Topic: Government and Politics

Krugman’s ‘Gotcha’ Moment Leaves Something to Be Desired

I’ve had some fun over the years by pointing out that Paul Krugman has butchered numbers when writing about fiscal policy in nations such as FranceEstoniaGermany, and the United Kingdom.

So I shouldn’t be surprised that he wants to catch me making an error. But I’m not sure his “gotcha” moment is very persuasive. Here’s some of what he wrote for today’s New York Times.

Gov. Jerry Brown was able to push through a modestly liberal agenda of higher taxes, spending increases and a rise in the minimum wage. California also moved enthusiastically to implement Obamacare. …Needless to say, conservatives predicted doom. …Daniel J. Mitchell of the Cato Institute declared that by voting for Proposition 30, which authorized those tax increases, “the looters and moochers of the Golden State” (yes, they really do think they’re living in an Ayn Rand novel) were committing “economic suicide.”

Kudos to Krugman for having read Atlas Shrugged, or for at least knowing that Rand sometimes referred to “looters and moochers.” Though I have to subtract points because he thinks I’m a conservative rather than a libertarian.

But what about his characterization of my position? Well, he’s right, though I’m predicting slow-motion suicide. Voting for a tax hike isn’t akin to jumping off the Golden Gate bridge. Instead, by further penalizing success and expanding the burden of government, California is engaging in the economic equivalent of smoking four packs of cigarettes every day instead of three and one-half packs.

Was the Halbig Decision Political?

Writing in the Washington Post about the D.C. Circuit’s decision in Halbig v. Burwell, E. J. Dionne Jr. bemoans 

a conservative judiciary that will use any argument it can muster to win ideological victories that elude their side in the elected branches of our government.

There are several problems with his argument. First, of course, the argument accepted by two judges on the D.C. Circuit is pretty strong: the IRS can’t rewrite a law just because because the law isn’t working out so well.

Second, it’s not so clear that it’s conservatives who couldn’t “win ideological victories … in the elected branches of our government.” Democrats in Congress and other ACA supporters wanted states to establish exchanges, so they wrote the law with subsidies for state exchanges. (See also this original paper by Michael Cannon and Jonathan Adler, especially pp. 142ff.) But because of widespread opposition to the law, many states chose not to set up exchanges. That is, supporters of the law were unable to “win ideological victories … in the elected branches of our government,” so they turned to the unelected bureaucracy to rewrite the law, and now they want the courts to uphold their end run around the legislative process.

Third, I wonder if E. J. Dionne Jr. really wants a judiciary that rolls over for the political branches, whether legislative or executive. Does he believe that the Warren Court should not have struck down school segregation, which was clearly the will of the people’s elected representatives–and no doubt the people–in Kansas, as well as in South Carolina and Virginia, whose similar cases were combined with Brown? Does he believe that the Supreme Court was wrong to strike down Virginia’s law against interracial marriage in 1967? The Texas law outlawing sodomy in 2003? Does he regret the Supreme Court’s reining in of the Bush administration’s claimed powers in several terrorism cases? Or the court’s 2013 rulings on gay marriage?

Probably not. And that’s why we should judge judicial decisions on the basis of their adherence to the law and the Constitution, not on political grounds. Three cheers for judges who uphold the rule of law without fear or favor and without political intent.

South Carolina Police Are Ready To Crack Down on Uber

Earlier this month UberX, Uber’s rideshare service, launched in four cities in South Carolina. Residents of Charleston, Greenville, Columbia, and Myrtle Beach are free to download Uber’s app and request a ride from a driver using his or her own vehicle. However, police across South Carolina are planning on taking action against UberX drivers, who they believe are violating regulations.

According to the South Carolina Office of Regulatory Staff, Uber is illegally operating in the Palmetto State without state or local business licenses.

The Nerve, a project of the South Carolina Policy Council, reported that police officers in Greenville and Columbia could issue UberX drivers warnings and citations at their discretion.

Myrtle Beach officials claim that Uber is not licensed to work in the city, and Myrtle Beach police have said that they plan to cite UberX drivers for operating without a business license, which Myrtle Beach officials claim each driver needs. Uber believes that it does not need a business license because it is connecting passengers and drivers via its app and not providing rides.

