Topic: Health Care & Welfare

Goldilocks, Canada, and the Size of Government

I feel a bit like Goldilocks.

Think about when you were a kid and your parents told you the story of Goldilocks and the Three Bears.

You may remember that she entered the house and tasted bowls of porridge that were too hot and also too cold before she found the porridge that was just right.

And then she found a bed that was too hard, and then another that was too soft, before finding one that was just right.

Well, the reason I feel like Goldilocks is because I’ve shared some “Rahn Curve” research suggesting that growth is maximized when total government spending consumes no more than 20 percent of gross domestic product. I think this sounds reasonable, but Canadians apparently have a different perspective.

Back in 2010, a Canadian libertarian put together a video that explicitly argues that I want a government that is too big.

Now we have another video from Canada. It was put together by the Fraser Institute, and it suggests that the public sector should consume 30 percent of GDP, which means that I want a government that is too small.

My knee-jerk reaction is to be critical of the Fraser video. After all, there are examples - both current and historical - of nations that prosper with much lower burdens of government spending.

IRS Officials Created a New Entitlement Program, Because They Felt Like It

Over at DarwinsFool.com, I summarize a lengthy report issued by two congressional committees on how the Treasury Department, the Internal Revenue Service, and the Department of Health and Human Services conspired to create a new entitlement program that is authorized nowhere in federal law. Here’s an excerpt in which I summarize the summary:

Here is what seven key Treasury and IRS officials told investigators.

In early 2011, Treasury and IRS officials realized they had a problem. They unanimously believed Congress had intended to authorize certain taxes and subsidies in all states, whether or not a state opted to establish a health insurance “exchange” under the Patient Protection and Affordable Care Act. At the same time, agency officials recognized: (1) the PPACA plainly does not allow those taxes and subsidies in non-establishing states; (2) the law’s legislative history offers no support for their theory that Congress intended to allow them in non-establishing states; and (3) Congress had not given the agencies authority to treat non-establishing states the same as establishing states.

Nevertheless, agency officials agreed, again with apparent unanimity, to impose those taxes and dispense those subsidies in states with federal Exchanges, the undisputed plain meaning of the PPACA notwithstanding. Treasury, IRS, and HHS officials simply rewrote the law to create a new, unauthorized entitlement program whose cost “may exceed $500 billion dollars over 10 years.” (My own estimate puts the 10-year cost closer to $700 billion.)

The full post includes details some pretty stunning examples of how agency officials were derelict in their duty to execute faithfully the laws Congress enacts.

IRS Illegally Expands Obamacare

To encourage the purchase of health insurance, the Affordable Care Act added a number of deductions, exemptions, and penalties to the federal tax code. As might be expected from a 2,700-page law, these new tax laws have the potential to interact in unforeseen and counterintuitive ways. As first discovered by Michael Cannon and Jonathan Adler, one of the new tax provisions, when combined with state decisionmaking and Interal Revenue Service rulemaking, has given Obamacare yet another legal problem.

Here’s the deal: The legislation’s §1311 provides a generous tax credit for anyone who buys insurance from an insurance exchange “established by the State.” The provision was supposed to be an incentive for states to create their own exchanges, but only 16 states have opted to do so. In the other states, the federal government established its own exchange, as another section of the ACA specifies. But where §1311 only explicitly authorized a tax credit for people who buy insurance from a state exchange, the IRS issued a rule interpreting §1311 as also applying to purchases from federal exchanges.

This creative interpretation most obviously hurts employers, who are fined for every employee who receives such a tax credit/subsidy to buy an exchange plan when their employer fails to comply with the mandate to provide health insurance. But it also hurts some individuals, such as David Klemencic, a lead plaintiff in one of the lawsuits challenging the IRS’s tax-credit rule. Klemencic lives in a state, West Virginia, that never established an exchange, and for various reasons he doesn’t want to buy any of the insurance options available to him. Because buying insurance would cost him more than 8% of his income, he should be immune from Obamacare’s tax on the decision not to buy insurance. After the IRS expanded §1311 to subsidize people in states with federal exchanges, however, Klemencic could’ve bought health insurance for an amount low enough to again subject him to the tax for not buying insurance.

Klemencic and his fellow plaintiffs argue that they face these costs only because the IRS exceeded the scope of its powers by extending a tax credit not authorized by Congress. The district court rejected that argument, ruling that, under the highly deferential test courts apply to actions by administrative agencies, the IRS only had to show that its interpretation of §1311 was reasonable—which the court was satisfied it had.

Cato and the Pacific Research Institute have now filed an amicus brief supporting the plaintiffs on their appeal to the U.S. Court of Appeals for the D.C. Circuit. While it is manifestly the province of the judiciary to say “what the law is,” where the law’s text leaves no question as to its meaning—as is the case here with the phrase “established by the State”—it is neither right nor proper for a court to replace the laws passed by Congress with those of its own invention or the invention of civil servants. If Congress wants to extend the tax credit beyond the terms of the Affordable Care Act, it can do so by passing new legislation. The only reason for executive-branch officials not to go back to Congress for clarification, and instead legislate by fiat, is to bypass the democratic process, thereby undermining constitutional separation of powers.

