Topic: Government and Politics

The IRS Scandal: Who’s Really Being Gullible?

Some figures on the left have aggressively sought to dismiss the renewed Internal Revenue Service scandal as unserious. Rep. Lloyd Doggett (D-Tex.) captured this mood at one recent Capitol Hill hearing when he suggested that after questioning whether the loss of emails was truly accidental, his GOP colleagues might go on next to quiz the IRS’s leadership about the president’s birth certificate and space aliens in Roswell, N.M. It’s not a “serious inquiry,” Rep. Doggett said. “I believe it’s an endless conspiracy theory here.”

And yet many Americans who do not care about space aliens do doubt the IRS’s account of what has happened. While we covered the story a year ago as well as more recently, this might be a good time to recapitulate why.

The IRS grants 501(c)(4) nonprofit status (less favorable than (c)(3) tax status, which affords donors charitable deductibility) to a wide array of “social welfare” organizations–many, like the ACLU, with a definite ideological valence. In recent years the status has been sought and obtained by groups whose missions are closely related to campaign and electoral politics, most notably Organizing for America, whose role on the national scene is to support President Obama’s messaging. Not surprisingly this has excited controversy about whether the eligibility rules for (c)(4) status are being drawn in the right place. Most advocates profess to believe, though, that whatever the right set of rules, they should apply alike to all sides in our political life.

By March 2012 the Associated Press was reporting on a flurry of bizarre and seemingly unprecedented IRS demands that some (c)(4) applicants of a right-of-center valence provide extraordinarily burdensome and intrusive documentation of their activities–things like copies of all books and literature distributed to participants, transcripts of leaders’ radio appearances and live speeches, printouts of all Facebook and Twitter output, and so forth, along with donor lists and names of family members. The IRS was also delaying groups’ approval for long periods–in fact, seemingly indefinitely–without explanation or a firm denial that could be appealed to a court. Defenders of the agency leadership subsequently put out a search for left-of-center groups that might have run into similar treatment, and although they did manage to turn up a few tales of bureaucratic red tape and rigmarole, they were unable to come up with anything remotely comparable.

IRS nonprofit chief Lois Lerner at first denied any targeting, then sought to blame rogue employees at the IRS Cincinnati office for it. But emails soon emerged clearly indicating guidance by high-level IRS managers in Washington. Lerner then declined to testify, asserting her Fifth Amendment privilege against admissions tending to expose herself to criminal liability.

Through the ensuing scandal, there was little hard proof that Lerner and other IRS insiders had coordinated the targeting with political actors outside the agency–on Capitol Hill, say, or in party organizations, or the White House–although a number of details on the record, such as frequent White House visits by agency insiders and coordination with outside figures on press messaging, made for suggestive circumstantial evidence. To establish that political operatives or officials outside the agency were aware of targeting at the time, or even perhaps instigated or directed it, would be to blow the scandal wide open, perhaps threatening the careers of well-known public figures. If any email documentation of such coordination is to be found, it would most likely be in the “external” (outside the agency) emails of Lerner and other key players in the targeting effort.

Magna Carta and Constitutional Criminal Procedure

In United States v. Booker (2005), the Supreme Court held that the Sixth Amendment prohibits a judge from sentencing a convicted defendant to a prison term exceeding the law’s maximum penalty for the crime committed, unless additional aggravating facts are found by the jury (or admitted by the defendant). The Court also held that all sentences must be reasonable.

In a subsequent case, Justice Scalia issued a concurrence in which he expressed concern about situations in which judges issue sentences below the statutory maximum, but which would only be reasonable in light of additional facts found solely by the judge. He proposed an “as-applied” doctrine, in which the reviewing court asks whether the sentence would be reasonable as applied to only those facts that were found by the jury.

The situation that Justice Scalia feared has now become manifest for three criminal defendants who were all convicted of selling small quantities of drugs but acquitted of conspiracy charges relating to the distribution of much larger quantities. Despite the acquittals, all three defendants received sentences four times greater than any other defendant convicted of the same crimes in the post-Booker era using the guidelines issued by the U.S. Sentencing Commission.

The defendants argue—and no prosecutor or judge has disputed—that their sentences would not be deemed reasonable without consideration of the additional evidence of conspiracy. In reviewing the sentences, the U.S. Court of Appeals for the D.C. Circuit adhered to settled precedent and declined to adopt the as-applied doctrine, and so the defendants seek to further appeal their sentences to the Supreme Court and finally resolve the question, under the Sixth Amendment, of whether a judge can base a sentence on facts that the jury did not find beyond a reasonable doubt.

