Topic: Law and Civil Liberties

Nine TEN! Questions on the House Vote to Tweak ObamaCare’s Employer Mandate

Tomorrow, the Republican-controlled House of Representatives will vote on a measure that would alter the definition of full-time work, for purposes of the Patient Protection and Affordable Care Act’s employer mandate, from 30 hours per week to 40 hours per week. The measure is likely to pass. The House approved a similar measure last Congress, but it never went anywhere in the Senate, which was then under Democratic control. Now that Republicans have a majority in the Senate, there’s a chance the measure could clear both chambers of Congress. The president threatens a veto. Yuval Levin writes this change “seems likely to be worse than doing nothing.”

I have a few questions about this supposed threat to ObamaCare:

  1. This legislation would reduce the burden of ObamaCare’s employer mandatem but it would also increase government spending by making more workers eligible for health-insurance subsidies through ObamaCare’s Exchanges. How is that a policy victory?
  2. The legislation would therefore shift part of ObamaCare’s cost from an organized and influential interest group (employers) to a disorganized and less-influential interest group (taxpayers). How is that strategically smart?
  3. The legislation would make ObamaCare more tolerable for an organized and influential interest group (again, employers), thereby reducing their incentive to lobby for full repeal. How is that strategically smart?
  4. House Republicans say they are committed to repealing ObamaCare entirely. If so, why is this bill, rather than a full-repeal bill, the first item on their agenda? 
  5. House Republicans say this bill will show they can govern. But they also acknowledge the president will veto it. How is that governing?
  6. This legislation would merely lessen the burden of the employer mandate, and only for some employers. By June, however, the Supreme Court could completely invalidate employer-mandate penalties for all employers across 36 states. (See King v. Burwell.) How is this legislation a wise use of Congress’ time, when a Supreme Court ruling could go much farther in just a few months?
  7. A King ruling could also invalidate Exchange subsidies in 36 states, thereby exposing millions of Americans to the full cost of ObamaCare’s hidden taxes. That would give Congress more leverage than ever before to reopen and repeal the law. With this legislation, House Republicans are playing small ball with no leverage. How is that strategically smart?
  8. If enacted, this legislation would actually reduce the leverage a King ruling would give Congress to reopen and repeal ObamaCare. How is that strategically smart?
  9. The president has said he would veto this legislation. Given the above, should Republicans believe him?

Note that many of these questions also apply to repeal of the employer mandate before a King ruling, and sometimes after.

Update: I forgot a question. (Ten questions!)

10. This legislation would repeal a perverse incentive for employers to cut workers’ hours from just above to below 30 hours per week. It would replace that perverse incentive with a perverse incentive to cut the hours of other workers from just above to below 40 hours per week. Those other workers would complain that Republicans just made ObamaCare worse for them. How is that a political win, or strategically smart?

(Cross-posted at Darwin’s Fool.)

Obamacare and the Rule of Law

This spring, the Affordable Care Act will make its third trip to the Supreme Court. But King v. Burwell is different from its predecessors. Instead of challenging Obamacare’s constitutionality, or the way certain regulations burden particular types of plaintiffs, this lawsuit questions how the executive branch has enforced the law generally—or, more precisely, modified, delayed, and suspended it.

After supporting the challengers’ successful request that the Supreme Court take up this case, the Cato Institute has now joined with Professor Josh Blackman on an amicus brief that alerts the Court to the separation-of-powers and rule-of-law violations attending the ACA’s implementation. Through a series of memoranda, regulations, and even blog posts, President Obama has disregarded statutory text, ignored legislative history, and remade the law in his own image.

King focuses on tax credits—the subsidies that allow people to pay increased premiums—one of the key pillars of Obamacare that the administration has toppled. To assist those who lack employer-sponsored insurance, and because it couldn’t command states to establish exchanges, Congress authorized these credits for residents of states that do create the exchanges. The statute expresses this design in language that is clear as day: Individuals receive tax credits if they bought a qualifying health plan “through an Exchange established by the State.”

In other words, if a state failed to establish an exchange, its residents—who would end up buying plans through the federal HealthCare.gov—would not be eligible for the subsidies. (The ACA’s Medicaid expansion plan operated with a similar carrot-and-stick approach until the Supreme Court rewrote it.)

