban was still in effect. DOI then issued a second ban on drilling that was identical to the first. The district judge held DOI in contempt of court, noting that “each step the government took following the Court’s imposition of a preliminary injunction showcase[d] its defiance” of the court’s authority.

On appeal, a panel of the New Orleans-based U.S. Court of Appeals for the Fifth Circuit sided 2-1 with the DOI’s position that the contempt finding was improper because the issuance of a second (identical) drilling ban was not technically disallowed by the text of the injunction — which explicitly prohibited only enforcement of the initial ban. Cato has filed an amicus brief urging the Supreme Court to hear the case because the appellate court’s ruling undermines the rule of law and the judiciary’s independent authority.

Under the Fifth Circuit’s rule, government agencies will be able to legally avoid court orders with bureaucratic trickery. If only the explicit text of an injunction — and not any of its spirit or clear purpose — binds the federal government, Congress or the executive could simply rename whatever statute or regulation has been declared unconstitutional and continue enforcing the substantively unconstitutional rule. Such an overly technical rule would force district court judges into the role of mind-readers, trying to predict how the government could weasel its way out of a ruling.

Without an effective contempt power to punish the violation of its orders, even the Supreme Court would be unable to enforce its important rulings, such as ending the District of Columbia’s unconstitutional ban on handguns, and striking down section 3 of DOMA. In both of those recent cases, the sort of semantic game-playing endorsed by the Fifth Circuit here would have resulted in hollow victories for liberty and an evisceration of the idea that in our constitutional republic, the government is bound by the same (if not stricter) rules as the rest of us.

CBO: One-Year Delay of Employer Mandate Increases Spending, Debt, and Dependence

The Congressional Budget Office has released its cost estimate of the Obama administration’s one-year repeal delay of ObamaCare’s employer mandate and anti-fraud provisions. The CBO expects the Obama administration’s unilateral rewriting of federal law (my words, not CBO’s) will increase federal spending by $3 billion in 2014 and reduce federal revenues by a net $9 billion, thereby increasing the federal debt by $12 billion. If President Obama keeps this up, Congress may have to raise the debt ceiling or something.

Where is that $3 billion of new spending going? The CBO estimates the administration’s action will lead to about half a million additional people receiving government subsidies, including through ObamaCare’s Exchanges:

All told, as a result of the announced changes and new final rules, roughly 1 million fewer people are expected to be enrolled in employment-based coverage in 2014 than the number projected in CBO’s May 2013 baseline, primarily because of the one-year delay in penalties on employers. Of those who would otherwise have obtained employment-based coverage, roughly half will be uninsured and the others will obtain coverage through the exchanges or will enroll in Medicaid or the Children’s Health Insurance Program (CHIP), CBO and JCT estimate.

Which makes the president’s delay of the employer mandate and anti-fraud provisions consistent with his administration’s goal of hooking enough voters on government subsidies to affect electoral outcomes and votes in Congress.

Yes, Delaying Obamacare’s Employer Mandate Is Illegal

Last week, when most Americans were starting their Fourth of July holiday, the Obama administration announced it will wait until 2015 to implement Obamacare’s penalties against employers who fail to offer “affordable” and “minimum value” coverage to their workers, rather than impose this “employer mandate” in 2014, as the statute requires. The administration’s stated rationale is that, despite nearly four years of lead time, it still won’t have the capacity to collect from employers the information required to determine which employers will be subject to penalties in 2014. As a result, the administration also announced it would not require employers to report that information until 2015, though (again) the statute requires employers to furnish that information in 2014.

Nicholas Bagley, a professor of law at the University of Michigan, suggests that maybe there is a legal rationale for the Obama administration’s delaying these provisions. So let’s take each provision in turn.

1) Has Congress given Treasury the authority to waive the penalties? The answer is no. The employer-mandate penalties unequivocally take effect on January 1, 2014, and the PPACA gives the Treasury secretary no authority to postpone their imposition.

Every element of the employer mandate demonstrates that it takes effect in 2014.

  • If any worker at a firm with more than 50 full-time-equivalent employees receives a tax credit through a health insurance “exchange,” then “there is hereby imposed on the employer an assessable payment.” Those tax credits become available on January 1, 2014. Thus that is also the date on which the penalties take effect.
  • The statute specifies penalty amounts that apply specifically in 2014, and provides that those penalties shall be adjusted for inflation in years after 2014.
  • The section creating the employer mandate even contains an effective date: “The amendments made by this section shall apply to months beginning after December 31, 2013.”