In an amicus brief supporting that petition, the Cato Institute, joined by the Rutherford Institute, argues that the Sixth Amendment prohibits the increased sentencing of defendants based solely on judge-found facts of the crime, regardless of whether the final sentence remains below the statutory maximum. The defendants’ constitutional right to a jury trial can be traced back to Article 39 of the Magna Carta, which is also the historical origin of the Constitution’s prohibition on ex post facto, or retrospective, criminal laws.

Article 39 reflected a deep concern that the government would undermine the jury’s role and imprison defendants without the input of their peers. Given the status of sentencing guidelines as “law” for purposes of the Ex Post Facto Clause, the Sixth Amendment should extend to the defendant’s right to the “lawful judgment of his peers,” meaning that a judge can only render a sentence based on the jury’s factual findings. 

In other words, if it’s unconstitutional to sentence a defendant based on rules issued after he commits the purported crime, it must be unconstitutional to sentence a defendant without the input of his peers.

The Supreme Court will decide whether to take the case of Jones v. United States when it comes back from its summer recess.

ObamaCare’s Exchanges Perform More than a Dozen Functions Besides Issuing Subsidies (Updated)

One of the issues underlying Halbig v. Sebelius and three similar lawsuits making their way through federal courts is whether Congress intentionally restricted the Patient Protection and Affordable Care Act’s (PPACA) private health-insurance subsidies to individuals who buy coverage through state-established Exchanges. If so, that would mean the Internal Revenue Service’s decision to issue subsidies in the 34 states that did not establish Exchanges (i.e., that have federally established Exchanges) is illegal. For more on the IRS’s attempt to rewrite the PPACA in this fashion, click here.

On Twitter, a skeptic challenges my coauthor Jonathan Adler’s claim that Congress intended to withhold subsidies in states that did not establish Exchanges, arguing, “The exchanges serve no purpose at all absent subsidies.” (Read the entire exchange here.)

In legal jargon, the skeptic argues that a literal interpretation of the statutory language restricting subsidies to those enrolled “through an Exchange established by the State” would produce absurd results, and the courts should defer to the agency’s reasonable interpretation.

Exchanges, however, are regulatory bureaucracies that perform other functions and serve other purposes besides dispensing subsidies. The PPACA’s authors, the Obama administration, and the president himself have all acknowledged this.

  • In 2008, Senate Finance Committee chairman Max Baucus wrote, “The Exchange would be an independent entity, the primary purpose of which would be to organize affordable health insurance options, create understandable, comparable information about those options, and develop a standard application for enrollment in a chosen plan.“ 
  • In 2009, President Obama said that health insurance Exchanges “would allow families and some small businesses the benefit of one-stop-shopping for their health care coverage and enable them to compare price and quality and pick the plan that best suits their needs.”
  • Senate Majority Leader Harry Reid (D-NV) has said the PPACA “guarantees real choice and competition to keep insurers in check… By creating strong competition, we’ll reduce skyrocketing health care costs.” 
  • The PPACA’s Senate drafters wrote, “Insurers that jack up their premiums before the Exchanges begin will be excluded–a powerful incentive to keep premiums affordable.”
  • The Internal Revenue Service’s proposed tax-credit rule issued August 17, 2011 explains, “Exchanges will offer Americans competition and choice. Insurance companies will compete for business on a level playing field, driving down costs. Consumers will have a choice of health plans to fit their needs and Exchanges will give individuals and small businesses the same purchasing power as big businesses.”

In fact, the Exchanges are supposed to perform more than a dozen functions besides issuing subsidies. Here are some of the ways the PPACA’s health insurance Exchanges attempt to serve the goals of “one-stop shopping,” price and quality comparisons, expanding choice and competition, and reducing health insurance premiums, even in the absence of subsidies:

  1. Facilitate the creation of SHOP Exchanges, where premium-assistance tax credits are not available. §1311(b).
  2. Certify, recertify, and decertify qualified health plans. §1311(d)(4)(A).
  3. Maintain a toll-free telephone hotline. §1311(d)(4)(B).
  4. Monitor premiums and require issuers of QHPs to justify premium increases. §1311(e)(2). 
  5. Monitor QHPs’ compliance with hospital quality measures. §1311(h).
  6. Monitor QHPs’ compliance with mental health parity regulations. §1311(j).
  7. Require transparency from issuers of QHPs, including periodic financial disclosures; and oversee compilation of information on enrollment, disenrollment, the number of claims that are denied, rating practices, cost-sharing and payments with respect to any out-of-network coverage, enrollee and participant rights, and “other information as determined appropriate by the Secretary.” §1311(e)(3)(A).
  8. Collect data from QHPs on the quality of care, including “case management, care coordination, chronic disease management, medication and care compliance initiatives…, prevent[ing] hospital readmissions through a comprehensive program for hospital discharge that includes patient-centered education and counseling, comprehensive discharge planning, and post-discharge reinforcement by an appropriate health care professional…, reduc[ing] medical errors through the appropriate use of best clinical practices, evidence based medicine, and health information technology…, [and] the implementation of wellness and health promotion activities [and] activities to reduce health and health care disparities.” §1311(g).
  9. Rate QHPs based on quality, price, and patient satisfaction. §1311(d)(4)(D).
  10. Maintain a website with standardized comparative information on qualified health plans. §1311(d)(4)(C), (E).
  11. Make eligibility determinations and enrolling applicants for Medicaid and SCHIP. §1311(d)(4)(F).
  12. Issue exemptions from the individual mandate, and certify such exemptions to the IRS. §1311(d)(4)(H).
  13. Facilitate the purchase of health insurance across state lines. §1311(f).
  14. Establish a Navigator program and awarding grants to Navigators. §1311(i).
  15. Facilitate the merger of the individual and small-group markets (at each state’s discretion). §1312(c)(3).
  16. Provide an employee benefit (health insurance coverage) for members of Congress. §1312(d)(3)(D).

Nor is the PPACA the only piece of legislation Congress debated that would allow for Exchanges without premium subsidies. As I have explained elsewhere, the Democrats who controlled the Senate’s Health, Education, Labor, and Pensions (HELP) Committee in 2009 approved a bill that would have withheld similar Exchange subsidies in states that failed to implement that bill’s employer mandate. This is true whether the state established its own Exchange, or the federal government established one for the state. Since the HELP Committee allowed for the creation of both state-run and federal Exchanges without subsidies, its drafters presumably saw the Exchange as serving more than just that one purpose. 

Twelve Senate Democrats voted for the HELP Committee bill. Why should we be surprised that they–and the remaining Senate Democrats, and the vast majority of House Democrats, and President Obama–would approve the PPACA’s similar provisions?

Update: This post has been updated to include the 2008 Baucus quote.

Update #2: This post has been updated to include the quote from the IRS’s proposed tax-credit rule.

Drones Risk Putting US on ‘Slippery Slope’ to Perpetual War

As the New York Times reports, the Stimson Center today released a report warning that “the Obama administration’s embrace of targeted killings using armed drones risks putting the United States on a ‘slippery slope’ into perpetual war.” The Washington Post, the Guardian and Vox all lead their articles on the report with that warning.

The slippery slope point probably isn’t new to most readers. But it’s worth focusing on here, both because the argument is often misstated or misunderstood, and because, in this case, I helped make it. The report’s task force, co-chaired by retired General John Abizaid, former head of U.S. Central Command and Rosa Brooks of Georgetown Law, included working groups. I was on one that considered, among other things, what danger drones create for U.S. foreign policy. The report largely reflects those we identified: the erosion of sovereignty, blowback from those in targeted countries, drone strikes’ tendency to undermine democratic oversight, and the slippery slope problem.

The report puts those concerns in context. It points out that: drones can serve wise or dumb policies; that most drones are for surveillance or other non-strike uses; and that it is drone strikes that occur off declared battlefields that have generated the most controversy. The report notes that past military innovations, like cruise missiles, raised similar concerns by making waging war easier.

The report rejects several common complaints about drones. It denies that they create a reckless, “playstation mentality” among pilots. It explains that drones are not more prone than other weapons cause civilian casualties.

Having delimited the circumstances where drones raise concerns, the report goes into considerable causal detail, at least compared to most reports of this kind, about what the trouble is. The blowback, oversight, and sovereignty problems are relatively easy to understand, in theory. The tricky part is measuring the harm.

Military Cooperation with China: RIMPAC as a Model for the Future

The Rim of the Pacific Exercise recently concluded in waters near Hawaii.  For the first time China joined the drills.  It was a small but positive step for integrating Beijing into more international institutions.