But a funny thing happened on the way to utopia: only 14 states set up exchanges, meaning that the text of the law denied subsidies in nearly three-quarters of states. This result was untenable to an administration intent on pain-free implementation. To obviate the uncomfortable compromises Congress reached, the executive engaged in its own lawmaking process, issuing a regulation that nullifies the relevant ACA provision.

Federal-State Entanglement—Drug Policy Version

Oh what a tangled web we weave when from the text we take our leave—or so it seems after reading the op-ed by David Rivkin and Elizabeth Foley in today’s Wall Street Journal, “Federal Antidrug Law Goes Up in Smoke.” Not that they’re entirely wrong, mind you, in their defense of the attorneys general of Nebraska and Oklahoma, who are suing to have the Supreme Court declare Colorado’s law legalizing marijuana unconstitutional. In fact, they’re relying simply on modern “constitutional law,” which has succeeded in this case in bringing a tangle of constitutional principles and powers to a fine boil.

Start with First Principles. In a radical fit some years ago I argued not only that Congress had no authority to wage a war on drugs under its power to regulate interstate commerce—its rationale for doing so today—but that it had a duty under the Fourteenth Amendment to block states from waging such a war. Since Congress’s commerce power was granted mainly to enable it to ensure free commerce among the states, especially by checking the kinds of state interference that had arisen under the Articles of Confederation, not only did Congress have no power to interfere with interstate commerce in “recreational” goods like tobacco, alcohol, and marijuana, but it had an affirmative power to check state interference with such commerce, as the Court held in 1824 in its first great Commerce Clause case, Gibbons v. Ogden. Moreover, since the general police power held by states was meant mainly to protect rights, not only could it not be employed to interfere with economic and personal liberty, but once the Fourteenth Amendment enabled individuals to seek federal protection against state violations of their rights, Congress had authority under section 5 of the amendment to afford that protection.

That’s not the law today, of course. Far from reading the Commerce Clause as empowering Congress to make commerce among the states “regular,” the Court read it in 1942 in the infamous case of Wickard v. Filburn as allowing Congress to prohibit a farmer from growing wheat in excess of the amount allotted by law even though the wheat never entered any stream of commerce—on the theory that his doing so, in the aggregate, “affected” interstate commerce, the same theory the Court used in 2005 in Gonzales v. Raich when it held that Congress could criminalize the medicinal use of home-grown marijuana, which California law allowed. Throw in the Supremacy Clause, which makes federal law supreme over conflicting state law, the Take Care Clause, which requires the president to see that the laws be faithfully executed, and add principles concerning federalism and individual liberty, and we have the fine constitutional brew that Rivkin and Foley are stirring.

Nebraska and Oklahoma complain that a significant influx of marijuana purchased in Colorado is increasing their law-enforcement costs. Hence their suit, arguing that “the Constitution and the federal anti-drug laws do not permit the development of a patchwork of state and local pro-drug policies and licensed-distribution schemes throughout the country which conflict with federal laws.” To conservatives complaining that the two states are “fair-weather federalists,” Rivkin and Foley answer that they should be directing their fire at President Obama, whose “now-signature response to disfavored laws” is to issue a memo directing federal law-enforcement officials, in this case, to ignore the federal ban in states that have liberalized their marijuana laws. The law is clear, they believe. Federal law trumps conflicting state law. And under Arizona v. United States (2012), even when the president won’t enforce that law, states “may not pursue policies that undermine federal law,” as policies in Colorado and three other states allegedly now do.

But do they? What precisely is Colorado doing that undermines federal law? Rivkin and Foley cite Colorado’s attorney general as saying that “his state is ‘becoming a major exporter of marijuana.’” He was doubtless speaking loosely there. After all, the state isn’t exporting marijuana. In essence, what the state has done is legalize the sale and use of marijuana—as if it had never made it illegal in the first place. Nothing requires a state to make marijuana illegal. Nor is the state doing anything to prohibit federal enforcement of federal prohibitions. It’s doubtful, therefore, that there is any conflict here.

Yet the issues and implications drawn together here are far reaching. Obama’s “law-by-memo” practices have arisen well beyond the war on drugs—with Obamacare, with same-sex marriage, with immigration, and more, all of which is now in litigation. And Rivkin and Foley are not oblivious to how this tangled web arose. “Whatever one thinks about Raich,” they write (or Wickard, one might add). And they note that “the Controlled Substances Act can be amended or repealed,” or the attorney general “could use his authority under the CSA to remove marijuana from Schedule I.” The heart of the problem remains, however, with the expansion of Congress’s commerce power beyond its intended bounds. When that happens, entanglement is inevitable and liberty suffers.