This case ultimately isn’t about money, the wisdom of individual health care decisionmaking, or even political opposition to Obamacare. It’s about who gets to create the laws we live by: the democratically elected members of Congress or the bureaucrats charged with no more than executing the laws that Congress passes and the president signs.

Halbig v. Sebelius will be heard by the D.C. Circuit on March 25 (the same day that the Supreme Court hears the Hobby Lobby contraceptive-mandate cases).

New CBO Numbers Show a Remarkably Simple Path to a Balanced Budget

A just-released report from the bean counters at the Congressional Budget Office is getting lots of attention because the bureaucrats are now admitting that Obamacare will impose much more damage to the economy than they previously predicted.

Of course, many people knew from the start that Obamacare would be a disaster and that it would make the healthcare system even more dysfunctional, so CBO is way behind the curve.

Moreover, CBO’s deeply flawed estimates back in 2009 and 2010 helped grease the skids for passage of the President’s failed law, so I hardly think they deserve any applause for now producing more realistic numbers.

But today’s post isn’t about the Obamacare fiasco. I want to focus instead on some other numbers in the new CBO report.

The bureaucrats have put together their new 10-year “baseline” forecast of how much money the government will collect based on current tax laws and the latest economic predictions. These numbers show that tax revenue is projected to increase by an average of 5.4 percent per year.

As many readers already know, I don’t fixate on balancing the budget. I care much more about reducing the burden of government spending and restoring the kind of limited government our Founding Fathers envisioned.

But whenever the CBO publishes new numbers, I can’t resist showing how simple it is to get rid of red ink by following my Golden Rule of fiscal restraint.

George F. Will Weighs in on the Halbig Cases

Last year, along with Jonathan Adler, I published this law-review article that explains how the IRS has now begun to tax, borrow, and spend hundreds of billions of dollars ultra vires – that is, without any statutory authorization from Congress. Today, George F. Will writes about our research, and the lawsuits that have sprang from it, in his syndicated column: 

Someone you probably are not familiar with has filed a suit you probably have not heard about concerning a four-word phrase you should know about. The suit could blow to smithereens something everyone has heard altogether too much about, the Patient Protection and Affordable Care Act (hereafter, ACA).

Scott Pruitt and some kindred spirits might accelerate the ACA’s collapse by blocking another of the Obama administration’s lawless uses of the Internal Revenue Service. Pruitt was elected Oklahoma’s attorney general by promising to defend states’ prerogatives against federal encroachment, and today he and some properly litigious people elsewhere are defending a state prerogative that the ACA explicitly created. If they succeed, the ACA’s disintegration will accelerate.

Pruitt is the plaintiff in, well, Pruitt v. Sebelius. I call these “the Halbig cases,” because even though Pruitt was first out of the gate, Halbig v. Sebelius is the farthest along of the four lawsuits that have been filed so far. 

Over at DarwinsFool.com, I tweak a couple of things Will writes about these cases, and give a little more context. For example, it’s not just four little words that prevent the IRS from taxing, borrowing, and spending those billions of dollars. It is a tightly worded set of eligibility rules that unequivocally precludes what the IRS is trying to do. Also, it is not accurate to say that these lawsuits would blow ObamaCare to smithereens. For more, including a classic Ferris Bueller clip, see here.

And click here for a comprehensive list of reference materials and commentary about the Halbig cases. 

The More We Learn about ObamaCare, the Less the President Wants to Discuss It

Remember how the more we learned about ObamaCare, the more we would like it? Well, it seems the more we learn about this law, the less President Obama wants to talk about it. He relegated it to just a few paragraphs, tucked away near the end of his latest State of the Union political rally speech. And while he defended the law, he closed his health care remarks by begging Congress not to repeal it, and asking the American people to nag each other into buying his health plans.

My full response to the president’s health care remarks are over at my Forbes blog, Darwin’s Fool. Here’s an excerpt:

Note what the president did not say: he did not say that [Amanda] Shelley would not have gotten the care she needed. That was already guaranteed pre-ObamaCare. If ObamaCare saved Shelley from something, it was health care bills that she couldn’t pay. It’s impossible to know from this brief account just how much that might have been. But we can say this: making health care more affordable for Shelley should not have cost anyone else their job. It may be that ObamaCare doesn’t reduce bankruptcies at all, but merely shifts them from medical bankruptcies to other types of bankruptcies because more people cannot find work.

Read the whole thing.

Actually, I should amend that. Making health care more affordable will cost some people their jobs, and that’s okay. Progress on affordability comes when less-trained people (e.g., nurse practitioners) can provide services that could previously be provided only by highly trained people (e.g., doctors). When that happens, whether enabled by technology or removing regulatory barriers, prices fall – and high-cost providers could lose their jobs. The same thing has happened in agriculture, allowing food prices to drop and making it easier to reduce hunger. My point was that we should not be making health care more affordable for Ms. Shelley by taxing her neighbor out of a job.

Cato Scholars Respond to the 2014 State of the Union

Cato Institute scholars Alex Nowrasteh, Aaron Ross Powell, Trevor Burrus, Benjamin H. Friedman, Simon Lester, Neal McCluskey, Mark Calabria, Dan Mitchell, Justin Logan, Patrick J. Michaels, Walter Olson and Jim Harper respond to President Obama’s 2014 State of the Union Address.

Video produced by Caleb O. Brown, Austin Bragg and Lester Romero.