RIMPAC started in 1971.  This year there are 23 participants, including the People’s Republic of China, which explained that the maneuvers are “an important mission of military diplomacy” and a means to strengthen “friendly relations with countries of the South Pacific through public diplomacy.”

Beijing’s participation comes at a time of significant regional tension.  The PRC’s more aggressive stance in asserting its territorial claims in the South China Sea and Sea of Japan have led to dangerous maritime confrontations. 

RIMPAC offers an opportunity to create some countervailing pressure in favor of a less threatening regional naval environment.  At the political level inviting Beijing to participate demonstrates respect for China’s increased military power and international role.   Doing so also counters the charge that Washington is seeking to isolate and contain the PRC.

Moreover, inclusion hints at the benefits for Beijing of a civil if not necessarily friendly relationship with its neighbors as well as America.  No doubt, the direct pay-off for China from RIMPAC is small. 

But to be treated as an equal and regular participant in international affairs is advantageous.  Although any great power must be prepared to accept unpopularity when necessary, in general a friendly environment is more conducive to ensuring both peace and prosperity. 

A Win, But a Major Missed Opportunity: NLRB v. Canning

To expand on Ilya’s earlier post, the Supreme Court today did indeed check President Obama’s unprecedented expansion of his recess appointments power when in January 2012 he filled three vacancies on the National Labor Relations Board with nominees that the Senate, then in “pro-forma” session, had to that point refused to confirm. In NLRB v. Noel Canning, the Court ruled unanimously in upholding the unanimous January 2013 decision of the D.C Circuit, which had vacated an NLRB order against the Noel Canning company, finding the three appointments to be unconstitutional. At issue, therefore, was the scope of president’s recess appointments power, his power “to fill up all Vacancies that may happen during the Recess of the Senate” by granting temporary commissions.

That power, however, is subsidiary to the president’s main appointments power, which is to make major appointments to his administration only “by and with the Advice and Consent of the Senate.” It was granted because, for much of our history, the Senate was in session only during certain periods of the year. If important vacancies should “happen” when the Senate was not in session, the president would be able to fill them so that the business of government could continue. Recess appointments were thus the exception, not the rule. In particular, the power was not meant to enable the president to make an end-run around the advice and consent of the Senate.

Unfortunately, in writing for the Court today, Justice Breyer has made a hash of Judge David Sentelle’s well-argued opinion below, as Justice Scalia makes clear in his concurrence for himself, Chief Justice Roberts, and Justices Thomas and Alito. As Scalia writes, the Recess Appointments Clause restricts the president’s power in two main ways. First, “it may be exercised only in ‘the Recess of the Senate,’ that is, the intermission between two formal legislative sessions. Second, it may be used to fill only those vacancies that ‘happen during the Recess,’ that is, offices that become vacant during the intermission.” The text is clear, Scalia says, and both conditions were clearly understood at the founding. But, he continues:

Today’s Court agrees that the appointments were invalid, but for the far narrower reason that they were made during a 3-day break in the Senate’s session. On its way to that result, the majority sweeps away the key textual limitations on the recess-appointment power. It holds, first, that the President can make appointments without the Senate’s participation even during short breaks in the middle of the Senate’s session, and second, that those appointments can fill offices that became vacant long before the break in which they were filled.

What was Breyer’s rationale for so watering down the clear constitutional text and so expanding the president’s power? To trump the text he offers what can only be called a tendentious reading of historical practice, to which Scalia answers: “What the majority needs to sustain its judgment is an ambiguous text and a clear historical practice. What it has is a clear text and an at-best-ambiguous historical practice.” Indeed,

The majority replaces the Constitution’s text with a new set of judge-made rules to govern recess appointments. Henceforth, the Senate can avoid triggering the President’s now-vast recess-appointment power by the odd contrivance of never adjourning for more than three days without holding a pro forma session at which it is understood that no business will be conducted. How this new regime will work in practice remains to be seen.

Scalia concludes sadly that today’s decision “will have the effect of aggrandizing the Presidency beyond its constitutional bounds and undermining respect for the separation of powers”—just what we need as the House considers whether to bring suit to try to check an increasingly out-of-control presidency. The decision today was a win, but it was also a major missed opportunity to restrain a power that for too long has been abused, flagrantly in this case. At least it illustrates, as we look to future elections, how important a question who sits on the Court is.

Small Is Beautiful

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