Cato Scholars: Ahead of the Curve

Congratulations to former Treasury secretary Robert Rubin, who has become concerned, as he writes in the Wall Street Journal, that

The U.S. rate of incarceration, with nearly one of every 100 adults in prison or jail, is five to 10 times higher than the rates in Western Europe and other democracies, according to a groundbreaking, 464-page report released this year by the National Academy of Sciences. America puts people in prison for crimes that other nations don’t, mostly minor drug offenses, and keeps them in prison much longer.

Of course, if he’d been following the work of the Cato Institute, he could have read about the problems of drug prohibition and mass incarceration in this 2009 symposium at Cato Unbound, this 2013 paper on incarceration rates in the United States and other countries, this Washington Post article by Tim Lynch in 2000 when the U.S. prison population first exceeded 2 million, or indeed my 1988 New York Times article on the excessive arrests and intrusions on freedom in the drug war.

Meanwhile, on the same page of Friday’s Wall Street Journal, former senator James L. Buckley calls for ending federal aid to the states, an idea central to his new book Saving Congress from Itself and inspired by the work of Cato’s Chris Edwards.

Licensing Speech in the Big Easy

The First Amendment protects the freedom of speech and of the press because the Framers wanted to prevent the creation in America of a license-based censorship. They were deeply opposed to Britain’s systematic restriction of speech, which treated the right to speak publicly as a privilege conditioned on an express grant of the sovereign’s permission. In order to publish books, newspapers, and pamphlets, or even to perform plays, a speaker had to obtain a permit.

American law has firmly rejected this sort of “prior restraint” on speech. While licenses to engage in potentially dangerous activities like the practice of medicine — or even driving — are often necessary to prevent great harm, the value judgment represented by the First Amendment is that the harm a “license to speak” would do to individual liberty is far greater than any potential harm that could be caused by “unqualified” speakers. It is for this reason that authors, publishers, filmmakers, journalists, and talk-show hosts don’t need to pass a test or ask the government for permission before engaging in their vocation.

Unfortunately, several municipalities seem to think that tour guides should be treated differently. Fearing the calamitous consequences of allowing “ignorant” guides to “mislead” tourists, these cities have instituted licensing regimes that make it a crime for tour guides to operate without a license — a license which can only be obtained by passing a test of history and culture. 

Last year, Cato, joined by First Amendment expert Prof. Eugene Volokh, filed briefs supporting lawsuits challenging the licensing schemes in Washington and New Orleans. While the U.S. Court of Appeals for the D.C. Circuit agreed with us that the law was unconstitutional, the Fifth Circuit upheld the New Orleans ordinance, claiming that it was a “content neutral” restriction on speech necessary to protect tourists and the city’s reputation. Joined again by Prof. Volokh, Cato has filed a brief urging the Supreme Court to take this case and reverse the Fifth Circuit’s decision to allow the very kind of licensing scheme that the First Amendment was intended to preempt.

New York Tells Private Company: Fire Your CEO

From yesterday’s Wall Street Journal [$], word that the New York Department of Financial Services has strong-armed Ocwen Financial Corp., a leading mortgage servicer, into a legal settlement that not only extracts $150 million from the company and puts it under the thumb of a state-appointed monitor but even requires its executive chairman to resign

The range of penalties assessed in the case is unusual and may set a new precedent of state regulatory involvement in financial companies’ affairs. Federal and state regulators have slapped banks with tens of billions of dollars in fines before, but Ocwen stands as a rare case of a firm having a top executive forced out to settle charges of mismanagement and misconduct and being obliged to consult with authorities when it appoints board members….

“You’re basically taking away from shareholders the ability to run their company,” said Ira Lee Sorkin, a former senior official at the Securities and Exchange Commission and now a lawyer who defends people and companies in regulatory actions. He isn’t involved in the Ocwen case. “You’re telling the company in effect that the regulator is now running the company.”

It might be one thing if the departing chairman, William Erbey, who built up the company over decades and owns part of it, had himself been convicted of some disqualifying offense, but the article makes no mention of his facing personal charges at all, let alone being found guilty. 