From WPDE NewsChannel 15:

So why doesn’t Uber just get a business license? Taylor Bennett, an Uber spokesperson said they don’t think they need one.

Statement on D.C. Circuit’s Ruling In Halbig v. Burwell

In August 2011, the Internal Revenue Service proposed offering subsidies through health insurance Exchanges established by the federal government, even though the Patient Protection and Affordable Care Act clearly and repeatedly provides those subsidies are available only “through an Exchange established by the State.” Due to the PPACA’s interrelated provisions, the decision to offer unauthorized subsidies in federal Exchanges also triggers unauthorized taxes against millions of individuals and employers in the 36 states that ultimately opted not to establish Exchanges. When the IRS finalized this proposal in May 2012, it cited no authority for its decision to depart from the clear language of federal law.

Jonathan Adler and I were the first to criticize this decision in August 2011, and have continued to show how it is contrary to federal law and the PPACA’s legislative history.

Today, a panel of the U.S. Court of Appeals for the D.C. Circuit – known as the second-highest court in the land – ruled in Halbig v. Burwell that the Obama administration is indeed imposing taxes and spending funds through those 36 federal Exchanges without statutory authority, and indeed contrary to the plain language of the PPACA.

Simply put, the President is violating the law.

Unlike other courts who have examined Halbig and related cases, the D.C. Circuit looked at the totality of the evidence, reached the only conclusion the law and the evidence permit, and struck down the IRS rule.

The court rejected the seemingly endless string of legal arguments the administration offered in defense of its actions. Despite those arguments, the court held, “the government offers no textual basis…for concluding that a federally-established Exchange is, in fact or legal fiction, established by a state.” As a result, the PPACA “does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges” and the Obama administration’s decision to offer them anyway is not only unauthorized but “gives the individual and employer mandates…broader effect than they would have” if the IRS followed the law.

While the dissent was political, focusing on the plaintiff’s motives, the opinion of the court was authored by Judge Thomas B. Griffith, whom the Washington Post has described as “widely respected by people in both parties, and those who have worked with him elsewhere regard him as a sober lawyer with an open mind. There is considerable reason to think he would make a fine judge.” His nomination to the D.C. Circuit drew praise from prominent Democrats including Seth Waxman and David Kendall. Indeed, then-senator Barack Obama himself supported Griffith’s nomination. Griffith noted that while the court’s ruling could have a significant impact on the PPACA, “high as those stakes are, the principle of legislative supremacy that guides us is higher still.”

The D.C. Circuit applied the law that Congress enacted. Any downstream effects of Halbig are the result of the PPACA itself, not today’s ruling. If those effects are intolerable, then it is up to Congress to change the law, not the IRS. If Halbig results in people losing health-insurance subsidies, the blame lies with a president who recklessly offered millions of Americans tens of billions of dollars in subsidies he had no authority to offer, that could vanish with a single court ruling.

Government Can’t Rewrite Obamacare Text Without Legislation

The D.C. Circuit ruled today that the government isn’t Humpty Dumpty and so statutory text doesn’t mean whatever the government says it means.  The provision at issue, which grants tax credits for people to buy health insurance, only applies to people buying policies through “exchanges established by the State”–which in any sane world can’t apply to exchanges established by the federal government. The fact that the vast majority of states have declined the federal government’s offer to establish exchanges–the list grows daily as initially supportive states’ exchanges fail–and that the resulting system thus doesn’t function as Obamacare’s supporters hoped is of no moment.

The government would have the IRS and courts rewrite the law to fix its massive structural weaknesses. But neither executive-agency bureaucrats nor judges can change the text of the Affordable Care Act, after-the-fact legal rationalizing notwithstanding. Today’s ruling shows that Obamacare, a cynical political bargain that lacked popular support from day one, simply doesn’t work as conceived. It’s time to repeal this Frankenstein’s monster and instead pass market-based health care reform that lowers costs, expands choice, and increases quality-all while respecting the rule of law.

Read Cato’s brief in Halbig v. Burwell, which I previously blogged about here.

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.

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.”