The statute gives the Treasury secretary the authority to collect these penalties “on an annual, monthly, or other periodic basis as the Secretary may prescribe.” It does not allow the secretary to waive the imposition of such penalties, except in one circumstance: Section 1332 authorizes the Treasury secretary to waive the employer mandate, but only as part of a state-specific waiver, and only if the state enacts a law that would provide equally comprehensive health insurance to as many residents, and only if that law would impose no additional cost to the federal government, and only if there is a “meaningful level of public input” over the waiver and its approval, and even then not until 2017. In other words, Congress spoke to the question of whether and when the executive should be able to waive the employer mandate, and Congress clearly did not want the administration to waive it unless certain specified conditions were met.

Nevertheless, Treasury claims it has the authority to waive those penalties without following Congress’ instructions: “[T]he employer shared responsibility payments…will not apply for 2014. Any employer shared responsibility payments will not apply until 2015.”

2) Has Congress given Treasury the authority to waive the reporting requirement? Again, the answer is no.

The PPACA added two sections to the Internal Revenue Code (sections 6055 & 6056) that require employers to report certain information on their health benefits and the workers who enroll in that coverage, in order to help the IRS determine whether those workers are eligible for tax credits and whether the employer is subject to penalties. Again, the statute is clear: those reporting requirements take effect in “calendar years beginning after 2013” and “periods beginning after December 31, 2013.” The statute contains no language authorizing Treasury to waive those requirements.

Bagley argues the statute does contain language that might enable Treasury to delay the imposition of these reporting requirements. Sections 6055 & 6056 state that employers must furnish this information “at such time as the Secretary may prescribe.” He writes, “Delaying the reporting requirements until 2015 is arguably just a specification of the ‘time’ at which the reports must be submitted.”

This theory reflects a misunderstanding of what an effective date is. When Congress imposes an obligation on some party, that obligation becomes effective on the effective date. The secretary’s discretion to prescribe the time at which the affected party must discharge that obligation neither affects the existence of the obligation, nor empowers the secretary to repeal it.

One might argue that Treasury has the authority to say employers need not report the required information regarding their 2014 health benefits offerings until, say, the next year, when they report the same information for their 2015 offerings. Yet that is not what Treasury is doing. Treasury claims it can altogether eliminate the obligation to report the 2014 information: “The Administration…will provide an additional year before the ACA mandatory employer and insurer reporting requirements begin.”

Moreover, if the language Bagley cites were interpreted to permit Treasury to waive the mandate and reporting requirements for 2014, is there any reason why that interpretation would not empower Treasury waive those provisions indefinitely? Could the secretary determine employers need discharge these obligations every 1,000 years? If not, why not?

Finally, Bagley concludes no one would have standing to challenge these actions in court. Thus even if the administration’s actions are illegal, he writes, “So what?”

Let’s assume for the moment that Bagley is correct on the standing issue. Here’s “what.” The law is a mutual compact between the government and the people. The more the government acts as though it is not bound by that the law, the more widespread will be the belief among the people that they are not bound by the law, either. That would be a very bad situation. There are already enough people out there who believe the government is not bound by the law that President Obama feels it is worth his time to counsel Americans to “reject these voices” – even as his actions lend credence to them, and further diminish respect for the law. That’s a “what” that I figured law professors understood.

50 Vetoes: How States Can Stop the Obama Health Care Law

Today, the Cato Institute releases my latest working paper, “50 Vetoes: How States Can Stop the Obama Health Care Law.” From the executive summary:

Despite surviving a number of threats, President Obama’s health care law remains harmful, unstable, and unpopular. It also remains vulnerable to repeal, largely because Congress and the Supreme Court have granted each state the power to veto major provisions of the law before they take effect in 2014.

The Patient Protection and Affordable Care Act (PPACA) itself empowers states to block the employer mandate, to exempt many of their low- and middle-income taxpayers from the individual mandate, and to reduce federal deficit spending, simply by not establishing a health insurance “exchange.” Supporters of the law do not care for this feature, yet they adopted it because they had no choice. The bill would not have become law without it.

To date, 34 states, accounting for roughly two-thirds of the U.S. population, have refused to create Exchanges. Under the statute, this shields employers in those states from a $2,000 per worker tax that will apply in states that are creating Exchanges (e.g., California, Colorado, New York). Those 34 states have exempted at least 8 million residents from taxes as high as $2,085 on families of four earning as little as $24,000. They have also reduced federal deficits by hundreds of billions of dollars.