The modern pioneer in seeking the personal ouster of executives as part of regulatory enforcement actions was then-New York attorney general, and later disgraced governor, Eliot Spitzer. Six years ago I wrote about two of the most celebrated of Spitzer’s wins: 

As prosecutor, part of Spitzer’s distinctively relentless style was to demand the decapitation of large organizations by the firing of their CEOs, even in the face of arguments that such steps presumptively punished the execs without a trial and might badly disrupt the enterprises they led. The arch example is Spitzer’s vendetta against Hank Greenberg of American International Group (AIG), without peer the most highly regarded executive in the insurance sector over the past half century. AIG, long known as three steps ahead of its industry and a huge asset to American business presence and prestige abroad, has now entered a tailspin without Greenberg, destroying billions and billions in value for shareholders and others, even as the charges against its former chieftain have mostly wilted on the vine. On a smaller but still significant scale, Spitzer forced Marsh, the biggest insurance broker, to oust its CEO, which it replaced with an old crony of Spitzer’s; that didn’t work out either, and further fortunes were lost.

Unlike AIG and Marsh, Ocwen Financial isn’t even a New York company, being headquartered in Atlanta. Its stock has lost many billions in value since last October, and fell yesterday by another 17%. The settlement requires Mr. Erbey to depart by the middle of next month.

Had the dispute proceeded to trial, it’s unlikely a judge would have ordered Mr. Erbey’s ouster. But large businesses today facing charges from financial regulators seldom dare insist on their right to a day in court – the risks of going to trial are just too high, as law professor Brandon Garrett and commenter James Copland explained at a recent Cato panel discussion on Garrett’s book Too Big to Jail: How Prosecutors Compromise with Corporations. Until that calculus changes, they will be at the mercy of whatever arbitrary if not vengeful terms regulators may insist on.

 

 

Nebraska and Oklahoma Sue Colorado

Yesterday, the attorneys general of Nebraska and Oklahoma filed a complaint asking the U.S. Supreme Court to declare Colorado’s Amendment 64, which legalized marijuana for adults, unconstitutional.

The gist of the complaint is that federal law prohibits possession of marijuana and that Colorado law “conflicts with and stands as an obstacle to the full purposes and objectives of” the federal government. Thus, the argument runs, Colorado’s Amendment 64 violates the Supremacy Clause of the Constitution and should be declared invalid. Unlike, say, Maine or Hawaii, Nebraska and Oklahoma border Colorado and claim they suffer substantial and irreparable harm from Colorado’s new policy on marijuana. (Some residents of Nebraska and Oklahoma would rather drive across the border and buy weed legally in a store rather than engage in a criminal black market transaction closer to home. This cross-border activity upsets the authorities in both states, prompting the lawsuit.)

Will the Supreme Court accept this case for review? That’s impossible to predict. However, the constitutional argument being advanced by Nebraska and Oklahoma is weak and so would likely fail. Just because the federal government enacts a law against marijuana, it does not follow that all the states have to enact laws against marijuana. And just because the federal police (FBI and DEA) have grown accustomed to having state and local police conduct marijuana raids and arrests, it does not follow that the local authorities can’t stop doing that. So long as the local police are not arresting or threatening to arrest federal agents for trying to enforce the federal law, there is no “conflict.” Thus, the Supremacy Clause does not come into play.

Here is an excerpt from a Cato paper by Robert Mikos on this subject:

The American Constitution divides governmental power between the federal government and several state governments. In the event of a conflict between federal law and state law, the Supremacy Clause of the Constitution (Article VI, Clause 2) makes it clear that state policies are subordinate to federal policies. There are, however, important limitations to the doctrine of federal supremacy.

First, there must be a valid constitutional basis for the federal policy in question. The powers of the federal government are limited and enumerated, and the president and Congress must always respect the boundary lines that the Constitution created.

Second, even in the areas where federal authorities may enact law, they may not use the states as instruments of federal governance. This anticommandeering limitation upon federal power is often overlooked, but the Supreme Court will enforce that principle in appropriate cases.

Using medical marijuana as a case study, I examine how the anticommandeering principle protects the states’ prerogative to legalize activity that Congress bans. The federal government has banned marijuana outright, and for years federal officials have lobbied against local efforts to legalize medical use of the drug. However, an ever-growing number of states have adopted legalization measures. I explain why these state laws, and most related regulations, have not been—and cannot be—preempted by Congress.