The Obama administration is nevertheless attempting to tax those employers and individuals, contrary to the plain language of the PPACA and congressional intent, and to deny millions of Americans the opportunity to purchase low-cost, high-deductible coverage. Employers, consumers, and even state officials in those 34 states can challenge those illegal taxes in court, as Oklahoma has done. States can also block those illegal taxes—and even stop the federal government from operating an Exchange—by approving a strengthened version of the Health Care Freedom Act.

The PPACA’s Medicaid expansion, which would cost individual states up to $53 billion over its first 10 years, is now optional for states, thanks to the Supreme Court’s ruling in NFIB v. Sebelius. Some 16 states have announced they will not expand their programs, while half of the states remain undecided. Yet the Obama administration is trying to coerce states into implementing parts of the expansion that the Court rendered optional. States can replicate Maine’s lawsuit challenging this arbitrary attempt to limit the Court’s ruling.

Collectively, states can shield all employers and at least 12 million taxpayers from the law’s new taxes, and still reduce federal deficits by $1.7 trillion, simply by refusing to establish Exchanges or expand Medicaid.

Congress and President Obama have already repealed the third new entitlement program the PPACA created—the Community Living Assistance Services and Supports Act, or CLASS Act—as well as funding for the “co-op” plans meant to serve as an alternative to a “public option.” A critical mass of states exercising their vetoes over Exchanges and the Medicaid expansion can force Congress to reconsider, and hopefully repeal, the rest of this counterproductive law. Real health care reform is impossible until that happens.

It’s “Declaration of Internet Freedom” Day!

… or at least I should have said so back on March 4th.

That was the anniversary of the day that Congress proposed to append a Bill of Rights to our Constitution. With a lovely preamble that went a little somethin’ like this:

THE Conventions of a number of the States, having at the time of their adopting the Constitution, expressed a desire, in order to prevent misconstruction or abuse of its powers, that further declaratory and restrictive clauses should be added: And as extending the ground of public confidence in the Government, will best ensure the beneficent ends of its institution.

The Bill of Rights contains gems like “Congress shall make no law … abridging the freedom of speech, or of the press,” (Amendment 1) and, “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated” (Amendment 4).

I think this original Declaration of Internet Freedom is the bee’s knees. Yes, it’s taking some work to apply its strictures to the modern communications environment, but that’s a much more contained problem than starting over.

Starting over. That’s what a collection of really lovely groups–some highly pro-regulation, others handmaidens of government growth–are doing. They’ve come up with a “Declaration of Internet Freedom” whose principal virtue is a pretty cool graphic. The actual “principles” in it are so weasel-y that I wouldn’t trust ‘em as far as I could throw ‘em.

When you’re done pondering how one could “throw” a principle, consider an alternative to the “mainstream” declaration put out by our friends at TechFreedom. Their Declaration of Internet Freedom has a bunch of principles like “Humility” and “Rule of Law.”

Their thing on “Free Expression” cites the First Amendment. Remember that one? That’s the “Congress shall make no law” one. So that’s pretty good.

But I’m really hoping that nobody living today gets to define the basic principles by which the Internet is ruled. We’ve got that. It’s a neato collection of negative rights, preventing the government from interfering with society’s development, whether that development occurs online or off.

So happy Declaration of Internet Freedom day! I’ll be celebrating the real one.

In case you’ve gotten confused in all the jostling around, the real one is the Bill of Rights.

The IRS Can’t Overrule the Supreme Court

Since the foundational administrative law case of Chevron v. Natural Resources Defense Council (1984), courts have given significant deference to executive agency interpretations of federal law. United States v. Home Concrete & Supply tests whether there are any meaningful limits on such deference.

The case involves a group of taxpayers who initiated a number of transactions designed to reduce their tax liability by allowing a financial entity they created, Home Concrete, to increase its tax basis and reduce its taxable gain from the sale of certain assets. In June 2003, the IRS ruled that the taxpayers’ use of Home Concrete in this way was improper and issued an adjustment to their tax return (requiring payment of back-taxes). Having missed the standard three-year limit for such actions, however, the IRS argued that the adjustment was timely under a tax-code provision that extends the statute of limitations to six years if the taxpayer “omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return.”

Despite the Supreme Court’s having long ago held otherwise, Colony v. Commissioner of Internal Revenue (1956), the IRS argues that an overstatement of basis qualifies as an omission under that tax provision. Further, during the course of this litigation, the Treasury Department issued a new regulation “clarifying” the provision in a way that supports the IRS’s argument. The IRS now argues that this new regulation is controlling and should be retroactively applied to Home Concrete’s 1999 returns.

After (mostly) winning at the district court, the IRS lost before the Fourth Circuit and asked the Supreme Court to review the case—which involves one of many similar applications of the relevant tax provisions. The Court took the case and now Cato has joined the National Federation of Independent Business on an amicus brief supporting the taxpayers, arguing that sanctioning this sort of ad hoc rule-making would undermine the rule of law and the separation of powers.

We note that “[t]he government’s position is that this regulation is due judicial deference” but the Supreme Court has “consistently held that where a statute has an unambiguous meaning, an agency’s contrary interpretation is not entitled to deference.” As Judge J. Harvie Wilkinson noted in his Fourth Circuit concurrence, “agencies are not a law unto themselves” and the government’s position in this case “seems to [be] something of an inversion of the universe and to pass the point where the beneficial application of agency expertise gives way to a lack of accountability and a risk of arbitrariness.”

In deciding Chevron, the Supreme Court surely never intended to undermine the very structure of the Republic and unleash an administrative state wholly a law unto itself.

The Supreme Court will hear United States v. Home Cincrete & Supply on January 17.

Things to Be Thankful For

Not long ago a journalist asked me what freedoms we take for granted in America. Now, I spend most of my time sounding the alarm about the freedoms we’re losing. But this was a good opportunity to step back and consider how America is different from much of world history — and why immigrants still flock here.

If we ask how life in the United States is different from life in most of the history of the world — and still  different from much of the world — a few key elements come to mind.

Rule of law. Perhaps the greatest achievement in history is the subordination of power to law. That is, in modern America we have created structures that limit and control the arbitrary power of government. No longer can one man — a king, a priest, a communist party boss — take another person’s life or property at the ruler’s whim. Citizens can go about their business, generally confident that they won’t be dragged off the streets to disappear forever, and confident that their hard-earned property won’t be confiscated without warning. We may take the rule of law for granted, but immigrants from China, Haiti, Syria, and other parts of the world know how rare it is.

Equality. For most of history people were firmly assigned to a particular status — clergy, nobility, and peasants. Kings and lords and serfs. Brahmans, other castes, and untouchables in India. If your father was a noble or a peasant, so would you be. The American Revolution swept away such distinctions. In America all men were created equal. Thomas Jefferson declared “that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride them legitimately, by the grace of God.” In America some people may be smarter, richer, stronger, or more beautiful than others, but “I’m as good as you” is our national creed. We are all citizens, equal before the law, free to rise as far as our talents will take us.

Equality for women. Throughout much of history women were the property of their fathers or their husbands. They were often barred from owning property, testifying in court, signing contracts, or participating in government. Equality for women took longer than equality for men, but today in America and other civilized parts of the world women have the same legal rights as men.

Self-government. The Declaration of Independence proclaims that “governments are instituted” to secure the rights of “life, liberty, and the pursuit of happiness,” and that those governments “derive their just powers from the consent of the governed.” Early governments were often formed in the conquest of one people by another, and the right of the rulers to rule was attributed to God’s will and passed along from father to son. In a few places — Athens, Rome, medieval Germany — there were fitful attempts to create a democratic government. Now, after America’s example, we take it for granted in civilized countries that governments stand or fall on popular consent.

Freedom of speech. In a world of Michael Moore, Ann Coulter, and cable pornography, it’s hard to imagine just how new and how rare free speech is. Lots of people died for the right to say what they believed. In China and Africa and the Arab world, they still do. Fortunately, we’ve realized that while free speech may irritate each of us at some point, we’re all better off for it.

Freedom of religion. Church and state have been bound together since time immemorial. The state claimed divine sanction, the church got money and power, the combination left little room for freedom. As late as the 17th century, Europe was wracked by religious wars. England, Sweden, and other countries still have an established church, though their citizens are free to worship elsewhere. Many people used to think that a country could only survive if everyone worshipped the one true God in the one true way. The American Founders established religious freedom.

Property and contract. We owe our unprecedented standard of living to the capitalist freedoms of private property and free markets. When people are able to own property and make contracts, they create wealth. Free markets and the legal institutions to enforce contracts make possible vast economic undertakings — from the design and construction of airplanes to worldwide computer networks and ATM systems. But to appreciate the benefits of free markets, we don’t have to marvel at skyscrapers while listening to MP3 players. We can just give thanks for enough food to live on, and central heating, and the medical care that has lowered the infant mortality rate from about 20 percent to less than 1 percent.

A Kenyan boy who managed to get to the United States told a reporter for Woman’s World magazine that America is “heaven.” Compared to countries that lack the rule of law, equality, property rights, free markets, and freedom of speech and worship, it certainly is. A good point to keep in mind this Thanksgiving Day.

This article originally appeared in the Washington Times in 2004 and was included in my book The Politics of Freedom.

Pages